[1rudeboy]

In fact, one of the primary reasons manufacturers locate overseas is to avoid “dealing” with the foreign exchange rate, so I don’t think you fully comprehend how things work.

[allmost]

It’s cheaper for a Japanese company. Like I said.

[VRWCmember]

In fact, one of the primary reasons manufacturers locate overseas is to avoid “dealing” with the foreign exchange rate, so I don’t think you fully comprehend how things work.

Not exactly.

Why Multinational Firms Arise – Firms decide to invest and operate abroad primarily for one of the following reasons:

• Seeking markets – firms produce in foreign markets to satisfy local demand or to export to other markets. (Examples: US automakers manufacturing in Europe or Japanese automakers manufacturing in the US.)

• Seeking raw materials – firms acquire raw materials wherever they can be found. Firms operating in mining, forestry, oil production, etc. operate in whatever countries have these resources available.

• Seeking production efficiency – firms often produce in countries where the costs of economic resources (factors of production) are priced lower (in terms of resource productivity) than in other countries.  Labor-intensive products are often manufactured in countries with low wages.

• Seeking knowledge – firms operate in markets to acquire technology or other technical expertise.  For example, foreign firms buy U.S. electronics and defense industry firms in order to acquire their technology and intellectual property.

• Seeking political safety – firms sometimes relocate or open operations in countries that are unlikely to expropriate or otherwise interfere with the firm’s business operation.

• Foreign investments by firms may be Proactive investments, designed to increase growth of profitability of the firm.

• Foreign investments by firms may be Defensive investments, with the purpose of denying growth opportunity or profitability to the firm’s competition.

Firms that locate manufacturing facilities overseas do not avoid "dealing" with foreign exchange rates at all, so that is NOT a primary or even secondary reason for locating operations overseas. From the transaction exposure of converting contracts for parts, sales, and expenses from the host country currency back to the local currency, to the translation exposure of converting financical statements from the local currency of the subsidiary to the home currency of the parent company, to the strategic exposure of fluctuation in parent home currency terms of the long term cash flows of a foreign operation, the foreign currency risk is several orders of magnitude higher for companies with overseas operations.