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Edison Part 3: Location Decisions Assume you have decided to build one plant in each country to serve the local market and to export as needed. Answer the following questions. For any information not presented, use your own logical assumptions. You do not have to research facts elsewhere. 1. Pick any country and determine the currency risk. You only need to pick one country but consider both a weakening and strengthening of the local currency against the currencies of the other two countries 2. Pick a plant in a different country than part A. Choose one of the following scenarios and describe the implications for that country's plant, including changes in the returns. Describe how you might adjust your business model if you expected these changes to remain for several years. Choose only one of the following scenarios: A. To protect its local supply of batteries, China has imposed a 100% tariff on exported batteries. Therefore, the cost of batteries sold outside of China is twice what it was. B. The U.S. has imposed 50% tariffs on all imported electric vehicles, replacing the tariffs it had in place prior C. The Brazilian Economic Miracle took hold. Inflation is now forecasted at 2% per year while inflation in the US is seen as 3% per year. Chinese inflation expectations remain at 59s per year. The Brazilian Real is now at R2.5: $1. Edison is a new company that plans to introduce an electric car using a novel battery technology available in China. You will need to make decisions about where to build plants to satisfy demand in three countries: Brazil, China and the U.S., which the following currencies: Brazilian Real (BRL), Chinese Yuan (CNY) and US Dollar (S). Your marketing department tells you that it has identified three key markets for the cars. Country Brazil China United States Expected Annual Demand 100,000 cars 150,000 cars 200,000 cars Expected Price BRL 112,000 CNY 210,000 $ 30,000 Your in-house economist gives you the following analysis of each country Country Exchange Rate Expected Annual inflation rate Brazil 3.7 BRL: 1 USD 10% China 6.9 CNY: 1 USD 5% United States 2% The economist also suggests that political uncertainty in Brazil has led to a decrease in foreign direct investment. The exchange rate has been steady for the last year, but the economist noted a sharp drop in foreign reserves. Brazil's central bank has no stated policy about the exchange rate

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