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 ***** results ***** the volatility ever present within ***** ***** rate and among interest rates. There are always other risks though associated with conducting ***** in a global marketplace. Fortunately there are very clear and decisive steps organizations can take to minimize the ***** associated with international business. Many hedging instruments or techniques are available and work well to ensure a company manages risk reasonably.

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

BMW Primary Risk Management Techniques

***** is a primary influencer of global financial *****. One of the biggest steps BMW took to minimize financial risk was deciding to build an assembly plant in the U.S and in other ***** areas (***** USA, 2005). By diversifying their manufacturing locations, BMW minimized currency fluctuation. BMW also set up shop in Mexico ***** 1994. Multiple other carmakers followed suit, in part due to the inexpensive labor and high quality *****fered in Mexico (Kim & McElreath, 2001). Be*****g able to produce their ***** in multiple countries enables BMW ***** have better economic exposure; in addition by having a m*****nufacturing plant in more than one country if the exchange rate declines in one place, like the US, ***** can easily shift part of its production to the other and thus increase the number ***** "exports to countries where the real ***** rate has risen" (Kim & McElreath, 21).

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

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