Premium Essay

What Types of Risks Does the Firm Face

In: Business and Management

Submitted By alyamani
Words 291
Pages 2
The nature of the international business environments Harley faces are complex and varies due to cultural and regional needs of the diverse markets it competes in. This is shown by the differences of the sales mix in U.S. and Europe as revealed in exhibit 1 of the case. For example, in 2006, custom models accounted for 47.4% in U.S., whereas it accounted for 13.4% in Europe. In the U.S., other sales of models based on different criteria such as performance, touring, and standard accounted for 15.1%, 35.5%, and 2.1% respectively. Europeans have different preferences however. Performance, touring, and standard accounted for 41.4%, 26.1%, and 19.2% respectively. The reason Harley faces such diversification is clearly due to customer preferences and market demands.
According to chapter 1 lecture slides, I believe that all four types of risks in international business are present: (1) Cross-cultural Risk: Harley operates in different facilities in the U.S., Brazil and Australia. Potential growth markets include Canada, Japan, Australia, Latin America (Brazil), India, and China. There are many cultural differences in languages, lifestyles, customs, and religion of the various countries. These differences may lead to inappropriate business strategies and ineffective relations with customers. However, understanding the different markets would be beneficial to Harley. (2) Country Risk: Differences in the country’s political, legal, and economic systems may adversely impact firm profitability. Government intervention restricts market access and imposes many challenges on the company. As the case mentions, Brazil’s government initially “imposed high import tariffs that doubled the cost of bikes to Brazilian buyers”. To overcome the high costs of import taxes, Harley built a plant in Brazil. (3) Currency or Financial Risk: Risk of exchange…...

Similar Documents

Premium Essay

Why Does Japan Faces Deflation?

...Deflation in Japan impacts economical growth and damages the financial health of the banking system. It is a unique phenomenon that intrigues many economists. Japan has the third largest economy in the world, yet it is unable to find effective ways out of stagnation and deflation. There are many opinions regarding deflation, its causes, and affects. However, this paper covers only a few that interested me the most. It covers factors that contribute to deflation such as high corporate rate, strong yen, and trade surplus. Why does Japan face deflation? According to the World Factbook, Japan has the third largest economy in the world with a 2011 GDP of $5.85 trillion US dollars. It is one of the largest exporters of goods in the world, which contributes to a consistent trade surplus for the country. China, one of the primary Japan’s trading partners, has gained the largest share of Japan’s import’s market due to significantly lower price of goods. Japan is also among the world’s largest and most technologically advanced producers, dominating the export of electronic equipment, machine tools, steel and nonferrous metal, ships, motor vehicles, chemical, textiles, and processed foods. Another important factor contributing to the strength of the Japanese economy is the robotics industry; it possesses more than half of the world’s “working robots” (CIA, 2012). The agricultural sector is small,......

Words: 1970 - Pages: 8

Premium Essay

What Is a Digital Firm

...What is a Digital Firm Jeremy Schmidt What is a Digital Firm My definition of a "Digital Firm" is a company that uses many types of software that are all tied together to run the major parts of their business. I currently work for an Electrical Supply company. Our company, Werner Electric Supply, is a great example of a Digital Firm. A customer can place an order with one of our inside sales people via phone call, email, or online order from our website.  That order is placed into our business system manually or automatically if done via online order.  Then our business system automatically places an order from our vendors by linking into their business system.  When the product is available in our warehouse, a ticket is printed and stock is pulled and loaded onto our trucks for delivery.  This is tracked by scanning the bar code on the product and the warehouse location, when loaded onto our trucks.  When the product is delivered, the customer signs the bar code reader.  This information is sent wirelessly back to our business system.  Then our accounting group can send an invoice to the customer via email. All of this information is also tied to our customer relationship management software called Tour de Force, which I can access from my laptop, tablet, or Smartphone. Anyone in the company can access this information, to see sales history, and run reports.  I personally use all this information to see what business we ...

Words: 673 - Pages: 3

Premium Essay

Leverage and Firm Risk

...Firm's Risk and Debt Capacity Introduction One notion of the riskiness of a firm is the extent to which the firm’s earnings can fluctuate from period to period in response to changes in total firm revenues. The variability of earnings relative to revenues is determined by two categories of risk. The first source of risk is business risk and is related to the basic industry and operating decisions of the firm. Business risk depends on a number of factors including the variability of demand for the firm’s products, the stability of sales prices and basic product input prices, and the extent to which the firm’s costs are fixed. Each of these factors is determined to some extent by the character of the firm's industry, but each of them is also controllable to some degree through the firm's strategic operating decisions. The second source of risk is financial risk. This risk is related to the firm’s financial policies, specifically the use of debt in financing operations. The use of debt obligates a firm to make interest and principal payments, regardless of profit levels. These fixed financial expenses compound fluctuations in operating income (EBIT) and introduce additional risk to stockholders. Separating business and financial risk convenient illustrates the division between firm operating and financial policies. Both are important and poor management in one area can easily undo good management in the other. Operating Leverage Business risk......

Words: 4423 - Pages: 18

Premium Essay

What Does Forensic Mean?

...1. What does forensic mean? From Latin forensis ‘in open court, public,’ - Relating to, used in, or appropriate for courts of law or for public discussion or argumentation. - Of, relating to, or used in debate or argument; rhetorical. - Relating to the use of science or technology in the investigation and establishment of facts or evidence in a court of law: a forensic laboratory. http://www.thefreedictionary.com/forensic 2. Define forensic accounting. Forensic accounting is a type of accounting which unites investigation accounting and litigation support to provide an accounting analysis that is suitable for court. 3. What are the key components of the definition of forensic accounting? Forensic, accounting, time, purpose - legal forum, peremptory. 4. How does a forensic audit differ from a regular audit? According to Ronald L. Durkin, the following differences in a forensic audit versus a traditional audit: •Not limiting the scope of the engagement based upon materiality. •Not accepting sampling as evidence. •Not assuming management has integrity. •Seeking the best legal evidence. •Melding the requirements of the evidential matter standard with the rules of evidence R.L. Durkin, "Defining the Practice of Forensic Accounting," CPA EXPERT (Special Edition, 1999). 5.Who may have been the earliest expert witness? Hercules De Cordes may have been an early expert witness. 6. What impact did the IRS have on forensic accounting......

Words: 3750 - Pages: 15

Premium Essay

3) What Can a Firm Do to Manage the Exchange Rate Risk of Foreign Currency Borrowing?

...17. If the spot rate of the Malaysian ringgit is $.30 and the six month forward rate of the ringgit is $.32, what is the forward premium or discount on an annual basis? A. premium; about 14.5% B. discount; about 14.5% * C. premium; about 13.3% D. discount; about 13.3% E. premium; about 16.7% Solution: use Equation (5-4) [(.32 - .30)/.30] x (360/180) = 13.3% 18. If the spot rate of the Israel shekel is $.32 and the six month forward rate is $.30, what is the forward premium or discount on an annual basis? A. discount; 11.5% B. premium; 11.5% C. premium; 12.5% * D. discount; 12.5% E. premium; 22.5% Solution: use Equation (5-4) [(.30 - .32)/.32] x (360/180) = -12.5% 19. If the Canadian dollar is equal to $.86 and the Brazilian real is equal to $.28, what is the value of the Brazilian real in terms of Canadian dollars? * A. about .3256 reals B. about .3568 reals C. about 1.2 reals D. about 1.5 reals E. about .5600 reals Solution: cross rate .28/.86 = .3256 20. If the Japanese yen was worth $.0035 six months ago and is worth $.0045 today, how much has the yen appreciated or depreciated? * A. appreciated; about 29% B. appreciated; about 25% C. depreciated; about 20% D. depreciated; about 18% E. appreciated; about 15% Solution: use Equation (5-1) (.0045 - .0035)/.0035 = 29% 21. Assume: (1) the US annual......

Words: 21464 - Pages: 86

Premium Essay

What Value Does an Automated Asset Inventory System Have for the Risk Identification

...Name: Peter Michelsen____________________________ CSI 242 01 Chapter 3 Homework 1. What is a type of law that represents all of the laws that apply to a citizen (or subject) of a jurisdiction? Civil Law 2. What is a type of law that addresses violations harmful to society and that is enforced by prosecution by the state? Criminal Law 3. Private Law is a type of law that regulates the relationship between an individual and an organization. 4. Public Law is a type of law that regulates the structure and administration of government agencies. 5. Ethics define socially acceptable behaviors. 6. Laws define rules that mandate or prohibit certain behavior. 7. True or False: ___True_____ The cornerstone of many current federal computer-related criminal laws is the Computer Fraud and Abuse Act of 1986. 8. __B___ is created by combining pieces of nonprivate data—often collected during software updates, and via cookies—that when combined may violate privacy. a. Contextual information b. Aggregate information c. Profile data d. Privacy data 9. The law that regulates the overall role of the government in protecting the privacy of individuals is the Federal Privacy Act of 1974. 10. The law that regulates the role of the health-care industry in protecting the privacy of individuals is the __C___. e. GLB f. FOIA g. HIPAA h. CFAA 11. True or False: __False_____ The law...

Words: 474 - Pages: 2

Free Essay

To What Extent Has the Conservative Party Changed Since Thatcher and What Challenges Does It Still Face?

...Margaret Thatcher revolutionised the Conservative party, bringing life back into what many felt was a tired Tory party. She was dogmatic rather than pragmatic, she believed in the value of the individual and she was a strong advocate of the free market economy. She irrevocably changed the Conservative party and politics. Leaders since her may have felt they were living in her shadow – none of them would dare publically question her, and many of her ideals have stuck. Even Labour accepted some of her policies, such as anti-trade union laws and privatisation. However, she also bred bitterness, so Cameronist politics cautiously echo Thatcherism, whilst trying to appeal to a wider audience. Cameron respected Thatcher rather than worshipped her – he set about what the media called “detoxifying” the Tories, but he still shared many core values with Thatcher. Cameron faces a different backdrop to Thatcher and his challenge has been to adapt rather than revolutionise – he admired Thatcher but is pragmatic enough to change rather than blindly follow her unshaking beliefs. Cameron’s Conservatism is different to Thatcherism – and although much of it can be put down to the coalition diluting the more hard-line Tory policies, there are many decisions Thatcher would never have taken – again highlighting the difference between Thatcher’s dogmatism and Cameron’s pragmatism. Cameron had also planned to match Labour’s public spending increases from 2010-11 - whilst abandoned the idea shows he...

Words: 1774 - Pages: 8

Premium Essay

What Is Value Chain Analysis? What Does a Firm Gain When It Successfully Uses This Tool?

...South and middle America, Hawaii and Asia ,communication the standards related to the quality of coffee beans, establishing strategic relationships with suppliers and organizing the supply-chain management. Operations. Pacific Coffee operations are conducted mainly in Hong Kong, Macau , Mainland China, Singapore and Malaysia with stores over 130 in two ways :direct operations of the stores by the company and the licensing. Outbound logistics. The outbound logistics for Pacific Coffee ,it sells own-brand coffee beans and Jura brand coffee machines to distributors and corporate clients, such as banks, airline companies, clubs and hotels. Its coffee beans are sold in Hong Kong , Macau and Singapore. Marketing and Sales. Pacific Coffee does not heavily invest in marketing relying instead on the word-of-mouth achieved through the high quality of products and high level of customer services. However, occasional marketing activities initiated by the company involve sampling of new products that are usually conducted within areas nearby the stores. Service. Providing superior level of customer services is one of the Pacific Coffee’s main objectives and it is driven from the mission statement of the company. Accordingly, the company staffs are encouraged to go to great lengths in order to ensure the high level of customer satisfaction. Assignment 1 Lu Janet Tao S05001741 Part A 1 Support activities: Infrastructure . Pacific Coffee infrastructure......

Words: 1727 - Pages: 7

Premium Essay

Outline the Types of Institutions Which Comprise the Emerging Global Civil Society. What Is Their Potential for Contributing to ‘Globalization with a Human Face’?

...Economy Assessed Essay Question: Outline the types of institutions which comprise the emerging global civil society. What is their potential for contributing to ‘globalization with a human face’? Essay Number: 707004 Word Count: 3491 I. Introduction While globalization processes have propelled the world into an era of shrinking borders, rapid technological advances and intensifying connectedness, global civil society has risen at an equally rapid pace. Though global civil society is not a new phenomenon, the realm has become increasingly compelling in light of the explosion of civil society institutions that constitute a truly global sphere (Falk, 2000). By 2002, more than 30,000 international nongovernmental organizations existed alongside more than 20,000 global civil society networks, ninety percent of which had emerged during the previous three decades (Edwards, 2002). As numbers continue to increase, the true estimate of global civil society institutions is likely in the millions (Matthews, 2003). The growth of global civil society in the era of globalization leads naturally to questions regarding the institutions included in this sector and their contributions to the processes of globalization. Consequently, this essay will review the institutions that comprise the emerging global civil society and critically assess their potential to promote ‘globalization with a human face’, as defined by the 1999 United Nations Human......

Words: 4271 - Pages: 18

Premium Essay

Explain Systematic Risk and What Is Firm-Specific Risk?

...systematic risk and what is firm-specific risk? Market equity beta measures the covariability of a firm’s returns with all shares traded on the market (in excess of the risk-free interest rate). We refer to the degree of covariability as systematic risk. The market prices securities so that the expected returns should compensate the investor for the systematic risk of a particular stock. Stocks carrying a market equity beta of 1.20 should generate a higher return than stocks carrying a market equity beta of 0.90. Firm-specific risk is any source of risk that does not affect the covariability of a firm’s returns with the market. People examined the analysis of financial risk associated with the use of leverage along the four dimensions, which would be listed later. In these four dimensions, the first two dimensions of risk are firm-specific risk and the third dimension of risk as systematic risk. The four dimensions are: first with respect to time frame: We examined the analysis of a firm’s ability to pay liabilities coming due the next year (short-term liquidity risk analysis) and its ability to pay liabilities coming due over a longer term (long-term solvency risk analysis). The financial ratios examined a firm’s need for cash and other liquid resources relative to amounts coming due within various time frames. Secondly, with respect to the degree of financial distress: We emphasized the need to consider risk as falling along a continuum from low risk to high risk of......

Words: 1350 - Pages: 6

Premium Essay

Types of Supply Chain Risk

...Types of Supply Chain Risk 09.05.2016, 15:22 Print REFERENCE THIS 3,061 Words 7 Pages CHAPTERS LINE SPACING Types of Supply Chain Risk Types of Supply Chain Risk Introduction There have been many different definitions of supply chain risk, but it can be broadly defined as "the variation in the distribution of possible supply chain outcomes, their likelihood, and their subjective values" (March & Shapira, 1987, p. 1404). However, this definition has since been expanded upon to account for all the different departments and functions that operate within a supply chain. This leads to an overall definition of supply chain risk as "any risks for the information, material and product flows from original supplier to the delivery of the final product for the end user" (Juttner, et al., 2003, p. 202). Simply put, supply chain risk refers to the probability of a risk event occurring the supply line and when the product goes on sale. Furthermore, risk sources are the predominant causes of risk events, which are "the environmental, organisational or supply-chain variables which cannot be predicted with certainty and which impact on the supply chain outcome variables" (Juttner, et al., 2003). Identifying Supply Chain Risk There are a variety different approaches that a company can take in order to identify risk in their supply chain. Steele and Court (1996) proposed a conceptual framework for identifying the potential risk in an organisations supply chain...

Words: 2774 - Pages: 12

Premium Essay

Bonds: Types, Risks, and Benefits

...BONDS: TYPES, RISKS, AND BENEFITS When a corporation wants to borrow money from the public on a long-term basis, it does so by selling securities that are called bonds. There are different types of bonds available, each with different risks and rewards. The different factors associated with each type of bond, determines how it fits into your portfolio. A bond is an interest-only loan, where the borrower will pay the interest every period, and then repay the principal amount at the end of the loan. The value of bonds fluctuates. When the interest rate increases, the bond becomes worth less. When interest rates fall, the bond becomes worth more. A bonds value at a particular point in time, known as its yield to maturity, can be calculated by using information such as: the number of periods to maturity, the face value, the coupon or stated interest payment made on a bond, and the market interest rate for bonds with similar features. With this information we can calculate the bonds yield to maturity (YTM) or “Yield” for short. The US government is the biggest borrower in the world. In early 2009, the total debt of the US Government was approaching $11 Trillion Dollars. When the government wants to borrow money for more than one year, it sells Treasury Notes/Bonds to the public. Most US treasury bonds are just ordinary coupon bonds. Some older issues are callable meaning the government can repurchase the bond at specific price prior to maturity. Treasury issues......

Words: 917 - Pages: 4

Premium Essay

Types of Risk

...systematic risk and unsystematic risk In finance, systematic risk, sometimes called market risk, aggregate risk, or undiversifiable risk, is the risk associated with aggregate market returns. By contrast, unsystematic risk, sometimes called specific risk, idiosyncratic risk, residual risk, or diversifiable risk, is the company-specific or industry-specific risk in a portfolio, which is uncorrelated with aggregate market returns. Unsystematic risk can be mitigated through diversification, and systematic risk can not be.[1] Systematic risk should not be confused with systemic risk, the risk of loss from some catastrophic event that collapses the entire financial system. Contents [hide] * 1 Example * 2 Systematic risk and portfolio agement * 3 References * 4 See also | ------------------------------------------------- [edit]Example For example, consider an individual investor who purchases $10,000 of stock in 10 biotechnology companies. If unforeseen events cause a catastrophic setback and one or two companies' stock prices drop, the investor incurs a loss. On the other hand, an investor who purchases $100,000 in a single biotechnology company would incur ten times the loss from such an event. The second investor's portfolio has more unsystematic risk than the diversified portfolio. Finally, if the setback were to affect the entire industry instead, the investors would incur similar losses, due to systematic risk. Systematic Risk: It is the risk which is due......

Words: 1612 - Pages: 7

Premium Essay

Types of Risks

...There are several risks which is directly associated with financing. Some of these risks are: Currency Exchange Risk This is a form of financial risk which arises when there is a potential change in the exchange rate of one currency against another. The persons who are mostly affected by this risk are investors and businesses who have assets and operations across international borders. They can also be faced with this risk if they have a loan or borrowings in a foreign currency. An example of this risk is if a dollar gets stronger against a foreign currency, reducing value of foreign investments. Business Risk This is the degree of uncertainty associated with an investment earnings and the investments ability to pay returns owed to investors. A company with a higher business risk should choose a capital structure that has a lower debt ratio to ensure that it can meet its financial obligations at all times. Some examples if business risks are declining in company profits or market share and bad management decisions Financial Risk This risk is the degree of uncertainty of payments resulting from a firm’s mix of debt and equity, the largest proportion of debt financing the greater this risk. For instance, if a company can’t get additional loans for growth of to fund operations here we can say they have high financial risk. Purchasing Power Risk The risk that unexpected changes in consumer prices will penalize an investor's real return from holding an investment...

Words: 524 - Pages: 3

Premium Essay

3) What Can a Firm Do to Manage the Exchange Rate Risk of Foreign Currency Borrowing?

...1) What is going on at Carrefour SA? Carrefour S.A. is a retail corporation located in France. Carrefour is Europe’s largest retailer, with 5,200 stores. Over the last four years they have been growing with several large acquisitions, mostly outside of France, which is requiring them to take on debt. In the past, Carrefour management had generally financed company growth through securities denominated in the currency of business operations. But have recently been suggested to consider borrowing in British pounds sterling in order to take advantage of a borrowing opportunity in that currency. Carrefour is exposed to exchange rate risk because of foreign-currency exposure from imported goods. This risk was being hedged through forward contracts. The €13.5 billion of debt on the Carrefour books is 97% hedged in Euro currency, €6.4 billion of that being publicly traded bonds. Carrefour has a large exposure risk to the Euro because of their hedging policy. 2) Why does the Eurobond market exist? A Eurobond is an international bond that is denominated in a currency not of the currency to the country where it is issued. Like many bonds, Eurobonds are usually fixed-rate, interest-bearing notes, although many are also offered with floating rates and other variations. Most pay an annual coupon and have maturities of 3-7 years. Eurobond issues are made to cater to the issuers' and investors' needs, and can vary in terms and form substantially. The Eurobond market exists for large......

Words: 313 - Pages: 2