Student Resource 12.1 Memo: New Markets for Mercury Shoes Mercury Athletic Shoes Sebastian Oxnard, President & CEO Memorandum To: New Consultants From: Sebastian Oxnard, President & CEO Subject: Expanding Our Shoe Sales and Manufacturing to Overseas Markets Mercury Athletic Shoes has shown significant growth over the past five years. Our board of directors is considering expanding the sales of our shoes to a number of overseas markets. In order to make a decision whether to expand and, if so, to which countries, we would like you to study the impact on our company of expanding in each of the five countries represented in the table below. I’ve included currency exchange data on each country in the table. Please analyze the data and give us your recommendations. In order to help some of our board members (who are not experts in currency exchange rates) to understand your reasoning, we would like you to cover the following in your report: country is the best place for us to expand our market, based on current currency exchange rates and purchasing power? Explain in detail why you selected that country and why you think people in that country are more likely to buy our shoes than people in other countries you did not select. Which country is the best place for us to open a new manufacturing plant, based on exchange rates and purchasing power? Explain in detail why you selected the country and why you think this would be a more affordable place for us to manufacture our shoes than the other countries you did not select. Given our average shoe price in the United States (per pair) of $100, in US dollars, what would it cost a consumer of each country on our list to buy our shoes if (a) we based the local price in each country on converting US $100 into local currency, and (b) if we set the local price in each country at the amount of local currency that has the same purchasing power, locally, that US $100 does in the United States? What wage paid in local currency to workers at a factory in each country would have the same purchasing power as the $10/hour average wage paid in the United States? The board of directors will be evaluating your recommendations based on the following minimum criteria: You demonstrate an understanding of an exchange rate, trade, and purchasing power.
Student Resource 12.1 Memo: New Markets for Mercury Shoes Mercury Athletic Shoes Sebastian Oxnard, President & CEO Memorandum To: New Consultants From: Sebastian Oxnard, President & CEO Subject: Expanding Our Shoe Sales and Manufacturing to Overseas Markets Mercury Athletic Shoes has shown significant growth over the past five years. Our board of directors is considering expanding the sales of our shoes to a number of overseas markets. In order to make a decision whether to expand and, if so, to which countries, we would like you to study the impact on our company of expanding in each of the five countries represented in the table below. I’ve included currency exchange data on each country in the table. Please analyze the data and give us your recommendations. In order to help some of our board members (who are not experts in currency exchange rates) to understand your reasoning, we would like you to cover the following in your report: country is the best place for us to expand our market, based on current currency exchange rates and purchasing power? Explain in detail why you selected that country and why you think people in that country are more likely to buy our shoes than people in other countries you did not select. Which country is the best place for us to open a new manufacturing plant, based on exchange rates and purchasing power? Explain in detail why you selected the country and why you think this would be a more affordable place for us to manufacture our shoes than the other countries you did not select. Given our average shoe price in the United States (per pair) of $100, in US dollars, what would it cost a consumer of each country on our list to buy our shoes if (a) we based the local price in each country on converting US $100 into local currency, and (b) if we set the local price in each country at the amount of local currency that has the same purchasing power, locally, that US $100 does in the United States? What wage paid in local currency to workers at a factory in each country would have the same purchasing power as the $10/hour average wage paid in the United States? The board of directors will be evaluating your recommendations based on the following minimum criteria: You demonstrate an understanding of an exchange rate, trade, and purchasing power.
BusinessEconomics_Lesson12_StudentResource_011716.docx