Read the closing case “Billabong.”
This case explores the implications of changing currency
values on the profits of Australian retailer Billabong.
Billabong relies on the U.S. market for a significant share
of its total sales.
Consequently, the company must continually monitor
and adapt to the changing relationship between the
Australian dollar and the U.S. dollar.
Explore the implications of changing currency values on
the profits of Australian retailer Billabong from the
Why does a fall in the value of the Australian dollar again st the U.S. dollar benefit Billabong ?
• The products price relatively become cheaper.
• The demand of Billabong’s goods will increase
• The revenue will increase.
Could the rise in the value of the Australian dollar
that occurred in 2009 have been predicted?
• 2008 Financial Crisis - Collapse of Lehman Brothers
• The price of USD decreases
• Also, the interest rate of Australia increases.
• Demand of Australian currency increase.
rise in the value of the
What might Billabong have done in order to better protect itself ag ainst the unanticipated rise in the value of the Australian dollar tha t occurred in 2009?
• ∵ Billabong rely on one markets in 2009. It lefts itself exposed to risk • ∴ Billabong could engaged in the forward market, reduce reliance on the US market
The Australian dollar continued to rise by another
20 percent against the U.S. dollar in 2010 and 2011.
How would this have affected Billabong?
• Cause more problems for Billabong exports
• Negative effect on sales and profit
Is there anything that Billabong might have done to limit its long-term econom ic exposure to changes in the value of the currency in its largest export marke t
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