1.7 Case study & role play Case 1

“Coburn Tool Corporation, an American manufacturer of large and small machine tools and parts, gears, valves, and bearings, was a major supplier to industries and companies world-wide. Because of the rise of the U.S. dollar on exchange markets and serious financial crises in many of the countries in which Coburn did business, sales, particularly to Latin America, began to decline.

A major market for Coburn’s products had until recently been Brazil. For instance, in 1980 sales to that country’s industries were $640,000; but by 1983 sales had declined to just $183,000.

This serious problem seemed to have little solution because of Brazil’s chronic credit problems and lack of foreign exchange.

In the fall of 1984, however, a unique proposition was received at Coburn’s head office near Cleveland, Ohio, from a Brazilian commodities broker, Companhia Internacional de Comercio, S.A. (CIC). CIC’s offer was essentially this: in exchange for US $ 400,000 in assorted gears, Coburn would receive the equivalent in Brazilian shoes, which it could sell in the American market.”

Case Analysis

1.7.1 Develop the following ideas.

1. The lack of foreign exchange is causing problems for Third World countries .

(a recent phenomenon in international trade, chronic shortage of foreign exchange in developing countries, the lack of understanding how desperate many developing countries are)

2. The solution to the problem is countertrade.

(countertrade / barter (the exchange of goods for goods); a worldwide phenomenon; to be concentrated between Western manufacturing countries and developing countries; to send highly specialized items - cars, computers, cameras; a middleman representing a developing country)

3. Coburn has to decide whether to take the risk. John McEnroe’s first reaction - finding the proposal ludicrous - changes on further consideration.

( to be worthwhile to accept something. in order to increase sales; risks involved on both sides; to find itself with merchandise it cannot sell; to find a way to sell something.; to ensure a return on the sale)

Critical Thinking Tasks

1.7.2

A. Search the Internet for keywords countertrade, barter, offset, buyback, switch trading, counter purchase. Use the obtained information in your case analysis.

B. Describe a countertrade exchange between two countries. Explain the possible problems associated with countertrade.

C. Say how countertrade differs from the traditional method of trading products between countries. Give reasons why countries engage in countertrade.

D. Prepare a report on the case. Use the instructions below.

Preparing reports on a case

The following guidelines will help you write an effective case analysis.

First, in business communications a short report is usually considered better than a long report. This does not mean that in your report you can skip key points, but rather that you state relevant points clearly and concisely. Do not include trivial matters.

Second, the report should be well written. It should be typed and not contain spelling or grammatical errors. The report you hand in for class should be equivalent in quality to a report you would write for your boss, a senior manager of a business company.

A well-written report would contain the following elements:

• Executive summary. This is a concisely written statement, less than one page, placed at the front of the report. It briefly summarizes the major points of the case and your solution. It should describe the major issue, the proposed solution, and the logic supporting the solution.

• Problem statement. Present the central issue(s) or major problem(s) in the case here. Do not rehash the facts of the case; assume that anyone reading the report is familiar with the case.

• Alternatives. Discuss all relevant alternatives. Briefly present the major arguments for and against each alternative. Be sure to state your assumptions and the impact of constraints on each alternative.

• Conclusion. Present the analysis and the logic that led you to select a particular solution. Also discuss the reasons you rejected the other alternatives.

• Implementation. Outline a plan of action that will lead to effective implementation of the decision so that the reader can see not only why you chose a particular alternative but how it will work.

Preparation of an oral case report should include the following:

• Description of the case situation. Present a brief overview of the situation in the case. Sometimes a teacher will ask a student to start off the classroom discussion with this overview.

• Problem statement. Describe the major issues or problems in the case.

• Analysis of the key alternatives. Present the results of your analysis of relevant alternatives in a concise manner. Depending on the type of analysis, this is sometimes called "running the numbers."

• Conclusion. Briefly describe the logic that led you to choose the alternative. Summarize why the other alternatives were not chosen.

• Implementation. Present your implementation plan.