Note to instructors: A-1 Lanes and the currency crisis of the East Asian tigers.

Introduction

Rick Baker and two investors founded A-1 Lanes, a global supplier of wood and synthetic bowling lanes in 1985. Baker was successful in growing the company domestically, bur A-1 Lanes ran into difficulties as it grew internationally.

In July of 1997, Thailand devalued the baht by 11%. Baker wondered how this might affect A-1 Lanes' future because 80% of its sales and over $1 million in accounts receivable were from Asian-Pacific Rim countries. At the same time, the company owed $500,000 for a new manufacturing facility built to sustain its recent growth.

As a result of these issues and what he called "cut-throat competition" within the industry, Baker had to make a decision on the future of his company. He was considering three options: (1) liquidate A-1 Lanes, (2) sell the company or (3) stay in business and try to weather the impending storm.

Key Issues and Discussion Points

The major theme throughout the case relates to the risks that are involved with a small business going international. Some of the key issues and discussion points include:

1. Managing growth when going international.

2. The ability to manage the risks that are involved when a small business goes international.

* How to manage international credit and currency risk.

* How to manage cash flow and interpret financial statements.

3. How to value a small business.

4. The complexities in making a decision that could determine the fate of your business and doing so on the basis of limited information.

Potential Audience anal Uses

A-1 Lanes can be used in senior-level undergraduate or graduate courses in small business, entrepreneurship, strategic management, as well as in some finance-oriented entrepreneurship courses. The case is designed to be taught in an 80-minute period. Students are expected to spend at least 4 hours of outside preparation.

The case makes valuable contributions related to the risks involved when a small firm goes international. It focuses on emerging markets, emphasizing their rapid growth, varied national cultures, and currency risks, and highlights the special financing a small firm needs in order to compete in them. These areas provide an excellent forum for discussion especially since the case is based on a real company.

Suggested Teaching Approach

1. It is recommended that the following questions be used to guide classroom discussion with students.

2. What events and/or trends in the macroenvironment were important to the bowling industry'?

3. Using Porter's 5-Forces Model, describe the dynamics of the industry environment.

4. Analyze the financial ratios for A-1 Lanes. Compare them to industry averages. Is the firm financially healthy? Why or why not?

5. What are the internal strengths and external opportunities for A-1 Lanes? What are the internal weaknesses and external threats?

6. Drawing from the analysis of the firm's strengths and weaknesses, articulate the firm's capabilities and determine the degree to which the firm has a core competency. (Use VIRO and the resource-based view of the firm for the analysis. It is suggested that students list the tangible and intangible resources that might strategically contribute to the firm's capabilities.)

7. What were the major problems facing A-1 Lanes? Is the irrevocable Letter of Credit the best means by which a firm can protect the collection of its international accounts receivable? Or, as ah alternative to Letters of Credit, how might A-1 Lanes protect its transaction exposure?

8. What should Baker do now? Why?

OUTSIDE OR SUPPLEMENTARY READINGS

In addition to references cited in the Teaching Notes, the following readings may assist the reader with the analysis of the case

Bowling Centers. (2004). Encyclopedia of American Industries. Online edition: Gale. Reproduced in Business and Company Resource Center.

Economist, The. (1998). Six deadly sins. Economist, 346(8058), 12. Retrieved 1 July 2005, from Academic Search Premier database.

Fong, G.H. (1997). Currency risk management in emerging markets. Emerging Markets Quarterly, 1(3), 19-24.

Four Asian tigers. Wikipedia. Available at http://en.wikipedia.org/wiki/Four_Asian_ Tigers, accessed 8 January 2008.

Hagelin, N. & Pramborg, B. (2004). Hedging foreign exchange exposure: Risk reduction from transaction and translation hedging. Journal of International Financial Management and Accounting, 15(1), 1-20.

Markillie, P. (2000). The tigers that changed their stripes. Economist, 354(8157), 3. Retrieved 1 July 2005, from Academic Search Premier database.

Rigobon, R. (2002). International financial contagion: Theory and evidence in evolution. Charlottesville, VA: The Research Foundation of Association for Investment Management and Research (AIMR).

Samuelson, P. (1999). Major lesson from Asian financial crisis. Business Times (Singapore), Editorial & Opinion; The Bottom Line: p. 12. Retrieved 4 July 2005 from Lexis-Nexis Academic Universe.

Sporting Goods Manufacturers Association International (8 April 1999). America's top 25 participation sports according to new superstudy statistics. Available at http:// www.sgma.com/press/1999/press986228974-27294.html, accessed 1 July 2005.

Stanek, M.B. (2002). A review of exchange rate policies and their effect upon nations and firms. Management Research News, 25(4), 19-34.

Timmons, J. & Spinelli, S. (2004). New venture creation: Entrepreneurship for the 21st century (6th ed., Chapters 16 and 17). New York: McGraw Hill Companies.

Tyrangiel, J. (2004). The rapper who likes bowling. Time, 164(13), 73.

Woodall, P. (1987). Tigers adrift. Economist, 346(8058), 3. Retrieved 1 July 2005, from Academic Search Premier database.

Trade Magazines

International Bowling Industry. West Lake Village, CA. June 2005: ([dagger]) College Centers: Cheering for Bowling May 2005: Special International Issue

Bowling Center Management. Luby Publishing, Inc., Chicago. (Official publication of the BPAA) June 2005: International Bowl Expo (preview guide)

Bowlers Journal International (or website: www.bowlersjournal.com) June 2005: ([dagger]) NCAA Bowling: Nebraska's Deja Two

([dagger]) Recent articles that may be of interest.

Phil E. Stetz *

Todd A. Finkle

Larry R. O'Neal

Please send correspondence to: Phil E. Stetz, tel: (936) 468-4103: e-mail: pstetz@sfasu.edu.

* This case is intended to stimulate class discussion rather than to illustrate the effective or ineffective handling of a managerial situation. The company, names, events, and financials are all real.