Consider a U.S.-based manufacturing firm that is considering a move to the United Kingdom. Because the company will be using the British pound in its operations, the management team has hired you to...

Ford Motor, is one of the most successful auto-mobile manufacture organisations. Ford is also the fifth largest automobile manufacturing organisation based out in Michigan, Detroit in United States of America. Founded by father of automobiles Henry Ford in 1903. It is one of the most profitable automakers who are able to survive two Great Depression (Cannis, 2009).
As per the global norms that are more inclined towards protectionist policies has its consequence on Ford Organisation as its operations are in UK and Europe. As company's automobile manufacturing centres are operated in targeted geographies of the world. It has significantly invested its manufacturing facilities in UK.
Explanation of the Purchasing Power Parity Theory
One of the most crucial macroeconomic factors that is primarily utilised to compare economic productivity as well as cost of living standards among two or more countries can be comprehended by Purchasing Power Parity (PPP). It is an economic illustration that contrast currencies of different countries by the virtue of basket of goods approach. If one has ever travelled globally to another country then one must know for the fact that a dollar of US spend isn’t the same everywhere. According to the exchange rates of the UK where Ford organisation wants to expand the amount of expenditure to procure same resource will differ. This discrepancies of comparing currencies can best explained by PPP (Bank, 2007). Essentially, it looks forward to weigh the value of US dollar against the British pound in this particular case. PPP as a concept visualizes everything as basket of goods which can be compared further with cost of those goods in particular country.
PPP can a determinant of currency exchange rate differences among the Two Countries
Yes, indeed PPP can determine currency exchange rate differences among countries, like in this...