The Far East Trading
Autor: Jannisthomas • January 16, 2018 • 1,137 Words (5 Pages) • 487 Views
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Finally, a third impact, this time a long- term one with strategic implications, came from the operating exposure of the company. The Asian Crisis was deemed, at that time, to cause an economic recession in the area (although this indeed happened, the countries involved recovered extremely fast), which would mean an overall lower demand on the market. Hence, at this time, the company could have asked itself whether its presence in the area could prove profitable in the next years to come.
All these short- term and long- term implications of the Asian Crisis gave way to another impact: the significant drop in the company’s share price.
4. Unfortunately, and this is an important point to be made, the Asian flu could not be cured, but the company could indeed take some actions in order to minimize its effects.
There are two alternative choices for the company. The first one would mean the liquidation of the non- core businesses for the company, immediately and at any price. This would mean extra capital that could be used to pay up some of the debts that the company had accumulated and send a positive signal to the shareholders that the company had a well determined plan which would pull the company out of the crisis.
The second alternative choice for FETC would be to wait and sell the non- core businesses at a later time, if this was still needed. This solution had two advantages. First of all, the company could later on sell them at a higher price, while in the meantime, they would continue to produce and generate cash flows.
In my opinion, corroborated with what actually happened in the area after the Asian Crisis, the best solution would be to wait. From my knowledge, these countries have swiftly recovered after the crisis and their economies are now growing and developing at the same rate as precious to the crisis. After a period of time, many of FETC’s business units could begin to grow profitable again and the company would only need to sell those that aren’t performing as well, at a higher price, as mentioned.
Bibliography
1. Case online at www.t-bird.edu/faculty_research/case_series/cases_1999/far_east_trading.htm
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