1. Toyota Motor Corporation
1.1 Corporate Overview
Toyota Motor Corporation is one of the bigger automobile industries in the world, located in Toyota, Aichi, Japan. This corporation was founded in 1937 by the Toyoda family. Toyota has a subsidiary that has known as Toyota Australia. Toyota Corporation itself have been doing their business in almost all around the world with 50 manufacturing firms abroad in 26 countries and regions.
1.2 Transaction exposure
Transaction exposure is the risk that occurs as a result of the currency structure of liabilities and deviated expanses from the currency structure on the sale of assets. Transaction exposure are extremely related to the result of operations of non domestic sales of Toyota vehicles which in production in Japan. Toyota Corporation is very aware to the fluctuations in foreign currency exchange rates, in addition to the Japanese yen.
Toyota Corporation bare to the fluctuations of some currencies includes the US dollar and the euro, then a lower level, namely the English pound and Australian dollar. Toyota Corporation believes that the location of their production facilities in various parts of the world can significantly reduce the risk level of the transaction exposure. Then as the part of the globalization strategy, Toyota Corporation continuously allocate their production by establishing production facilities in several major markets where it is the market sales of motor vehicle.
1.3 Translation exposure
Translation exposure was the risk that Toyota’s consolidated in financial statements for a specific time or for a specific date that could be exaggerated due to the changes in exchanges rates against the currencies in the countries where the Toyota Corporation co...
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...ents. The contract was effectively to protect the impact of exchange rate variability in the future. Protected by major currencies include the US dollar, Australian dollar and Euro.
The conclusion is every international company such as Toyota Motor Corporation and Mitsubishi Motor Corporation must have experienced the risks in running their business in the automotive field. These risks can be the risk in conducting transactions in various countries, and the risk in translating currencies from the subsidiaries company in others country, operating risk occurs because of the unexpected changing in the exchange rate. Therefore, to be more effective in managing the overall exposure to foreign exchange Toyota and Mitsubishi can use several strategies to prevent risks that may occur, such as, with the using derivative financial instrument or fair value hedge.
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