Effect of Changing Exchange Rates on Bluestone Lane

Question 4: Discuss the effect that the changing exchange rates of the identified currency to
AUD have had on strategic direction and operations of the Australian company?
Solution 4:
Bluestone Lane is a Limited Liability Company primary established in NewYork and it
has active chain of cafes operating at 30 locations. Bluestone Lane is famous for its artisanal
coffee (Premium Range of Coffee) and also delivers some delicious food items with best in class
service. Bluestone Lane is famous for its Australian Style coffee shop, cafes and lifestyle.
Bluestone Lane has been founded by Nick Stone in year 2010 in city of NewYork and since then
drinking coffee is an experience for American rather than a regular drink. The primary
commitment of Bluestone Lane is to change the perception of people about the coffee and to
promote the Aussie Coffee Culture in America.
In order to understand the impact of exchange rate (USD to AUD) on Bluestone Lane it is
important to know the facts regarding the coffee demand and sales in America after
establishment of Bluestone Lane in NewYork. As per the report by Arielle Milkman in year
2016, New Yorkers drink coffee on large quantities and for them drip coffee is like a drug to
keep them going (Milkman, 2016). But in Australia it is premium beverage which is linked with
wellness, socializing and for practicing mindfulness. The increasing demand of coffee in USA is
widely connected with the work and people productivity but Australian coffee culture is unique,
linked with leisure and relaxed beach centric lifestyle. So, when Nick Stone has started its
business of coffee inspired by Australia coffee culture it sprout out across United States and
business slowly grew to built a $20 million business in year 2017 as per the report of Care
Waters (Waters, 2017). Bluestone Lane takes most of coffee from Australian market due to
lower prices and to get most of exchange rate differences.
Exchange rate difference between USA and Australia has promoted the export of coffee
bean from Australia to USA after year 2014. The increase in demand of coffee products at
Bluestone Lane has promoted the exports of coffee beans from Australia to USA. After 2014, the
exchange rate (A$/US$) start to decline and it value of goods imported from Australia become
more cheaper in USA that helps Nick Stone to earn more profit and expand his business more
quickly. The report published by Reserve Bank of Australia in year 2019, clearly identify the
downfall of Australian dollar with respect to US Dollars and it is main reason the increase of
export of coffee beans from Australia to USA. Please see the below graph for change in
exchange rate (AUD$ to US$).

(Source: Reserve Bank of Australia, 2019)
The investment in Bluestone Lane Coffee by Stephen Ross, a billionaire and owner of
Miami Dolphins, help Nick Stone to make its best strategic move and to announce the expansion
of its store over 100 locations in next 3 years. Stephen Ross has evaluated the increasing demand
of products of Bluestone Lane in NewYork and plans to invest $19.5 million to acquire some
stake in Bluestone Lane business. So, it can be said that exchange rate plays an important role in
strengthen the Bluestone Lane business USA due to higher purchasing power from Australia and
trade the same in USA to earn higher income. A decrease or depreciation in Australian Dollar
encourages Australian exports more competitive in international market due to the fact that
exported goods and services become relatively cheaper in international market due to lower
exchange rates. Exchange rate movement helps economy as well as international players to
adjust in their structural change and it was just happened in Australia. Australia is not the biggest
but it is one of finest producer of coffee beans and it also exports major of production to USA to
earn the benefit of exchange rate.