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Management 14th Edition by Leslie Rue,Lloyd Byars ,Nabil Ibrahim
Edition 14ISBN: 978-0078029110Management 14th Edition by Leslie Rue,Lloyd Byars ,Nabil Ibrahim
Edition 14ISBN: 978-0078029110 Exercise 10
International Trade Decision
The Castle Company is a small yet fairly profitable American company that raises animals for their wool-merino wool sheep for merino wool, angora goats for cashmere, and alpacas for alpaca wool. The company also cleans, dyes, and spins the wool. Because of the high quality of the wool fibers, the Castle Company can command top dollar for the product. The retail prices per pound for dyed and natural yarns are: merino wool-$25; alpaca wool-$35; merino wool and alpaca blend-$40; and cashmere and merino wool blend-$50.
Jack Castle, the Castle Company president, believes their product line would sell well in Canada. Currently the exchange rate for the Canadian dollar is 0.9354 to one U.S. dollar. He has been considering two options.
The first option is to sell his yarns through a wholesaler in Montreal. Rather than receiving a commission, the wholesaler wants to pay the Castle Company a wholesale price in U.S. dollars that is 75 percent of the U.S. retail price. Presently the Castle Company receives a wholesale price of 80 percent of the retail price from its distributors in the United States. The Montreal wholesaler is also willing to pay for the yarns up front, that is, before it sells them.
The second option is for Jack to sign a licensing agreement with a chain of stores that specializes in craft products, like yarn and knitting needles. The chain's headquarters is in Toronto. The licensing agreement states that it would market and sell the Castle Company yarns for 5 percent of the Canadian retail price.
Other differences between the Montreal wholesaler and the chain craft store from Toronto involve their markets and the breadth of their distribution. The Toronto craft store is part of a 25-store chain throughout Canada, and it sells supplies for all kinds of crafts-from painting to jewelry making to sewing to needlepoint. The Montreal wholesaler sells only to yarn sellers and some specialty craft stores in Quebec.
After reviewing both offers, Jack chooses the wholesaler in Montreal. He believes the wholesaler would sell his yarns to the most appropriate market-specialty weavers and knitters.
Do you agree with Jack Castle's decision?
The Castle Company is a small yet fairly profitable American company that raises animals for their wool-merino wool sheep for merino wool, angora goats for cashmere, and alpacas for alpaca wool. The company also cleans, dyes, and spins the wool. Because of the high quality of the wool fibers, the Castle Company can command top dollar for the product. The retail prices per pound for dyed and natural yarns are: merino wool-$25; alpaca wool-$35; merino wool and alpaca blend-$40; and cashmere and merino wool blend-$50.
Jack Castle, the Castle Company president, believes their product line would sell well in Canada. Currently the exchange rate for the Canadian dollar is 0.9354 to one U.S. dollar. He has been considering two options.
The first option is to sell his yarns through a wholesaler in Montreal. Rather than receiving a commission, the wholesaler wants to pay the Castle Company a wholesale price in U.S. dollars that is 75 percent of the U.S. retail price. Presently the Castle Company receives a wholesale price of 80 percent of the retail price from its distributors in the United States. The Montreal wholesaler is also willing to pay for the yarns up front, that is, before it sells them.
The second option is for Jack to sign a licensing agreement with a chain of stores that specializes in craft products, like yarn and knitting needles. The chain's headquarters is in Toronto. The licensing agreement states that it would market and sell the Castle Company yarns for 5 percent of the Canadian retail price.
Other differences between the Montreal wholesaler and the chain craft store from Toronto involve their markets and the breadth of their distribution. The Toronto craft store is part of a 25-store chain throughout Canada, and it sells supplies for all kinds of crafts-from painting to jewelry making to sewing to needlepoint. The Montreal wholesaler sells only to yarn sellers and some specialty craft stores in Quebec.
After reviewing both offers, Jack chooses the wholesaler in Montreal. He believes the wholesaler would sell his yarns to the most appropriate market-specialty weavers and knitters.
Do you agree with Jack Castle's decision?
Explanation
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The company C is a small company with go...
Management 14th Edition by Leslie Rue,Lloyd Byars ,Nabil Ibrahim
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