国际商务PPTChapter9.pptVIP

* * * * * * The answer is b. * * * * * * * Management Focus: Dealing with the Rising Euro Summary This feature describes the exchange rate exposure faced by two German companies, SMS Elotherm and Keiper. Discussion of the feature can revolve around the following questions: Suggested Discussion Questions 1. Could SMS Elotherm have taken steps to avoid the position it now found itself in? What were those steps? Why do you think the company did not take these steps? Discussion Points: SMS Elotherm signed a deal in late 2004, to sell parts to DaimlerChrsyler. The company anticipated making about €30,000 profit on each part. However, within days, the anticipated profit was just €22,000. SMS Elotherm, which had priced its parts in dollars, but had its costs in euros, faced transaction exposure. The company could have done several things to limit its exposure to exchange rates. One of the easiest strategies would have involved entering forward contracts to buy euros with the dollars it would receive from DaimlerChrysler. The company could have followed a similar strategy with options to buy euros. A more involved strategy would have been to diversify its manufacturing so costs were spread across more than one currency. Finally, the company might have negotiated a deal with DaimlerChrysler to price some of its sales in dollars and others in euros. 2. Why was Keiper weathering the rise in the euro better than SMS Elotherm? Discussion Points: Keiper was able to limit its exposure to the sudden shift in exchange rates because it had opened a plant in Canada where its parts were being made. While the company still encountered exchange rate exposure because its costs were in Canadian dollars and its profits were in U.S. dollars, its exposure was not as great. 3. In retrospect, what might Keiper have done differently to improve the value of its “real hedge” against a rise in the value of the euro? If the U.S. dollar had appreciated against the euro and the