Sell abroad!
I've been in London this Thanksgiving break, and the media here is blanketing coverage of the dollar's plummet. Europeans hate it. It drives up the cost of their exports to the U.S. I'll decline comment on U.S. fiscal policy for now, but there's one important message here for Silicon Valley technology companies: If ever there's been a time to sell into foreign countries, especially Europe and Japan, it's now. Within three years, the euro has rocketed from 85 cents to $1.33 -- making this a great time to grab market share.
From yesterday's IHT: LONDON, Nov. 26 - The falling dollar reached new depths against the euro today, after a weeklong erosion of value prompted by concern that the dollar's status as the premier international reserve currency is growing more precarious. The central bank of Russia said today that it would stop trying to peg the ruble solely against the dollar, shifting instead to a target based on a basket of global currencies. That could result in a decline in dollar purchases by the Russian central bank, whose currency reserves are dominated by dollar assets.
The biggest questions hang over Asian central banks, which have bought hundreds of billions of dollars' worth of United States Treasury securities and other dollar-denominated assets in recent years to slow the decline of the dollar, in order to safeguard their countries' exports to the United States. Comments by a Chinese central bank official, suggesting that the bank might slow its dollar purchases, briefly sent the American currency into a volatile spin before they were retracted.
Not all Europeans hate a low dollar - importers, consumers of US products and tourists, for example.
The exchange rate was 5:1 when I was born and 3:1 when Mrs Thatcher ruled. Wasn't it originally 10:1? Fashion changes.
Now would be a good time for UK investors to buy Silicon Valley.
John Bartram on November 27, 2004 2:34 PMComment link
john has a great point. its all very talking about how easy it will be to sell abroad because of your low cost of goods. but in order to sell abroad you have to invest abroad. China, for example, is not going to buy software from a firm that has not made an investment in China. internationalization startup costs will effectively soar--advertising, marketing, PR, local product support. oops there goes our VC money... and what about costs of raw materials anyway--doesnt the US import most of this?
you need money to grab market share. if the dollar drops your money goes less far.
James Governor on November 29, 2004 4:37 AMComment link
James is correct about local marketing and support costs. Here in EMEA, dollar-denominated marketing has become an increasingly expensive business. I suspect that there's a further issue here, too: namely, that current dollar/euro/sterling exchange rates are encouraging marketing tactics based around price promotion. This makes sense on one level: if the value of each euro of revenue repatriated to the US continues to grow, there's even more space available than usual for discounting. However, a marketing approach that leans even more heavily than usual on discounting (without much of that expensive brand promotion stuff)helps to inculcate buying habits that won't do the industry much good in the long term. Add to this EMEA's low growth economics and the "thinness" of many vendors' local marketing staffs here (so much work has been centralised back to the US), and the long-term prognosis ain't great. . .
Peter Kirwan on December 1, 2004 3:56 AMComment link
