Foreign Currency AgreementThis case

Foreign Currency Agreement
This case study reveals the importance of deciding on and making a foreign currency
agreement with an international business partner.
When a negotiator embarks on an international agreement with a foreign partner, they have to
give serious consideration to which currency is going to be used in their financial
transactions. There is a certain amount of risk that a company might have to assume as the
negotiators consider whether they are going to issue or receive payments in a foreign
denomination. It occasionally happens that between the time when a contract is signed, and
when payment begins to flow, the currency of the foreign partner’s company could either
increase or decrease dramatically. Any company that handles foreign currency faces the
hazard of paying more or receiving less than it projected. The risk increases proportionately
in relation to the duration or longevity of the contract agreement.
The value of any country’s currency typically depends on supply and demand. Any currency
is affected by various factors. This includes the rate of inflation, economic growth, the
internal political stability of the country, and interest rates, just to name a few. Many newer
countries use their central banks to allow their currency to rise and fall within a narrow band,
and may peg their currency’s value to a leading international currency such as the Euro, or
British Pound.
Back in the 1980’s a small U.S. company signed a long term agreement with a Japanese
manufacturer to purchase a brand of adhesive that was much cheaper than could be obtained
in the U.S. The Japanese negotiating team was adamant that they were to be paid in Japanese
yen. The American company, eager to lock in this cheap supply of this particular adhesive,
agreed. This meant that the U.S. company would now assume any risk in currency fluctuation
for the Japanese yen.
At the time the agreement was signed the value ratio between the yen and the U.S. greenback
was 185 yen to $1.00 U.S. dollar. For awhile the U.S. company prospered even more as the
exchange rate fell from 250 yen to $1.00 U.S. It was looking like a really good bargain.
Unfortunately, the tide shifted the other way and by 1988, the yen was valued at 140 yen to
$1.00 U.S., much to the dismay of the U.S. company.
Needless to say, the U.S. company began to lose money and this jammed the company into
being caught between the proverbial ‘rock and the hard place’. The U.S. company faced the
additional burden in that they were facing such stiff competition from their competitors that
they had no latitude to increase their prices. The agreement did not include any provisions to
renegotiate the contract if faced with such a dramatic shift in the value of the rate of currency
either, which was another serious drawback.
A negotiator who conducts an international negotiation has 4 choices to make regarding
foreign currency when concluding an international joint venture. 1) They can both share the
risk. 2) The foreign partner assumes the risk. 3) Your side assumes the risk. 4) One or both
parties stipulate in the contract that the currency denomination is an area open to
renegotiation, allowing for a certain percentage of rate fluctuation to occur.
Always remember that the longer the lifespan of the agreement - the greater the risk.

ผลลัพธ์ (อังกฤษ) 2:

Second Currency Agreement
This Case Study reveals the importance of deciding on and Making a Second currency
Agreement with an International business Partner.
When a negotiator embarks on an International Agreement with a Second Partner, they have to
give Serious consideration to which currency is going to be. Financial used in their
transactions. There is a certain amount of risk that a Company Might have to assume as the
negotiators consider whether they are going to receive Payments or in a Second Issue
Denomination. It occasionally Happens that between the time when a Contract is signed, and
when Payment Begins to flow, the currency of the Second Partner's Company could either
increase or decrease dramatically. Second Company handles any currency that faces the
Hazard of Paying more than it projected or receiving less. Proportionately increases the risk
in relation to the Duration or longevity of the Contract Agreement.
The Value of any Country's currency typically depends on Supply and demand. Any currency
is affected by Various factors. This includes the rate of inflation, Economic growth, the
internal stability of the Political Country, and interest Rates, just to name a few. Many newer
countries use their Central Banks to Allow their currency to rise and Fall Within a Narrow band,
and May peg their currency's Value to a Leading International currency such as the Euro, or
British Pound.
Back in the 1,980's a Small US Company signed a. long term Agreement with a Japanese
manufacturer to Purchase a Brand of adhesive that was much Cheaper than could be obtained
in the US The Japanese Team was negotiating Adamant that they were to be paid in Japanese
Yen. The American Company, Eager to Lock in this cheap Supply of this particular adhesive,
agreed. This meant that the US would now Company assume any risk in currency fluctuation
for the Japanese Yen.
At the time the Agreement was signed the Value ratio between the Yen and the US greenback
was 185 Yen to $ 1.00 US Dollar. For Awhile the US Company prospered even more as the
Exchange rate fell from 250 Yen to $ 1.00 US It was Looking like a Really good bargain.
Unfortunately, the Tide shifted the Other Way and by 1,988, the Yen was valued at 140 Yen to
$ 1.00 US. , much to the Dismay of the US Company.
Needless to Say, the US began to Lose Money Company and the Company Jammed Into this
being Caught between the proverbial 'and the hard Rock Place'. The US Company faced the
additional burden in that they were such stiff Facing Competition from their competitors that
they had to increase their prices no Latitude. The Agreement did not include any Provisions to
renegotiate the Contract if faced with such a dramatic Shift in the Value of the rate of currency
either, which was another Serious drawback.
A negotiator Who Conducts an International negotiation has 4 Choices to Make regarding
Second currency when. concluding an international joint venture. 1) Can They both share the
risk. 2) The foreign partner assumes the risk. 3) Your side assumes the risk. 4) One or both
Parties in the Contract stipulate that the currency Denomination is an Area open to
renegotiation, allowing for a certain percentage of rate fluctuation to occur.
Always Remember that the lifespan of the Longer the Agreement - the Greater the risk.