  We analyze an operational policy for a multinational manufacturer to hedge
against exchange rate uncertainties and competition. We consider a single
product and single period. Because of long-lead times, the capacity investment
must done before the selling season begins when the exchange rate between the
two countries is uncertain. we consider a duopoly competition in the foreign
country. We model the exchange rate as a random variable. We investigate the
impact of competition and exchange rate on optimal capacities and optimal
prices. We show how competition can impact the decision of the home
manufacturer to enter the foreign market.
