What is currency exchange

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Reference no: EM131045883


Please answer all questions on the test. You can use your notes, books or calculators during the test. You MAY use the internetAS A REFERNCE SOURCE, but you must quote ANY source from it. You may NOT copy entire answers from the internet and submit them as your own work. ALL work must be submitted using your own words, so if using the internet, you MUST paraphrase any material you use! Failure to quote an internet source may result in a "0" being awarded for that answer.

Copying answers directly from any internet source will result in a "0" for that answer.

If any answers from two student are identical, then BOTH students will receive a "0" for the question.

Each question has a point value assigned to it. Answer each question completely, explaining your answer and giving examples when requested.

A simple definition is not satisfactory if the question asks for examples and/or an explanation.

The exam is due on Tuesday, May 3rd at 10pm. NO EXCEPTIONS

Welcome to St. Louis Plastics, a small company in the metro St. Louis area. Your new job is to act as a consultant to the company owner, CFO and Sales Manager. Your mission (and you HAVE to accept), is to answer all of the questions posed by management and to do your best to guide them to profitability in any international strategy or transactions.

Bob, the owner, is kind of an old-fashioned guy who started the company 40 years ago. He doesn't quite "get" the idea of "going international," but he has been reading many articles and wants to find out some information. The company does not have a lot of money to waste trying to put together an international program, so you need to advise him based on spending the least amount of money possible.

1) Name 6 good reasons to export the company products. Explain each reason and explain how eachwill benefit the company, stating how each makes more profit for the company.

Bob thinks you might have some good ideas, so he sends you down to the Sales Manager's office. His name is Pete, and he also is a little concerned about exporting. As Sales Manager, he is the one responsible for contacting customers and trying to convince them to buy from the company.

2) What steps would you recommend he follow to find a customer for plastic storage tubs in South America or Central America? The countries being considered are Guatemala and Chile. Be sure to discuss completely the information, including culture, used to narrow your selection and ultimately decide on which country to choose.For your convenience, the Hofstede charts for each country are shown below.



Your employment is very timely. Pete just found out he has two people coming from two different countries to talk to him about possibly buying from the company. They are from completely different countries and Pete says he thinks they will act very differently when meeting with him. As stated, Pete needs some help in how to deal with the expected visitors.

3) Using the chart below, discuss how Pete would expect each person to act in a negotiation, since Pete will be trying to find a way to gain the best advantage for the company. Be sure to include the influence age and sex would have on the expected reactions. You must discuss ALL characteristics listed.


The visiting executives are a woman, 30 years old, who is the daughter of the Australian company owner. She is accompanied by a female subordinate assistant. The person from El Salvador is a man, 50 years, who has worked in the company for 30 years and has an engineering degree. He is accompanied by a male subordinate assistant.

Characteristics to be discussed are:

Individualism, collectivism, linear and circular communication, low or high power distance, femininity and masculinity, long term and short term orientation, neutral and affective behavior, universalism and particularism, achievement and ascription and monochromic /polychromic orientation.

Wow. Pete's very happy you were hired! He is a somewhat relieved now that he has talked to you. He knows a little more about what to expect, so he sends you down the hall to Craig's office. He's the CFO, and he is tough. All he thinks about is money, money, money (most CFOs do!).

Craig sits you down in an uncomfortable chair and starts asking questions immediately.

4) "I have heard a lot about "globalization." What is it and how does it benefit the company?

5) What are three ways I can price my products when exporting? What are the disadvantages or advantages of each?

"You know," Craig says, " we're not opposed to using any international strategy to help us make money."

6) a. What are four good reasons to import? Describe the benefit to the company for each reason?

b. Using the chart below, compare the costs of import from two separate countries by calculating the total landed cost.

c. Is landed cost the only factor that determines the country from which you will export. Why or why not?

Economic Factors

Country A

Country B




Normal import duty rate is 20%



Normal import tax rate is 10%



Free Trade Agreement in Place






Purchase order 1000 units









Cost of goods

8.25 per unit

5.85 per unit










Transportation of complete order



from factory to port



port fees



ocean transportation



from destination port to your dock



insurance for order



Craig has been contacted by a company in China that wants to sell to St. Louis Plastics. Craig wants to know some details before speaking with the Chinese company representative.

7) What is currency exchange?

8) If the rate for the Chinese Yuan (CNY) is 1CNY = $0.1654, then how many CNY does the Chinese factory expect to be paid for 100 units that cost $2.10 each?Discuss your reasoning for your answer. Full credit will only be given if you explain how you arrived at your answer. 50% credit for the correct numerical answer.

Craig says that this calculation causes him to think of other ways the company can save money. One of his main focuses is on driving efficiencies into their business model.

9) Explain what supply chain management is and why controlling the supply chain is important to a company's profit margins?

"This is all fine and good," sais Craig, " but how the heck do we pay for imports and how do we collect money from people we sell to?"

10) Name 6 different payment methods used in international business and explain how each one can protect the buyer or seller. Please be specific in your answers.

Reference no: EM131045883

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