1. Debate the relative merits of fixed and floating exchange rate regimes. From the perspective of an international business, what are the most important criteria in a choice between the systems? Which system is the more desirable for an international business?
2. What opportunities might current IMF lending policies to developing nations create for international businesses? What threats might they create?
3. Imagine that Canada, the United States, and Mexico decide to adopt a fixed exchange rate system. What would be the likely consequences of such a system for (a) international businesses and (b) the flow of trade and investment among the three countries?
4. In what kind of industries does a localization strategy make sense? When does a global standardization strategy make the most sense?
5. In a world of zero transportation costs, no trade barriers, and nontrivial differences between nations with regard to factor endowments, firms must expand internationally if they are to survive. Discuss.
Sample solution
Dante Alighieri played a critical role in the literature world through his poem Divine Comedy that was written in the 14th century. The poem contains Inferno, Purgatorio, and Paradiso. The Inferno is a description of the nine circles of torment that are found on the earth. It depicts the realms of the people that have gone against the spiritual values and who, instead, have chosen bestial appetite, violence, or fraud and malice. The nine circles of hell are limbo, lust, gluttony, greed and wrath. Others are heresy, violence, fraud, and treachery. The purpose of this paper is to examine the Dante’s Inferno in the perspective of its portrayal of God’s image and the justification of hell.
In this epic poem, God is portrayed as a super being guilty of multiple weaknesses including being egotistic, unjust, and hypocritical. Dante, in this poem, depicts God as being more human than divine by challenging God’s omnipotence. Additionally, the manner in which Dante describes Hell is in full contradiction to the morals of God as written in the Bible. When god arranges Hell to flatter Himself, He commits egotism, a sin that is common among human beings (Cheney, 2016). The weakness is depicted in Limbo and on the Gate of Hell where, for instance, God sends those who do not worship Him to Hell. This implies that failure to worship Him is a sin.
God is also depicted as lacking justice in His actions thus removing the godly image. The injustice is portrayed by the manner in which the sodomites and opportunists are treated. The opportunists are subjected to banner chasing in their lives after death followed by being stung by insects and maggots. They are known to having done neither good nor bad during their lifetimes and, therefore, justice could have demanded that they be granted a neutral punishment having lived a neutral life. The sodomites are also punished unfairly by God when Brunetto Lattini is condemned to hell despite being a good leader (Babor, T. F., McGovern, T., & Robaina, K. (2017). While he commited sodomy, God chooses to ignore all the other good deeds that Brunetto did.
Finally, God is also portrayed as being hypocritical in His actions, a sin that further diminishes His godliness and makes Him more human. A case in point is when God condemns the sin of egotism and goes ahead to commit it repeatedly. Proverbs 29:23 states that “arrogance will bring your downfall, but if you are humble, you will be respected.” When Slattery condemns Dante’s human state as being weak, doubtful, and limited, he is proving God’s hypocrisy because He is also human (Verdicchio, 2015). The actions of God in Hell as portrayed by Dante are inconsistent with the Biblical literature. Both Dante and God are prone to making mistakes, something common among human beings thus making God more human.
To wrap it up, Dante portrays God is more human since He commits the same sins that humans commit: egotism, hypocrisy, and injustice. Hell is justified as being a destination for victims of the mistakes committed by God. The Hell is presented as being a totally different place as compared to what is written about it in the Bible. As a result, reading through the text gives an image of God who is prone to the very mistakes common to humans thus ripping Him off His lofty status of divine and, instead, making Him a mere human. Whether or not Dante did it intentionally is subject to debate but one thing is clear in the poem: the misconstrued notion of God is revealed to future generations.
References
Babor, T. F., McGovern, T., & Robaina, K. (2017). Dante’s inferno: Seven deadly sins in scientific publishing and how to avoid them. Addiction Science: A Guide for the Perplexed, 267.
Cheney, L. D. G. (2016). Illustrations for Dante’s Inferno: A Comparative Study of Sandro Botticelli, Giovanni Stradano, and Federico Zuccaro. Cultural and Religious Studies, 4(8), 487.
Verdicchio, M. (2015). Irony and Desire in Dante’s” Inferno” 27. Italica, 285-297.
Sample Answer
Sample Answer
Analysis of Exchange Rate Regimes and International Business Strategies
1. Fixed vs. Floating Exchange Rate Regimes
Relative Merits
Fixed Exchange Rate Regimes:
– Stability: Fixed exchange rates provide a stable environment for international business, as they eliminate exchange rate risk. Companies can predict costs and revenues more accurately.
– Inflation Control: Governments can use fixed rates to control inflation by tying their currency to a stable one, leading to lower inflationary expectations.
– Encouragement of Investment: Stability in exchange rates may attract foreign direct investment (FDI) and encourage international trade, as businesses feel more secure.
Floating Exchange Rate Regimes:
– Market-Driven Adjustments: Floating rates allow currencies to fluctuate based on market forces, potentially leading to a more efficient allocation of resources.
– Policy Flexibility: Countries have the ability to respond to economic shocks through monetary policy adjustments without the need to defend a fixed rate.
– Automatic Stabilizers: Floating exchange rates can act as automatic stabilizers, helping countries adjust to external shocks by allowing the currency to depreciate or appreciate as needed.
Important Criteria for International Businesses
When choosing between fixed and floating exchange rate systems, international businesses consider the following criteria:
– Exchange Rate Stability: The volatility of exchange rates affects pricing, budgeting, and profitability. Stable rates reduce risk.
– Predictability of Costs: Fixed rates provide predictability of costs in foreign markets, which is crucial for long-term contracts and pricing strategies.
– Access to Capital Markets: Companies may prefer the system that offers better access to international capital markets and financing options.
– Economic Conditions: The overall economic environment, including inflation rates and trade balances, plays a role in determining which system is more favorable.
Desirability for International Business
For international businesses, a fixed exchange rate regime is generally more desirable due to reduced uncertainty and lower risk in foreign transactions. This stability allows businesses to focus on operational strategies rather than constantly monitoring currency fluctuations.
2. IMF Lending Policies and International Business Opportunities
Opportunities Created
IMF lending policies often aim to stabilize economies facing crises, providing several opportunities for international businesses:
– Market Access: As countries stabilize their economies with IMF assistance, they may open their markets to foreign investment and trade, presenting new opportunities for international businesses.
– Infrastructure Development: IMF programs may include funding for infrastructure projects, creating business opportunities for international firms in construction and services.
– Economic Reforms: Structural adjustments often required by the IMF can lead to improved business environments, reducing barriers for foreign companies.
Threats Created
However, these lending policies can also pose threats:
– Economic Instability: While aimed at stabilization, IMF programs can sometimes result in social unrest or economic volatility during implementation, which may deter businesses from investing.
– Increased Competition: As economies stabilize and liberalize, local businesses may become more competitive against foreign firms, potentially impacting market share.
– Regulatory Changes: Rapid reforms may lead to unpredictable changes in regulations, potentially causing compliance challenges for international businesses.
3. Consequences of a Fixed Exchange Rate System Among Canada, the U.S., and Mexico
(a) Impact on International Businesses
A fixed exchange rate system among Canada, the U.S., and Mexico could lead to:
– Reduced Currency Risk: Businesses would experience less uncertainty regarding currency fluctuations, facilitating smoother cross-border transactions.
– Increased Trade Volume: With stable exchange rates, trade may increase as companies are more willing to engage in international transactions without worrying about adverse currency movements.
– Potential Loss of Competitiveness: If one country’s economy faces challenges that require currency devaluation, a fixed rate could hinder that adjustment, potentially harming competitiveness.
(b) Impact on Trade and Investment Flows
The flow of trade and investment could be significantly affected:
– Simplified Trade Agreements: A fixed exchange rate would simplify trade agreements among the three countries, as businesses would not have to hedge against currency risk.
– Investment Stability: Investors might be more inclined to invest in Canadian, U.S., or Mexican markets due to reduced risks associated with currency valuation.
– Imbalances in Trade Relations: Over time, if economic conditions diverge significantly among the three countries, maintaining a fixed rate could lead to trade imbalances that are difficult to correct.
4. Industries Favoring Localization vs. Global Standardization
Localization Strategy
A localization strategy makes sense in industries where:
– Cultural Sensitivity: Products must cater to local tastes and cultural preferences (e.g., food and beverages).
– Regulatory Requirements: Local regulations dictate specific product standards (e.g., pharmaceuticals).
– Market Variability: Different markets exhibit significant variations in consumer behavior (e.g., fashion).
Global Standardization Strategy
Conversely, a global standardization strategy is most effective in industries where:
– Homogeneous Demand: Products are universally needed and desired (e.g., technology products like smartphones).
– Cost Efficiency: Economies of scale can be achieved through uniform production processes (e.g., electronics).
– Brand Consistency: Maintaining a consistent brand image across markets is crucial (e.g., luxury goods).
5. The Need for International Expansion in a Perfect Market Scenario
In a hypothetical world with zero transportation costs and no trade barriers, firms would face both opportunities and challenges in expanding internationally:
– Increased Competition: With no barriers, companies from different nations would compete globally. This competition necessitates that firms innovate and expand internationally to survive against global rivals.
– Access to Resources: Firms could access diverse resources and factor endowments by operating across borders, enhancing efficiency and reducing costs.
– Market Saturation at Home: As domestic markets become saturated, companies must seek growth opportunities abroad. International expansion becomes essential for survival and profitability.
In conclusion, the dynamics of exchange rate regimes, IMF policies, trade systems among nations, industry strategies, and global market conditions deeply influence international business operations. Understanding these factors allows companies to make informed decisions that enhance their competitive advantage in an increasingly interconnected world.
