Business is a complex phenomenon that is characterized by its own peculiarities, rules, and regulations. Analytical thinking is also essential for any person wishing to succeed in business. The case of HDT Truck Company is a perfect opportunity to see how business decisions should be taken and how business analyses should be carried out.
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Thus, the case of HDT Truck Company is all about alternatives involved in conducting international business activities (Murphy and Wood, 2007, p. 316). The HDT Truck Company faces the need to deliver the 50 trucks that its customers in Doha, Saudi Arabia, have ordered (Murphy and Wood, 2007, p. 316). The company has to major ways to do this: chartering a vessel to Doha or delivering the trucks on a regular vessel that sets off from Baltimore to Doha twice a week. Traditionally, HDT Truck Company charters a vessel, but the current situation makes the company officials consider the alternative way out. The comparison developed by Mr. Vanderpool, traffic manager in HDT, reveals that chartering a vessel would cost the company $96,470, while the alternative delivery way will amount to $144,000 in expenses (Murphy and Wood, 2007, p. 318).
Accordingly, it is recommended that HDT Truck Company should resort to its traditional chartering technique instead of inventing some innovations trying other alternatives. There are two basic reasons for such a recommendation. First of all, the process of delivery by a chartered vessel is as simple as can be in international trade, and HDT has rich experience in using this process. Secondly, this alternative is much cheaper, which is also important for HDT. In more detail, chartering a vessel will allow HDT to avoid such essential elements of the alternative’s cost as the rail rate to Baltimore ($44,800) and the ocean freight rate ($72,000) that the company will still have to pay even using the unchartered vessel for transporting its trucks.
Further on, the development of the discussed transaction might offer the third alternative way of truck delivery to HDT. If the Saudi Arabian buyers of the truck consider the possibility of collecting all their US purchases and delivering them by a vessel chartered at their expense, HDT can solve its major current issue even easier. At the same time, such an option will mean that the total transaction cost will be reduced. It would be reasonable for HDT, if it agrees that its Saudi buyers deliver the truck, to cut the transaction value by its freight costs. Specifically, the sum of $8,696,470 (total for 50 trucks and delivery by a chartered vessel to Doha) can be reduced by HDT’s delivery costs minus 5 to 10% of delivery costs for the untimely change of transaction terms. At the same time, if HDT has to deliver the truck to Baltimore port only, the total transaction value can be reduced by about $70,000 on the basis of HDT’s delivery expenses in this scenario.
However, if the two main rates that condition the choice of HDT’s routing alternative are changed, the company can switch to another alternative, as well as change its decision regarding the possibility for the Saudi buyers to deliver the trucks on the vessel chartered by them. These rates are railroad and ocean freight rates, and if they fall, HDT would consider an alternative of delivering the trucks to Doha by an unchartered vessel and obtaining the full payment from its Saudi buyers.
Finally, there is a chance for HDT to borrow money at a 12% interest rate to speed up the production and delivery process, but this is not the best alternative. Interest rates are subjected to numerous changes, and HDT might lose more than it earns from the discussed transaction if interest rates grow and it has to repay its loan at, for instance, 17%. So, it is recommended that HDT should not speed the course of the transaction up, but simply calculate the financial implications of delivery alternatives and implement the selected way to complete the transaction.
Murphy, Paul and Donald Wood. Contemporary logistics. NJ: Pearson Education, 2008. Print.