Mexico and International Marketing
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Today's economy is a global economy with companies based in the United States selling products in Europe that were manufactured in Mexico. Where international marketing was once the exclusive domain of large conglomerates, computer technology and telecommunications now make it possible for even small companies to enter the international marketplace. Another key factor in the growth of international marketing is the ability of financial institutions to be able to handle transactions conducted in various currencies, which facilitates international trade, but which also exposes companies to greater risk than if they dealt in a single strong currency. Today's international competitors must be concerned not only with the marketing potential of the product, but with the financial situation of the destination country and the risks to which the company will be exposed from a foreign exchange standpoint. This research examines one popular market for American goods, Mexico, considers the foreign exchange risk that companies face when doing business in Mexico, and offers recommendations on how to minimize that risk.The problem of foreign exchange risk in Mexico is not insignificant. The Mexican currency, the peso, is not strong relative to other major currencies (including the American dollar, the German mark and the Japanese yen); as a result, the value of the peso fluctuates in relation to these other currencies, and sometimes with great volati
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rentials (Zhou, 1995, p. 939). The higher a nation's productivity, the stronger its currency tends to become. This comes about as the nominal exchange rate is multiplied by the ratio of the price index of a highly productive nation compared to a less productive nation. In this way, the real exchange rate is insulated somewhat from possible equalization through international exchanges.
Oil prices have an effect on the currency markets because of the dependence of the world's strongest economies on imported oil. Thus an increase in oil prices would affect those countries which have a heavy dependence less than those countries with less of a dependence. Japan, for example, is highly susceptible to fluctuations in the oil market, and the yen traditionally suffers against the dollar when such increases occur. Actions by the Japanese government sometimes work to weaken the yen further as it may raise the nominal exchange rate (Zhou, 1995, p. 943).
Government spending may also bring about a change in the real exchange rate, but here the direction of the change depends on whether the government spending is on tradable or nontradable goods. High domestic spending on nontraded goods may raise the relative price of the commodity and
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Some common words found in the essay are:
Butler Butler, Bartolini Bodnar, Actions Japanese, Ajakaiye Ojowu, Latvia Lithuania, Cayman Islands, Concepts Flexible, American Mexico, Introduction Today's, Board FASB, exchange rate, foreign exchange, exchange rates, transaction risk, developing countries, nominal exchange rate, nominal exchange, floating currency, 5 pesos, multinational company, mexican economy, ajakaiye ojowu 1994, foreign exchange risk, international financial managers, bartolini bodnar 1996,
Approximate Word count = 3592
Approximate Pages = 14 (250 words per page)
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