Pepsi Co is one of the largest Multi-national enterprises in US having operations in different countries of the world. It basically deals in beverages and soft drinks and offers different brands such as Pepsi, Tropicana, and Gatorode etc. The sheer success of its brands depicts that it is one of the most successful organizations in US which is operating at The International level. Pepsi receives its revenue in US dollars from all its licensed bottlers working across the world.
However, it pays to its suppliers and employees in the local currency where it operates. Due to this factor, its cost structure is affected as the volatile movements in currency can really produce a volatile movement in its cost of sales. This factor also creates more sever impact when some of the countries where Pepsi Co works do not allow forward booking of US dollars. Therefore, Pepsi Co may not be able to hedge itself against the currency volatility. (G. I.
, 2003) There are countries where Pepsi Co makes and receives payments in US dollars. However, since its foreign affiliates have to purchase the US dollar from the local market to pay to it therefore, the impact may be more volatile specially if the local currency appreciates against the US Dollar. If local currency appreciates against US Dollar, the revenues of the company will go down because local affiliates would not buy fewer US Dollars because of appreciation.
This will also affect the profitability of the company because Pepsi Co would now have to remit the higher amount of US Dollars to pay to its suppliers in the local market. Therefore, its overall expense would increase. Therefore, the whole profitability would come down as a result of this. (Tallman, 2007). Bibliography 1. G. I. , Z. (2003). MNEs, globalisation and digital economy: legal and economic aspects. Managerial Law, , 45 (1), pp. 1-296. 2. Tallman, S. B. (2007). A New Generation in International Strategic Management. New York: Edward Elgar Publishing,.