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


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BMW

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

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

BMW Primary Risk Management Techniques

***** is a prim*****ry influencer ***** global financial risk. One of ***** biggest ***** BMW took to ***** financial ***** was deciding ***** build an assembly pl*****t in the U.S and in other ***** areas (BMW USA, 2005). By diversifying their manufacturing locations, BMW minimized currency fluctuation. BMW also set up shop in Mexico in 1994. Multiple other carmakers followed suit, ***** part due to the inexpensive labor ***** high quality offered in Mexico (Kim ***** McElreath, 2001). Be*****g able to produce their product in multiple countries enables BMW ***** have better economic exposure; ***** addition by having a m*****nufacturing plant in more than one country if the exchange rate declines in ***** place, like the US, ***** can easily sh*****t ***** 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 financial risks (Choi & Prasad, 1995). Joint ventures have also benefited BMW. In early 1994 the ***** acquired a subst*****ntial 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" (***** & McElreath, 21). This merger boosted BMW's ***** and doubled ***** company's size, giving it a lot ***** weight and negotiating power in the long run. Joint ventures also help BMW access other growing and or promising markets and al***** the company to sh***** costs ***** partners as ***** as resources (Kim & McElreath, 2001). This helps minimize ***** problems in times of slow sales or at times when ***** may be pricey or unavailable. All of these actions help mitigate ***** global

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