Question

Provide real examples of companies that have been affected by changes in exchange rate, foreign political conditions and foreign economic conditions. Provide at least one real example for each factor

Answer 1

Company that has been affected by changes in exchange rate – A real life example of a company that has been affected by changes in exchange rate is Toyota. Toyota is exposed to fluctuations in the value of the Japanese Yen, the U.S. dollar, and the Euro. The company presents its consolidated financial statements in Japanese Yen and so it faces both translation risk and transaction risk. In the last quarter Japanese Yen had marginally strengthened against the U.S. dollar and this had an adverse impact on the company’s operating results.

Company that has been affected by foreign political conditions – A real life example of a company that has been affected by foreign political conditions is Harley Davidson. The recent political condition in China after the trade war has been anti-America. As a result China has been imposing retaliatory import duties on imported bikes and due to this sales of Harley Davidson bikes in China have been negatively impacted.

Company that has been affected by foreign economic conditions - A real life example of a company that has been affected by foreign economic conditions is Apple Inc. The company depends a lot on few emerging markets and China for the sales of its flagship products. With the recent slowdown in economic growth rates in China and other emerging economies like India, Russia and Brazil Apple’s sales of products like i-Phones etc. have slowed down as well as majority of international sales growth was dependent on these economies.