Madison Company is a large manufacturer and distributor of cake supplies. It is based in Chicago(Headquarters) and Trinidad. It sends supplies to firms throughout the United States and the UnitedKingdom . It markets its supplies through periodic mass mailings of catalogues to those firms. Itsclients can make orders over the phone and Madison ships the supplies upon demand.The main competition for Madison’s in the United States comes from one U.S. firm and oneCanadian firm. A British firm has a small share of the U.S. market but is at a disadvantagebecause of its distance. The British firm’s marketing and transportation costs in the U.S. marketare relatively high.a) Madison Company plans to penetrate either the Canadian market or two other CaribbeanCountries (Jamaica and Haiti). What factors deserve to be considered in deciding which market ismore feasible?b) Given that one-third of the company sales are exports to the United Kingdom and invoices forexports are in US dollars, the demand for its exports is highly sensitive to the value of the Britishpound. In order to maintain its inventory at a proper level, it must forecast the total demand for itsproducts which is somewhat dependent on the forecasted value of the pound. In your memoseparate demand-related factors from the supply-related factors, that may influence exchange ratemovements. Include any possible government-related factors and be specific. (Tie your descriptionto the specific Madison Company case background provided here).
Madison Company is a large manufacturer and distributor of cake supplies. It is based in Chicago
(Headquarters) and Trinidad. It sends supplies to firms throughout the United States and the United
Kingdom . It markets its supplies through periodic mass mailings of catalogues to those firms. Its
clients can make orders over the phone and Madison ships the supplies upon demand.
The main competition for Madison’s in the United States comes from one U.S. firm and one
Canadian firm. A British firm has a small share of the U.S. market but is at a disadvantage
because of its distance. The British firm’s marketing and transportation costs in the U.S. market
are relatively high.
a) Madison Company plans to penetrate either the Canadian market or two other Caribbean
Countries (Jamaica and Haiti). What factors deserve to be considered in deciding which market is
more feasible?
b) Given that one-third of the company sales are exports to the United Kingdom and invoices for
exports are in US dollars, the demand for its exports is highly sensitive to the value of the British
pound. In order to maintain its inventory at a proper level, it must forecast the total demand for its
products which is somewhat dependent on the forecasted value of the pound. In your memo
separate demand-related factors from the supply-related factors, that may influence exchange rate
movements. Include any possible government-related factors and be specific. (Tie your description
to the specific Madison Company case background provided here).
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