Jet engine manufacturing entails enormous economies of scale. Pratt & Whitney, a large U.S. jet engine producer, faces substantial competition from Rolls?Royce, the British engine manufacturer. What would be the best way for P & W to cope with a dollar that has recently appreciated by 50%?

Question

Quizplus · Accepted Answer

With the recent appreciation of the dollar, P & W's engines would become more expensive for foreign buyers. In order to remain competitive, P & W should focus on accelerating their R&D spending and cost-cutting efforts to improve their efficiency and reduce manufacturing costs. This would allow them to maintain the quality of their products while keeping prices competitive. Shifting production abroad or raising foreign currency prices are not ideal solutions as they may lead to higher costs and/or decreased sales. Buying dollars forward is a financial strategy that could help mitigate the effects of currency fluctuations, but it's not directly related to jet engine manufacturing.

Jet Engine Manufacturing Entails Enormous Economies of Scale