Please read Management Focus: Volkswagen's Hedging Strategy on page 287 in book "global Business Today' by Charles Hill,7th edition" or in "8th edition Global Business Today' by Charles Hill" .
Volkswagen saw a 95% drop in its fourth quarter profits in 2004 after an unexpected surge in the value of the Euro left the company with losses of $1.5 billion.
1. What is hedging? Explain how Volkswagen's failure to fully protect itself against foreign exchange fluctuations had a negative effect on the company? What can Volkswagen and other companies learn from this experience?
2. Why was Volkswagen so vulnerable to the change in the value of the Euro against the US Dollar relative to the US Dollar?
3. Please search on the internet and find a recent case where the strong dollar hurts the company. What can this company do to protect itself from exchange rate fluctuations?
Remember that your answers should be comprehensive