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A car manufacturer may regard his business as highly competitive because he is keenly aware of his rivalry with the other car manufacturers in the market when making pricing and investment decisions?
Oligopoly structure
Explain the competitive and conversion effects of exchange rate changes on the firms operating cash flow?
1. Explain the competitive and conversion effects of exchange rate changes on the firm's operating cash flow. Due to random change in the exchange rate a company's competitive position in the market place changes. For example if the Yen depreciates against US dollars then a Car manufacturer in USA will be adversely effected, as the Japanese imported cards become cheaper due to change in the exchange rate of Japanese Yen. On the other hand if a Japanese owned car is being produced in USA than that too will be adversely effected , however if its components are being imported from Japan, they may cost lower thus they will gain some advantage over the US manufacturer which makes all the components in US. In this case the US car manufacturer like Ford or GM will lose their competitive position to the Japanese subsidiary in US, thus effecting their cash flows adversely. The Competitive Effect is a change in the firm's competitive position in the market which may arise due to change in cost or price. The US car manufacturer's cash flow will decline due to the unfavourable change in the competitive position in the US markets. The Conversion Effect is evident when a parent company's balance sheet reflects the foreign subsidiary cash flows by converting in the domestic currency. For the Parent company the Domestic currency appreciation results in smaller domestic currency receipts and Domestic currency depreciation results in larger domestic currency receipts. If Yen depreciates then the Japanese parent company will value the receipts from a US subsidiary at a higher rate in Yen showing a larger domestic currency receipt.
What impact does the car industry oligopoly have on competition and consumer choice in the market?
The car industry oligopoly limits competition by allowing a few large companies to control the market, which can lead to higher prices and less variety for consumers. This can restrict consumer choice and make it harder for smaller companies to enter the market.
What is a sentence using the term market value?
Although you can pay a lot for a fancy car, its market value will decrease with age. Winning a championship can raise the market value of a professional sports team. The company was still profitable, but competition had reduced its market value.
Describe two benefits you enjoy because of the free market system be sure to state why the free market system brings each of these benefits?
My job and my car are two examples of the benefits of a free market system. Free market means I choose. I chose a career path based on my likes and dislikes and looked for a job that best reflected my interests. I like economics, therfore I did not become a cook. I chose my car from various dealers. No one forced me to accept a car I did not like. The problem is when a free market becomes a monopoly. In a monopoly you have no choice and have to accept whatever they offer at the prices the supplier stipulates.
