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Harding Tool Corporation
- 1. Harding Tool Corporation Paul CHEVRIER, Dimitri ESMAILZADEH, Thomas POLLIANDECE-Paris 2014 - Crisis as opportunity
- 2. Background Companies: Harding 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 worldwide Companhia Internacional de Comercio : a Brazilian commodities broker Overseas Development Corporation : an American commodities broker
- 3. Harding Tool Corporation Companhia Internacional de Comercio Overseas Development Corporation
- 4. Main characters: Lloyd Willcox : Overseas sales manager, Harding Tool Corporation Jose Cabral : President, Companhia Internacional de Comercio Julia Peters : Commodities broker, Overseas Development Corporation Background
- 5. Presentation of the deal Because of the rise of the U.S. dollar on foreign exchange markets and serious financial crises in many countries in which Harding did business, sales, particularly to Latin America, began to decline. In the fall of 1986, a unique proposition was received from Companhia Internacional de Comercio: In exchange for US$400,000 in assorted gears, Harding would receive the equivalent in Brazilian shoes, which it could sell in the American market.
- 6. Presentation of countertrade ? Countertrade or Barter : Exchange of goods or services directly for other goods or services without the use of money as means of purchase or payment. Countertrade start growing during the 1970s. Nowadays, it is estimated that countertrade accounts for between 20 to 25 % of total world trade. At the start of it, it was mainly the developing country that were using it for common and basic goods. Countertrade can also occur when countries lack sufficient hard currency.
- 7. Dialogue n属1 $400 000 worth of gears $400 000 worth of shoes Harding Tool Corporation Companhia Internacional de Comercio (CIC) Commission on the sale of the shoes : +7% sales worth $430 000 HTC doesnt have the assurance to be paid Call specialists to deal with the shoes will cost money $9.60 for each pair of shoes
- 8. Dialogue n属1 Lloyd Wilcox Jose Cabral Surprised and skeptical Wants to talk with his associates and specialists before giving an answer for the deal Try to set Mr. Wilcoxs mind at ease Advises on how to handle the situation Agrees to send specs and samples Wants more information and some samples
- 9. Exhibit n属1 Men Women 13 200 pair of shoes 31 670 pair of shoes 7, 7遜, 8, 8遜, 9, 9遜, 10, Widths: B, C, D, some E, 11, 11遜, 12, 12遜 5, 5遜, 6, 6遜, 7, 7遜, 8, 8遜, 9, 9遜, 10 Widths: some A, B, C brown, black, gray, burgundy, leather uppers, cr棚pe soles, foam insole; natural dark brown eather uppers and soles; natural light brown, natural dark brown, black, tan, navy
- 10. Exhibit n属2 Interested in selling the shoes, used to handle countertrade Needs more information to proceed A 2% commission on the sales $9.6 => $9.4 for each pair of shoes
- 11. 1000 1200 1400 1600 1800 2000 2200 2400 1978 1979 1980 1981 1982 1983 1984 1985 Total Exhibit 3: Total Hardings Gross Sales to Latina America, 1978-1985 (in thousands of US$)
- 12. 0 100 200 300 400 500 600 700 1978 1979 1980 1981 1982 1983 1984 1985 Argentina Brazil Colombia Venezuela Mexico Chile Exhibit 3: Hardings Gross Sales to Latina America, 1978-1985 (in thousands of US$)
- 13. 0 100 200 300 400 500 600 700 1978 1979 1980 1981 1982 1983 1984 1985 Brazil Exhibit 3: Hardings Gross Sales to Brazil, 1978-1985 (in thousands of US$)
- 14. Brazil Economy Currency Inflation (Cruzeiro-US Dollar) between 1978 and 1985 : + 50 000% Foreign debt between 1977 and 1982 : + 225 % By the end of the 1970s, country is forced to meet payment interest Self-sufficiency policy during the 70s : Promote import of basic industrial equipment During the 1980s, also called the 束 lost decade 損, the GDP (Gross Domestic Product) increased at an average annual rate of only 2.9%. Harding Tool sales rose Harding Tool sales nose-dived
- 15. 1 10 100 1000 10000 100000 1978 1979 1980 1981 1982 1983 1984 1985 Exchange rate Cruzeiro-US Dollar, 1978-1985 (in thousands of Cruzeiro)
- 16. Exhibit n属4 Harding should add 5-10 percent on to the cost of the gears to cover additional costs. Harding needs to make sure they could actually sell the shoes. The title to the shoes should be received before even one gear was shipped. New situation for Harding Tool Corporation No final decision taken during the meeting
- 17. Statement Should we take the risk and change our business habits ? What is the long-term vision of Harding tool company ?
- 18. Solution 1 Decline the offer + No risk with the shoes - Loss of a potential benefit - Loss of influence in the Latin American market Advantage Drawback
- 19. Solution 2 Accept the offer + Develop a new way of trading for the future + Make profit + Increase our influence on the Latin American market - Take the risk to not sell the shoes - Pay the 2% commission - Appear desperate Advantage Drawback
- 20. Solution 3 Negotiate the offer + Bargain to gain a better deal + More time to think about it - Take the risk to cancel the deal - Increase the commission Advantage Drawback
- 21. Solution 4 Try with a sample of the shoes + Decrease the risk + Check the integrity of the Brazilian company - CIC may lose patience - Slower income - Complicate the process Advantage Drawback
- 22. Solution 5 Create a subdivision to deal with the shoes + Save money by not paying the commission - Take a big risk - Invest money - Take time Advantage Drawback
- 23. Sum Up 1 Reject the offer 5 Create a subdivision 2 Accept the offer 3 Negotiate the offer 4 Try a little deal to test
- 24. Suggested Solution 2 Accept the offer 1 Reject the offer
- 25. Sum Up 1 Reject the offer 5 Create a subdivision 2 Accept the offer 3 Negotiate the offer 4 Try a little deal to test
- 26. Thank you for your attention. Any questions ? Sources : International Economics G.W. University Analysis of recent trends in U.S. Countertrade