Tifanny & Co. Harvard Case Study 9-296-047

Case Background In July 1993, Tiffany & Company reorganized its Japanese distribution channel by repurchasing its inventory from its Japanese distributor Mitsukoshi Limited. As a result of this action, Tiffany would assume the responsibility of establishing yen retail prices, holding inventory in Japan for sale, and controlling local Japanese management. Tiffany would be able to have control over retail price in Japan where historically had higher price. Under the previous arrangement, Tiffany contracted Mitsukoshi as the …

…as has been the situation for the past 10 years. On the other hand, Tiffany does not need to fully hedge the ¥/$ risk, as Tiffany has many other international operations that would provide some degree of natural hedging of the US currency to various foreign currency fluctuations. Tiffany should purchase the put option with maturity as close as possible to the inventory repurchase schedule, while the retail income will need to be managed quarterly or yearly.