Multinational companies followed the demand forecasting from all over the markets and manufacture by forming an aggregate production plan in order to fulfill the customers wants and needs. The major drawback of relating production with demand is that the risk of fluctuating exchange rate is being overlooked. As the fluctuating exchange rates dramatically affect the consolidated revenue of multinational firms, thus it requires the managers to consider the fluctuating exchange rates while developing an aggregate production plan. The author provides a framework that based on manufacturing less than the overall demand and supports the operational activities (Operational hedging). The firm pursues a proactive approach to avoid the vulnerability of exchange rates by manufacturing less than its overall demand and the article proves how this approach strengthens a firm’s bottom line. This article provides a guideline for the marketing managers to evaluate the economic potential of a market. It also defines why operational hedging has significant impact rather than financial hedging.
Related Case Solutions & Analyses:
Fiddler Livestock Company
JPMorgan: Hiring Chinese Princelings Becomes a Royal Pain
A Business Plan
BP and Contingent Liabilities
Thin Political Markets: The Soft Underbelly of Capitalism
Developing Financial Insights: Using a Future Value (FV) and a Present Value (PV) Approach
Note on Operating Exposure to Exchange-Rate Changes
Westchester Distributing, Inc. (A), Spanish Version
Fullerton: Risk Analytics and Business Strategy
The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate
