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Japan Auto

In: Business and Management

Submitted By ahilton
Words 2165
Pages 9
Executive Summary
The purpose of this report is to provide analysis of the Japanese auto manufacturer’s response to the rapid appreciation of the yen during the period known as Endaka and to offer recommendations to modern day multi-national corporations who are currently operating in a volatile exchange rate environment. The method of analysis includes evaluating the circumstances that led to the rise in the value of the yen as well as the subsequent actions of the Japanese auto manufacturers during this time. The results of this analysis suggest that there are several important lessons that can be derived from the Japanese auto industry’s Endaka experience. These lessons have been used to develop several strategies that can be employed by multi-national corporations in any industry to more effectively manage the operating exposure that fluctuations in exchange rates can create. These strategies include:
• Employing cost reduction methods
• Increasing operational efficiencies
• Investing in research and development efforts
• Diversifying the markets in which they participate
• Expanding production locations to low-cost sites
• Utilizing financial hedging practices.
This report recognizes that the method of implementation of the operating exposure management strategies discussed will vary depending upon the size, structure, industry, and nations in which individual multi-national corporations operate. However, these recommendations are presented with the intention of providing long-term solutions for managing operating cash flows that are subject to both favorable and adverse reactions to the prevailing exchange rates changes.
Introduction
During the decade spanning from 1985 to 1995 Japanese automakers endured the exchange rate phenomenon dubbed “Endaka” which literally translates to “high yen”. Prior to 1985, Japanese auto manufacturers had built an

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