Hi guys. I'm Doug Thomas. Welcome to Global Business Environment Course 2. I extend a special welcome to those of you who participated in Global Business Environment Course 1. This Course 2 will build on that Course 1. And we will explore some new and additional ideas about the Global Business Environment in Course 2. This course, Course 2, will also have 6 Modules just like Course 1 did. And we will have an introduction and then several parts to each of those Modules. This will be Module 1 of Global Business Environment Course 2. And in this introduction, we will begin to talk about the key question that we'll be asking in trying to answer in Module 1 of Global Business Environment Course 2. And in this Module, we'll be asking, what is the impact of foreign exchange and foreign currency on globalization and global, and then on the global business environment. This is probably one of the most important topics in the course and it's one of the ones that can be a little bit difficult to understand. Some people have an intuitive sense for exchange rates and how they work. And others have less experience and knowledge with it. So I'll try to go through this carefully and, and, have an angle or take on it that will hopefully shed additional light for those of you who have some knowledge and experience. I've got here on the screen some exchange rates. And this particular photograph doesn't tell us what country we're exchanging, what country's currency we're exchanging. But it has these prices of various currencies, the US dollar, the Japanese yen, the Australian dollar or example the Euro. And it has information on how much it would be to buy US dollars, this, this unknown currency, and how much it would cost to sell them. And so, this is the type of thing we're going to be talking about today. We're going to really get into this. We're going to try to understand foreign exchange and foreign currency. We're going to try to understand how the, the market for foreign exchange works, and the history of it. We're going to try to understand how it impacts business. Just as an introduction and we may refer to this again in another part of this module. The thing that I like to start with is to step back from foreign exchange and foreign currency, and to look at a separate example. And what I've got up here on the screen right now is a picture of a parking lot full of cars, vehicles, automobiles for sale. And many of you have family members or yourselves have access to an automobile. And you may have been involved in a purchase of one. It may have been a new car or maybe it had been a used car that you purchased. Have you ever thought about how the price was set for that car? Have you ever thought how the price might change over time? Think about that for a minute. What are the factors that determine the price of a used car for example? Let's say you wanted to buy a 2006 Honda Civic. That may not be for sale in all markets that are listening to this course, participating in this course. But the 2006 Honda Civic. What factors in my community might determine that price? What factors in your community might determine that price? Well, as you're thinking about it you're probably saying something in your mind about supply and demand. If there are lots of Civics for sale, that might affect the price. If there are only a few Civics for sale, that might affect the price. If there's a lot of demand, if that's a car that people really want, then it might affect the price. And, if people don't really care about the Civic that would affect the price. In fact the Civic tends to be a very high in demand car and that generally affects the price and pushes the price upward, for example. And that's related in some part to the reputation of the brand Honda and also to the quality that's related to that brand. The, the stability and the, the the long term need for maintenance and it's a low need, and a low need for mechanical work. And so there are a lot of factors that go into determining that price. That price could change if suddenly all Honda Civics were taken off the market for some reason, but people still really wanted them. You might see the price go up really high for, for the few that somehow were able to sneak through the system and, and be sold. You might see a change if suddenly they made too many and everyone sold at the same time. Perhaps because they, there was a deal on new car prices. And so if everyone sold their used, that might drive down the price. And so that's how the, the used car price market might work. And it's probably different in every city and every community across the globe depending on a variety of factors. There might be taxes in some places. It might have not have the same reputation in other places. The reason we're talking about this is because you can start to understand how the foreign exchange and the foreign currency market works. If you think of currency in the same way as you think of cars or any other product or service. I've got a picture here of one US dollar and a large stack of another foreign currency that we see is requires a lot of these bills to equal one US dollar. What you want to take away from the, the car example is, you can understand the rate the exchange rate as the price of one currency, in terms of another currency. And, I want you to keep that in mind as we go through this. The market for foreign currency is determined by the same factors that determine the market for cars. It's supply and demand and many other similar factors. So, with that introduction we're going to pick this back up in the next part, part one of this module, and we'll continue this example and, and explore it even further.
