International Marketing Practices

competitiveness against other exporters who are willing to accommodate payment in foreign currency [39].

100% 110% 120% 130% 140% 150% 160% 170%

MXN

CAD

JPY

CNY

70% 80% 90%

EUR

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Figure 15. Change in monthly exchange rates for U.S. major trade partners, 2010-2019 (Jan 2010=100%). MXN=Mexican peso, CAD=Canadian dollar, JPY=Japanese yen, CNY=Chinese yuan, EUR=Euro. Source: IMF [202]. Weak currencies are generally favorable for exporting countries, causing their products to be more competitive in the international market. On the other hand, a strong domestic currency is, in general, favorable for imports [203]. However, before accepting payment in foreign currency, it is advised to consult with an international bank. An example of the effects of foreign exchange rate volatility within the forest sector is reflected through the case of Lamford Forest Products Ltd. in the late 1980s. This Vancouver-based company exported about 70% of their product to the United States [204]. Because Lamford priced their product in U.S. dollars, an unexpected increase in the Canadian dollar decreased the overall valuation of the $3 million in product [204]. Firms had gotten used to the Canadian dollar standing at a lower value to the U.S. dollar, and businesses were not prepared for a 7% increase within the year, totaling up to 30 cents [204]. Ultimately, it was estimated that Lamford lost an average of $275,000 Canadian dollars each month due to the exchange rate change [204]. Exchange rates are also relevant when considering financing in a foreign country, because they can affect the valuation of letters of credit or other payment instruments. If an exporter does not factor in exchange rates, it has the potential to add 15%-20% to the costs [19].

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