How can Managers use Exchange markets and Rates to benefit their firms? Give examples.

please do not repeat these examples :

1) Managers can use exchange markets and rates to benefit their firms by using exchange techniques such as exchange risk hedging. For example, let's assume the owner of a company is based in the United States and produces wool sweaters. He has decided that a supplier in New Zealand, where there are many sheep and they are of great quality, is where he chooses to get wool from. He has also decided on a price per pound of wool in US dollars that is advantageous for his company. For a while, everything seems to be going according to plan, but when he goes to place his next purchase a few months later, he learns that his supplier is charging 10% extra for the same amount of wool. The price increase may have been caused by a variety of factors, but for the purposes of this example, let's say that it was solely caused by a change in the exchange rate between the US dollar and the New Zealand dollar (often referred to as the "kiwi" by currency traders). The U.S. dollar has specifically lost 10% of its value relative to the New Zealand currency. Furthermore, even if our sweater-maker has always paid in US dollars, he might not have known that those dollars aren't worth much to someone who lives in New Zealand. As a result, his supplier must exchange those US dollars for NZ dollars, and as a result of the US dollar's decline in value, the supplier must now charge 10% more US dollars per pound of wool to continue earning the same amount of money (Hbs, 2022).

2) Exchange rate as we know is the rate at which one country's currency is converted into another country's currency or the rate or amount one currency will be swap or replace for another country's currency. It tells us how many units of one currency is needed to buy a single unit of another. It also tells us the value of that currency compared to other currency. The foreign exchange market is where trade transaction of the exchange of the currencies of the different countries takes place to convert one international currency into another. In other words, it is like the location where international currency is bought and sold by participants at different exchange rates. However, how can mangers use exchange market and rates to benefit their firms? In the St. Louis Business Journal Article titled "6 ways business benefit and profit from foreign exchange", it gives the reader several scenarios as to how businesses can benefit and profit from foreign exchange. In Scenario 5 of the article, it states that a business can benefit by saving money with a foreign currency account if it sends and receive payments regularly in a particular foreign currency account. It states that if you're paid in the foreign currency and deposit, it to your account, you can later use it to make payment to a foreign seller. By holding it in the account instead of exchanging it to U.S. dollars and back to the currency, you don't have to pay to exchange it. (St. Louis Business Journal)

Scenario 6 gives a good example of how exchange rate can benefit a firm. To eliminate the risk of rate fluctuations, FX forward can be utilized. How does this work. With this the exchange rate of a currency today can be fix for a product you may want to purchase in the future. In other wards the rate is locked in for a future currency transaction. As stated in the article example, if a European customer purchase a product today for 100,000 euros, a company might give them three months to pay. With the FX Forward, when the customer euro payment is received by the three months, the bank would credit the firms account with the U.S. dollar equivalent based on the current rate. (St. Louis Business Journal) Finally, as the textbook mentioned that the foreign exchange market is the lubricant that enables companies based in countries that use different currencies to trade with each other. (International Business, pp 298) Managers who do business internationally have to constantly monitor exchange rates and to be aware of any factors that influence the currency rate or fluctuation that can affect their business.

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Managers can use exchange markets and rates to benefit their firms in several ways Here are three additional examples 3 Cost Saving in International P... View the full answer