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Q-3. MNCs operate across the world in different countries and different continents either as mutually exclusive in productions or production in parts at the different locations to optimally utilizing the least cost resources. Eventually dealing with the various currencies. Evaluate the importance of foreign exchange market in international business? Explain various strategies firms can apply to hedge against foreign exchange risk?
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Answer #1

Foreign exchange implies great economic advantage in international business domain.

Whenever currency depreciates it is best to adopt exports and whenever it appreciates it is best to adopt imports to gain maximum advantage and drive revenue maximisation.

For example when rupee depreciate in Indian context, pharma sector which is net exporter will export more because each dollar will fetch more rupee due to depreciation and hence exports become more lucrative .

Similarly when rupee appreciates it is best to import crude oil and save on CAD by reducing import bill.

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