Tuesday, November 30, 2010

A Prize for Modeling a Business with Constraints: Selling from Novosibirsk

Sometimes, the model that is given to you has to be tweaked radically in order to explain the situation at hand. With this thought in mind, Bernard Beauzamy (the owner of SCM SA) has set up a 500 euros prize for whoever can find a way for the following business model to work (see below). The solutions should be sent before Friday December 3rd, 2010, 5 pm (Paris local time, that's GMT+1) to scm.sa@orange.fr.
Selling from Novosibirsk
A factory in Novosibirsk produces gloves. Each pair costs 40 rubles to produce, including everything : raw material, salary of workers, machines, transportation, and so on.
They produce 10,000 pairs and they want to sell them in a country where customs duties are 4/5 of the selling price. They cannot sell at a price higher than 200 rubles each pair, because of local competition and local buying power (at a higher price, nobody would buy). How do they manage to make a profit, and how much do they gain ?
One cannot cheat with the customs and corruption is forbidden. The price declared for the sale must be the true price. The exchange rate between currencies is assumed to be fixed and is not to be taken into account : everything is stated in the seller's currency (here the ruble). The solution should work repeatedly, any number of times, without violating any law, between any countries with normal customs.
Prize offered : 500 Euros, for the best answer received before Friday, December 3rd, 2010, 5 pm (Paris local time). Send answers to scm.sa@orange.fr. Answers may be written in English, French, Russian.

[Check the solution here]

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