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

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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 ***** 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 minimize the risks associated with international business. Many hedging instruments or techniques are available and work well to ensure a company manages risk reasonably.

***** factors affect a ********** exposure to financial ***** including operational activities ***** the strength of the dollar compared with foreign currency (Kim & McElreath, 2001). ***** is an example of an international au*****maker that mitigates financial ***** successfully. BMW ********** multiple steps to manage the global financial 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 (Kim & *****, 2001). These ideas are discussed in greater detail below.

BMW Primary Risk Management Techniques

Location is a prim*****ry influencer of global financial risk. One of ***** biggest steps BMW took to minimize financial risk was deciding ***** build an assembly pl*****t in the U.S ***** in o*****r ***** areas (BMW 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 lab***** and high quality offered in Mexico (Kim ***** McElreath, *****). Being able ***** produce their ***** in multiple countries enables BMW to have better economic exposure; in addition by having a manufacturing plant in more than one country if the exchange rate declines in ***** place, like the US, ***** can easily sh*****t part of its production to the o*****r ***** thus increase the number of "exports to ***** where the real exchange rate has risen" (Kim & *****, 21).

***** ventures or partnerships and mergers are ***** a solid method f***** minimizing global ***** risks (Choi & Prasad, 1995). Joint ventures ***** also benefited BMW. In early 1994 ***** ***** acquired a substantial portion of the automaker Rover, thus enabling greater production capability at a low cost, which in turn resulted in larger "economies of scale in purc*****es from suppliers" (Kim & McElre*****h, 21). This merger boosted BMW's production ***** doubled the company's size, giving it a lot more weight and negotiating power in ***** long run. Joint ventures also help BMW access other growing and or promising markets ***** al***** the company to share costs w*****h partners as well 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 ***** *****se actions help mitigate ***** global


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