Week 3 Discussion 1 & 2 Response

BUS592 Week 3 - Discussion Forum 2 Response

Guided Response: Review the posts from your classmates and respond to at least two. Compare and contrast the points you and your classmates made regarding strategies for reducing risk associated with foreign exchange fluctuations. Each response should have a minimum of 100 words.

Below are two of my classmates that need response to their discussion. They are Christopher Rich and Brett Beatty

Christopher Rich

While reviewing the information on John Deere's investor relations, I was able to gather statistics and statements in order to provide feedback in this discussion. Analyst would potentially be able to utilize this information shared, and ask if the company would be more profitable pulling out of some economy's or markets. As an example Canada is a place where they could possibly at least down size judging by the poor performance that has been consistent for quite some time. According to 1Q 2020 numbers their net sales are down by 10%, which can partially be blamed on the Global pandemic at hand. However, the foreign exchange transaction translation has certainly decreased the profitability in the company currently. The fluctuation of markets or the economy can affect the currency and exchange rates, which again, did not help John Deere in a positive manner, yet did so negatively. Given different situations or circumstances, there is ways to offer strategies to businesses in order to reduce risks in order to keep from losing tons of profit. It may be possible to increase prices somewhat to combat the fluctuation of foreign exchange currencies. Also, if a company can swing it, use their own modes of transportation to ship products where they need to be shipped. Pull out of a market if the forecast isn't looking the best is always on the table. Pricing things high yet within reason when entering a new market can help the population become used to that price/product in general, so when exchange rates become unattractive, the price is still favoring the company. John Deere is so far stretched across the globe it is wise for the strategist to follow balance sheets and cut costs elsewhere or make sure researchers are planning the best areas to conduct business, with foreign currency transactions in mind. 

Brett Beatty

4:15pmApr 23 at 4:15pm

Manage Discussion Entry

Like all companies operating in the global economic market of today, Deere & Co. has experienced both the benefits and the drawbacks that occur when trading on an international scale. One such drawback is loss of revenue due to exchange rates (Block, Hirt, & Danielson, 2020). According to Deere & Co.’s 2019 Q2 financial statement, the firm saw a loss of $34.8 million directly attributable to foreign currency exchange. This change would be characterized as the effect of exchange rate. Moreover, such a significant loss is not the norm for the firm as they saw a comparatively substantial gain in the same quarter just one year prior.

One means of mitigating the risk that comes with exchanging foreign currencies is deferring the exchange to avoid a poor time to make the exchange for an opportunity to make the exchange during a more favorable time. Additionally, during the time prior to the exchange, the foreign currency could be maintained in an interest bearing account so that it does not remain stagnant (Block, Hirt, & Danielson, 2020).

As mentioned in the first paragraph, Deere & Co. is definitely susceptible to having its bottom-line impacted by foreign currency exchange rates. Accordingly, it is advantageous to the firm that it is located in the United States. The US is a strong currency that is not as prone to large fluctuations as other forms of currency found internationally (Amadeo, 2019).

References:

Amadeo, K. (2019, December 13). Why the US Dollar Is the Global Currency. Retrieved from https://www.thebalance.com/world-currency-3305931

Block, S. B., Hirt, G. A., & Danielson, B. R. (2019). Foundations of financial management (17th ed.). Retrieved from  https://www.vitalsource.com/ (Links to an external site.)

John Deere. (n.d.). Investor relations (Links to an external site.). Retrieved from https://investor.deere.com