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Baker Adhesives

In: Business and Management

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Case 37 – Baker Adhesives
Background/Facts
This case is about Baker Adhesives which is a small company that manufactures specialty adhesives in Newark, NJ. The setting is June of 2006. Baker Adhesives was a modest company founded by Doug Baker’s father who was a chemist and believed in flexible production systems. Baker Adhesives had recently forayed into international markets with a sale to Novo, a Brazilian toy manufacturer. Alissa Moreno was a sales manager and needed to meet with Doug to discuss the recent results. Going into the meeting Doug is excited at the prospects of finding new markets. As U.S. manufacturing continues to migrate overseas, he is under intense pressure to find new markets. This recent sale to Novo had been a financial boost to Baker Adhesives. The company was able to easily meet the order and in fact it freed up some raw material the company had in inventory. The purpose of the meeting was to finalize details on a new order from Novo that was to be 50% larger than the original order. When the meeting started, Moreno hit Baker with the bad news immediately. The problem was that since Novo order was denominated in Brazilian, the payment from Novo had to be converted into U.S. dollars at the current exchange rate. Exchange rates had changed since the time Baker Adhesives and Novo had agreed on a price, the value of the payment was now substantially lower than anticipated. This was going to hurt profit. So obviously Baker was concerned and wanted to know what could be done, so they could continue to do business internationally.
Analysis/Decision
This deal was initially thought to be a good financially for Baker Adhesives. Although, after factoring in exchange rates, this was not the case. In the original order, Novo was charged 104,338.30 BRL for their purchase. After the exchange of currency from BRL to

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