(Tiểu luận) case 1 subaru’s sales boom thanks to the weakeryen

DUY TAN UNIVERSITY INTERNATIONAL SCHOOL BÀI TẬP NHÓM CASE STUDY MÔN HỌC : INTERNATIONAL BUSINESS LỚP : PSU IB 351 BIS GVHD : PHẠM MINH VÂN ANH NHÓM SV : Lương Thị Ngọc Bích Nguyễn Nhật Cương Lê Thanh Hiền Nguyễn Thị Diễm Quỳnh Lê Hà Kiều Trang Đà nẵng, ngày 17 tháng 06 năm 2023 ĐẠI HỌC DUY TÂN KHOA QLKT VIỆT MỸ PSU PHIẾU CHẤM ĐIỂM ĐỒ ÁN MÔN HỌC (Dành Cho Đồ Án Cá Nhân/ Đồ Án Nhóm) MƠN: International MÃ MƠN: PSU IB Business 351 NĂM HỌC: 2023 - 2024 HỌC KỲ: Tên Đề tài/ Dự Án CASE STUDY Giảng viên: Phạm Minh Vân Anh Họ Tên viên 1: Họ Tên viên 2: Họ Tên viên 3: Họ Tên viên 4: Họ Tên viên 5: Sinh Lương Thị Ngọc Bích Nguyễn Nhật Cương Mã SV: 26212123408 Sinh Lê Thanh Hiền Mã SV: 26203824458 Sinh Nguyễn Thị Diễm Quỳnh Lê Hà Kiều Trang Mã SV: 26202134902 Sinh Sinh LỚP: BIS Mã SV: 26202141774 Mã SV: 26202141727 Điểm Đánh giá Thành viên % Đánh giá Tiêu chí Đánh giá Hình thức Nội dung Thái độ Tổng TRUNG TÂM KHẢO THÍ Đà Nẵng, Ngày 17 tháng năm 2023 Giảng viên (Ký ghi rõ họ tên) BẢNG TỰ ĐÁNH GIÁ STT Họ tên MSSV % Tham Gia Lương Thị Ngọc Bích 26202141774 20% Nguyễn Nhật Cương 26212123408 20% Lê Thanh Hiền 26203824458 20% Nguyễn Thị Diễm Quỳnh 26202134902 20% Lê Hà Kiều Trang 26202141727 20% Chữ kí CASE 1: SUBARU’S SALES BOOM THANKS TO THE WEAKER YEN For the Japanese carmaker Subaru, a sharp fall in the value of yen against the U.S dollar has turned a problem—the lack of U.S production—into an unexpected sales boom Subaru, which is a niche player in the global auto industry, has long bucked the trend among its Japanese rivals of establishing significant manufacturing facilities in the North American market Instead, the company has chosen to concentrate most of its manufacturing in Japan in order to achieve economies of scale at its home plants, exporting its production to the United States Subaru still makes 80 percent of its vehicles at home, compared with 21 percent for Honda Back in 2012, this strategy was viewed as something of a liability In those days, one U.S dollar bought only 80 Japanese yen The strong yen meant that Subaru cars were being priced out of the U.S market Japanese companies like Honda and Toyota, which had substantial production in the United States, gained business at Subaru's expense But from 2012 onward, with Japan mired in recession and consumer prices falling, the country's central bank repeatedly cut interest rates in an attempt to stimulate the economy As interest rates fell in Japan, investors moved money out of the country, selling yen and buying the U.S dollar They used those dollars to invest in U.S stocks and bonds where they anticipated a greater return As a consequence, the price of yen in terms of dollars fell By December 2015, one dollar bought 120 yen, representing a 50 percent fall in the value of the yen against the U.S dollar since 2012 For Subaru, the depreciation in the value of the yen has given it a pricing advantage and driven a sales boom Demand for Subaru cars in the United States has been so strong that the automaker has been struggling to keep up The profits of Subaru's parent company, Fuji Heavy Industries, have surged In February 2015, Fuji announced that it would earn record operating profits of around ¥410 billion ($3.5 billion) for the financial year ending March 2015 Subaru's profit margin has increased to 14.4 percent, compared with 5.6 percent for Honda, a company that is heavily dependent on U.S production The good times continued in 2015, with Subaru posting record profits in the quarter ending December 31, 2015 Despite its current pricing advantage, Subaru is moving to increase its U.S production It plans to expand its sole plant in the United States, in Indiana, by March 2017, with a goal of making 310,000 a year, up from 200,000 currently When asked why it is doing this, Subaru's management notes that the yen will not stay weak against the dollar forever, and it is wise to expand local production as a hedge against future increases in the value of the yen Indeed, when the Bank of Japan decided to set a key interest rate below zero in early February 2016, the yen started to appreciate against the U.S dollar, presumably on expectations that negative interest rates would finally help stimulate Japan’s sluggish economy By late March 2016, the yen had appreciated against the dollar and was trading at $1=112 yen Sources: Chang-Ran Kim, “Subaru-Maker, Fuji Heavy Lifts Profit View on Rosy US Sales, Weak Yen,” Reuters, February 3, 2015; Yoko Kubota, “Why Subaru's Profit Is Surging,” The Wall Street Journal, November 14, 2014; Doron Levin, “Subaru Profit Soaring on Weaker Yen,” Market Watch, November 15, 2014; Y Kubato, “Weaker Yen Drives Subaru Maker’s Profit Higher,” The Wall Street Journal, February 4, 2016 Page 294 ANSWER Why you think that historically, Subaru chose to export production from Japan, rather than set up manufacturing facilities in the United States like its Japanese rivals? - To achieve economies of scale at its home plants - To achieve special care for quality - To achieve lower cost What are the currency risks associated with Subaru's export strategy? What are the potential benefits?  Currency risk:  Fluctuating foreign exchange rates  Unpredictable gains or losses  If Yen appreciates against the dollar -> Subaru’s cars become more expensive and less competitive in U.S market compared to other rivals -> reduce sales and profit  Potential benefits:  High pricing power  Discount  Exchange rate of JPY and USD  Lower manufacturing costs Why did Subaru's sales and profits surge in 2014 and 2015? Is Subaru wise to expand its U.S production capacity? - Because the yen depreciated -> price advantage - Subaru is wise to expand its U.S production capacity:  As a hedge against future increases in value of the yen  Meet the growing demand for its cars in the U.S market  Reduce transportation costs and tariffs Document continues below Discover more from: Thương mại Quốc tế IB 351 Trường Đại Học… 159 documents Go to course Nguyên TẮC CẤM SỬ 18 DỤNG VŨ LỰC VÀ Đ… Thương mại Quốc… 100% (8) ÔN TẬP GK THƯƠNG 10 MẠI QUỐC TẾ đã… Thương mại Quốc… 100% (4) BÀI-GIẢNG-tay - học 60 22 làm việc Thương mại Quốc… 100% (2) Trắc nghiệm môn Thương mại quốc tế Thương mại Quốc… 100% (2) IS 212 Thương mại Quốc… 79% (14) What other strategies could the company use to hedge against adverse changes in exchange rates? What are the pros and cons of the different hedging strategies Subaru might adopt? Bài giảng Thương Advantages Forward exchange rates - Currency swaps - Spot exchange rate - Inexpensive to maintain Lock in the current exchange rate for a future purchase Reduce downside rsk exposure Enable Subaru to exploit comparative advantages Flexible High degree of liquidity Easy to operate Limit order and stop losses Lower capital requirements Disadvantages mại quốc tế -55Possibility of default Thương - Require typing up 100% (2) mại Quốc… capital - Possibility of default Breakage cost - High risk Not time flexible CASE 2: VENEZUELA UNDER HUGO CHÁVEZ AND BEYOND On March 5, 2013, Hugo Chávez, the president of Venezuela, died after losing a battle against cancer Chávez had been president of Venezuela since 1999 A former military officer who was once jailed for engineering a failed coup attempt, Chávez was a selfstyled democratic socialist who won the presidential election by campaigning against corruption, economic mismanagement, and the “harsh realities” of global capitalism When he took office in February 1999, Chávez claimed he had inherited the worst economic situation in the country’s recent history He wasn’t far off the mark A collapse in the price of oil, which accounted for 70 percent of the country’s exports, left Venezuela with a large budget deficit and forced the economy into a deep recession Soon after taking office, Chávez worked to consolidate his hold over the apparatus of government By 2012, Freedom House, which annually assesses political and civil liberties worldwide, concluded Venezuela was only “partly free” and that freedoms were being progressively curtailed In 2006, for example, Parliament, which was dominated by his supporters, gave him the power to legislate by decree for 18 months In late 2010, Chávez yet again persuaded the National Assembly to grant him the power to rule by decree for another 18 months On the economic front, the economy shrank in the early 2000s, while unemployment remained persistently high (at 15 to 17 percent) and the poverty rate rose to more than 50 percent of the population A 2003 study by the World Bank concluded Venezuela was one of the most regulated economies in the world and that state controls over business activities gave public officials ample opportunities to enrich themselves by demanding bribes in return for permission to expand operations or enter new lines of business Despite Chávez’s anticorruption rhetoric, Transparency International, which ranks the world’s nations according to the extent of public corruption, noted that corruption increased under Chávez In 2012, Transparency International ranked Venezuela 165th out of 174 nations in terms of level of corruption Consistent with his socialist rhetoric, Chávez progressively took various enterprises into state ownership and required that other enterprises be restructured as “workers’ cooperatives” in return for government loans In addition, the government took over large rural farms and ranches that Chávez claimed were not sufficiently productive and turned them into state-owned cooperatives In mid-2000, the world oil market bailed Chávez out of mounting economic difficulties Oil prices started to surge from the low $20s in 2003, reaching $150 a barrel by mid-2008 Venezuela, the world’s fifth-largest producer, reaped a bonanza On the back of surging oil exports, the economy grew at a robust rate Chávez used the oil revenues to boost government spending on social programs, many of them modeled after programs in Cuba These included ultra-cheap gasoline and free housing for the poor In 2006, he announced plans to reduce the stakes held by foreign companies in oil projects in the Orinoco regions, to increase the royalties they had to pay to the Venezuelan government, and to give the state-run oil company a majority position Simultaneously, he replaced professional managers at the state-owned oil company with his supporters, many of whom knew little about the oil business They extracted profits to support Chávez’s social programs but at the cost of low investments in the oil company, and over time its output started to fall Notwithstanding his ability to consolidate political power, on the economic front, Venezuela’s performance under Chávez was mixed His main achievements were to reduce poverty, which fell from 50 percent to 28 percent by 2012, and to bring down unemployment from 14.5 percent at the start of his rule to 7.6 percent in February 2013 Profits from oil helped Chávez achieve both these goals However, despite strong global demand and massive reserves, oil production in Venezuela fell by a third between 2000 and 2012 as foreign oil companies exited the country and the state-run oil company failed to make up the difference Inflation surged and was running at around 28 percent per annum between 2008 and 2012, one of the highest rates in the world To com- pound matters, the budget deficit expanded to 17 percent of GDP in 2012 as the government spent heavily to support its social programs and various subsidies Following Chávez’s death, his handpicked successor, Nicolas Maduro, took over the presidency Maduro continued the policies introduced by Chávez Things did not go well By 2014, the country was in a recession The economy contracted by percent, while inflation surged to around 65 percent The situation continued to deteriorate in 2015 Exacerbated by a sharp fall in oil prices and hence government revenues, the economy shrunk by 10 percent, the worst decline in the world By 2015, widespread shortages of basic goods had emerged Unemployment was rising Inflation increased to 275 percent (the highest in the world) The poverty rate was back up over 30 percent To cap this litany of disaster, the value of the Venezuelan currency, the bolivar, fell from 64 per U.S dollar in 2014 to 960 per dollar by early 2016 The economy looked to be on the brink of total collapse Parliamentary elections held in December 2015 resulted in large losses for the ruling United Socialist Party For the first time since 1999, the opposition gained a majority of seats in Parliament, although Maduro still holds the presidency As yet, he shows no sign of changing course Sources: D Luhnow and P Millard, “Chávez Plans to Take More Control of Oil away from Foreign Firms,” The Wall Street Journal, April 24, 2006, p A1;R Gallego, “Chávez’s Agenda Takes Shape,” The Wall Street Journal, December 27, 2005, p A12; “The Sickly Stench of Corruption: Venezuela,” The Economist, April 1, 2006, p 50; “Chávez Squeezes the Oil Firms,” The Economist, November 12, 2005, p 61; “Glimpsing the Bottom of the Barrel: Venezuela,” The Economist, February 3, 2007, p 51; “The Wind Goes Out of the Revolution—Defeat for Hugo Chávez,” The Economist, December 8, 2007, pp 30–32; “Oil Leak,” The Economist, February 26, 2011, p 43; “Medieval Policies,” The Economist, August 8, 2011, p 38; “Now for the Reckoning,” The Economist, May 5, 2013 “Heading For a Crash,” The Economist, January 23, 2016; ANSWER Under Chávez’s leadership, what kind of economic system was put in place in Venezuela? How would you characterize the political system? Under Hugo Chavez’s presidency, the economic system in Venezuela can be classified as a command economy During his term, there were various enterprises, rural farms, and ranches which the government claimed to take over and turned them into state-owned cooperatives which implies that the economy is planned, organized, and controlled by the government The political system under Chavez’s regime is quite mixed but can be described as authoritarianism A massive concentration of power and blatant contempt for basic human rights protections were trademarks of his administration He won because he campaigned against corruption, economic mismanagement, and harsh realities of global capitalism, but ended up committing to it too How you think that Chávez’s unilateral changes to contracts with foreign oil companies will affect future investment by foreigners in Venezuela? When Chavez announced plans to reduce the stakes help by foreign companies in oil sales just to increase royalties sales, it is clear that by making it, its become more challenging for future international investors to conduct business in Venezuela Chavez is endangering future economic growth because investors extracted profits to support Chavez social programs And despite of having a strong demand, it causes oil production in Venezuela decreased every quarter between 2006 and 2008 How will the high level of public corruption in Venezuela affect future growth rates? Because of corruption, instead of the people benefiting, it is only the corrupt official who hold positions of power get the money instead of the public as a whole As a result, a nation's problems will worsen which will have an impact on Venezuela's future growth rate Instead, the money they embezzle may be utilized to build infrastructure, such as buildings and bridges, as well as hospitals and other healthcare facilities, and to support the most vulnerable citizens, it will only goes to corrupt officials who think of nothing but personal gain Furthermore, a lot of investors won't make investments because they will think the money they put into the nation can be corrupt During the latter part of Chávez’s rule, Venezuela benefited from high oil prices Since 2014, however, oil prices have fallen substantially What has been the effect of this on government finances and the Venezuelan economy? Venezuela's economy were greatly affected as oil production dropped substantially The economic inflation rate in the country, which ranges from 65 to 275 percent, is thought to be the greatest in the world Unemployment rate grew as the poverty rate rising back to over 30 percent The economy seemed to be on the verge of collapsing which led to an increase in the value of Venezuelan currency During the Chávez years, many foreign multinationals exited Venezuela or reduced their exposure there What you think the impact of this has been on Venezuela? What needs to be done to reverse the trend? Since the foreign companies are helping the Venezuela’s economy to grow by means of investments, reducing their investments will result to a lower revenue generated from the oil industry Furthermore, to reverse the trend, Venezuela needs to establish the country’s legal structure that is competent and trustworthy The foreign investors must be given the utmost assurance that their investment to Venezuela is worthwhile to be compensated well Their legal contracts with the foreign investors must be well structured and is favorable to both As such illegal acts will not bring economic growth to Venezuela and will not attract foreign investors CASE 3: BEST BUY AND EBAY IN CHINA The People’s Republic of China opened up to foreign direct investments (FDI) in the late 1970s Since that time, numerous companies have tried to establish operations and sell their products to customers in China Many more companies will try in the years to come: China is expected to have some 190 million people in the middle- and upperincome categories by 2020 This is an increase from only about 17 million people in these income brackets as recently as in 2010 China’s purchasing power for virtually all products and services has strong potential, and foreign companies will seek these market opportunities What have we learned culturally that can help companies establish themselves in China’s marketplace? Some background on China can serve as a starting point for better understanding the culture in China and what some well-known companies such as Best Buy and eBay have done to target the Chinese marketplace The motivation for many foreign companies to enter China—beyond those that have been there for a few decades for reasons of low-cost production—was the triple growth of the Chinese economy that was seen from 2000 to 2010 With this growth, China overtook Japan to become the second-largest economy in the world behind only the United States, and its large population makes for an enormous target market Investment from foreign companies was the largest driver of China’s growth in this period However, many companies also increased their exports to China The United States, for example, saw its companies increase exports to China by 542 percent from 2000 to 2011 (from about $16.2 billion to $103.9 billion), while total exports to the rest of the world by U.S companies increased by only 80 percent in the same time period Interestingly, while foreign investments grew, domestic consumption as a share of the Chinese economy declined from 46 percent to 33 percent in the same time period This consumption decline—coupled with slower growth globally and, ultimately, the worldwide economic downturn that started in 2008—raised questions about China’s momentum Right now, around 85 percent of mainstream Chinese consumers are living in the top 100 wealthiest cities By the year 2020, these advanced and developing cities will have relatively few customers who are lower than the middleand upper-income brackets by Chinese standards The expectation is that these consumers will be able to afford a range of products and services, such as flat-screen televisions and overseas travel, making the Chinese customer much more of a target for a wide variety of consumption This begs the question, can the unprecedented Chinese growth really continue, and would it come from increased consumption? The resounding answer is yes, according to research conducted by McKinsey & Company McKinsey found that barring another major economic shock similar to what we saw in 2008, China’s gross domestic product (GDP) will continue to grow, albeit not at the historic levels seen between 2000 and 2010, when it grew about 10.4 percent annually The growth from 2010 to 2020 is expected to be about 7.9 percent per year, which is still far above the expected growth for the United States (2.8 percent annually), Japan (1.2 percent annually), and Germany (1.7 percent annually)—the three countries among the top four worldwide economies along with China And the key is that consumption will now be the driving force behind the growth instead of foreign investment The consumption forecast opens up opportunities for foreign companies to engage with Chinese consumers who are expected to have more purchasing power and discretionary spending But culturally translating market success from one country or even a large number of countries to the Chinese marketplace is not necessarily as straightforward as it may seem Often, a combination of naiveté, arrogance, and cultural misunderstanding have led many well-known companies to fail in China Lack of an understanding of issues such as local demands, buying habits, consumption values, and Chinese customers’ personal beliefs led to struggles for companies that had been very successful elsewhere in the world Let’s take a brief look at Best Buy and eBay as two examples Best Buy, the mega-store mainly focused on consumer electronics, was founded in 1966 as an audio specialty store Best Buy entered China in 2006 by acquiring a majority interest in China’s fourth-largest appliance retailer, Jiangsu Five Star Appliance, for $180 million But culture shock hit Best Buy, best described by Shaun Rein, the founder of China Market Research Group He pointed to a few reasons for this culture shock and lack of success First, the Chinese will not pay for Best Buy’s overly expensive products unless they are a brand like Apple Second, there is too much piracy in the Chinese market, and this reduces demand for electronics products at competitive market prices Third, like many Europeans, the Chinese not want to shop at huge mega-stores So, these three seemingly easy-to-understand cultural issues created difficulties for Best Buy Solving these issues, Best Buy believed that it would have to develop and implement a different business model for the Chinese market than it has used, for example, in the United States Now, how far should a company go outside its normal business model to adhere to cultural values and beliefs of a new market? Strategically moving forward, Best Buy opted to close all of its Best Buy– branded stores in China and focus on its wholly owned local Jiangsu Five Star chain of stores But will this new strategic business model be successful with the new makeup of customers in China expected by 2020? eBay, the popular e-business site focused on consumer-to-consumer purchases, was founded in 1995 The company was one of the true success stories that lived through the dot-com bubble in the 1990s It is now a multibillion-dollar business with operations in more than 30 countries But China’s unique culture created problems for eBay in that market Contrary to the widespread cultural issues that faced Best Buy, one company in particular (TaoBao) and one feature more specifically (built-in instant messaging) shaped a lot of the problems that eBay ran into in China Some 200 million shoppers are using TaoBao to buy products, and the company accounts for almost 80 percent of online transaction value in China TaoBao is owned by the powerful Alibaba Group Uniquely, TaoBao’s built-in instant messaging system has been cited as a main reason for its edge over eBay in China Basically, customers wanted to be able to identify a seller’s online status and communicate with them directly and easily—a function not seamlessly incorporated into eBay’s China system Clearly, built-in instant text messaging is a solvable obstacle in doing business in China It sounds easy now when we know about it but may not always be the case when we take into account all the little things that are important in a market How can a foreign company entering China ensure that it tackles the most important “little” things that end up being huge barriers to success as we approach the year 2020, when China is expected to have significantly increased purchasing power among its middle class? Sources: B Carlson, “Why Big American Businesses Fail in China,” GlobalPost, September 22, 2013; Y Atsmon, M Magni, L Li, W Liao, “Meet the 2020 Chinese Consumer,” McKinsey Consumer; Shopper Insights, March 2012; “Exports to China by State 2000–2011,” The US-China Business Council, 2012; A Groth, “Best Buy’s Overseas Strategy Is Failing in Europe and China,” Business Insider, November 4, 2011 ANSWER Will China maintain its strong economic growth in the years to come? Some suggest it will until 2050 What you think? I believe China will maintain a strong economic growth rate and slow down around the year 2050 Currently, many parts of China and its inhabitants are an untapped market for many business and if purchasing power is to increase as well as consumption then this will drive economic growth However, just as economic growth in Germany or the United States during the industrial revolution, economic growth will not necessarily decline but instead remain stagnant in China by 2050 If China will go from 17 million to 190 million middle-income people by the year 2020, would the scenario presented Best Buy in 2006 not be applicable anymore? That is, the culture shock in 2006 was that the Chinese would not pay for Best Buy’s overly expensive products unless they are a brand like Apple Would newly rich Chinese customer engage in this purchasing by 2020? - With a larger middle class and increased disposable income, Chinese consumer buying behavior could grow As consumer preferences and buying habits change, there may be a shift in willingness to pay for products that were considered too expensive in the past - Although being in a growing middle class can open up opportunities for companies like best buy, success still depends on factors such as competitive pricing, brand reputation, product offerings as well as understanding local preferences and needs + First of all, Chinese people will not pay for products that are too expensive + Second, there is too much piracy in the Chinese market and this reduces demand for electronic products at competitive market prices With Alibaba’s ownership of the very popular TaoBao online shopping system (similar to eBay and Amazon) and its spread across the world, will a Westernbased online shopping culture ultimately infiltrate China? That being said, multicultural influences are not uncommon in the global market Western-based online shopping platforms like eBay and Amazon already have some presence in China, albeit to a lesser extent than local players like TaoBao and Tmall I think there is a possibility high is that it's infiltrating China, especially like Amazon Due to the fact that there are already many businesses based in China that offer their products through Amazon, I can see this company easily breaking into China More from: Thương mại Quốc tế IB 351 Trường Đại Học… 159 documents Go to course 18 Nguyên TẮC CẤM SỬ DỤNG VŨ LỰC… Thương mại… 100% (8) ÔN TẬP GK 10 THƯƠNG MẠI… Thương mại… 100% (4) BÀI-GIẢNG-tay 60 học làm việc Thương mại… 100% (2) Trắc nghiệm môn 22 Thương mại quốc tế Thương mại… More from: 100% (2) Bích Ngọc 999+ BN Trường Đại Học Du… Discover more PHÚC-LONG 26 PHÚC-LONG Tiếp thị 31 75% (4) CHƯƠNG VĂN MINH LƯỠNG HÀ lịch sử văn min… 100% (1) THỦY SẢN VIỆT NAM - THỦY SẢN… kinh tế vi… 67% (3) NHÓM PHÚC LONG - PHÚC LONG Tiếp thị None Recommended for you Thuong MẠI QUỐC TẾ - THƯƠNG MẠI… Thương mại Quố… 100% (1) 109 71 GIAO Trinh Listening Level 4… tin ứng dụng 100% (5) Textbook Writing Level 4- SEND SS-… tin ứng dụng 100% (1) Resumen Cap 59 Guyton Luis… Fisiología Human… 96% (25)