Business

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

Product Strategy. Companies often respond to exchange risk by altering their product strategy, which deals with areas such as new-product introduction, product line decisions, and product innovation. One way to cope with exchange rate fluctuations is to change the timing of the introduction of new products. For example, because of the competitive price advantage, the

Questions 1. Why does a rise in the dollar hurt Markel? How does a falling dollar help Markel? 2. What does Markel do to hedge its currency risk? Can Markel use hedging to completely eliminate its currency risk? 3. Comment on Markel’s policy of selective hedging. Are there any speculative elements involved in such a

Questions 1. Why does a rise in the dollar hurt Markel? How does a falling dollar help Markel? 2. What does Markel do to hedge its currency risk? Can Markel use hedging to completely eliminate its currency risk? 3. Comment on Markel’s policy of selective hedging. Are there any speculative elements involved in such a

Questions 1. Why does a rise in the dollar hurt Markel? How does a falling dollar help Markel? 2. What does Markel do to hedge its currency risk? Can Markel use hedging to completely eliminate its currency risk? 3. Comment on Markel’s policy of selective hedging. Are there any speculative elements involved in such a

Questions 1. Why does a rise in the dollar hurt Markel? How does a falling dollar help Markel? 2. What does Markel do to hedge its currency risk? Can Markel use hedging to completely eliminate its currency risk? 3. Comment on Markel’s policy of selective hedging. Are there any speculative elements involved in such a