The Ripple Effect: How the Slumping Loonie Affects Businesses Across Canada
globeandmail.com
Jan. 24, 2015
Jan. 24, 2015
Coded Expectation
IM4.03- demonstrate an understanding of how changes in the value of the Canadian dollar can affect business opportunities
Summary
The fall in the Canadian dollar will help most exporters, while importers will be hurt by the increased fuel prices and increased price of U.S. goods. Some companies have already taken actions to make up for the loss, including vacation companies such as Air Canada, who have charged a $35 fee for US based trips. Additionally, many retailers buy a majority of their stock from the US, and will increase their prices. Larger companies are not as affected by this, such as Canadian Tire, who buy products up to six months in advance. Other companies, such as energy firms and lumber companies that operate in Canada but sell to the US, are thrilled with the decline due to an increased value of items. Overall, the drop in value appears to help some companies, while hurting others.
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The slumping loonie has been affecting businesses all over Canada; some negatively, some positively (7).
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Connection
The recent decline in the Canadian dollar has presented an excellent example of how currency changes can affect businesses. This article perfectly describes why some businesses want a lower value for the Canadian dollar, while others fear the lower dollar.
For some businesses, the Canadian dollar’s drop in value will help their company to see greater profits. Many primary industries, such as lumber and natural gas, sell to the US, and are paid in US dollars. Therefore, when they exchange the US money for Canadian, they will receive a significantly larger amount due to the low Canadian dollar.
For many other companies, however, the lower dollar can be negative, and even lead to bankruptcy. Many companies that sell items acquire their products from the US. With the lower value of the Canadian dollar, they will have to spend more money to buy the same goods. Many larger companies, such as Canadian Tire, have plans for these scenarios, and store a large amount of items in case of a low currency value. Other companies will have to pass the higher costs on to consumers, such as Air Canada, who are charging a $35 fee for US trips. Smaller companies are affected the most though, as many people will stop buying their products if they raise the prices too high.
Overall, the value of the Canadian dollar greatly affects businesses in Canada and can lead to the success of some businesses while failing others.
For some businesses, the Canadian dollar’s drop in value will help their company to see greater profits. Many primary industries, such as lumber and natural gas, sell to the US, and are paid in US dollars. Therefore, when they exchange the US money for Canadian, they will receive a significantly larger amount due to the low Canadian dollar.
For many other companies, however, the lower dollar can be negative, and even lead to bankruptcy. Many companies that sell items acquire their products from the US. With the lower value of the Canadian dollar, they will have to spend more money to buy the same goods. Many larger companies, such as Canadian Tire, have plans for these scenarios, and store a large amount of items in case of a low currency value. Other companies will have to pass the higher costs on to consumers, such as Air Canada, who are charging a $35 fee for US trips. Smaller companies are affected the most though, as many people will stop buying their products if they raise the prices too high.
Overall, the value of the Canadian dollar greatly affects businesses in Canada and can lead to the success of some businesses while failing others.