Running head: CASE STUDY: THE SWISS FRANC 1

Case Study: The Swiss Franc

[Author Name(s), First M. Last, Omit Titles and Degrees]

[Institutional Affiliation(s)]
CASE STUDY: THE SWISS FRANC 2

The following case study corresponds to an analysis of the known facts going around the

Swiss Franc and the effects it has from the point of view of investors, managers, employees,

manufacturers and tourists. In order to show this breakdown, the next set of questions will be

answered accordingly.

1. Why is the Swiss Franc a “haven currency” according to many international investors?

For international investors, the Swiss Franc represents a “haven currency”, thanks to its

ability to protect capital and revenues since it keeps strong even from events causing devaluation

of other global currencies such as the US dollar or Euro (Peng, 2013, p. 229). No wonder why

Switzerland has gained the status of a place for international settlements, investing or simply

saving money for individuals, corporations and specially governments (Sprout Money, 2014).

2. Why have the unfavorable foreign exchange movements made the Swiss Franc a

“currency from hell” according to a lot of Swiss firms’ managers and employees?

For those firms who have a lot of Swiss-franc costs, and revenues coming from the Euro

zone or other markets, the Swiss Franc embodies many difficulties derived from the unfavorable

changes on currencies. When the Swiss-Franc appreciates, these types of companies have to face

great generalized losses due to negative currency exchange movements. On the other hand, most

of these companies find themselves in the necessity of cutting down wages to reduce costs

accordingly with the exchange rates and keep their businesses running, nevertheless, as a

consequence, workers’ unions protest stating that is the company owners who should deal with

the vulnerabilities produced by the variation of these rates (Peng, 2013, p. 229).

3. If you were a CEO of a medium-sized manufacturer in Switzerland, what are the options

you may consider in response to the spike of the Swiss Franc?

CASE STUDY: THE SWISS FRANC 3

The decision would depend on where our revenues as a company are located. If our

revenues come mainly from the Swiss market, which means in Swiss currency, the movement to

make is to try to keep our Swiss costs to a minimum in order to take advantage of currency

peaks. This would include keeping only wages and factory expenses in Switzerland, and rather

than buying production materials in Swiss Francs, we would evaluate obtaining them from

nearby sources in the Euro zone while the spike lasts to optimize costs of production. If, on the

contrary, most of our income were obtained in other currencies such as the Euro or the US

Dollar, we would definitely move our operations out of Switzerland to cut down Swiss-based

costs even more. Though this would imply reducing manufacturing-related jobs in Switzerland

and would lead to more unemployment, it would also represent a strong reduction of costs, and

along with this, we could benefit from manufacturing outside and exporting to the Swiss market

whenever is possible, which would also give us the chance of saving funds in a stronger currency

and exchange them during the spikes to obtain more cash revenues.

4. As a tourist looking to have a vacation in Europe, you are very interested in Switzerland,

but you are concerned about the high prices. What other European countries would you

consider?

This decision would definitely depend on the conditions I have for the trip (available

budget, desired locations, willingness to save on accommodation and so on). If money is a

problem and I look forward to save as much as I can while being in Europe, I would consider

other countries and cities where inflation stays stably low like Spain, Portugal or Austria, and

even those out of the Euro zone to take more advantage of exchange rates, such as Eastern

European countries that have proved to be less expensive such as Czech Republic, Lithuania,

Hungary, Latvia, among others (Papworth, 2013).

CASE STUDY: THE SWISS FRANC 4

References List

Peng, M. (2013). Global Business, 3rd Edition. Dallas, TX: Cengage Learning.

Sprout Money (2014, November 26). The Real Reason Why The Swiss National Bank Hates The

Gold Referendum. Zero Hedge. Retrieved from http://www.zerohedge.com/news/2014-

11-26/real-reason-why-swiss-national-bank-hates-gold-referendum

Papworth, J. (2013, January 18). Low-cost holiday destinations in 2013. The Guardian.

Retrieved from http://www.theguardian.com/money/2013/jan/18/low-cost-holiday-

destinations-2013