Section 2: Exchange Rates & Competition

Over to you…..• Teach me the key points you learnt in Thursday’s lesson with

Mr Light!

Fill in the Gaps-Exchange RatesWho’s going to finish first with all answers

correct??

Exchanged Rates

•What is meant by a fixed exchange rate?

• Now- complete 2(d) on your case study questions individually

• 2 marks= 2 minutes

Team Game- Exchange Rates• In your 3 groups- you are competing to be the first group

holding up the complete sentence in the right order.

• Clue- sentence startersRound 1) If the pound gets stronger…Round 2) If the Chinese Government fixed the exchange rate at £1=5Yuan… Round 3) The weakening of the £ against the…

Take a picture of the winning teams

answer

In groups of 3 or 4….

Think about with 3 different ways that AS plc could seek to reduce the impact of exchange rate movements?

How could you expand each point?

How might AS plc seek to reduce the impact of exchange rate movements?

1. Sign long term contracts at fixed prices with suppliers for the purchase of components, or with business customers for the sale of cars. A long term contract at fixed prices would provide some protection against exchange rates.

2. Reduce foreign exchange transactions. E.g. locating its headquarters in the Eurozone instead of the UK would eliminate foreign exchange transactions that currently arise from sales to customers in the Eurozone, as well as the purchases of components from suppliers in the Eurozone ie Italy (tyres), Spain (leather seats), Germany (radiators) and Poland (disc brakes).

3. Alternatively, sourcing more of its components from UK manufacturers and / or selling a bigger percentage of its cars to customers within the UK, would also reduce the impact of exchange rate movements on AS plc’s profits, but this might not be possible (given the slow growth of the UK market), or profitable, given the lower labour costs abroad.

Ideal answer!

SPLATEurozone Strong Pound Fixed exchange

rate

Weak PoundYuan Exports

Imports Demand Fluctuating exchange rate

Homework• In your case study work books, answer question 2(e)- 4 marks

• Complete the crossword task sheet

• Focus revision on the following topics:Competition, ethics and inflation and

ensure you are 100% prepared to look at section 3 next lesson