Business Implications of Exchange Rate Changes
Business Implications of Exchange-Rate Changes
Marketing Decisions
Production Decisions
Financial Decisions
Table of Contents 1 2 3 4 5 6
Page
Introduction ........................................................................................................... 1 Marketing Decisions ............................................................................................. 2 Production Decisions ........................................................................................... 3 Financial Decisions ............................................................................................... 5 Conclusion and Recommendations .................................................................... 6 Bibliography ......................................................................................................... III
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1
Introduction
Who could imagine not to travel in 2013 or to eat any fruit during winter time? The worldwide trade plays a significant role for all economies involved, especially at a time that is characterized by increasing globalization and integration of markets. Despite all benefits of trading, its risks must also be considered in order to reveal any trade-restrictive effects and possibly eliminate or reduce these. (Beck, 2009) In this global economy goods and services are imported and exported between countries with different currencies. For this purpose exchange rates, the amount at which one currency is traded for the other country’s currency, are used to complete the transaction. The collapse of the fixed exchange rate system of Bretton Woods in the early 1970s laid to the transition from fixed to flexible exchange rates. This means that currency exchange rates change every day depending on the forces of supply and demand for money. Therefore, in addition to the already existing foreign trade risks of the fixed exchange rate system, economic subjects face fluctuating exchange rate conditions. In
Marketing Decisions
Production Decisions
Financial Decisions
Table of Contents 1 2 3 4 5 6
Page
Introduction ........................................................................................................... 1 Marketing Decisions ............................................................................................. 2 Production Decisions ........................................................................................... 3 Financial Decisions ............................................................................................... 5 Conclusion and Recommendations .................................................................... 6 Bibliography ......................................................................................................... III
II
1
Introduction
Who could imagine not to travel in 2013 or to eat any fruit during winter time? The worldwide trade plays a significant role for all economies involved, especially at a time that is characterized by increasing globalization and integration of markets. Despite all benefits of trading, its risks must also be considered in order to reveal any trade-restrictive effects and possibly eliminate or reduce these. (Beck, 2009) In this global economy goods and services are imported and exported between countries with different currencies. For this purpose exchange rates, the amount at which one currency is traded for the other country’s currency, are used to complete the transaction. The collapse of the fixed exchange rate system of Bretton Woods in the early 1970s laid to the transition from fixed to flexible exchange rates. This means that currency exchange rates change every day depending on the forces of supply and demand for money. Therefore, in addition to the already existing foreign trade risks of the fixed exchange rate system, economic subjects face fluctuating exchange rate conditions. In
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