EZ Lawn Currency Risk (Scenario)
The EZ Lawn Corporation manufactures lawn equipment such as lawn mowers, blowers, and trimmers. The lawn equipment is assembled in the U.S. at a facility in Florida, but the firm outsources inputs from a number of countries, each with varying degrees of economic stability. Given the importance of the firm's sourcing activities, EZ Lawn managers are discussing methods that might reduce the currency risk faced by EZ Lawn.
-Contracting with secondary suppliers outside the U.S. for critical input components would most likely enable EZ Lawn to ________.

Question

Quizplus · Accepted Answer

Contracting with secondary suppliers outside the U.S. allows EZ Lawn to shift production from one country to another in case of currency fluctuations, thereby reducing currency risk by diversifying the source of inputs. This flexibility can protect the company against adverse movements in exchange rates.