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, and deciding on strategies to deal with these possibilities.
When a currency change actually occurs, the firm is able to quickly adjust its marketing and production strategies in line with the plan. Given the substantial costs of gathering and processing information, a firm should focus on scenarios that have a high probability of occurrence and that also would have a strong impact on the firm.