Blueberry: Information about the company Blueberry manufactures products that are technologically obsolete and have a short lifecycle. It is intended to keep at least 18 months of each product in production so that it can recover the high cost of product development and achieve acceptable profit before the product becomes obsolete. Blueberry has always manufactured its products in Deeland, where all materials come from. Kayland Sales Opportunity One of the three newly developed products, Red, Blue and Green, was exported to Kayland due to an increasing level of income for the population. In Kayland, the rate of technological obsolescence is slower than in Deeland. The estimated demand levels, selling prices and costs of the three products are listed in Appendix 1. Stakeholders' views on the risks of Kayland In view of the export proposals to Kayland and, in particular, on which of the three newly developed products to be exported, three of the main stakeholder groups, staff, managers and shareholders of Blueberry were consulted. Following the recent failure of another product launch, employees are cautious about the proposal. The product was withdrawn because it violated misunderstood safety regulations and, as a result, several employees lost their jobs. The directors, who are all individually rich, have served on the board for many years and are keen to receive the large bonus that is currently only offered on the full profit made by the new product throughout its lifetime. Shareholders are neither avoiding nor seeking risk, but want the company to take into account Kayland's external environment in order to maximise its performance, whatever of the products to be exported is chosen. They asked to produce a PEST * environmental analysis in Kayland. In a first draught, the rate of exchange between the Deeland dollar (D $) and the Kayland dollar (K $) is an important economic factor that could have an impact on performance. * Political, economic and socio-cultural Required: (a) To advise which of the three newly developed products would be exported by each of the three main stakeholder groups based on their respective risk appetites to Kayland. (b) Explain the problems of using techniques of risk analysis and uncertainty that you have used in part (a) (c) Advise shareholders how Blueberry can maximise its performance by analysing the external environment in Kayland through a PEST analysis. You must NOT produce a PEST analysis. Estimated demand, sales prices and costs of the three newly developed products1 Blue, Green, Red Total Request (units) 2 50,000 60,000 160 thousand Price of sale (K $) 3 800 900 600 600 Total cost unit (D $) 4 240 300 250 4 340 300 Notes to the Annex 1 The cost of development is sunk and can be ignored. 1 2 The estimated product life of each of the three products is the same and the total demand for the entire product life is the same. 3 D $100 = K $200 is the current exchange rate between D $and K $. Blueberry's Chief Financial Officer has estimated that there is a 75% probability that the average exchange rate of the D $will increase by 10% over the K $, while the average currency of the dollar will weaken by 10% over the K $by 25%. At the current exchange rate, 50 percent of each product's total costs are for materials imported from Kayland, invoiced in K $. No inventory will be opened or closed, whichever of the three new products is chosen.