A look at the American Airlines as an example of the use of financial and operational strategies.
Written in 2000; 2,200 words; 6 sources; $ 68.95
Paper Summary:
This paper discusses reasons for exchange rate volatility and the negative effect it has on many aspects of doing business internationally. This volatility is shown to lead to ongoing problems of resource allocation, business strategy and risk management. The defensive and proactive responses of firms is discussed. American Airlines is looked at as an example. The paper concludes that it is important to assess risk, plan, make decisions and maintain flexibility wherever possible.
From the Paper:
"The number of variables affecting global businesses can make the effect of exchange rates on international business activity difficult to determine. The typical multinational firm may have operations in many countries, with many product lines and with competitors in yet other countries, creating quite a knot of factors to unravel.
Even within exchange rate considerations, there are two major factors: first is the impact of changes in the level of the exchange rate (the appreciation or depreciation of a currency's value) on a particular company or industry. The appreciation of the U.S. dollar by 50 percent between 1980-1985 coincided with an increase in the U.S. trade deficit to nearly $160 billion in 1987. Some U.S. companies were heavily hit and lost market share and profitability to foreign competitors. Foreign firms with dollar denominated costs were also hard-hit: Laker Airways, with fuel costs and aircraft financing in U.S. dollars went bankrupt during this time."
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