International expansion-business Essay Example | Topics and Well Written Essays - 750 words

International expansion-business - Essay ExampleIn the depicted object of transaction it is the case that if Natural purifying inc, were to engage in a lease with a Mexican supplier than the company runs the endangerment that arises out of a time delay from the moment they sign the contract and the moment they execute the contract. In this regard if the Mexican peso were to rapidly appreciate against the American long horse than it would theoretically cost more money to settle the contract. In regards to a translation happen this is the risk associated with Natural Detergents inc. keeping some measure of wealth (Property, plant, equipment, cash reserves etc.) and if the value of this measure reign by a foreign currency that was to rapidly appreciate against the American dollar sign than Natural Detergent inc. would recognize a loss. One could conclude that before any expansion project were to move frontward than a firm understanding of the Mexican peso and its historical re -sentencing rate to the American dollar would be of utmost importance to potential investors.Historically speaking, Mexico has had a lot of commercial ties with the United States and the saving of Mexico was strongly affected by the strength (Or weakness) of the American economy. For these reasons according to Iowa State University Department of Economics (2010) Mexico had and so pegged the Peso to the United States Dollar. What this translates to is that the country had determined what the exchange rate ought to be (typically between 9 and 13 pesos per dollar) and this became the official exchange rate. During these times there was effectively very little risk to engaging in commerce with Mexico because the exchange rate was always kat oncen, and any changes that would be made to the exchange rate would not typically be too drastic. However it is the case that the inflation rates of the devil countries varied vastly and as such the decision to float the currency was made. This s ets the stage for how the peso now