- This topic has 1 reply, 2 voices, and was last updated 5 years ago by
Ken Garrett.
Ken Garrett.-
Posts
-
laureennora
- Topics: 5
- Replies: 6
- ☆
Man Co is a manufacturing company operating in contry Westland, and it neighter imports nor exports.
If the currency of Westland strengthens with respect to other currencies, the likely effect on Mant Co’s sales is —> Sales are likely to decrease
I was thinking there should be NO effect. Could you please explain the answer?
Ken Garrett
- Topics: 10
- Replies: 10055
- ☆☆☆☆☆
Even if a company does not import or export, it will be in competition with companies which do. In particular, competitors who import similar products will have to pay less for those products if the home currency strengthens (eg the £ strengthening against the US$ from 1.3 to 1.5 $/£). If the cost of the imported purchases falls then the importer can make the same profits even if their selling prices are lowered. If a competitor lowers selling prices then that will attract customers and your sales will decrease (unless you are able to match prices and even then your revenue will fall even if your market share stays the same as revenue = price x quantity).
Ken Garrett- You must be logged in to reply to this topic.