Sony: United States Dollar and Yen
"Welcome to the World of Sony - Unless the Yen Keeps Rising"
- Given instability in the currency markets, why do you think it is important for Sony to manufacture more products in the United States and Europe and to also buy more from suppliers in other countries in Asia?
It is important for Sony to manufacture more products in the United States and Europe as a way to sell more and improve profit margins.
The most straightforward way to manage exchange rate fluctuations and minimize the risk from these fluctuations is to shift production to those countries whose exchange rates are less violate and to the United States and Europe. This will allow Sony to produce under the same currency regime that the company is selling the product in. The downside to this production approach is the higher labor rates in these countries. This is why China is a good option since China's currency is fixed, minimizing exchange rate fluctuations, and China has a low cost of labor. Sony should buy more from suppliers in other countries in Asia because "the purchasing power of the yen rises as it strengthens compared with other currencies" (Daniels et al., 2011) so everything Sony imports into Japan or outside of Japan for its' manufacturing is cheaper. Sony must match dollar revenues with dollar expenses through investing more in the U.S. or n other countries in Asia, where components are less expensive but where Sony can invoice in dollars.
- What are the major forces that affected the Japanese yen prior to the global financial crisis in the fourth quarter of 2008? In your opinion, what has had the greatest impact on the yen since then, and where do you forecast the future value of the yen?
Prior to financial crisis in 2008 it appears that the exchange rate between Japanese yen and other for currency, such as the United States dollar was based primarily off of fundamentals within individual countries such as economic growth, unemployment growth, and inflation. The U.S.
- Given instability in the currency markets, why do you think it is important for Sony to manufacture more products in the United States and Europe and to also buy more from suppliers in other countries in Asia?
It is important for Sony to manufacture more products in the United States and Europe as a way to sell more and improve profit margins.
The most straightforward way to manage exchange rate fluctuations and minimize the risk from these fluctuations is to shift production to those countries whose exchange rates are less violate and to the United States and Europe. This will allow Sony to produce under the same currency regime that the company is selling the product in. The downside to this production approach is the higher labor rates in these countries. This is why China is a good option since China's currency is fixed, minimizing exchange rate fluctuations, and China has a low cost of labor. Sony should buy more from suppliers in other countries in Asia because "the purchasing power of the yen rises as it strengthens compared with other currencies" (Daniels et al., 2011) so everything Sony imports into Japan or outside of Japan for its' manufacturing is cheaper. Sony must match dollar revenues with dollar expenses through investing more in the U.S. or n other countries in Asia, where components are less expensive but where Sony can invoice in dollars.
- What are the major forces that affected the Japanese yen prior to the global financial crisis in the fourth quarter of 2008? In your opinion, what has had the greatest impact on the yen since then, and where do you forecast the future value of the yen?
Prior to financial crisis in 2008 it appears that the exchange rate between Japanese yen and other for currency, such as the United States dollar was based primarily off of fundamentals within individual countries such as economic growth, unemployment growth, and inflation. The U.S.