A manager needs to: A manager needs to know when their company is in a foreign market, and they must know the differences between the foreign market and our market. They must also focus on the business cycles in other countries, and determine the similarities and differences from the United States market and the foreign countries market.
For a major industrialized country, the monitoring system would closely resemble that used in the United States with an addition of foreign exchange risk.
For a less developed country,
| Risk | Indicators |
|---|---|
| monetary policy | varies depending on individual countries |
| foreign exchange risk | divergence between PPP and actual exchange rate |
| capital control | country’s bond credit ratings and stock exchange prices |
| oil | know how dependent the country is on imported oil |
| commodity | commodity price |
| trading partner risk | know who the major trading partners are (including tourism) |
| war or rebellion | local press |
Each country has different monetary policies, and these actions can dictate differences and similarities from foreign markets And the United States market. This can change the money supply and economic growth.
Business managers should focus on foreign markets as well as their own, this way they can see if there’s a supply shock in a foreign country. Things may Seem normal in our market, but in a foreign market there might be a higher supply the demand.
Countries that do not have many different products can be risky to work with because Prices can change randomly and can be bad for your company.
Having training partners and different foreign economies, can be risky because if their economy is struggling then your partnership may collapse.
Each country has a different exchange rate, and business managers should be aware of this. Some countries have a higher exchange rate, or a lower exchange rate which can be beneficial to Your business.
Any foreign partnership, or business Branch in a different country can be at risk for a financial crisis in a foreign country. Good business managers should be aware of the financial market in these countries and determine recessions.
War and revolutions have a huge impact on the economy, because they require many resources and will disrupt the foreign economy.
The foreign business cycle can be very different than the regular business cycle considering the multiple different foreign markets, and many different aspects such as wars, financials recessions and more.
Good business managers must have a good monitoring system in foreign countries to determine recessions and determine whether or not there will be a major foreign market collapse.
Just like in the United States you should have contingency plans just in case there are major impacts on foreign markets.
Overall a good business manager should I only know their own market, for the market of different foreign countries where your business operates, and where your partners operate. You should also focus on the exchange rate of these foreign countries, which can help increase Profits.
Explan each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the terms in your own words briefly.
Foreign exchange rate means the United States dollar could be worth more or less in a specific foreign country.
Pegged exchange rate is a fixed exchange rate for both foreign countries and the United States. Therefore the United States dollar cannot be more or less.
When a country’s currency price is determined by the relative supply and demand of the country
When the government makes a monetary policy to reduce a currency value.
A drop in the value of a currency in terms of the exchange rate Versus other countries
Restrictions that the government sets in place to limit or ban the use of foreign currencies.
This is when countries compare their currencies but exchange rate.
Describe the characteristics of the following events briefly.
This economic event is Win the Mexican government used to currency devaluation to lower the value of their currency. By doing this they pegged the peso to the US dollar. The problem with this is that this made the peso less valuable than the United States dollar which led to many different businesses in Mexico face a downturn in profit.
Most individuals got loans from international banks. After the Asian financial crisis The Indonesian currency went through devaluation. This lower the value of the Indonesians peoples currency causing them to not be able to afford paying back the loans given to them.
This started because of foreign exchange restrictions implemented by the government at the time. This meant you could no longer take your money outside the country, this sparked a big problem for people with businesses in these Asian countries because they couldn’t take their money out to pay shareholders or employees.This led to many different businesses going bankrupt because of unpaid debts.