This is “Cases and Problems”, section 3.7 from the book An Introduction to Business (v. 1.0).
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Keeping Current About Currency
On a day-to-day basis, you probably don’t think about what the U.S. dollar (US$) is worth relative to other currencies. But there will likely be times when ups and downs in exchange rates will seem extremely important to you in your business career. The following are some hypothetical scenarios that illustrate what these times may be. (Note: To respond to the questions raised in each scenario, search Google for a currency converter.)
Scenario 1: Your Swiss Vacation
Your family came from Switzerland, and you and your parents visited relatives there back in 2002. Now that you’re in college, you want to make the trip on your own during spring break. While you’re there, you also plan to travel around and see a little more of the country. You remember that in 2002, US$1 bought 1.64 Swiss francs (Frs). You estimate that, at this rate, you can finance your trip (excluding airfare) with the $1,000 that you earned this summer. You’ve heard, however, that the exchange rate has changed. Given the current exchange rate, about how much do you think your trip would cost you? As a U.S. traveler going abroad, how are you helped by a shift in exchange rates? How are you hurt?
Scenario 2: Your British Friends
A few years ago, you met some British students who were visiting the United States This year, you’re encouraging them to visit again so that you can show them around New York City. When you and your friends first talked about the cost of the trip back in 2002, the British pound (£) could be converted into US$1.45. You estimated that each of your British friends would need to save up about £700 to make the trip (again, excluding plane fare). Given today’s exchange rate, how much will each person need to make the trip? Have your plans been helped or hindered by the change in exchange rates? Was the shift a plus for the U.S. travel industry? What sort of exchange-rate shift hurts the industry?
Scenario 3: Your Canadian CDs
Because certain CDs are simply hard to get in the United States, over the years, you’ve gotten into the habit of buying a lot of music from a company located in Canada. You order CDs by mail and pay in Canadian currency, which you get at your local bank. They cost about $16 in Canadian dollars, and when you bought your first Canadian CD in 2002, US$1 could be converted into $1.60 in Canadian currency. At that conversion rate, you were getting CDs for about US$10. How much would you be paying at the current conversation rate? Would an American company that imports goods from Canada view the current rate more favorably or less favorably than it did back in 2002?
Scenario 4: Your German Soccer Boots
Your father rarely throws anything away, and while cleaning out the attic a few years ago, he came across a pair of vintage Adidas soccer boots made in 1955. Realizing that they’d be extremely valuable to collectors in Adidas’s home country of Germany, he hoped to sell them for US$5,000 and, to account for the exchange rate at the time, planned to price them at $5,535 in euros. Somehow, he never got around to selling the boots and has asked if you could sell them for him on eBay. If he still wants to end up with US$5,000, what price in euros will you now have to set? Would an American company that exports goods to the European Union view the current rate more favorably or less favorably than it did back in 2002?
Broadening Your Business Horizons
At some point in your life, you’ll probably meet and work with people from various countries and cultures. Participating in a college study-abroad program can help you prepare to work in the global business environment, and now is as good a time as any to start exploring this option. Here’s one way to go about it:
Select a study-abroad program that interests you. To do this, you need to decide what country you want to study in and your academic field of interest. Unless you speak the language of your preferred country, you should pick a program offered in English.
The Right, Wrong, and Wisdom of Dumping and Subsidizing
When companies sell exported goods below the price they’d charge in their home markets (and often below the cost of producing the goods), they’re engaging in dumping. When governments guarantee farmers certain prices for crops regardless of market prices, the beneficiaries are being subsidized. What do you think about these practices? Is dumping an unfair business practice? Why, or why not? Does subsidizing farmers make economic sense for the United States? What are the effects of farm subsidies on the world economy? Are the ethical issues raised by the two practices comparable? Why, or why not?
Three Little Words: The China Price
According to business journalists Pete Engardio and Dexter Roberts, the scariest three words that a U.S. manufacturer can hear these days are the China price. To understand why, go to the Business Week Web site (http://www.businessweek.com/magazine/content/04_49/b3911401.htm) and read its article “The China Price,” which discusses the benefits and costs of China’s business expansion for U.S. companies, workers, and consumers. Once you’ve read the article, each member of the team should be able to explain the paradoxical effect of U.S.–Chinese business relationships—namely, that they can hurt American companies and workers while helping American companies and consumers.
Next, your team should get together and draw up two lists: a list of the top five positive outcomes and a list of the top five negative outcomes of recent Chinese business expansion for U.S. businesses, workers, and consumers. Then, the team should debate the pros and cons of China’s emergence as a global business competitor and, finally, write a group report that answers the following questions:
When you hand in your report, be sure to attach all the following items:
Go East, Young Job Seeker
How brave are you when it comes to employment? Are you bold enough to go halfway around the world to find work? Instead of complaining about U.S. jobs going overseas, you could take the bull by the horns and grab one job back. It’s not that tough to do, and it could be a life-changing experience. U.S. college graduates with business or technical backgrounds are highly sought after by companies that operate in India. If you qualify (and if you’re willing to relocate), you could find yourself working in Bangalore or New Delhi for some multinational company like Intel, Citibank, or GlaxoSmithKline (a pharmaceutical company). In addition, learning how to live and work in a foreign country can build self-confidence and make you more attractive to future employers. To get a glimpse of what it would be like to live and work in India, go to the Web sites of American Way magazine (http://americanwaymag.com/aw/business/feature.asp?archive_date=3/15/2005) and CNN and Money (http://money.cnn.com/2004/03/09/pf/workers_to_india), and check out the posted articles: “Passage to India,” and “Needs Job, Moves to India.” Then, go to the Monster Work Abroad Web site (http://www.monster.com/geo/siteselection.asp) and find a job in India that you’d like to have, either right after graduation or about five years into your career. (When selecting the job, ignore its actual location and proceed as if it’s in Bangalore.) After you’ve pondered the possibility of living and working in India, answer the following questions: