IGCSE/ A-Level Revision Questions

Here's an analysis of the potential effects of a strengthening Japanese Yen on a UK company importing components from Japan, presented in a table format:

Effect	Description
Import Cost	The cost of the components purchased from Japan will increase. Since the Yen is stronger, it takes fewer Yen to buy the same amount of Pounds. Therefore, the company will need to spend more Pounds to acquire the same quantity of Yen-denominated components.
Production Costs	Higher import costs will directly increase the company's overall production costs. This is because the components are a key input into the final product.
Pricing Strategy	The company has several options. It could: Absorb the increased costs (reducing profit margins). Pass the increased costs onto the consumer (raising prices). Seek alternative suppliers (potentially at a higher cost or with different quality). The choice depends on the company's market position and the price elasticity of demand.
Competitiveness	The company's products may become less competitive if it raises prices significantly. Competitors who source their components from countries with weaker currencies may be able to offer lower prices. The company may need to focus on product differentiation or cost reduction to maintain competitiveness.

Business Studies – 6.2.4 Exchange rates | e-Consult

6.2.4 Exchange rates (1 questions)