Global Factor in Nissan
Nissan is a motor company located in Tokyo, Japan, and manufactures various automobiles since the year 1930. It is a multinational company that sells its products in overseas countries like the United States, in Europe, and in the developing and emerging markets of Asia. Due to their operation beyond the Japanese borders, Nissan is always vulnerable to changes in the economic and financial downturns of the international financial markets. This paper looks at fluctuating exchange rates and how this occurrence affects the operations in Nissan as a multinational company.
Nissan exports its vehicles to other countries, meaning that it has to operate in a currency other than the Japanese Yen. The bigger picture of this is that yen may appreciate or depreciate depending on the economic situation of Japan (Nissan Sustainability Report, 2011). When yen appreciates, Nissan becomes too expensive for the global market, reducing its demand from other stronger currencies. Otherwise, when the yen depreciates against the dollar, Nissan becomes easily affordable because of the few dollars required to purchase it. Hence, exchange rate systems in the international markets will see Nissan grappling with methods to manage these imbalances in the balance of trade.
To appropriately respond to fluctuating balance of trade in the international markets, Nissan must be in a position to also fluctuate its production depending on the exchange rates against yen. This means that the company must maximize on marketing at the time that yen is cheap and hold its costs of production at the time that yen is more expensive. This will help reduce the cost at the time that profits cannot be fully maximized (Fischer, 2001). The overall picture is that Nissan cannot control the exchange rate system and hence must only control internal processes.
References
Fischer, S. (2001). Exchange rate regimes: is the bipolar view correct?. Journal of economic perspectives, 15(2), 3-24.
Nissan Sustainability Report (2011). Risks Other and Risks