4. Suppose that a decade ago, the Japanese yen stood at 120 Yen/$; Today, 10 years later, the Japanese yen is trading at 100 Yen/$. Consider the case of the heavy earth-moving equipment industry, consisting of essentially two major players globally, US-based Caterpillar and Japan-based Komatsu.

a) What has happened to the Japanese Yen and how does it affect the relative competitive positions of Caterpillar and Komatsu? Explain your answer clearly. (2 points)

b) How should this affect the strategic behavior of the two firms? You may wish to answer this question first from the short-term perspective, and then from the long-term perspective. (3 points)