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M is a multinational IT company with headquarters in Asia and with operations in all continents.
It is now trying to expand its operations in Europe.This is seen as a major challenge as the European market is very well developed with established players in fierce competition against each other.
As well as developing and producing its own products, it sources products across Asia, America and Europe as part of infrastructure deals which have to include as much of its own equipmentas possible. In doing this, transfer prices can be set in YEN, USD, EURO, GBP. Transfer prices are revised every month in line with production times as most goods are made on short order timeswith sales cycles running at 3-4 months.
The longer sales cycle against committed transfer pricing presents problems as customers expect quotes to be valid for 90 days whereas M's suppliers reserve the right to revise pricing at the end of every month with quotes only valid for 8 days in the following month.
How should M deal with this problem?
Suggested Answer: B, E, F
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33 comments · newest first
CA
Caprice
11 months ago
Surprised they haven't thought of this sooner!
LO
Loreen
11 months ago
Really? Do salespeople actually have control over pricing accuracy?
KI
Kimbery
11 months ago
Offering discounts for home currency payments (option B) could attract more customers!
MA
Madonna
12 months ago
I disagree, option C seems like a cop-out.
RE
Regenia
12 months ago
M should definitely go with option A, centralised treasury sounds smart.
LE
Letha
1 year ago
Doing nothing feels risky, but I guess if everyone is in the same boat, maybe it’s not as bad? Still, I wouldn’t want to be the one to take that chance.
CH
Chandra
1 year ago
I recall a similar case study where a company faced pricing challenges in Europe. They ended up incentivizing their sales team, which seemed to improve forecasting accuracy.
SI
Sina
1 year ago
I think offering a discount for payments in the home currency could help stabilize cash flow, but I’m unsure if it’s enough to solve the pricing issue.
RA
Rasheeda
1 year ago
I remember we discussed the importance of managing transfer pricing in our last class, but I'm not sure if unilateral netting is the best approach here.
CE
Cecil
1 year ago
Option C of doing nothing doesn't seem like a great idea. We need to be proactive in addressing this challenge. I'll have to weigh the pros and cons of the other options.
MI
Minna
1 year ago
Hmm, the centralized treasury function idea in option A could help balance things out, but I'm not sure if that's the most practical approach. I'll have to think this through.
JU
Judy
1 year ago
This seems like a tricky situation with the fluctuating transfer prices and long customer quote periods. I'll need to carefully consider the options to find the best solution.
DA
Daren
1 year ago
Offering a discount for customers who pay in the home currency, as in option B, might be a good way to incentivize that and reduce the impact of the price changes. I'll keep that in mind.
JE
Jennie
1 year ago
This looks like a straightforward SQL question. I'm pretty confident the answer is A, CREATE FUNCTION, since that's the standard command used to define user-defined functions in a database.
DE
Denny
1 year ago
I think the key is to prioritize requirements after the maintain requirements task is complete. That way you have a solid understanding of all the requirements before prioritizing.
ED
Edda
1 year ago
I think I know the difference between default zones and immutable zones, but I want to double-check the details before answering.
AS
Ashton
1 year ago
I'd say M should just start a new currency, the 'M-coin,' and force all their customers to use it. Problem solved!
ES
Estrella
1 year ago
Incentivizing sales people to forecast prices more accurately is a good idea, but it doesn't directly address the underlying issue of the misaligned sales cycle and supplier pricing.
TA
Tasia
1 year ago
Doing nothing is not a viable option. The company needs to proactively address this challenge to stay competitive in the European market.
KA
Karrie
1 year ago
D) Incentivise sales persons to be more accurate when forecasting prices.
EL
Eleni
1 year ago
Doing nothing is not a viable option. The company needs to proactively address this challenge to stay competitive in the European market.
JE
Jess
1 year ago
B) Offer a small discount for any customers who pay in M's home currency.
NA
Nancey
1 year ago
A) Use a centralised treasury function to set up unilateral netting so that all trades can be balanced off against each other before any money is transferred.
YV
Yvonne
1 year ago
Offering a discount for the home currency might work, but it could create complications with the transfer pricing and supplier relationships.
JE
Jennifer
1 year ago
C) Do nothing, everyone is in the same situation.
WI
Wilburn
1 year ago
B) Offer a small discount for any customers who pay in M's home currency.
MO
Mozell
1 year ago
A) Use a centralised treasury function to set up unilateral netting so that all trades can be balanced off against each other before any money is transferred.
SH
Shayne
2 years ago
Option A seems like the most logical choice. A centralized treasury function can help manage the currency risk and cash flows more effectively.
SI
Silva
1 year ago
Option A seems like the most logical choice. A centralized treasury function can help manage the currency risk and cash flows more effectively.
SH
Shayne
1 year ago
A) Use a centralised treasury function to set up unilateral netting so that all trades can be balanced off against each other before any money is transferred.
DO
Dortha
2 years ago
I believe incentivising sales persons to forecast prices accurately could also be a good solution.
DE
Detra
2 years ago
I agree with Sharmaine, it would help in managing the transfer pricing effectively.
SH
Sharmaine
2 years ago
I think M should use a centralised treasury function for balancing trades.