Describe the exchange rate problems Toyota, Nissan, and GM face while manufacturing in Britain and propose a long-term strategy for these companies.
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Sprache:Englisch
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Erscheinungsdatum
28.11.2003
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GRINSeitenzahl
21 (Printausgabe)
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351 KB
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1. Auflage
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Englisch
EAN
9783638236195
Seminar paper from the year 2002 in the subject Economics - International Economic Relations, grade: 1,3 (A), University of Applied Sciences Mainz (Economics), course: European Integration, language: English, abstract: Theories on exchange rate risks and the closely related theory of Purchasing
Power Parity (PPP) provide the basis for the analysis of the exchange rate
problems the three car producers face while manufacturing in the UK.
1.1 Theories on exchange rate risks
The exchange rate risk represents one of the most important risks for
companies operating in international industries.1 There are three kinds of
exchange risks: transaction risk, translation risk and economic risk. Transaction
exposure is the risk of changes in the value of currency occurring between the
time of the settlement of the transaction and the maturity of it.2 The second and
most important type of exchange risk is economic risk. Economic exposure
occurs when currencies, that are involved in the actual or potential competitive
situation, become over- or undervalued.3 It can heavily affect current and future
cash flows of domestic and foreign operations.4 The third type of risk is called
translation exposure. It refers to the risk that exchange rate fluctuations may
change the value of current assets and liabilities of the balance sheet of a
foreign affiliate in case of consolidation.5 [...]
1 See: Punett, Betty J. / Ricks, David A., 1994, p. 305
2 See: Grosse, Robert / Kujawa, Duane, 1992, p. 447
3 Over- and undervaluation are expressions that will be explained under the point 1.2 "Theory of
Purchasing Power Parity".
4 See: Czinkota, Michael R. / Ronkainen, Ilkka A. / Moffett Michael H., 1992, p.542
5 See: Grosse, Robert / Kujawa, Duane, 1992, p. 447
Power Parity (PPP) provide the basis for the analysis of the exchange rate
problems the three car producers face while manufacturing in the UK.
1.1 Theories on exchange rate risks
The exchange rate risk represents one of the most important risks for
companies operating in international industries.1 There are three kinds of
exchange risks: transaction risk, translation risk and economic risk. Transaction
exposure is the risk of changes in the value of currency occurring between the
time of the settlement of the transaction and the maturity of it.2 The second and
most important type of exchange risk is economic risk. Economic exposure
occurs when currencies, that are involved in the actual or potential competitive
situation, become over- or undervalued.3 It can heavily affect current and future
cash flows of domestic and foreign operations.4 The third type of risk is called
translation exposure. It refers to the risk that exchange rate fluctuations may
change the value of current assets and liabilities of the balance sheet of a
foreign affiliate in case of consolidation.5 [...]
1 See: Punett, Betty J. / Ricks, David A., 1994, p. 305
2 See: Grosse, Robert / Kujawa, Duane, 1992, p. 447
3 Over- and undervaluation are expressions that will be explained under the point 1.2 "Theory of
Purchasing Power Parity".
4 See: Czinkota, Michael R. / Ronkainen, Ilkka A. / Moffett Michael H., 1992, p.542
5 See: Grosse, Robert / Kujawa, Duane, 1992, p. 447
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