《跨国经营学》第九章volkswagenhedgingstrategy案例分析中英文

《跨国经营学》大作业（15-16-1）案例EvolutionofStrategyatProcter&Gamble选自CharlesW.L.Hill《InternationalBusiness》(9ed.)学生梅先婷学号13429109专业班级营销131小组成员刘金星梅先婷彭娇娇日期第十七周CasesynopsisVolkswagenisEurope’slargestcarmaker.ManymultinationalcompanieslikeVolkswagendohedgingoftheirinternationalcurrenciestominimizetheirriskofadverseexchangerates.Generally,Volkswagenhedgesabout70%oftheirinternationalcurrency.But,in2003,Volkswagendecidedtohedgeonly30%oftheircurrencyagainsttheUSDollar.VolkswagenmanufacturesitscarsinEuropeandexportstoUS.Oneoftheirbest-sellingmodelsJettacostsabout€14000tomakeinGermanyandsellsfor$15000inUS.AtthetimeofmanufacturingtheEurotoDollarvaluewas1to1.Sowiththethencurrentexchangerate,JettamadeVolkswagenabout$1000or€1000profitpercar.Duringtheyear2003,therewasasharpriseinEuroagainstDollar.Earlierwhichwas€1=$1,nowin2003beingtradedas€1=$1.25.So,eachdollarearnedwillnowonlyprofit€0.80whichsqueezedVolkswagen.Attheexchangerateof€1=$1.25,Volkswagenonlygets€12000perJettasold,thattosayVolkswagenlost€2000percarsoldintheUS.Unfortunately,Volkswagenonlyhad30%oftheircurrencyhedgedto€1=$1price.ThisdrasticincreaseinEurovaluecausedamajordropinoperatingprofitofVolkswagenanditsfourthquarterprofitsdrop95percenttomere€50million.TraditionallyVolkswagenhadhedged70%oftheircurrencies.Inthatcase,theywouldn’thavelostsuchahugeoperatingprofitduetotheexchangerateshike.Strategytobuyingforwardguaranteesthatatsomefuturepoint,VolkswagenwouldbeabletoexchangeitsUSearneddollarsintoEurosatthePre-Determinedratesof€1=$1,regardlessofwhatthecurrentexchangepriceis.IncaseofdepreciationinthepriceofEuro,Volkswagenwouldhavemademoreprofitsbyhedginglessofitscurrencywhichseemsthecasebeinganticipated.Hedgingisalsocostlyastheforeignexchangedealerswillchargeahighcommissionforforwardcurrencyselling,butaftersuchahugelossintheirprofit,Volkswagendecidedtogetbacktoitshistorichedgingof70%ofitsforeigncurrencyexposure.knowledgepoint：Theforeignexchangemarketisamarketforconvertingthecurrencyofonecountryintothatofanothercountry.Anexchangerateissimplytherateatwhichonecurrencyisconvertedintoanother.Theforeignexchangemarketservestwomainfunctions.Thefirstistoconvertthecurrencyofonecountryintothecurrencyofanother.Thesecondistoprovidesomeinsuranceagainstforeignexchangerisk,ortheadverseconsequencesofunpredictablechangesinexchangerates.Thespotexchangerateistherateatwhichaforeignexchangedealerconvertsonecurrencyintoanothercurrencyonaparticularday.Thevalueofacurrencyisdeterminedbytheinteractionbetweenthedemandandsupplyofthatcurrencyrelativestothedemandandsupplyofothercurrencies.Theforeignexchangemarketisnotlocatedinanyoneplace.Itisaglobalnetworkofbanks,brokers,andforeignexchangedealersconnectedbyelectroniccommunicationssystem.caseanalysisThisfeatureexaminestheeffectsofVolkswagen’sdecisiontonotproperlyhedgeitsforeignexchangeexposurein2003.Volkswagensawa95percentdropinitsfourthquarterprofitsafteranunexpectedsurgeinthevalueoftheeuroleftthecompanywithlossesof$1.5billion.Traditionally,Volkswagen,whichproduceditsvehiclesinGermanyandexportedthemtotheUnitedStates,hedgedsome70percentofitsforeignexchangeexposure.However,in2003,thecompanymadetheunfortunatedecisiontohedgejust30percentofitsexposure.Discussionofthefeaturecanbeginwiththefollowingquestions.Traditionally,Volkswagenhedged70percentofitsforeignexchangeexposure,butin2003,thecompanywascaughtoffguardbyasuddenriseinthevalueoftheeuroagainstthedollar.Expertshadfailedtopredicttheriseintheeuro,andVolkswagen,likeothercompaniesthatfailedtohedgetheirforeignexchangeexposure,washardhit.Volkswagenlostsome€1.2billionasaresultofitsdecisiontohedgejust30percentofitsforeignexchangeexposure.MostpeoplewillrecognizethattheexperiencesofVolkswagenunderscoresthevolatilityoftheforeignexchangemarketandtheneedforcompaniestotakestepstoprotectthemselveseveniftherearenoanticipatedchangesincurrencyvaluesVolkswagenwasespeciallyvulnerabletotheriseoftheeuroagainsttheU.S.dollarin2003becausethecompanymanufactureditscarsinGermanyandthenexportedthemtotheUnitedStates.WhenVolkswagenfailedtoadequatelyhedgeitsexposuretoforeignexchangeratechanges,andtheeuro-dollarrelationshipshifted,thecompanylostout.MostpeoplewillprobablyrecognizethathadVolkswagenproducedsomeofitscarsintheUnitedStates,theeffectsofthecurrencyshiftwouldhavebeenmuchsmaller.Riticalthatinternationalbusinessesunderstandtheinfluenceofexchangeratesontheprofitabilityoftradeandinvestmentdeals.Adversechangesinexchangeratescanmakeapparentlyprofitabledealsunprofit.Whenvolkswagendecidedtohedgejust30percentofitsforeignexchangeexposurein2003,thecompanyessentiallygambledthattheEurowoulddeclineinvaluerelativetothedollar.Thecompanyhopedthatbysavingthecostofthecommissioninvolvedinsellingacurrencyforward,itwouldincreaseitsprofitmargin.thisstrategyofcourse,backfired.TheappreciationoftheeurorelativetotheUSdollartookmanypeoplebysurprise.It’srisehasbeenattributedtorecordUSforeigntradedeficitsandpessimismaboutthefuturevalueofthedollar.Inadditiontousingforwardcontracts,volkswagencouldusecurrencyswaps,andleadandlagpayablesandreceivables.2003：exchangerate