Please enable JavaScript.
Coggle requires JavaScript to display documents.
Operational exposure (Marketing management (right markets, pricing &…
Operational exposure
Marketing management (right markets, pricing & product strategy)
-
If home country's FX appreciated & exporters lose competitive advantage, they can either hold foreign price constant & loose market share/ retain market by lowering foreign price & suffer thinner profit
-
Product strategy: respond to ex. rate changes by altering product strategies such as introducing new products/ changing existing products
Period after home country's FX devaluation is ideal to introduce new product & increase product lines
-
Other management
-
-
-
-
-
Design evaluation criteria so that operating managers neither rewarded nor penalized for unexpected ex. rate changes
What?
-
FX fluctuations can alter company's future revenues & expenses by affecting price & cost competitiveness
-
-
-
Product differentiation
How different & internationally diversified the local firm's products are to competitors is important
Greater the difference, greater the price elasticity protection
-
-
Product management
-
-
One can increase production in a country with weaker currencies and decrease with stronger currencies
-
Price elasticity
-
greater price elasticity, less flexibility to respond to exchange rate changes
As home currency appreciated, pricing flexibility is the key
Financial management
Structure liabilities so a reduction in FX asset earnings is matched by corresponding decrease in FX servicing liabilities
-
Eg: volkswagen suffered when the Euro appreciated against USD. Could have minimised loss by borrowing in USD from US banks
Shift & substitution
Greater flexibility to substitute between home & foreign country inputs of production, lower exchange rate risk