Business Implications of Exchange-Rate Changes

Marketing Decisions

Production Decisions

Financial Decisions

Table of Contents 1 2 3 4 5 6

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Introduction ........................................................................................................... 1 Marketing Decisions ............................................................................................. 2 Production Decisions ........................................................................................... 3 Financial Decisions ............................................................................................... 5 Conclusion and Recommendations .................................................................... 6 Bibliography …show more content…

A few years later, around the end of the first decade, the value of the dollar had risen since €1 could now be exchanged with less than $1 instead of $1.30. Marketing activities encouraged Americans to travel to Europe, promoting it as low price journeys. Thereby exchange rates influence people’s buying decision and marketing managers need to work on marketing campaigns how to address potential customers. (Back, Harris and Baack, 2013)

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Production Decisions

In response to changes in currency a company may take strategic changes regarding the location of its production. Generally speaking, firms who cope with this issue manufacture in countries where wages and operating expenses are high. These companies may be tempted to relocate their production facilities where labour costs are lower and the currency is weaker compared to the currencies where the products are sold. Exchange rate changes affect a company’s competitive position in the long-term, when strong currencies and high labour costs rise production costs and therefore sales prices. Managers have constantly to assess every singular production plant and to avoid high costs, a company can elaborate a new plant location strategy where it increases its manufacturing in countries with depreciating currencies and decrease it instead where an appreciation of the currency is common. (Abele et al., 2008) India is good example