Discussion Topic 2

Consider some examples of successful global business. Complete either an interview with a manager doing business internationally or an analysis of global business news (your choice). Use this information to answer the following question: How might you incorporate your previous learning on the supply and demand curve to understand how exchange rates and trade embargoes influence global business?

THREE examples: DO NOT COPY THE SAME THING OR EXAMPLE (This is just to guide you)

1. One great example of a global business being affected by shortages and trade embargoes would be the famous British automotive company Jaguar Land Rover (JLR). this is due to a global chip shortage called the semiconductor chip, many automakers are suffering from such a shortage of chips. The demand for these semiconductor chips is so high that suppliers cannot keep up due to failures in shipping and shortages of materials to produce such chips. With such high demand but low supply, automakers such as Land Rover have to up the prices of the cars they actually have built with the chips due to the fact that they need to make up for huge losses because of the chip shortage. Currently, Jaguar Land Rover has lost over 9 million British pounds because of this. Since LJR is also taking a huge hit, their Indian parent company Tata Motors has also taken a loss since LJR accounts for a big majority of sales in the UK. So overall due to such high demand and low supply, auto production for JLR has been at an all-time low and now they have to up the prices of those vehicles that have been built.

2.Exxon Mobil (America?s largest oil company) reported its most profitable earnings in seven years last week. Oil prices have continued to rise because of limited oil supplies and the tensions between Russia and Ukraine. Furthermore, as the world recovers from the pandemic, more people are demanding oil to fuel their vehicles. As oil is quoted/pegged to the dollar, this influences exchange rates. Oil-exporting nations receive dollars for their exports, as opposed to their own currency. Therefore, most oil exporting nations peg their currencies to the dollar because their nation?s income is reliant on their oil industry, and thus dependent on the dollar?s value. When the price of oil increases, the value of the dollar declines and vice versa. Trade embargoes on oil would cause price increases and a country to start rationing its supply.

3.China?s strict zero COVID-policy is facing great challenges as the detection of the Omicron variant emerged in early January. At least 30 cities are said to have reported COVID cases. Some believed that the virus came in a package from Canada. With the opening of the Beijing 2022 Winter Olympics around the corner, Chinese travel regulations remain strict and over 20 million people continue to endure extensive lockdowns. Consequently, Starbucks reported a 14% shrink in its same-store sales in China. China is Starbucks? second largest market, after the United States. There is a weaker demand for the company?s coffee, as many people are not leaving their homes or travelling. Additionally, a grande sized latte at a Starbucks in Beijing costs around 30 yuan ($4.80), which is a dollar more than what it costs in America. China?s per capita income is also significantly less than the U.S., thus, customers would most likely resort to a cheaper option if they need some caffeine. The cheapest iced Americano in Beijing is around 21 yuan per cup ($3.30). There are uncertainties of when China?s Starbucks? revenues will return to pre-COVID numbers. Exchange rates play a crucial role in global business. For instance, a weaker yuan would make imports more expensive, but simultaneously, stimulate exports. Moreover, if China continues to aim for their ?zero-COVID? goal and decides to place trade embargoes, the nations doing business with China will greatly suffer, as there will be less demand for their products/services.