EC3406 : International and Financial Economics (2015-2016, Semester 2) (University Main Campus)
Assignment One 2500 words
Submit by Turnitin by midnight Sunday 20th March
What are the business implications of exchange rate changes for a global British company?
What measures can companies take to increase profitability?
Use diagrams and empirical examples to illustrate your answer.

Assignment One – Guidance
What are the business implications of exchange rate changes for a global British company?
What measures can companies take to increase profitability?
Exchange rate fluctuations can affect all areas of a company’s operation.
Marketing Decisions
Production Decisions
Financial Decisions
Marketing Decisions
Exchange rate changes can affect demand for a firm’s products, both at home and abroad. For instance, the strengthening of a country’s currency could create price competitiveness problems for exporters; on the other hand importers would favour the situation.
Production Decisions
Firms may choose to locate production in a country whose currency is weak because initial investment there is relatively inexpensive; it could also be a good base for exporting the firm’s output. Exchange rate differentials contribute to this situation across industrialised nations, as well as from industrialised to developing nations.
Financial Decisions
Exchange rate fluctuations can affect financial decisions in the areas of sourcing funds (both debt and equity), the cross-border remittance of funds and the reporting of financial results.