{"id":23868,"date":"2022-01-10T09:10:16","date_gmt":"2022-01-10T09:10:16","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/case-analysis-for-belco-global-foods-1157\/"},"modified":"2022-01-10T09:10:16","modified_gmt":"2022-01-10T09:10:16","slug":"case-analysis-for-belco-global-foods-1157","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/case-analysis-for-belco-global-foods-1157\/","title":{"rendered":"Case analysis for belco global foods. 1157"},"content":{"rendered":"
\n

\u00a0<\/p>\n

I need to do case analysis for Belco Global Foods.
\n
\nPlease answer attached files and give me answers :)
\n
\nAmerican Samoa\tWire transfer in advance\t1\t0\t1\t3.7\t4.0\t7,036
\nAmerican Samoa\tOpen account\t0\t3\t1\t3.7\t4.0\t7,036
\nAmerican Samoa\tOpen account\t0\t2\t1\t3.7\t4.0\t7,036
\nAmerican Samoa\tOpen account\t0\t3\t1\t3.7\t4.0\t7,036
\nAngola\tWire transfer in advance\t1\t1\t0\t3.0\t2.5\t6,622
\nArmenia\tWire transfer in advance\t1\t2\t0\t3.0\t2.5\t5,853
\nAruba\tOpen account\t0\t3\t0\t3.5\t3.5\t1,874
\nAruba\tOpen account\t0\t3\t0\t3.5\t3.5\t1,874
\nAustralia\tWire transfer in advance\t1\t2\t1\t4.0\t4.0\t9,918
\nBermuda\tOpen account\t0\t2\t1\t3.0\t3.5\t826
\nChile\tWire transfer in advance\t1\t1\t0\t4.0\t3.5\t5,020
\nChina\tWire transfer in advance\t1\t0\t0\t2.5\t2.0\t6,934
\nChina\tWire transfer in advance\t1\t1\t0\t2.5\t2.0\t6,934
\nChina\tWire transfer in advance\t1\t2\t0\t2.5\t2.0\t6,934
\nChina\tWire transfer in advance\t1\t1\t0\t2.5\t2.0\t6,934
\nChina\tWire transfer in advance\t1\t2\t0\t2.5\t2.0\t6,934
\nChina\tWire transfer in advance\t1\t3\t0\t2.5\t2.0\t6,934
\nChina\tWire transfer in advance\t1\t1\t0\t2.5\t2.0\t6,934
\nColombia\tWire transfer in advance\t1\t1\t0\t3.5\t2.5\t2,379
\nColombia\tLetter of Credit\t0\t1\t0\t3.5\t2.5\t2,379
\nColombia\tOpen account\t0\t1\t0\t3.5\t2.5\t2,379
\nDominican Republic\tOpen account\t0\t2\t0\t3.5\t2.5\t1,476
\nGhana\tWire transfer in advance\t1\t1\t1\t2.8\t2.5\t5,276
\nGuam\tOpen account\t0\t1\t1\t3.0\t3.5\t7,935
\nGuam\tOpen account\t0\t2\t1\t3.0\t3.5\t7,935
\nGuam\tOpen account\t0\t3\t1\t3.0\t3.5\t7,935
\nHaiti\tWire transfer in advance\t1\t1\t0\t2.5\t1.0\t1,436
\nJamaica\tOpen account\t0\t0\t1\t3.5\t3.0\t1,446
\nJamaica\tOpen account\t0\t1\t1\t3.5\t3.0\t1,446
\nJamaica\tOpen account\t0\t2\t1\t3.5\t3.0\t1,446
\nJapan\tLetter of Credit\t0\t3\t0\t4.0\t3.5\t6,783
\nKorea, South\tLetter of Credit\t0\t2\t0\t3.5\t3.0\t6,945
\nMalaysia\tWire transfer in advance\t1\t2\t1\t3.5\t3.0\t9,536
\nMalaysia\tOpen account\t0\t0\t1\t3.5\t3.0\t9,536
\nMalaysia\tOpen account\t0\t1\t1\t3.5\t3.0\t9,536
\nMexico\tWire transfer in advance\t1\t1\t0\t3.0\t3.0\t1,886
\nMexico\tOpen account\t0\t2\t0\t3.0\t3.0\t1,886
\nMexico\tOpen account\t0\t3\t0\t3.0\t3.0\t1,886
\nMexico\tOpen account\t0\t2\t0\t3.0\t3.0\t1,886
\nMexico\tOpen account\t0\t3\t0\t3.0\t3.0\t1,886
\nNetherlands Antilles\tOpen account\t0\t1\t0\t3.5\t3.5\t1,919
\nPuerto Rico\tWire transfer in advance\t1\t1\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t1\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t2\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t3\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t1\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t2\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t3\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t2\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t3\t1\t3.7\t4.0\t1,558
\nPuerto Rico\tOpen account\t0\t2\t1\t3.7\t4.0\t1,558
\nRussia\tWire transfer in advance\t1\t1\t0\t2.5\t3.5\t4,866
\nRussia\tWire transfer in advance\t1\t0\t0\t2.5\t3.5\t4,866
\nRussia\tWire transfer in advance\t1\t2\t0\t2.5\t3.5\t4,866
\nRussia\tWire transfer in advance\t1\t3\t0\t2.5\t3.5\t4,866
\nRussia\tWire transfer in advance\t1\t1\t0\t2.5\t3.5\t4,866
\nRussia\tWire transfer in advance\t1\t0\t0\t2.5\t3.5\t4,866
\nRussia\tOpen account\t0\t3\t0\t2.5\t3.5\t4,866
\nRussia\tOpen account\t0\t3\t0\t2.5\t3.5\t4,866
\nSpain\tWire transfer in advance\t1\t1\t0\t3.6\t3.5\t3,788
\nSpain\tOpen account\t0\t2\t0\t3.6\t3.5\t3,788
\nSpain\tOpen account\t0\t3\t0\t3.6\t3.5\t3,788
\nSri Lanka\tOpen account\t0\t2\t1\t3.5\t2.2\t8,951
\nTaiwan\tWire transfer in advance\t1\t1\t0\t3.5\t4.0\t7,864
\nTaiwan\tLetter of Credit\t0\t1\t0\t3.5\t4.0\t7,864
\nTrinidad and Tobago\tOpen account\t0\t3\t1\t3.5\t4.0\t2,176
\nUkraine\tWire transfer in advance\t1\t2\t0\t3.0\t1.5\t4,872
\nUkraine\tWire transfer in advance\t1\t3\t0\t3.0\t1.5\t4,872
\nUnited Arab Emirates\tLetter of Credit\t0\t0\t1\t3.0\t4.0\t7,057
\nUnited Kingdom\tOpen account\t0\t3\t1\t3.0\t3.5\t3,669
\n
\n_______
\nProfesso
\nnot refle
\nserve as
\nCopyrig
\nwrite Ha
\nphotoco
\nC . F RI T
\nMATTH
\nBel
\nIn
\nhow t
\ncredit
\nreceiv
\npoultr
\nmore
\nsuper
\nof com
\nExhib
\nBe
\nteam\u2019
\nreceiv
\nany g
\ncustom
\nsurviv
\nThere
\novera
\nTh
\nbased
\naccou
\nwith B
\nhad a
\nwas c
\npaym
\nArnol
\nHist
\nTh
\nLeah
\nworke
\ntogeth
\n_______________
\nor C. Fritz Foley an
\nect the actual oper
\ns endorsements, sou
\nght \u00a9 2010 Presiden
\narvard Business Sc
\nopied, or otherwise
\nTZ FOLEY
\nHEW S . JOHNSO
\nlco Glo
\nlate 2009, Pa
\nto handle a pa
\nt team at Bel
\nvable. Since
\nry, meat and
\nthan 125 cou
\nrvising sales t
\nmpleting $1 b
\nbit 2 describes
\netween 40 and
\ns job to ma
\nvables were d
\ngiven time B
\nmers spread
\nval and grow
\nefore, if even
\nall profitability
\nhe particular r
\nd in Moscow,
\nunt that Belco
\nBelco on ope
\nan outstandin
\ncertainly not t
\nment, but Belco
\nld had no inte
\ntory of Bel
\nhe beginnings
\nBlair, who w
\ned in their s
\nher to open th
\n_______________
\nnd Research Associ
\nrations of any real
\nurces of primary da
\nnt and Fellows of H
\nchool Publishing, Bo
\nreproduced, poste
\nN
\nobal Fo
\nam Arnold, H
\narticular over
\nlco, had the t
\nits founding
\nother food p
\nuntries around
\nto Russia, Asi
\nbillion in ann
\ns its destinatio
\nd 50 percent o
\nake sure cus
\ndenominated i
\nBelco could
\nover the enti
\nwth of the co
\nn a few receiv
\ny would suffe
\nreceivable in
\n, Russia that
\nwanted to lo
\nen account ter
\ng balance for
\nthe first custo
\no had a super
\nention of mar
\nlco
\ns of Belco can
\norked togeth
\nsame office b
\nhe New Orlea
\n_______________
\niate Matthew S. Joh
\nentity. HBS cases
\nata, or illustrations
\nHarvard College. T
\noston, MA 02163, o
\ned, or transmitted, w
\nods
\nHead of Glob
\nrdue account
\ntask of overs
\nin 1978, Belc
\nproducts. Mo
\nd the world.
\nia, and the Am
\nnual sales. E
\non breakdow
\nof Belco\u2019s sale
\ntomers fulfil
\nin U.S. dollar
\nhave outstan
\nire globe. Th
\nompany. Ind
\nvables turned
\ner markedly.
\nquestion was
\nhad been tra
\nse, as it had b
\nrms. In addi
\nan additiona
\nomer in Belco
\nrb track recor
\nrring the recor
\nn be traced to
\ner at Breaux B
\nbuilding. The
\nans office of T
\n________________
\nhnson prepared thi
\nare developed sole
\nof effective or inef
\nTo order copies or
\nor go to www.hbsp
\nwithout the permis
\nbal Credit at B
\nreceivable. A
\nseeing risk m
\nco had quick
\nost product w
\nThomas Quin
\nmericas, was
\nxhibit 1 desc
\nwn.
\nes were made
\nlled their pa
\nrs. Given its s
\nnding accoun
\nhe credit team
\ndustry margin
\nd into bad d
\ns for $84,000,
\nading with B
\nbecome a loya
\nition to the $8
\nal $78,000 that
\no\u2019s more than
\nd of collecting
\nrd now.
\no the 1970s i
\nBridge Protei
\nthree forme
\nThevenet Exp
\n_______________
\nis case. Names, figu
\nely as the basis for
\nffective managemen
\nrequest permission
\np.harvard.edu\/edu
\nssion of Harvard Bu
\nBelco Global
\nArnold, along
\nmanagement a
\nkly grown to
\nwas sourced in
\nnn, who had
\nleading the c
\ncribes Belco\u2019s
\non open acco
\nayment oblig
\nsize and the b
\nnts receivabl
\nm thus played
\nns for food m
\ndebts that nee
\nand it was w
\nBelco since 20
\nal enough cus
\n84,000 that w
\nt would come
\nn 30 year histo
\ng even in par
\nin New Orlea
\nins, happened
\ned an instant
\nporters, a pou
\nREV
\n_______________
\nures, and details ha
\nr class discussion.
\nnt.
\nn to reproduce mat
\ncators. This publica
\nusiness School.
\nFoods (\u201cBelc
\ng with the oth
\nand the colle
\nbecome a le
\nn the U.S. and
\nbecome Presi
\ncompany tow
\ns core produc
\nount terms, an
\ngations. Nea
\nbreadth of cou
\ne from hund
\nd a critical ro
\nmarketers we
\neded to be w
\nwith Kooritsa
\n005. Kooritsa
\nstomer to earn
\nwas overdue,
\ne due in 15 da
\nory that had
\nrticularly chal
\nans, LA, whe
\nd to meet And
\nt connection,
\nultry trading c
\n9-211-
\n: NOVEMBER 1 8
\n________________
\nave been disguised
\nCases are not inte
\nterials, call 1-800-5
\nation may not be d
\nco\u201d), was deb
\nher members
\nections of acc
\nading marke
\nd then export
\nident of Belco
\nwards the mile
\nct breakdown
\nnd it was the
\narly all sales
\nuntries it serv
\ndreds of diff
\nole in ensurin
\nere typically
\nwritten off, B
\nKiev, a whole
\na Kiev was n
\nn the right to
\nKooritsa Kiev
\nays. Kooritsa
\nfallen behind
\nllenging situa
\nen Alex Fishe
\ndrew Walker
\nand they ba
\ncompany. De
\n-033
\n, 2 0 1 0
\n______
\nd and do
\nended to
\n45-7685,
\nigitized,
\nbating
\nof the
\ncounts
\neter of
\nted to
\no after
\nestone
\nn, and
\ncredit
\ns and
\nved, at
\nferent
\nng the
\n2-4%.
\nBelco\u2019s
\nesaler
\nnot an
\ntrade
\nv also
\na Kiev
\nd on a
\nations.
\ner and
\nr, who
\nanded
\nespite
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n211-033 Belco Global Foods
\n2
\nfinding early success, they were forced to shut their doors due to heavy losses from speculative
\ntrading at the parent company.
\nThe team was not fazed, though. Propelled by dreams to own their own company, Fisher and
\nWalker started Belco in the office suite next door with $1,000 in cash, a line of credit, and a few phone
\nlines and office supplies left over from their previous employer. They brought in Jeff Taylor as an
\nadditional partner and were able to secure some early financing from the Washington, DC-based firm
\nDealy and Sons. The company quickly grew, and by the early 1980s the partners were able to buy out
\nDealy and Sons\u2019 stake.
\nOne factor that propelled Belco\u2019s rapid early growth was its commitment to understanding its
\nmarkets and its customers. Belco opened foreign offices and hired employees who could speak with
\ncustomers in their own language. The company\u2019s push to develop a foreign presence not only gave it
\na leg up in tracking market trends, but it was also part of its vision to build strong and mutually
\nadvantageous relationships with its suppliers and customers. Customers kept Belco informed of
\nlocal demands, and Belco offered suggestions to customers seeking to expand the scale and scope of
\ntheir operations. Its devotion to its customers reaped dividends; many customers had been with
\nBelco through several generations of leadership. By 2009, Belco had 18 offices on 4 continents and an
\nemployee base that spoke 22 languages and spanned 40 nationalities.
\nWhile Belco began as an exporter of U.S. proteins, the strengthening of the U.S. dollar in the early
\n1980s forced it to reevaluate its strategy, and it attempted to expand its business to become an
\nimporter of food products into the U.S. Importing opportunities became less attractive when the
\ndollar depreciated in the late 1980s, but Belco gained invaluable knowledge about foreign suppliers,
\nallowing it to source some products more effectively from other countries.
\nAlong with its supplier base, Belco made great efforts to diversify across the products it offered
\nand the countries it served. Belco had focused on marketing poultry products at its inception, but it
\nexpanded into pork and beef when Puerto Rican customers expressed interest in them. When it
\nlearned of demand for chicken feet in the Far East, it financed equipment for its U.S. suppliers to
\nprocess them. When China and Russia opened up to trade, Belco built a strong presence in each
\ncountry, securing large new markets for its products.
\nBelco\u2019s internal culture was one in which its employees were challenged and empowered to make
\ntheir own decisions. Employees were given a high degree of independence and encouraged to
\nsuggest new products or markets, and the company devoted substantial resources to training and
\ndeveloping its employees. It also fostered a spirit of camaraderie and created opportunities for
\nadvancement. Many employees who left Belco could not stay away for long and soon returned, a
\ngroup the company affectionately called the \u201cBoomerang Club.\u201d
\nAnother component of Belco\u2019s growth strategy was the development of its own branded products.
\nBelco\u2019s efforts to build its own brands helped it break free of commodity pricing practices and
\nestablish itself in smaller markets with brand-loyal customers. 10 to 15 percent of Belco\u2019s products
\nwent to consumers as a branded product.
\nCredit and Risk Management Practices
\nAs a marketer of frozen and refrigerated foods, Belco\u2019s business inherently came with substantial
\nrisk. The global credit and risk management team at Belco monitored these risks, playing a key role
\nin ensuring the company\u2019s profitability. The team was guided by the following mission statement:
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\nBelco Global Foods 211-033
\n3
\nBelco\u2019s global credit and risk management team of professionals are charged with the
\nresponsibility for financial and product risk assessments and collection activities of our entire
\ncustomer portfolio. We perform these functions in tandem with the strategic initiatives that
\nsupport Belco\u2019s worldwide business expansion. The department is aligned with sales and
\nmarketing to know each of our customers, their marketplaces, and the countries involved in
\nour global business platform.
\nWe will seek and obtain competitive advantage through finance, credit programs and
\nindustry terms that contribute to Belco\u2019s ability to leverage its global expansion. We do so
\nwhile selling to all customers that represent a prudent credit risk. We protect Belco\u2019s largest
\nfinancial asset, our accounts receivable, via check and balance systems as well as title retention
\nof cargo where appropriate due to credit terms and country of destination.
\nTo this end, the credit team learned everything it could about a new customer, and it continued to
\nmonitor the customer through each subsequent transaction. The team created a credit file on every
\nnew customer, regardless of credit terms. It collected information from a variety of sources. From
\nthe customer itself, it would obtain financial statements when possible, but only about 20 percent
\nprovided audited financials, and there were often inconsistencies in the information others provided.
\nSome customers had company brochures that Belco used as a resource. When sales personnel visited
\nlarger potential customers, members of the credit team joined them to \u201cview the market with their
\ncredit eyes.\u201d1
\nBelco learned what it could from a new potential customer\u2019s suppliers and from existing Belco
\ncustomers. It also sought bank references and obtained information from third-party reporting
\ncompanies like Dunn & Bradstreet and Sea Fax. The usefulness of such reports could be limited,
\nthough, as they primarily included information about past events. Once a credit file was opened it
\nwas never destroyed, and the credit team regularly reviewed and updated it. Additionally, for each
\ncustomer the credit team tracked credit terms, credit limits, payment history, renegotiations, claims,
\ndeductions, and other information.
\nAlong with customer-level data, the credit team tracked relevant country- and market-level
\nfactors. It monitored macro-level risks such as capital control policies that could cause payment
\ndelays, regardless of the credit rating of the customer. It tracked pressures on exchange rates, as a
\nsharp depreciation of a local currency could impair a customer\u2019s ability to pay Belco. It used U.S
\nembassy officials and other resources to check the veracity of market rumors.
\nThe competitive dynamics of a country was another factor that Belco tracked, as these dynamics
\ncould affect the choice of credit terms. If other suppliers offered favorable credit terms to customers,
\nBelco would need to as well to stay competitive. For example, smaller, more stable countries that
\nwere located close to the U.S. tended to be markets where customers traded on open account terms so
\nBelco had limited flexibility when setting terms there. Having many other customers in a country
\ncould create benefits for Belco as well. For example, if enough other potential customers existed in a
\nmarket, Belco was more willing to sell on sight draft terms, as these terms could be viewed as
\nreplacing customer risk with market risk.
\nThis information it collected was integral to Belco\u2019s decisions over which kinds of credit terms to
\noffer a customer. When making these decisions, Belco considered the above factors along with its
\nexperience with a customer, the idiosyncrasies of a transaction, and many other pieces of information.
\nExhibit 3 provides a sketch of some information on two new customers that the credit team was
\n1 Interview with Pam Arnold, September 13, 2010.
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n211-033 Belco Global Foods
\n4
\ncurrently reviewing. Exhibit 4 illustrates a sample of terms offered to recent customers, and Exhibit
\n5 summarizes Belco\u2019s use of different credit terms in recent years.
\nThe credit team required the support of other departments at Belco to execute its credit policies. It
\nconstantly interacted with the sales team to ensure that the terms of the credit policy were followed
\nand to alert the sales team of any potential problems with a customer. It also used the sales team to
\nlearn more about customers. The credit team also required the support of the operations department
\nto track arrival and departure dates of its products and to ensure that the credit terms on a
\ntransaction were consistent with its Incoterms.2
\nAlong with its role in choosing credit terms, the credit team was also charged with collecting
\nBelco\u2019s receivables. The team followed a detailed set of guidelines to enhance the efficiency and
\nefficacy of its activities. Credit terms offered to a customer could not exceed 30 days after the arrival
\nof cargo in the destination port unless approved by Arnold, the Head of Global Credit. Collection
\nefforts intensified as soon as an invoice was due and no grace period was offered. The credit team
\nwas responsible for ensuring that customers were contacted on the due date of an invoice if payment
\nhad not been received and on a regular basis thereafter. The credit team made the utmost effort to
\n\u201cbuild rapport from day one,\u201d but at the same time to be \u201caggressive and assertive\u2026so that if a
\ncustomer was deciding whether to pay Peter or Paul, it would pay Belco first.\u201d3
\nThe credit team reviewed weekly exposure reports on Belco\u2019s accounts receivable that were
\nbroken down by customer and by due date, which allowed it to be fully knowledgeable at all times of
\nthe status of a customer\u2019s accounts. If an invoice was a certain number of days past due, the credit
\nteam put the customer\u2019s account on credit hold. Belco also implemented a cargo tracking system that
\nrequired the approval of the credit team before any goods were shipped or released. The credit team
\ncould refuse approval if there was a credit concern over a customer or if a previous payment was past
\ndue.
\nCollecting on its receivables as quickly as possible was of the utmost importance to Belco. At any
\ngiven time, it had roughly $100 million outstanding in accounts receivable. The average maturity
\nwas 30 days, and the interest rate associated with financing accounts receivable was roughly 10
\npercent. Although Belco hoped not to file claims on overdue accounts, it insured its receivables. This
\nnot only reduced Belco\u2019s borrowing costs, but it also protected it from catastrophic risk. Insurance
\ntypically covered 85-90 percent of contract value, and first losses were assumed by Belco. The
\ncompany paid a premium for the policy, and policies came with country, buyer, and term limits.
\nCredit Experiences
\nHistorically, Belco had limited credit losses: as of 2008, about 99.8 percent of its portfolio was
\ncurrent and write offs of bad debt were less than .00001 percent of sales. Belco\u2019s relationships with
\ncustomers and close monitoring of markets played a crucial role in helping it avoid large losses. For
\nexample, in 1994 Belco had about $10 million in receivables from customers based in Mexico and
\nbegan learning that these customers were having trouble collecting their own receivables. Coupled
\nwith this, macro-level concerns over excessive public and private debt and rumors surrounding the
\nrecent assassination of a presidential candidate and expected Congressional majority leader were
\ncreating an environment of instability. All these factors pushed Belco to reduce its exposure to the
\ncountry as quickly as possible. In December of 1994 the Mexican peso was devalued, significantly
\n2 Incoterms, which stood for International Commercial Terms, were a universally recognized set of definitions of terms used in
\ninternational trade developed by the International Chamber of Commerce.
\n3 Interview with Pam Arnold, September 13, 2010.
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\nBelco Global Foods 211-033
\n5
\nraising the costs of imports into the country and threatening the competitiveness of Belco\u2019s
\ncustomers, but by then Belco had cut its exposure to Mexico from $10 million $1 million. Belco was
\non the ground quickly to collect the debts that did remain, at times taking watches, vehicles, and any
\nother hard assets it could find as payment. As a result, its losses were kept to a minimum.
\nCollecting Receivables from Kooritsa Kiev
\nDespite Belco\u2019s historic success in collecting on its accounts receivable, Arnold knew that each
\ncase was unique, and the Kooritsa Kiev account could prove to be problematic. Kooritsa Kiev was a
\nwholesaler that supplied local restaurants and food markets with poultry, pork and other products.
\nBelco had been trading with Kooritsa Kiev for four years, and in early 2008 Belco had begun to grant
\nit open account terms, as Kooritsa Kiev had consistently placed large orders and made prompt
\npayments. Belco employees in its Moscow office had developed a personal relationship with the
\ncompany\u2019s officers. The sales team had obtained some financials during the site visit, which are
\nshown in Exhibit 6. The sales team also learned that about half of Kooritsa Kiev\u2019s cost of goods sold
\nwere associated with food products imported from the U.S. are were dollar denominated while other
\ncosts were incurred in rubles. The credit team had spoken with the company\u2019s bank as well as other
\nsuppliers who had extended credit to it in the past. Each of them indicated no episodes of payment
\nproblems and had given a positive impression of Kooritsa Kiev. Kooritsa Kiev\u2019s debt was
\ndenominated in rubles.
\nThe particular receivable that was overdue was related to an order Kooritsa Kiev had placed with
\nBelco for $84,000 of bone-in hams and chicken leg quarters. Belco had set terms that gave Kooritsa
\nKiev until 30 days after the arrival of the goods to pay; Belco\u2019s tracking system, however, indicated
\nthat 40 days had passed since the goods had arrived, and Belco had not yet received payment. A
\nmember of the credit team had called Sergei Barsov, the purchasing agent at Kooritsa Kiev, several
\ntimes since the invoice date, and Barsov had confirmed the goods had arrived on time and that the
\ncompany was very pleased with the product. Barsov had also indicated that the hams were very
\npopular and that there was likely to be high demand for them in the future. During the most recent
\ncall, Barsov had insisted he would call Kooritsa Kiev\u2019s bank that day to wire the funds to Belco, but as
\nof yet no funds had arrived. In addition to the $84,000 that was overdue, Kooritsa Kiev also had an
\noutstanding balance for an additional $78,000 that would come due in 15 days.
\nRussia had been a strong market for Belco in recent years, but the economic situation had been
\nfairly volatile. Since mid-2008, the Russian ruble had depreciated significantly against the US dollar,
\nand growth had slowed substantially as indicated in Exhibit 7. The average U.S. dollar\/ruble
\nexchange rate was 0.040 in 2008, and it fell to 0.031 for the first part of 2009. Although demand for
\npoultry and other food products fell in late 2008, it had rebounded, and U.S. exports of these goods
\ninto Russia had returned to values experienced in 2007 and early 2008. Exhibit 8 presents the
\nmonthly value of poultry, pork and other meat U.S. exports to Russia. Kooritsa Kiev\u2019s orders from
\nBelco were lower in early 2008 than they were in early 2009, but they were now tracking 2008 levels.
\nArnold and her credit team debated how to approach their collections efforts on the overdue
\naccount. One approach would be to engage the customer further. The credit team could continue to
\ncall Barsov and perhaps ask to speak to someone else in the company, or it could involve the sales
\nteam to see if a sales representative might have better luck. It could also have someone from Belco\u2019s
\nMoscow office visit the customer in person. With any of these options, the credit team would have to
\ndecide what kind of tone to take with the customer and how forceful to be.
\nAs an alternative, Belco could make use of a more formal commercial dispute resolution
\nmechanism. Belco could hire legal counsel and take Kooritsa Kiev to court, or at least threaten to do
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n211-033 Belco Global Foods
\n6
\nso. It could also try to arbitrate the claim: Russia had an arbitrations procedure similar to those in
\nother countries and a court dedicated to resolving disputes through arbitration. While these were
\nlengthy and costly processes, it was important for Belco to avoid getting a reputation for being
\nlenient in collecting credits, or else other customers might feel less pressure to make on-time
\npayments.
\nA third option Belco could pursue would be to file a claim with its insurance company. While
\nthere was substantial paperwork involved with this process, it would minimize the time and
\nresources spent pursuing collection on the account, and Belco\u2019s insurer would certainly have the
\nability to pay.
\nWhichever approach she decided to take, Arnold needed to act quickly: not only did she want to
\nmaintain Belco\u2019s historical record of low bad debt, but she had the rest of Belco\u2019s entire portfolio of
\nreceivables to tend to.
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\nBelco Global Foods 211-033
\n7
\nExhibit 1 Belco\u2019s Core Product Breakdown
\nSource: Company documents.
\nExhibit 2 Belco\u2019s Destination Country Breakdown
\nSource: Company documents.
\nPoultry, 57%
\nMeat, 5%
\nPork, 18%
\nOther products,
\n20%
\nAsia and Pacific
\nIslands, excl. China,
\n12%
\nChina, 24%
\nPuerto Rico, 9%
\nRussia, 14%
\nEurope, excl.
\nRussia, 9%
\nLatin America and
\nCaribbean, 20%
\nMiddle East and
\nAfrica, 11%
\nNorth America, 1%
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n211-033 Belco Global Foods
\n8
\nExhibit 3 Two New Belco Customers Under Review for Credit Terms
\nCustomer 1
\nName: Szechuan Supersellers
\nCountry: China
\nIndustry: Wholesaler of pork
\nYears in business: Two
\nNumber of Employees: 20
\nAnnual Sales: Less than $1 million
\nMethod of Contact: Customer contacted Belco directly
\nTransportation Capital: Owns three trucks to move product from port to facility and from facility to customer
\nFacilities: Leases one distribution center with one cold storage facility, does not own retail stores
\nInformation available: No audited financial statements, no trip reports available, no Belco site visits
\nCustomer 2
\nName: Carne Borinquen
\nCountry: Puerto Rico
\nIndustry: Distributor of frozen fish, meat and poultry to several large international hotel chains
\nYears in business: 30 (run by second generation owner)
\nNumber of Employees: Over 100
\nAnnual Sales: Over $10 million
\nMethod of Contact: Food manager at hotel recommended Belco as a source of product
\nTransportation Capital: Fleet of refrigerated trucks
\nFacilities: Owns 3 distribution locations
\nInformation available: Company website, well-staffed sales team
\nSource: Casewriters.
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n211-033 -9-
\nExhibit 4 A Sample of Credit Terms Offered to Recent Customers
\nCountry Financing Terms Number of Past
\nTransactions Legal Origin Contract Viability Payment Delays Distance
\nAmerican Samoa Wire transfer in advance 0 1 3.7 4.0 7036
\nAmerican Samoa Open account 3 1 3.7 4.0 7036
\nAmerican Samoa Open account 2 1 3.7 4.0 7036
\nAmerican Samoa Open account 3 1 3.7 4.0 7036
\nAngola Wire transfer in advance 1 0 3.0 2.5 6622
\nArmenia Wire transfer in advance 2 0 3.0 2.5 5853
\nAruba Open account 3 0 3.5 3.5 1874
\nAruba Open account 3 0 3.5 3.5 1874
\nAustralia Wire transfer in advance 2 1 4.0 4.0 9918
\nBermuda Open account 2 1 3.0 3.5 826
\nChile Wire transfer in advance 1 0 4.0 3.5 5020
\nChina Wire transfer in advance 0 0 2.5 2.0 6934
\nChina Wire transfer in advance 1 0 2.5 2.0 6934
\nChina Wire transfer in advance 2 0 2.5 2.0 6934
\nChina Wire transfer in advance 1 0 2.5 2.0 6934
\nChina Wire transfer in advance 2 0 2.5 2.0 6934
\nChina Wire transfer in advance 3 0 2.5 2.0 6934
\nChina Wire transfer in advance 1 0 2.5 2.0 6934
\nColombia Wire transfer in advance 1 0 3.5 2.5 2379
\nColombia Letter of Credit 1 0 3.5 2.5 2379
\nColombia Open account 1 0 3.5 2.5 2379
\nDominican Republic Open account 2 0 3.5 2.5 1476
\nGhana Wire transfer in advance 1 1 2.8 2.5 5276
\nGuam Open account 1 1 3.0 3.5 7935
\nGuam Open account 2 1 3.0 3.5 7935
\nGuam Open account 3 1 3.0 3.5 7935
\nHaiti Wire transfer in advance 1 0 2.5 1.0 1436
\nJamaica Open account 0 1 3.5 3.0 1446
\nJamaica Open account 1 1 3.5 3.0 1446
\nJamaica Open account 2 1 3.5 3.0 1446
\nJapan Letter of Credit 3 0 4.0 3.5 6783
\nKorea, South Letter of Credit 2 0 3.5 3.0 6945
\nMalaysia Wire transfer in advance 2 1 3.5 3.0 9536
\nMalaysia Open account 0 1 3.5 3.0 9536
\nMalaysia Open account 1 1 3.5 3.0 9536
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n211-033 -10-
\nMexico Wire transfer in advance 1 0 3.0 3.0 1886
\nMexico Open account 2 0 3.0 3.0 1886
\nMexico Open account 3 0 3.0 3.0 1886
\nMexico Open account 2 0 3.0 3.0 1886
\nMexico Open account 3 0 3.0 3.0 1886
\nNetherlands Antilles Open account 1 0 3.5 3.5 1919
\nPuerto Rico Wire transfer in advance 1 1 3.7 4.0 1558
\nPuerto Rico Open account 1 1 3.7 4.0 1558
\nPuerto Rico Open account 2 1 3.7 4.0 1558
\nPuerto Rico Open account 3 1 3.7 4.0 1558
\nPuerto Rico Open account 1 1 3.7 4.0 1558
\nPuerto Rico Open account 2 1 3.7 4.0 1558
\nPuerto Rico Open account 3 1 3.7 4.0 1558
\nPuerto Rico Open account 2 1 3.7 4.0 1558
\nPuerto Rico Open account 3 1 3.7 4.0 1558
\nPuerto Rico Open account 2 1 3.7 4.0 1558
\nRussia Wire transfer in advance 1 0 2.5 3.5 4866
\nRussia Wire transfer in advance 0 0 2.5 3.5 4866
\nRussia Wire transfer in advance 2 0 2.5 3.5 4866
\nRussia Wire transfer in advance 3 0 2.5 3.5 4866
\nRussia Wire transfer in advance 1 0 2.5 3.5 4866
\nRussia Wire transfer in advance 0 0 2.5 3.5 4866
\nRussia Open account 3 0 2.5 3.5 4866
\nRussia Open account 3 0 2.5 3.5 4866
\nSpain Wire transfer in advance 1 0 3.6 3.5 3788
\nSpain Open account 2 0 3.6 3.5 3788
\nSpain Open account 3 0 3.6 3.5 3788
\nSri Lanka Open account 2 1 3.5 2.2 8951
\nTaiwan Wire transfer in advance 1 0 3.5 4.0 7864
\nTaiwan Letter of Credit 1 0 3.5 4.0 7864
\nTrinidad and Tobago Open account 3 1 3.5 4.0 2176
\nUkraine Wire transfer in advance 2 0 3.0 1.5 4872
\nUkraine Wire transfer in advance 3 0 3.0 1.5 4872
\nUnited Arab Emirates Letter of Credit 0 1 3.0 4.0 7057
\nUnited Kingdom Open account 3 1 3.0 3.5 3669
\nNotes: Number of past transactions is the number of transactions Belco has had with a customer prior to the transaction associated with an observation. Legal origin is assigned a value of 1 for
\ncountries with a common law legal origin and a 0 for countries with a civil law legal origin. Contract viability is drawn from the International Country Risk Guide, and it measures the risk of contract
\nmodification or cancellation with higher values indicating lower risks. Payment Delay is also drawn from the International Country Risk Guide, and it measures the risk of receiving and exporting
\npayments from a country with higher values indicating lower risks. Distance measures the distance from Washington DC to the capital city of a country.
\nSource: These are not actual transactions, but instead are transactions formulated by the casewriters.
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\nBelco Global Foods 211-033
\n11
\nExhibit 5 Breakdown of Credit Terms by Year
\nYear
\nCash in Advance
\nShare
\nLetter of Credit
\nShare
\nSight Draft Share
\nOpen Account
\nShare
\n2001 41.3% 6.3% 8.1% 44.4%
\n2002 41.0% 6.7% 10.7% 41.7%
\n2003 42.3% 4.8% 9.9% 42.9%
\n2004 38.4% 5.6% 9.3% 46.7%
\n2005 45.1% 6.9% 8.1% 40.0%
\n2006 45.3% 5.6% 7.6% 41.5%
\n2007 44.1% 4.5% 9.4% 42.0%
\n2008 49.7% 4.7% 10.1% 35.6%
\nSource: Company documents.
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n211-033 Belco Global Foods
\n12
\nExhibit 6 Financial Statements for Kooritsa Kiev (thousands of Rubles)
\nIncome Statement
\n12\/31\/2007 12\/31\/2008
\nSales 450,000 472,500
\nCosts of Sales 360,000 392,175
\nOther Expenses 56,250 59,063
\nInterest Expense 6,000 6,500
\nPretax profit 27,750 14,763
\nBalance Sheet
\n12\/31\/2007 12\/31\/2008
\nASSETS
\nAccounts Receivable 45,000 55,000
\nOther Current Assets 75,000 87,500
\nTotal Current Assets 120,000 142,500
\nNet Property Plant and Equipment 62,500 60,000
\nOther Assets 60,000 54,375
\nTotal Assets 180,000 196,875
\n:
\nLIABILITIES AND EQUITY
\nAccounts Payable 37,500 43,750
\nShort Term Debt 50,000 50,000
\nOther Current Liabilities 1,875 2,125
\nTotal Current Liabilities 89,375 95,875
\nOther Non Current Liabilities 625 1,000
\nTotal Shareholders' Equity 90,000 100,000
\nTotal Liabilities and Equity 180,000 196,875
\nSource: Casewriters.
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\nBelco Global Foods 211-033
\n13
\nExhibit 7 Russian Economic Indicators
\nUS dollar per Russian ruble exchange rate, 2002-2009 (monthly average)
\nSource: Created by casewriters using data from Pacific Exchange Rate Service, accessed September 2010.
\nRussian GDP growth compared to quarter a year ago, 2002Q1-2009Q4 (percent)
\nSource: Created by casewriters using data from Economist Intelligence Unit, accessed September 2010.
\n-15
\n-10
\n-5
\n0
\n5
\n10
\n15
\npercent
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n211-033 Belco Global Foods
\n14
\nExhibit 8 U.S. exports of meat products to Russia: Jan 2002-Sept. 2009 (thousands US$)
\nSource: Created by casewriters using data from USATradeOnline, accessed September 2010.
\n0
\n20,000
\n40,000
\n60,000
\n80,000
\n100,000
\n120,000
\n140,000
\n160,000
\n180,000
\nthousands US$
\nOther Meat products Poultry, Fresh, Chill Or Frozen Pork, Fresh, Chilled Or Frozen
\nPurchased by: MINYONG KIM [email\u00a0protected] on October 06, 2013
\n
\nAssisgnment: Belco Global Foods
\n
\n1. Discuss the relative merits of each of the following trade finance terms: open account; letters of credit; documents against payment; cash in advance. How does each of these methods shift the risks of the transaction? Can you rank them in terms of the exporter\u2019s preference? [2]
\n
\n2. What kinds of considerations determine the terms on which Belco trades with its customers, and in what way do these considerations matter? Support your answer with a regression analysis using the data provided in the spreadsheet appendix (provided on Blackboard). [4]
\n
\n3. Which terms should Belco offer to the new customers mentioned in the case? [2]
\n
\n4. How should Pam Arnold attempt to collect the overdue payment from Kooritsa Kiev? [2]<\/pre>\n<\/div>\n","protected":false},"excerpt":{"rendered":"
\u00a0 I need to do case analysis for Belco Global Foods.
 
 Please answer attached files and give me answers :)
 
 American Samoa Wire transfer in advance 1 0 1 3.7 4.0 7,036
 American Samoa Open account 0 3 1 3.7 4.0 7,036
 American Samoa Open account 0 2 1 3.7 4.0 7,036
 American […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-23868","post","type-post","status-publish","format-standard","hentry","category-education"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/23868","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=23868"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/23868\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=23868"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=23868"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=23868"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}