For the past year, however, rising world oil prices had caused Gamali to run a significant balance-of-trade deficit, and inflation had risen to 15 percent from a prior low of 8 percent. Inflation was also fueled by government spending to try and offset unemployment, which was currently estimated at 48 percent. High unemenile delinquency and drug addicted to a number of social problems, including juverile treaty with the government, the sough rebel groups had recently signed intermittent armed conflict from separatist gouth of Gamali was still plagued with Gamali Air originated in 1965 when it groups and bandits. (SOE). As a result of privatization, 30 it was established as a state-owned enterprise Gamali business group whose other prount of the company had been sold to a trading company, and investments in companies included several hotels, a government retained the remaining 70 construction and textiles. The Gamali Paris, Lyons, Marseilles, London, and Nercent of the airline. With flights to to become the leading carrier in Africa. York, the stated goal of Gamali Air was the two additional planes would add to the airline's current fleet of four planes. Gamali Air had purchased Boeing and Airbus aircraft in the past, but it was now in the market for planes appropriate for medium hauls. The airline was expanding its regional service within Gamali primarily to service increased demand from tourists visiting its wildlife parks. Jennifer had supervised the original bid for the sale. Now the vice president of Gamali Air had formally notified her that Ameridere was one of two finalists for the contract. Their remaining competitor was a Brazilian firm that Ameridere had never before bid against. However, Jennifer knew that the Brazilian firm, which was about half the size of Ameridere, was strong in Latin America and Asian markets and had recently won a substantial contract in Europe. Both firms specialized in making smaller planes for regional markets. For example, Ameridere's L700 Turboprop was designed for flights shorter than 500 miles and carried 86 passengers. Ameridere was especially well known for the comfort and quietness of its planes, as well as its after-sales service. The Brazilian firm was well known for the creative financing packages it offered customers. Although the recent communication from Gamali Air was exciting, Jennifer realized that Ameridere would have to respond quickly to three requests forwarded by its potential customer: Ameridere was now asked to present a bid for after-sales service and training for flight and maintenance crews. - Management at Gamali Air also suggested that payment for the planes be mad by countertrade. The airline would arrange through the Gamali government t deliver fertilizer or phosphate valued at $46 million over a period of three year These products would be valued at their world market price less 5 percent on th day it was received by Ameridere. The 5 percent was supposed to cover the co of shipping the products to possible markets in France or Spain. Finally, Ameridere was asked to agree to quote the price in Gamali dinars inste of U.S. dollars. The vice president of Gamali Air reminded Jennifer that the din had been pegged 1:1 to the euro three years earlier and the euro had increased percent against the dollar in the past year. He noted that if the sale had be concluded a year ago, Ameridere would have realized 30 percent more dollars ite Gamali Air Jennifer Beaudreau, an account manager at Ameridere, was very excited to learn that Gamali Air was seriously considering purchasing two of her company's L700 Turboprop planes. Ameridere had been invited to bid on the contract and had subsequently offered to deliver the two planes for US\$46 million. Gamali Air was to pay $12 million in cash upon delivery, $12 million one year later, and $22 million three years after delivery. Interest charges were already included in the $46 million bid, Gamali, once a part of French West Africa, was now a multiparty democracy with a population of 10 million, 85 percent of whom were Muslim. The GDP per capita in Gamali was only $1,600, and the illiteracy rate remained at about 60 percent. The main industries of Gamali were tourism, agriculture, fish processing, phosphate mining, fertilizer production, and petroleum refining. The latter required the importation of oil since Gamali had no crude oil reserves itself. The country's exports of $1.1 billion included fish, peanuts, refined petroleum products, phosphates, and cotton. Tourism was another substantial source of foreign exchange. Jennifer knew that her company wanted to expand out of its current markets in North America and Europe where sales growth had slowed, and management at Gamali Air had intimated that, all things being equal, they would prefer to work with an American rather than a Brazilian supplier. However, Ameridere had never become involved in countertrade or pricing in foreign currencies. As she sat down to develop answers to the requests made by Gamali Air, Jennifer remembered what her boss had said that morning: "Let's make them a counteroffer both sides can live with." Discussion Questions 1. Evaluate Gamali Air's countertrade proposal. 2. Evaluate the proposal to quote the price in dinars rather than in U.S. dollars. 3. How would you address each of Gamali Air's requests? Develop a counterproposal that "both sides can live with." Explain why your proposal would be reasonably attractive to both Ameridere and Gamali Air