The Business Benefits of a Weak Dollar.
By Wade A. Barker, 22nd Sep 2011 | Follow this author
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Posted in WikinutBusinessStarting A Business
How can small businesses benefit during an environment of a weak Dollar. Use the weak Dollar to promote increased profitability and reduced costs.
Overview
According to Investopedia, a strong domestic currency causes foreign investments to produce lower returns as the returns on the investment are converted back to the original currency. The converse becomes true for a weak domestic currency. During an environment with a weak Dollar, export companies will flourish as foreign currencies can purchase more dollars and hence, more goods and services. Import companies will struggle during this environment as the U.S. Dollar will purchase less of foreign currencies and less foreign goods.
Things you’ll need
Computer
Internet
Spreadsheet
Step 1
Find a way to increase your revenue in this environment. Exporting your goods and services will show strength with the weak Dollar. Many software tools exist to convert currencies as well as translate languages, both of which become barriers to entering new foreign markets.
Step 2
Use a new distribution channel, a partner, or the Internet to access a foreign market. The Internet has emerged as a great channel to market, educate and sell both goods and services. Many online carts have become so sophisticated that the buyers can make purchases in a multitude of different currencies.
Step 3
Lower your cost by purchasing materials, inventory or possibly labor from a foreign source. Search on the Internet for complimentary foreign suppliers. Many times these online sources provide convenient and reliable way to purchase goods online as well as shipping the goods in a fast and reliable way.
Step 4
Calculate the entire cost of purchasing goods and services from foreign sources. The cost of converting currencies and the cost of shipping goods internationally needs to remain cheaper than the cost of purchasing the goods or services locally.
Step 5
Track with a spreadsheet the on-going benefit during the weak Dollar environment. Chart the recorded data over a period of time to visually analyze the benefits during this environment.
Tips
Sometimes the benefits of a weaker dollar may not show up immediately. The vendor may have existing inventory that was purchased in a different currency environment. Therefore, once the old inventory has become depleted, the new inventory should reflect the weaker Dollar environment.
Warnings
In the past, other countries have de-valued their currencies. Keeping a minimum amount of cash in a foreign currency or hedging foreign cash holdings would show prudence. Any assets or cash held in a foreign currency that de-values would become essentially worthless. Along these lines, a foreign partner with a strong economy and government backing it can also show prudence.
Sources:
Investopedia: Foreign Currency Effects http://www.investopedia.com/terms/f/foreigncurrencyeffects.asp
Read more: http://bizcovering.com/business/the-business-benefits-of-a-weak-dollar/#ixzz1Yh5dAEen
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