Caterpillar is one of the Americas major exporters. The company sells its construction equipment, mining, equipment and engines to some 200 countries.

Discuss the following questions briefly

1. In the 1980s a stronger dollar hurt Caterpillars competitive position, but in 2008 a stronger dollar did not seem to have the same effect. What had changed?

2. How did Caterpillar use strategy as a "real hudge" to reduce its exposure to foreign exchange risk? What is the downside of its approach?

3. Explain the difference between transaction exposure and translation exposure using the material in the Caterpillar case to illustrate your answer.