Essay - BMW What did BMW Do to Manage Global Financial Risk?...


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BMW

What Did BMW Do To Manage Global Financial Risk?

Any firm conducting business internationally faces global financial risk. Of particular concern is risk associated from foreign exchange transactions or currency related issues. Much of this risk results from the volatility ever present within ***** ***** rate and among interest rates. There are always other risks though associated with conducting ***** in a global marketplace. F*****tunately there are very clear and decisive steps organizations can take to m*****imize the risks ***** with international business. Many hedging instruments or techniques are available and w*****k well to ensure a company manages risk reasonably.

***** factors affect a firm's exposure to financial ***** including operational activities and the strength of the dollar compared with foreign currency (Kim & McElreath, 2001). ***** is an example of an international automaker that mitigates financial risks successfully. BMW takes multiple steps to manage the global financial risk associated with doing business in an ***** ***** competitive climate. Among the strategies the automaker adopts to minimize *****d ***** financial ***** include optimizing plant location, product sourcing, improvements in productivity, pric*****g and product strategy, joint ventures and market segmentation (Kim & *****, 2001). These ideas are discussed in greater detail below.

BMW Primary ***** Management Techniques

Location is a primary influencer ***** ***** financial risk. One of the biggest ***** BMW took to minimize financial risk was deciding to build an assembly pl*****t in the U.S and in o*****r global areas (***** USA, 2005). By diversifying their manufacturing **********, BMW minimized currency fluctuation. BMW also set up shop in Mexico in 1994. Multiple other carmakers followed suit, in part due to the inexpensive labor ***** high quality *****fered in Mexico (Kim ***** McElreath, *****). Be*****g able to produce their product in multiple countries enables BMW to have better economic exposure; in addition by hav*****g a m*****nufacturing plant in more than one country if the exchange rate declines in one place, like the US, BMW can easily shift part of its production to the other and thus increase the number of "exports to countries where the real ***** rate has risen" (Kim & *****, 21).

***** ventures or partnerships and mergers are also a solid method f***** minimizing glob*****l ***** risks (Choi & Prasad, 1995). Joint ventures ***** also benefited BMW. In early 1994 ***** company acquired a subst*****ntial portion of the automaker Rover, thus enabling ***** production capability at a low cost, which in turn resulted in larger "economies of scale in purchases from s*****pliers" (Kim & McElre*****h, 21). This merger boosted BMW's production and doubled the company's size, giving it a lot more weight and negotiating power in the long run. Joint ventures also help BMW access other growing and or promising markets ***** al***** the company to sh***** costs w*****h partners as ***** as resources (Kim ***** McElreath, 2001). This helps minimize financial problems in times of slow sales or at times when resources may be pricey or unavailable. All of *****se actions help mitigate ***** global

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