Reference no: EM133337223
Case Study: Weak Dollar Boosting Quarterly Earnings
Wall Street Journal
The slumping U.S. dollar is opening new sales opportunities abroad for American manufacturers, who are worried about a sputtering economy but also concerned about how to cope with a volatile currency market. Many U.S. companies-from coal miners to a producer of tugboat clutches-are seeing stronger demand in Europe and Asia as the weak dollar makes U.S. goods cheaper there
Despite the gloom, says Larry Kantor, global head of research for Barclays Capital in New York, the weak dollar "is a net plus for the U.S. economy." In the absence of free-trade agreements. A weaker dollar "is one of the few ways you can get exports going," says Mr. Kantor, who thinks many U.S. energy, industrial and agricultural companies will benefit. For some smaller companies, the dollar's weakness offers greater potential benefits because they are growing from a small base. Ron Overton, president of Overton Industries Inc., a tool-and-die company in South Mooresville, Ind., recently hired a marketing company in Chicago to help find more buyers in Japan and elsewhere in Asia.
With the dollar on the ropes, "We have a little bit of a price advantage," says Mr. Overton, whose company traditionally has relied on North American for nearly all its sales. At Webco Industries Inc., a maker of metal tubes based in Sand Springs, Okla., the weak dollar helps in another way. Along with spurring exports, it makes its products less expensive than imports. It is "going to help us be insulated against foreign competition," says Mike Howard, chief financial officer.
Questions: Base on your knowledge and the case answer the following questions:
- How is the weak dollar helping in the case?
- Why a Weak Home Currency is Not a Perfect Solution?