After receiving demand projections from all markets to meet consumer needs, global firms typically make based on their aggregate production strategy. Among the results of matching demand with production is that these strategies generally discount the impact of exchange rate changes. Consolidated gains for global firms are significantly affected by fluctuations in exchange rates and opportunity exists to integrate exchange rate uncertainty into international production preparation.
Due to uncertainty in exchange rates, conservative actions are taken by the firm and by choice fabricate a smaller amount than its overall global demand. The article shows how a higher gain can be created by manufacturing. Additionally, it demonstrates operational hedging, in the form of creation hedging, is more valuable than financial hedging.
Publication Date: 07/15/2014
This is just an excerpt. This case is about Finance
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