SMALL BUSINESS DILEMMA
Multinational Restructuring by the Sports Exports Company
The Sports Exports Company has been successful in producing footballs in the United States and exporting them to the United Kingdom. Recently, Jim Logan (owner of the Sports Exports Company) has considered restructuring his company by expanding throughout Europe. He plans to export footballs and other sporting goods that were not already popular in Europe to one large sporting goods distributor in Germany; the goods will then be distributed to any retail sporting goods stores throughout Europe that are willing to purchase these goods. This distributor will make payments in euros to the Sports Exports Company.
1. Are there any reasons why the business that has been so successful in the United Kingdom might not be successful in other European countries?
2. If the business is diversified throughout Europe, will this substantially reduce the exposure of the Sports Exports Company to exchange rate risk?
3. Now that several countries in Europe participate in a single currency system, will this affect the performance of new expansion throughout Europe?