Case summary:
Company S is an automobile manufacturing division of Country J. There was a sudden drop in the value of yen against the dollar of Country U. This company has concentrated most of its manufacturing in the home country itself to achieve economies of scale than exporting its production to the Country U.
In the year 2012, the Country J has faced recession and the consumer prices have fallen tremendously. Later, the Country J’s central bank has cut down its interest rates to stimulate the economy. There was a sales boom in the year 2015 due to
To discuss: Whether the Company S’s decide is wise to expand its Country U’s production capacity.
To discuss: The other strategy that the company uses to hedge against adverse changes in the exchange rates.
Introduction:
A value of one country’s currency is used to convert into another country’s currency is termed as an exchange rate. The rate of exchange can be either floating or fixed.
To discuss: The advantage and disadvantage of the hedging strategy that might be adopted by Company S.
Want to see the full answer?
Check out a sample textbook solutionChapter IC Solutions
INTERNATIONAL BUSINESS LL+CONNECT >BI<
- What are the most profound ways in which globalization has changed our lives? Do you think that the widespread use of cryptocurrencies will make further global exchange inevitable? it plausible that we will reach " peak globalization in the near future and return to a life more focused on local production of what we need? it Inevitable that we will have future pandemics that will spread like COVID-19 and its variants have?arrow_forwardCan you answer those questions, please? 31) A business might become a multinational in order to obtain A) a spread of risks. B) lower production costs. C) larger sales. D) all of the above 32) Which of the following explains why China has received relatively high levels of FDI? A) All of the above B) Heavy investment by the government C) The economy is growing rapidly D) It is a huge economy, with a massive population 33) Transfer pricing may be a problem for host countries as A) profits may not be accurately recorded as occurring in the host country. B) the cost of exchanging one currency for another is costly in monetary terms and time. C) prices are transferred to the local currency resulting in losses if exchange takes place on a day when the exchange rate is 'low'. D) profits are always removed to the host country 34) If the budget deficit is lower than it was last year, we could say that A) the general government debt will fall. B) other things being…arrow_forwardWhat are the benefits to American medical providers of outsourcing certain well-defined tasks such as interpreting an MRI scan to foreign providers based in countries such as India? What are the costs? On balance, do you think that the kind of outsourcing undertaken by American health care providers is a good thing or a bad thing for the American economy? Explain your reasoning. What are the practical limits to outsourcing health care provision to other countries? Who are the primary beneficiaries of the growth of medical tourism? Who might lose from this trend?arrow_forward
- In 2015, Greece's debt had reached 323 billion euro—the highest in modern history. With debt amounting to 177 percent of its GDP, Greece's rating was downgraded. Not only Greece but other highly indebted countries such as Ireland, Portugal, and Spain were under scrutiny. Since then, the EU's economy has gone into crisis. The EU and IMF agreed to bailout packages for Greece, Ireland, and Portugal. In February 2011, euro zone finance ministers set up a permanent bailout fund, called the European Stability Mechanism. In mid-2011, talk abounds that Greece would be forced to be the first country leaving the euro zone although this speculation was denied. The EU's private sector shrank for the first time in two years; the euro continued to fall against the U.S. dollar; and the euro was seen as a "burning building with no exits". Some economists and politicians have forecast the demise of the euro. The Greek crisis has exposed fault lines in the single currency project since its introduction…arrow_forwardWhat adjustments might be made to the domestic cost of capital for a foreign investmentdue to exchange rate risk, political risk, and country risk?arrow_forwardIf your firm is considering investing in Russia, however, after learning that BP's investment is suffering from Ukraine-related sanctions, identify at least 2 reasons why you may want to invest in Russia anyway.arrow_forward
- What dilemma did Amazon encounter with its distribution of AmazonFresh? In light of this dilemma, what will need to happen before Amazon can pursue expansion with Whole Foods Market? What are the widespread economic consequences of this acquisition?arrow_forwardExplain the concept of risk and risk management processes from a foreign exchange/currency perspective. Discuss hedging and explain why is it used, illustrating with examplesarrow_forwardIn the year 2020 how much debt does the Philippines have?arrow_forward
- Toacther with large current account deficits, the Argentine govemment began running increasingly large budget deficits. How might this be structurally related t the choice of a foxed exchange rate regime? a) deficits were needed to finance capital outflow at the established rate b)with no monetary policy, fiscal policy became the only macroeconomic policy tool to fight recessions c) fiscal profligacy had nothing to do with the exchange rate, Argentina's political leadership was as irresponsible as its monetary leadership had been d)the debt allowed Argentina's government to import arms for an attempt at another war with Brittain A Moving to another question will save this response. [ i will 5 upvotes]arrow_forwardwhy did google reorganize under alphabet in 2015? Was this move due to Google’s stagnant share price and an attempt to pacify investors?arrow_forward3 a) Start with a model of the situation before the crisis in Ukraine. Draw a model of a representative individual firm in the market for wheat, i.e. an Australian wheat farmer who is a price-taker in the global market for wheat, in long-run equilibrium. Comment on the assumed market structure. Show and explain the amount of wheat the farmer will produce to the market, and explain revenue, costs and profits.arrow_forward
- Foundations of Business (MindTap Course List)MarketingISBN:9781337386920Author:William M. Pride, Robert J. Hughes, Jack R. KapoorPublisher:Cengage Learning