The Impact of the Fluctuating Foreign Exchange & Marketing

Businesses coordinate marketing budgets alongside exchange rates to improve profits.

Foreign exchange rates describe the amount of one currency that must be traded to procure one unit of another currency. Foreign exchange rates fluctuate according to prevailing economic conditions. Familiarize yourself with the factors that influence exchange rates prior to executing your marketing strategy.

Identification

Higher exchange rates are associated with strong economies, as foreigners covet the underlying nation's investments and manufactured goods. Alternatively, low exchange rates are generally indicative of recession or political instability.

Strategy

To counter recessions and weak exchange rates, businesses can improve sales by competing at lower price points. Amidst times of economic growth, businesses can use marketing to create an aura of exclusivity for their products.

Features

Exchange rates present major implications for global trade. High exchange rates increase buying power for foreign imports. Multinational firms can profit from this trend by directing more advertising cash toward countries featuring high exchange rates.

Considerations

Political considerations also factor into business marketing for global trade. For example, legislators may propose high import quotas and taxes that increase business costs for foreigners. Marketing strategy should then emphasize quality, rather than low prices.

Warning

Large multinational firms risk consumer backlash abroad. Consumers may refuse to patronize firms that are perceived to be exploiting a particular country for material gain.

References

• Federal Reserve Bank of New York: The Basics of Foreign Trade and Exchange
• Investopedia: Foreign Exchange Market
• Investopedia: Marketing

Resources

• Investopedia: Foreign-Exchange Risk
• Investopedia: Multinational Corporation