Discuss the primary reasons why linton records may benefit

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Reference no: EM131296905

Linton Records is a U.S. producer of recordings of soul music, which are sold in the United States and exported to Europe. A year ago, the company entered into a joint venture with a distributor in London to retail its records. It is planning to import British rock into the United States, as it has just entered into a strategic alliance with this distributorship. Sales are expected to increase 20 percent a year over first-year sales of £12.5 million. Linton receives payment for its exports in British pounds.

The dollar has been weakening against the British pound. Linton Records has learned that its product line will be subject to a tariff on goods imported into Europe. The tariff is related to the European Union, the common market alliance that includes many European countries. The company has expressed concern because it believes that political intervention disrupts the free flow of trade as it exists in the United States. Management is developing a strategic alliance with a French manufacturer to produce compact discs for the entire operation.

The company expects to cut production costs by 25 percent because of the French firm's advanced technology. In this strategic alliance, the French manufacturer will buy all its raw materials from a company in Bonn, Germany. In addition to the distributorship in London, Linton Records plans to open new markets in six different countries in western Europe in the future.

Questions
1. Discuss the primary reasons why Linton Records may benefit from its international business

2. How will Linton Records be affected if the dollar weakens further?

3. Should music imported by U.S. firms from England be subjected to a tariff?

Reference no: EM131296905

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