Robin Rowell
FIN 565
Week 6 Case Study
Small Business Dilemma, page 501, text
Multinational Restructuring by the Sports Exports Company
Are there any reasons why the business that has been so successful in the United Kingdom
might not be successful in other European countries?
When Sports Exports Company was first opened, it was under the assumption that basketball
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would become popular with British consumer just as it was in the United Kingdom. When Sports
Exports Company was opened they should have done more research to see if other European
countries would be interested in this hobby. In all new businesses research should be done before
expanding into other countries.
If the business is diversified throughout Europe, will this substantially reduce the exposure
of the Sports Exports Company to exchange rate risk?
No. The European expansion will result in payments of euros for the
exports. Therefore the receivables will be pounds and euros. This will result
in the move in the same direction against the dollar. This will also cause
more European business that will result in a larger absolute amount of
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business and will be subject to exchange rate risk.
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Now that several countries in Europe participate in a single currency system, will this affect
the performance of new expansion throughout Europe?
Sports Exports Company will be exposed to exchange rate risks if the distributors work with
local stores throughout Europe. This will create economic stability which will allow the
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Robin Rowell
FIN 565
Week 6 Case Study
government to plan for the future. But economic stability also benefits businesses because it
reduces uncertainty and encourages companies to invest. This, in turn, benefits citizens who see
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more employment and better-quality jobs.
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