5. What do you think Chami should do about the sawmill? Elaborate on the advantages and disadvantages of vertically integration (owning the sawmill) provides Chabros and whether such provides a greater competitive advantage over Chabros? Include discussion of currency and future events in your answer.

In 2007 Chami doubled its capacity by investing more than $11 million to buy a Serbian sawmill.

How Currency changes affects the demand
Generating most of its sales in Dubai and Saudi Arabia, which have its currencies bounded at the U.S. Dollar, but its sawmill located in the European Union puts Chabros sometimes in an advantageous and sometimes in a disadvantageous position.
For instance, in times of a strengthened Euro or a weakened U.S. Dollar European goods are relatively more expansive than goods imported from countries which trade and price in U.S. Dollar.
As a consequence, the amount of goods purchased from the European sawmill will decrease in terms of a strengthened euro and/or a weakened U.S. Dollar, but will increase in terms of a weakened euro and/or a strengthened U.S. Dollar.

€⇒€⁄$⇒EX⇒IM
€⇒€⁄$⇒EX⇒IM

The impact of the fluctuating exchange rate constitutes a threat for the company, difficult to predict. Owning the sawmill constitutes in this reference a disadvantage and an advantage, because if Chabros would have an contract with an European supplier and a similar contract with another supplier located in Russia, for example to purchase its European wood, instead of owning the whole sawmill, Chabros would be able to purchase its European products always at the lowest cost, independent from the actual exchange rate.

Depreciation of the Euro
Chabros in the role of a manufacturer:
➢ benefits from increasing sales at the Serbian sawmill
Appreciation of the Euro
Chabros in the role of a manufacturer:
➢ harmed by decreasing