Question

The executive managers of Auto International, a U.S.-based multinational car manufacturer, want to reduce the vulnerability of the company to unpredictable exchange rate movements. Which of the following would provide the company with a hedge against currency fluctuations?
a. not contracting out manufacturing
b. dispersing production to different locations around the globe
c. restricting manufacturing to one location
d. using the spot exchange rate for international transactions

Answer 1

Answer:

b. dispersing production to different locations around the globe

Explanation:

Dispersing production to different locations around the globe would provide the company against currency fluctuations. this will enhance the firm's strategic flexibility and will help to combat the unpredicatable exchange rate fluctuations. another option is to switch the suppliers from one country to another. this will lead to resuction in the relative cost that was caused by the currency fluctuations.