This week, you will continue building your small MNC. Work on addressing the following questions while continuing developing your small MNC:
- Monitor Exchange Rate Trends: Use a business periodical or the Internet to determine how the value of the foreign currency of concern has changed in each of the last five weeks. Does it appear that there is a trend over the last five weeks? What is the mean percentage change over these weeks? If you believed that the currency’s value would continue following the recent trend, would it appreciate or depreciate in the near future?
- Recognize Exposure to Exchange Rate Risk: Recall that when you created your business idea, it was assumed that your receivables would be denominated in the foreign currency of concern upon the sale of your products. Describe your exposure to exchange rate risk. That is, describe the exchange rate conditions affecting the performance of your business. Is your business subject to transaction exposure? Economic exposure? Translation exposure? Explain why your business is or is not subject to each of these types of exposure.
Recall that it was assumed that your receivables would be denominated in the foreign currency of concern. For this question only, assume that you could switch your pricing policy so that the receivables would be denominated in dollars instead of the foreign currency. How would this switch affect the transaction exposure and the economic exposure of your business? Explain the conditions that could still cause the performance of your business to be affected by exchange rate movements.
Submit your idea for a small MNC using an APA formatted essay. Remember, you should cite and reference all sources.