abhishreshthaa
Abhijeet S
Possible strategies for dealing with price escalation
1. Reduce manufacturing costs by eliminating costly product features, lowering quality, or offering a stripped-down version
2. Shorten channels of distribution by eliminating intermediaries and/or setting up own distribution
3. Seek to reclassify product into a different tariff category (most often achieved by shipping components and assembling/packaging in the foreign market). Transfer pricing which is common among MNCs and their affiliates.
4. Seek to reduce physical distribution costs
2] Currency Fluctuation (Maitali)
Shifts in the relative value of currency - even between "strong" currencies - can have a dramatic effect on firms’ international competitiveness and on the profitability of export activities. Exporters can chose to quote and invoice in either:
• Own currency
• The client's currency
• The currency of a third country (US$, D.M., Swiss Franc etc.) or the ECU
Each method has its advantage in terms of ease of administration and level of risk involved.
Exporters own currency
Administratively simple for exporter
Lower risk for exporter
But:
More complicated for client
Client takes risk
Quotation in foreign currency not acceptable (notably, in the US)
Potential for "windfall" profits ignored
Client's currency
Administratively simple for client
Customer oriented
But:
Exporter carries the risk of potential exchange losses
Third Currency
Used in trading with countries which have volatile exchange rates where the US $ is often used by importers and exporters alike
Often used in commodity trading (US$) or tendering for EU contracts (ECU) or UN/World Bank development projects (US$)
1. Reduce manufacturing costs by eliminating costly product features, lowering quality, or offering a stripped-down version
2. Shorten channels of distribution by eliminating intermediaries and/or setting up own distribution
3. Seek to reclassify product into a different tariff category (most often achieved by shipping components and assembling/packaging in the foreign market). Transfer pricing which is common among MNCs and their affiliates.
4. Seek to reduce physical distribution costs
2] Currency Fluctuation (Maitali)
Shifts in the relative value of currency - even between "strong" currencies - can have a dramatic effect on firms’ international competitiveness and on the profitability of export activities. Exporters can chose to quote and invoice in either:
• Own currency
• The client's currency
• The currency of a third country (US$, D.M., Swiss Franc etc.) or the ECU
Each method has its advantage in terms of ease of administration and level of risk involved.
Exporters own currency
Administratively simple for exporter
Lower risk for exporter
But:
More complicated for client
Client takes risk
Quotation in foreign currency not acceptable (notably, in the US)
Potential for "windfall" profits ignored
Client's currency
Administratively simple for client
Customer oriented
But:
Exporter carries the risk of potential exchange losses
Third Currency
Used in trading with countries which have volatile exchange rates where the US $ is often used by importers and exporters alike
Often used in commodity trading (US$) or tendering for EU contracts (ECU) or UN/World Bank development projects (US$)