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Question # 4

Six months have passed since you first heard of the possibility that Slide might relocate its Head Office to the Middle East.

You have been called into William Seaton, the Director of Finance’s office:

“After lots of deliberation, the Board has reached a final decision on the Head Office move. It has been decided that we will relocate to the Middle East.

I need you to draft a report on the following matters:

First of all, we need a strategy for the choice of country to which we are going to relocate. I need you to think about the strategic decisions that will have to be taken so that we obtain the best possible value from the relocation.

Secondly, we have to think about the change management issues with respect to Slide’s senior managers. We have a good team of senior managers and Board members and we wish to see them relocate with the company. I need your thoughts on this.

Thirdly, there will be significant change issues for the other staff members. We cannot justify moving all of them to the Middle East, but we will be relying on them to ensure an orderly transition from the current Head Office to the new one. They will be busy for several months, then most will be made redundant. The rest will be offered new jobs with Slide because we will need a scaled down administrative presence in Kayland. Again, I need your suggestions for this.

Finally, we need to put together a transition team to deal with the many administrative issues that the move will create. I need you to suggest a clear job description for the transition team that explains the main operational tasks required, so that the directors can be left free to focus on the strategic management.”

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Question # 5

From: Abdhulla Al- Waihabi, Regional Manager – Middle East – Slide

To: William Seaton, Director of Finance

Subject: Press article

Hi William,

I have just had a telephone call from a journalist at Business News to ask for a comment on a story that it plans to run. As you know, we purchased oil wells in the AZ40 field last year in order to bring them back to full production. We got the wells for a good price because the previous owner was struggling to maintain oil pressure and it appeared that the recoverable reserves in that field were close to exhaustion. Our experts worked out a plan to drill a hole and pump water into the well to force more oil to the surface. That is a standard industry technique. Our geologists are the best in the industry and so we are better than most at bringing wells back on stream.

It now appears that we are being blamed for an environmental catastrophe. Our pumping station is only one kilometre from the sea and there are reports of oil coming to the surface along the coast close to where we are operating. We have only just started operations and there are fears that we have ruptured a rock formation with our high pressure pumping.

I have ordered an immediate halt to all pumping activity, but the oil could continue to bubble up for years. The coastal area has some important coral reefs and there are fishermen who depend on shellfish that can be found there.

I told the journalist that she would have to wait for a response from Slide’s Board. Business News is a European newspaper, so any comment from you will carry more weight anyway.

I am sorry to be the bearer of such bad news.

Abdhulla

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Question # 6

Reference Material:

You have received the following email from Marcus Svenson, Finance Director:

From: Marcus Svenson, Finance Director

To: Senior Finance Manager

FW: Pricing

Hi,

I am forwarding an email from Sarah Johns.

Sarah has not been with us for very long and this is her first experience of dealing with a currency price movement.

I am really busy, so I need you to respond to her requests. Please email her as soon as possible.

Marcus

From: Sarah Johns, Marketing Director

To: Marcus Svenson, Finance Director

Subject: USD movement

Hi Marcus,

A lot of our biggest customers are threatening to cancel orders unless we reduce our selling prices. Timber and associated products are commodity items that are priced in USD, so I thought that our prices would automatically remain competitive regardless of what happened to the USD. I am particularly confused over domestic sales, because many of the customers who have threatened to cancel are based in this country and we invoice them in M$.

Please help me to understand why the M$/USD exchange rate can affect our competitive position in this way.

I also wish to know why you have chosen to do nothing to hedge against this risk. If you look at the attached article you will see that the USD is an issue in the business news.

Sarah

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