Suppose it costs each subsidiary 1 percent of the transaction amount each time it converts its home currency into another currency to pay its suppliers. Develop a strategy by which BLP as a corporation can reduce its total currency conversion costs. Suppose your strategy costs BLP 400 euros per month to implement. Should the firm still adopt your approach?

Consider Belgian Lace Products (BLP), a hypothetical table linens manufacturer. BLP consists of a parent corporation, a wholly owned manufacturing subsidiary in Belgium, and four wholly owned distribution subsidiaries in Belgium, the United Kingdom, Japan, and the United States. Its manufacturing subsidiary buys inputs from various suppliers, manufactures high-quality lace napkins and tablecloths, and sells the output to the four BLP-owned distribution subsidiaries. The four distribution subsidiaries in turn sell the products to retail customers in the subsidiaries’ marketing areas. The distribution subsidiaries buy certain inputs, such as labor, warehouse space, electricity, and computers, from outside suppliers as well.
The following summarizes typical monthly transactions for each of the BLP operating units (note that the symbol for the euro is €):
Manufacturing Subsidiary Sales to Belgian distribution subsidiary: €15,000 Sales to British distribution subsidiary: €12,500 Sales to Japanese distribution subsidiary: €17,500 Sales to U.S. distribution subsidiary: € 11,250 Costs of inputs purchased from Belgian suppliers: € 7,500 Costs of inputs purchased from British suppliers: £25,000 Costs of inputs purchased from Japanese suppliers: ¥3,000,000 Costs of inputs purchased from U.S. suppliers: \($5,000\) Belgian Distribution Subsidiary Sales to retail customers: € 50,000 Payments to BLP manufacturing subsidiary: € 15,000 Payments to external suppliers: € 750 and £10,000 British Distribution Subsidiary Sales to retail customers: £75,000 Payments to BLP manufacturing subsidiary: €12,500 Payments to external suppliers: £5,000, €1,000, and \($9,000\) Japanese Distribution Subsidiary Sales to retail customers: ¥5,000,000 Payments to BLP manufacturing subsidiary: €17,500 Payments to external suppliers: ¥3,000,000 and \($8,000\) U.S. Distribution Subsidiary Sales to retail customers: \($40,000\) Payments to BLP manufacturing subsidiary: € 11,250 Payments to external suppliers: \($10,000\) and ¥300,000 Exchange Rates €1.33 = £1 €1 = \($1.00\) €1 = ¥120