Business – 6.1 External influences – Economic | e-Consult
6.1 External influences – Economic (1 questions)
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A weaker currency makes the firm’s products cheaper for foreign buyers, potentially boosting export volumes and market share. Strategic responses may include:
- Increasing production capacity to meet higher overseas demand.
- Re‑pricing products to remain competitive while protecting margins.
- Investing in foreign marketing and distribution networks to capitalize on the price advantage.
- Hedging foreign‑exchange risk through forward contracts to lock in favourable rates for future sales.
However, the firm must also consider higher import costs for components priced in foreign currencies, which could erode profit margins. Decisions about sourcing locally versus abroad, or passing cost increases onto customers, become critical in this environment.