The specialty coffee trading company (TSCT): future and option contracts

2020 ◽  
Vol 10 (2) ◽  
pp. 1-18
Author(s):  
Mauricio Jenkins ◽  
Francisco Barbosa
Keyword(s):  
Latin American ◽  
Fair Trade ◽  
Price Risk ◽  
Production Chain ◽  
Content Type ◽  
Put Options ◽  
Fair Trade Coffee ◽  
Option Contracts ◽  
Academic Level ◽  
Specialty Coffee

Learning outcomes The main pedagogical objectives of the case are: illustrate how Latin American companies dedicated to the production and harvesting of commodities can be vertically integrated to gain a larger share of the value created throughout the production chain. Understand how futures and options contracts in commodities can be used to hedge price risk on long and short positions in the underlying products. Understand how option contracts add value by hedging risk in those contexts where the counterparty has optionality. Discuss the implications of Fair Trade for commodity traders and producers. Case overview/synopsis In the case, Hernan Arosamena, CFO of The Specialty Coffee Trading Co. (TSCT), faces the challenge of designing an effective strategy to hedge the price risk caused by the increasing demand of the so-called Fair Trade coffee. Hernan Arosamena decides to review how the company has typically managed the price risk in its business transactions using future contracts to then incorporate the additional elements that trading Fair Trade coffee may entail. The typical price risk hedging strategy involves the use of coffee future contracts in long and short positions to ensure that the company obtains the desired margin in its coffee trading negotiations. To hedge the exposure to the risk of fluctuations in the price of coffee when the company sells Fair Trade coffee requires the additional use of put options. Complexity academic level The case is appropriate for students enrolled in courses or specialization programs at both the undergraduate and graduate levels. Supplementary materials Teaching notes are available for educators only. Subject code CSS 5: International Business.

The specialty coffee trading company (TSTC): contratos de futuro y opciones

2020 ◽  
Vol 10 (2) ◽  
pp. 1-20
Author(s):  
Mauricio Jenkins ◽  
Francisco Barbosa
Keyword(s):  
Learning Outcomes ◽  
International Business ◽  
Fair Trade ◽  
Content Type ◽  
Fair Trade Coffee ◽  
Trading Company ◽  
Academic Level ◽  
Specialty Coffee

Learning outcomes Los principales objetivos pedagógicos del caso son: Ilustrar cómo empresas latinoamericanas que se dedican a la producción y cosecha de productos básicos (commodities) pueden integrarse verticalmente para apropiarse de una mayor proporción del valor creado a lo largo de la cadena productiva. Entender cómo los contratos de futuros y las opciones sobre productos básicos se pueden utilizar para cubrir riesgo de precio en posiciones largas o cortas en esos productos. Entender cómo los contratos de opciones agregan valor al mitigar riesgo en aquellos contextos en los que la contraparte posee opcionalidad. Discutir las implicaciones que tiene el llamado comercio justo para productores y comercializadores de productos básicos. Case overview/synopsis En el caso, Hernán Arosamena, gerente financiero de The Specialty Coffee Trading Co. (TSCT) enfrenta el reto de diseñar una estrategia efectiva para mitigar los riesgos de precio que está generando la creciente demanda del denominado café de comercio justo (fair trade coffee) para la empresa. Ante esta situación, Hernán Arosamena decide revisar la forma en que típicamente la empresa ha gestionado el riesgo de precio en sus transacciones comerciales mediante el uso de los contratos de futuros para luego incorporar los elementos adicionales que transacciones con granos de café de comercio justo puede conllevar. La estrategia típica de mitigación al riesgo de precio involucra el uso de contratos de futuro de café en posiciones largas y cortas para lograr que la empresa obtenga el margen de comercialización deseado en sus negociaciones de compra/venta de granos de café. Para poder mitigar la exposición al riesgo de fluctuaciones en el precio del café cuando la empresa comercializa granos de café de comercio justo requiere el empleo (además) de opciones de venta (put). Complexity academic level El caso es apropiado para estudiantes matriculados en cursos o programas especializados tanto de pregrado como de posgrado. Supplementary materials El caso esta acompañado por una nota de enseñanza detallada que incluye los diferentes tópicos que pueden discutirse y analizarse, así como el orden en que deberían cubrirse. Código de área: CSS 5: International Business.

Construction material supply risk management using Asian option contracts: the case of a pipeline project

2020 ◽  
Vol 27 (10) ◽  
pp. 3395-3414
Author(s):  
Mohammad Vahdatmanesh ◽  
Afshin Firouzi
Keyword(s):  
Risk Management ◽  
Scenario Analysis ◽  
Price Risk ◽  
Asian Option ◽  
Steel Pipeline ◽  
Content Type ◽  
Price Fluctuations ◽  
Option Contracts ◽  
Pipeline Project ◽  
Total Price

PurposeSteel price uncertainty exposes pipeline projects that are inherently capital intensive to the risk of cost overruns. The current study proposes a hedging methodology for tackling steel pipeline price risk by deploying Asian option contracts that address the shortcomings of current risk mitigation strategies.Design/methodology/approachA stepwise methodology is introduced, which uses a closed-form formula as an Asian option valuation method for calculating this total expenditure. The scenario analysis of three price trends examines whether or not the approach is beneficial to users. The sensitivity analysis then has been conducted using the financial option Greeks to assess the effects of changes in volatility in the total price of the option contracts. The total price of the Asian options was then compared with those of the European and American options.FindingsThe results demonstrate that the Asian option expenditure was about 1.87% of the total cost of the case study project. The scenario analysis revealed that, except for when the price followed a continuous downward pattern, the use of this type of financial instrument is a practical approach for steel pipeline price risk management.Practical implicationsThis approach is founded on a well-established financial options theory and elucidates how pipeline project participants can deploy Asian option contracts to safeguard against steel price fluctuations in practice.Originality/valueAlthough the literature exists about the theory and application of financial derivative instruments for risk management in other sectors, their application to the construction industry is infrequent. In the proposed methodology, all participants involved in fixed price pipeline projects readily surmount the risk of exposure to material price fluctuations.

Do young consumers care about ethical consumption? Modelling Gen Z's purchase intention towards fair trade coffee

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zachary Robichaud ◽  
Hong Yu
Keyword(s):  
Peer Influence ◽  
Significant Influence ◽  
Fair Trade ◽  
Purchase Intention ◽  
Sustainable Consumption ◽  
Subjective Norms ◽  
Ethical Consumption ◽  
Convenience Sample ◽  
Content Type ◽  
Fair Trade Coffee

PurposeA global shift in ethical/sustainable purchase drivers highlights Generation Z (persons aged 15–24) as an important market for producers and marketers. Although much research has touched on fair trade consumption, very little has focused on Gen Z's consumption patterns. This study provides insights into and implications of younger consumers' motivations in ethical/sustainable consumption.Design/methodology/approachThis research examines Gen Z's purchase intention towards fair trade coffee with the theory of reasoned action framework. Data were collected with a convenience sample, and analyses were conducted using structural equation modelling.FindingsThe research found a significant influence of knowledge of fair trade towards product interest. Furthermore, general attitudes towards fair trade had a significant influence on product interest, product likeability and convenience. Lastly, product interest and subjective norms significantly influenced Gen Z's purchase intentions towards fair trade coffee.Originality/valueFindings suggest that Gen Z's shift in ethical/sustainable consumption revolves around their subjective norms or peer influence circles and contributes to the notions of self-branding, identify claims and social currency. Younger generations are digital natives, and social media has created a looking glass into their actions. This digital expansion has created more opportunities for individuals to monitor the actions of others and release information in real-time. Therefore, ethical/sustainable consumption by Gen Z can be used as a communication tool among their peers to project personal values and ideological shifts and to influence others close to them.

scholarly journals How Fair Is Fair-Trade: How Much Do Coffee Buyers Know About Grower Food Security & Nutrition? (P04-080-19)

2019 ◽  
Vol 3 (Supplement_1) ◽  
Author(s):  
Nina Schlossman ◽  
Roberta Lauretti-Bernhard ◽  
Amanda Bridges
Keyword(s):  
Food Security ◽  
Fair Trade ◽  
Secondary Data ◽  
Small Scale ◽  
Fair Trade Coffee ◽  
Organic Certification ◽  
Funding Sources ◽  
Specialty Coffee ◽  
Small Scale Farmers ◽  
Food Security And Nutrition

Abstract Objectives There is currently no information on what buyers know about nutrition of their fair trade coffee grower's nutrition and therefore are missing the opportunity to improve the condition of their grower families, many of whom are headed by women. Our objectives are to highlight knowledge and awareness of buyers and consumers; identify best practices to address needs of coffee growers and families to improve nutrition resources; and develop “Nutrition Actions for Coffee Growers” for companies to implement. Methods Review evidence and secondary data; review U.S. Government programs supporting small-scale farmers and their effectiveness to address grower nutrition; conduct key informant interviews with coffee buyers and companies identified during the Specialty Coffee Expo, April 2019 and Sustainability Consortium TSC10 Conference. Research protocol: Internet-search (pubmed, other sources); synthesize evidence from studies, publications, research; attend Specialty Coffee Expo and Sustainability Consortium TSC10; identify key informants among TSC10, International Women's Coffee Association (IWCA), coffee buyers and companies focusing on fair trade coffee; develop interview instruments; conduct interviews. Results This abstract is focused on methods and protocol for our research which will be the first of its kind. Conclusions This study will provide insight into fair trade purchasers’ understanding and recommend actions companies can take to enable women growers and their families to improve family food security and nutrition. Women provide up to 70% of labor in cultivating and harvesting coffee and 20–35% of coffee-producing households are female headed (International Coffee Organization, ICC 121, 2018). Even when growers get a price premium for fair trade or organic certification, it is not enough to support family livelihoods (Bacon, 2008; Méndez, 2010; Beauchelt, 2012, 2011). Better understanding among fair trade coffee buyers and companies will provide opportunities for growers to ensure better household nutrition. These actions could be scaled to other fair trade products like cocoa, essential oils, artisanal textiles. Funding Sources Global Food & Nutrition Inc. provided funding for the literature review and conference participation.

Using put option contracts in supply chains to manage demand and supply uncertainty

2018 ◽  
Vol 118 (7) ◽  
pp. 1477-1497 ◽  
Author(s):  
Jiarong Luo ◽  
Xiaolin Zhang ◽  
Chong Wang
Keyword(s):  
Supply Chain ◽  
Supply Chain Coordination ◽  
Optimization Theory ◽  
Random Yield ◽  
Supply Uncertainty ◽  
Inventory Theory ◽  
Content Type ◽  
Put Options ◽  
Option Contracts ◽  
Put Option

Purpose The purpose of this paper is to value put option contracts in hedging the risks in a supply chain consisting of a component supplier with random yield and a manufacturer facing stochastic demand for end products. Design/methodology/approach This paper adopts stochastic inventory theory, game theory, optimization theory and algorithm and MATLAB numerical simulation to investigate the manufacturer’s ordering and the supplier’s production strategies, and to study the coordination and optimization strategies in the context of random yield and demand. Findings The authors find that put options can not only facilitate the manufacturer’s order but also the supplier’s production, that is, the manufacturer and the supplier can effectively manage their involved risks and earn more expected profits by adopting put options. Further, the authors find that the single put option contract fails to coordinate such a supply chain. However, when combined with a protocol, it is able to coordinate the supply chain. Originality/value This paper is the first effort to study the intersection of put option contracts and random yield in the presence of a spot market. From a new perspective, the authors explore the supply chain coordination. The authors propose a mechanism to coordinate the supply chain under put option contracts.

Fair trade coffee and inclusive globalization: a metamorphosis of institutional entrepreneurship

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rong Zhu ◽  
Sunny Li Sun ◽  
Ying Huang
Keyword(s):  
Nonprofit Organizations ◽  
Social Movement ◽  
Fair Trade ◽  
Process Model ◽  
Inclusive Growth ◽  
Institutional Entrepreneurship ◽  
Content Type ◽  
Fair Trade Coffee ◽  
Institutional Entrepreneurs ◽  
Inclusive Globalization

Purpose Initiated by non-governmental organizations (NGOs) over half a century ago, fair trade has successfully evolved from a regional business discourse to a global social movement within international trade. In the matter of fair trade coffee, this global social movement has transformed the traditional coffee trade structure of inequality and unfairness into a conglomerate of international institutions that embrace equity and inclusivity – a metamorphosis that can be attributed to NGOs’ institutional entrepreneurship. Design/methodology/approach In this exploratory study, the authors examine the fair trade coffee industry and trace the actions of NGOs along with other stakeholders at the organizational field level, in moving toward an inclusive model of globalization. Findings Departing from exploitative globalization, fair trade practices advocate inclusive growth through the promotion and establishment of greater equity for all as well as higher environmental standards in global value chains. Research limitations/implications This study contributes to nascent research on inclusive growth by analyzing how fair trade promotes inclusive growth and trade in GVCs. This study also contributes to research on institutional entrepreneurship by examining two enabling conditions – the shift in institutional logics and the peripheral social position of NGOs – that enabled NGOs to serve as institutional entrepreneurs in the initiation phase of institutional entrepreneurship. Practical implications Policymakers may encourage collaboration between profit organizations and nonprofit organizations to provide entrepreneurial opportunities for trials, errors, and revisions. The evolution of fair trade coffee provides such an example. Social implications The coevolution of NGOs and MNEs has made the globalization of fair trade practices possible. The collaboration between NGOs as institutional entrepreneurs (operating on the community logic) and MNEs as institutional followers (operating on the financial logic) support inclusive globalization and sustain fair trade practices. Originality/value Drawing on the process model of institutional entrepreneurship, the authors seek to understand the role of NGOs as institutional entrepreneurs in the dynamics of initiating, diffusing and sustaining fair trade coffee practices.

Product information and Chinese consumers’ willingness-to-pay for fair trade coffee

2014 ◽  
Vol 6 (2) ◽  
pp. 278-294 ◽  
Author(s):  
Shang-Ho Yang ◽  
Ping Qing ◽  
Wuyang Hu ◽  
Yun Liu
Keyword(s):  
Willingness To Pay ◽  
Fair Trade ◽  
Product Information ◽  
Consumer Preferences ◽  
Chinese Consumers ◽  
Survey Question ◽  
Payment Card ◽  
Content Type ◽  
Fair Trade Coffee ◽  
Willingness To Purchase

Purpose – The purpose of this paper is to investigate Chinese consumers’ willingness-to-pay (WTP) for fair trade coffee given different amount of product information. Although coffee is becoming more popular in China, the concept of fair trade is often found unfamiliar to most Chinese consumers. Design/methodology/approach – A total of 564 consumers were interviewed in Hubei, China. The key survey question asked consumers’ willingness to purchase a cup of fair trade coffee compared to a traditional cup of coffee. A modified payment card approach was used to elicit WTP. Before answering the purchase question, respondents were randomly assigned to one of three different information scenarios: basic definition, impact on sustainability and the environment, and information including both environmental and social implications. Findings – Results indicated that consumers were generally willing to pay additional amount for fair trade coffee. Information played an important role in determining what types of consumers were responsive to fair trade coffee. Furthermore, the amount of information provided and consumer WTP did not follow a linear relationship. Practical implications – Results obtained in this study are useful for coffee marketers to better target their promotion strategies. Originality/value – In contrast to China's fast growing coffee market, little is known about consumer preferences and far less on fair trade coffee. This study is the first of its kind to understand Chinese consumers’ preferences for coffee in general and for fair trade coffee in specific.

scholarly journals Being different matters! A closer look into product differentiation in specialty coffee family farms in Central America

2020 ◽  
Vol 27 (2) ◽  
pp. 165-188
Author(s):  
Allan Discua Cruz ◽  
Leonardo Centeno Caffarena ◽  
Marcos Vega Solano
Keyword(s):  
Central America ◽  
Latin American ◽  
Product Differentiation ◽  
Family Firms ◽  
Shared Vision ◽  
Family Farms ◽  
Coffee Production ◽  
Content Type ◽  
Strategic Behaviour ◽  
Specialty Coffee

PurposeThere is a growing interest in understanding the strategic behaviour of family firms producing international commodities such as coffee, particularly in contexts where decisions about what products to sell, where to commercialise them and how to promote them appear to be highly based on both business and family aspects. The purpose of this paper is to explore product differentiation strategies in family firms in the specialty coffee industry across Latin American countries. Whilst the socioeconomic relevance of coffee production in Central America is unequivocal, the approach and rationale of families that engage in specialty coffee production remain underexplored.Design/methodology/approachThis study examines product differentiation in specialty coffee family farms across countries in Central America: Guatemala, Honduras and Nicaragua. The study relies on in-depth interviews, case studies and an interpretative approach to unpick the dynamics of product differentiation by families in business dedicated to producing specialty coffee.FindingsThe findings show that product differentiation in specialty coffee family farms is influenced by both business and family aspects and driven by entrepreneurial stewards. Coffee-farming families can engage in product differentiation through a shared vision, a combination of traditional and specialised knowledge, and through the continuous development of an exchange network. The findings reveal a connection between families in business balancing family and business interests, and the strategic intention to build up their assets entrepreneurially over time.Originality/valueThis study contributes to the literature on stewardship and strategic behaviour in family firms when families in business engage in differentiating their products in a highly competitive industry. More specifically, this study focuses on companies across countries where coffee is of crucial socioeconomic importance, and where the said companies are owned and managed by families. The study expands understanding of product differentiation in family-enterprise-first businesses and suggests that the family elements in differentiation can be explained through an entrepreneurial stewardship perspective.

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