MANAGING ECONOMIC EXPOSURE

Some of the proactive marketing & production strategies which a firm can pursuer in response to anticipated or actual real exchange rate changes are as follows:

· MARKETING INITIATIVES

· Market selection

a. Product Strategy

b. Pricing Strategy

c. Promotional Strategy

· PRODUCTION INITIATIVES

a. Product sourcing

b. Input mix

c. Plant Location

d. Raising Productivity

MARKETING MANAGEMENT OF EXCHANGE RISK

· Market Selection

Major strategy considerations for an exporter are the markets in which to sell, i.e., market selection. It is also necessary to consider the issue of market segmentation with individual countries. A firm that sells differentiated products to more affluent customers may not be harmed as much by a foreign currency devaluation as will a mass marketer. On the other hand, following a depreciation of the home currency, a firm that sells primarily to the upper income group may now find itself able to penetrate mass markets abroad.