Business

Application Toshiba Copes with a Rising Yen by Cutting Costs By 1988, Toshiba’s cost cutting reduced its cost-to-sales ratio to where it was before the yen began rising. The company shifted production of lowtech products to developing nations and moved domestic production to high-value-added products. At a VCR plant outside of Tokyo, it halved the […]

Application Kodak Plans for Currency Changes Historically, Eastman Kodak focused its exchange risk management efforts on hedging near-term transactions. It now looks at exchange rate movements from a strategic perspective. Kodak’s moment of truth came in the early 1980s when the strong dollar enabled overseas rivals such as Fuji Photo Film of Japan to cut

Planning for Exchange Rate Changes The marketing and production strategies advocated thus far assume knowledge of exchange rate changes. Even if currency changes are unpredictable, however, contingency plans can be made. This planning involves developing several plausible currency scenarios (see Section 11.4, p. 420), analyzing the effects of each scenario on the firm’s competitive position,

Application Nissan Reverses Course In 1993, Nissan renounced a decade-long quest to build cars in ever more sizes, colors, and functions to cater to every conceivable consumer whim. That effort had spun out of control. For the 1993 model lineup alone, Nissan offered 437 different kinds of dashboard meters, 110 types of radiators, 1,200 types

Raising Productivity. Many U.S. companies assaulted by foreign competition made prodigious efforts to improve their productivity—closing inefficient plants, automating heavily, and negotiating wage and benefit cutbacks and work-rule concessions with unions. Many also began programs to heighten productivity and improve product quality through employee motivation. These cost cuts stood U.S. firms in good stead as

Shifting Production Among Plants. Multinational firms with worldwide production systems can allocate production among their several plants in line with the changing dollar costs of production, increasing production in a nation whose currency has devalued and decreasing production in a country where there has been a revaluation. Contrary to conventional wisdom, therefore, multinational firms may

Application Japanese Automakers Outsource to Cope with a Rising Yen Japanese automakers have protected themselves against the rising yen by purchasing a significant percentage of intermediate components from independent suppliers. This practice, called outsourcing, gives them the flexibility to shift purchases of intermediate inputs toward suppliers with costs least affected by exchange rate changes. Some

Production Management of Exchange Risk Sometimes exchange rates move so much that pricing or other marketing strategies cannot save the product. This was the case for U.S. firms in the early 1980s and again in the 1990s and for Japanese firms in the early 1990s as well as the 2000s. Firms facing this situation must

Application Fresco Group Is Squeezed by Dollarization It is 2005, and while the rest of the world tries to cope with a weak dollar, Fresco Group, a clothing manufacturer in El Salvador, is worried that the dollar is too strong. Fresco’s concerns stem from El Salvadors decision in 2001 to adopt the U.S. dollar as

Application Automatic Feed Survives Through Ingenuity The strong dollar of the late 1990s and early 2000s set off a small revolution in factories across America. Consider Automatic Feed Co. Located in Napoleon, Ohio, it makes machinery used in auto plants. To cope with the strong dollar, it undertook the most extensive product redesign in its