A Certain Company Known as Bestbuy and Managment (Essay Sample)

TITLE
INSTITUTION AFFILIATED
NAME
PROFESSOR’S NAME
COURSE
DUE DATE
Financial Currency Risk
Financial exchange risk is a type of financial risk that exists when a financial transaction is denominate in a different currency other than the base currency of the particular company. It may also occur when the foreign subsidiary of the firm maintains a financial statement in a currency different from the reporting currency of the consolidated entity. The risk is brought about when there is an adverse movement in the exchange rate of the denomination currency in relation to the base currency prior the date when the transaction was completed. In the BestBuy, company there is a market risk that is developed from changes in foreign currency exchange rates related to the company international operations. The company utilizes foreign exchange forward contracts in order to manage the foreign currency exposure to certain recognized receivable, forecast inventory purchases, and payable balances. The net objectives in holding the derivatives are to reduce the volatility of net earnings and cash flow that is associated with changes in foreign currency exchange rates (Allayannis 2001). In the company, foreign management strategy it mainly includes derivatives that are not only designated as hedging instruments that mainly have terms for up to 12 months. The notional amount that is related to the foreign exchange forward contracts outstanding between 1 February 2014 and 2 February 2013 was about $157 million and $173 million respectively. The fair value that was recorded in the Consolidated Balance sheet related to our foreign exchange forward contracts outstanding at 1 February 2014 and 2 February. 2013 was $3 million and 1 million respectively . The amount that was recorded in the consolidated statement of Earning related to all contracts settled and outstanding was a gain of $ 4 million in the fiscal year 2014 and gain of 1 million in the fiscal year of 2013.(Bodnar 1995)
"The strength of the U.S. dollar compared to the Canadian dollar since the end of fiscal 2013 (11-month) had a negative overall impact on our revenue and earnings as the Canadian dollar translated into fewer U.S. dollars. The negative impact on revenue from the Canadian dollar depreciation was partially offset by a positive impact from the appreciation of the Chinese yuan and Mexican peso. We estimate that foreign currency exchange rate fluctuations had a net unfavorable impact on our revenue in fiscal 2014 (12-month) of approximately $159 million and a net unfavorable impact on earnings of $6 million. In fiscal 2013 (11-month), the impact of foreign currency exchange rate fluctuations had a favorable impact on our revenue of approximately $28 million and an unfavorable impact on earnings of $16 million.”
Global Operation
The International president is responsible for all areas relating to International segment. Leaders of the International business report directly to the International President. The Canada store operational are very similar to those in the Domestic segment, centrally controlled advertising, pricing, inventory policies and merchandise purchasing. The corporate management performs support capabilities to the U.S Best buy stores; all of the Canada stores use a standardized operating system, which includes the procedure for inventory, customer relations, store administration, merchandise display. The retail operation mainly includes two principal store brands. The future shop store has commissioned sales associates whereas in the Best buy branded stores in Canada like in the United States Best Buy stores are noncommissioned.(Kritzman 1993) The five star store utilizes vendor employee and full time sales associates in order to sell the products. The Corporate retail management generally controls merchandise purchasing, pricing, advertising, and inventory policies.
Merchandise and Services
In Canada the future shop and Best Buy branded stores have offers in Computing and mobile phones, Consumer Electronics, Entertainment while in the Future Shop only Appliances. Even though the Future Shop and Best Buy branded stores in Canada offer, the same products there are different in brands and in selection. In China, the Five Star stores offer four revenue categories: Consumer Electronic, Computing and Mobile Phones, Appliances and service. The services and products in these revenue categories are similar to those of our Domestic segment.
Geographic Segment beyond the U.S
The International segment is mainly comprised of (i) the Canada operation under the brand names Best Buy, Best Buy Mobile, Cell shop, Connect Pro, Future Shop and Geek squad
(ii) All the China operation, operating under the Brand name Five Star and Best Mobile
(iii) All the Mexico operation that are operating under the brand name Best Buy, Best Express, and Geek Squad. The Best Buy Mobile store with in store concepts in all Best Buy branded stores in Canada as well in the select five stores.
In 2009, Best Buy acquired a 50 percent controlling in Best Buy Europe Distribution Limited, a venture with Car phone Warehouse group. On 26 June 2013, we sold our 50 percent ownership interest in Best Buy Europe to CPW (Bansel 2000). This was in line with the aim of the company to align the fiscal report periods and comply with the statutory filling requirement in a certain foreign jurisdiction, the consolidation of the financial results of Europe, Mexico and China operation on a one-month lag. Consistently with the consolidation, the financial and non- financial information presented in the Annual Report on Form 10-K relative to Europe, China and Mexico
The following table represents the geographic information
Net sales to customer

12 months

11 month

12 months


2014

2013

2012

United States

35,831

33,222

37,596

Canada

4,522

4,818

5,635

China

1,806

1,574

2,069

Other

251

213

157

Total Revenue

$ 42, 410

$39,827

$45,457

Long-lived Assets




United States

2,190

2,404

2,507

Europe

-

352

352

C...