You have been asked to evaluate possible sites for an South American production facility that will manufacture your firm's products and sell them to the South American market. What real exchange rate considerations should you entertain in your evaluation?
What will be an ideal response?
Answer: You must be aware of the strength or weakness of the real exchange rates in the various countries. Because your firm will be exporting from the country in which the plant is located, your profits will be hurt by a future real appreciation of the currency of that country relative to the currencies of countries to which you export. Your costs would rise with no corresponding benefit in sales. Thus, if the potential production country currency is currently severely undervalued on foreign exchange markets, this country may appear to be a low cost production center, but it is likely that this cost advantage will be eroded by a real appreciation in the future.
You might also like to view...
Always Fresh Produce Company has a route selling to more than 100 groceries, schools, and restaurants at wholesale prices. Last week the owners opened up a walk-in discounted consumer produce outlet
Always Fresh is now using a dual distribution system. Indicate whether the statement is true or false
If a contract involves both goods and services, the UCC always controls
Indicate whether the statement is true or false
To be successful, most businesses focus on customer service. However, the cable industry has a history of poor customer service. Cable companies are facing competition for TV customers who once had no choice but cable if they wanted to see more than local programs. In the face of this competition from direct broadcast satellites, cable companies are trying to use a _____ strategy to show that they have become customer-oriented.
A. segmentation B. product differentiation C. targeting D. repositioning E. demarketing
Tax laws passed by Congress may be "crushing" in impact on business, according to the Supreme Court, and still be constitutional
a. True b. False Indicate whether the statement is true or false