This is due to a trade surplus with the USA. China does not want individual businesses domestically to hold onto the USD they receive from payments of exports to the USA. As the companies and holders will soon enough want to buy local currency for their business needs. This would cause a demand increase for the local currency, which would make the Chinese yen appreciate, increasing its value and price. This causes appreciation against the USD which is bad for the export business.
A rise in this ratio can signify that the firm has a competitive edge in the market and so it is able to charge higher prices for its products, or the firm is able to obtain its supplies at a lower cost. If this ratio remains stable while the net profit ratio is falling, which is the case for EYSI; this can signify that the control over expenses is weak. (CIMA, 2012) mentioned that the net profit ratio signifies the profit from trading operations before the interest costs are
First, international specialization happens that each country started to produces goods which they want in China for cheaper prices and this process has comparative advantages for those countries in order to obtain more goods compared with domestic production. Second, exports are an element of total demand and increasing on total demand assists the production of the country. Thirdly, trade and foreign investment has brought in advanced technology and technique of administration that has expanded efficiency in
Microeconomic factors significantly affect a business, especially global expansion. Therefore, some factors to analyze and monitor are the price elasticity of goods, competition in the market and the economy state. The state of economy determines consumer spending trends. An economic downfall will lead to a decrease in consumers spending and an increase in the economy state, will escalate consumer spending. There is no doubt that competition in the U.S. is robust and is the same in China, however, Nordstrom must have the ability to choose their competitive advantage as a global expansion strategy regardless if it is suited for success in the Chinese market.
How the Exchange Rate Affects Inflation If there is a depreciation in the exchange rate, this depreciation should cause inflation to increase. A depreciation means the currency buys less foreign exchange, therefore, imports are more expensive and exports are cheaper. Therefore, we get: • Imported inflation. The price of imported goods will go up because they are more expensive to buy from abroad • Higher domestic demand. Cheaper exports increases demand for UK exports.
Lose the cost benefit(threat) Strong U.S. dollar will increase exchange rates. It may make it more expensive for Apple in some key markets like China. Apple can increase the price to earn more. Some developed countries are stagnating, like U.S, and people will lose interest to buy higher-end consumer products in this kind of countries. So that, there is some decrease of the hidden market for higher-end consumer products such as those marketed by Apple.
Economic Stabilization: Fixed foreign exchange rate ensures internal economic stabilization and checks unwarranted changes in the prices within the economy. In a system of flexible exchange rates, the liquidity preference is high because the businessmen will like to enjoy wind fall gains from the fluctuating exchange rates. This tends to Increase price and hoarding activities in country. 9. Not Permanently
The best example of fixed exchange rate is dollarization, it fixed United State Dollar to its currency to maintain the value of its own currency. Fixed exchange rate helps to avoid currency fluctuation which reduced the risk in international trade where traders are encourages trading more goods and services in and out of the country, while low transaction cost and stable interest rate also attract foreign investors to bring in more
In my opinion on the gold dinar system in international trade, the gold dinar system is actually a good option in order to stabilise our currency as well as international trade. When former prime minister Mahathir Mohamad had expressed the idea to use gold dinar for international trade, it is the chance for Malaysia and any other country to reduce the speculation of currency. Gold can be volatile but it has an intrinsic value rather than paper money. Speculation and manipulation could be avoided with the use of gold and thus make the international trade would be protected from being undermined. The gold dinar system is good to be use nowadays as we have unstable currency compared to when we use the fiat money.
Tax Policy: The government could increase taxes on income. This reduces the disposable income of people. Consequently, there will be a reduction in their demand for goods and services. ii. In order to control inflation, the government could increase its borrowing from the Public and at the same time spend less of its revenue.