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 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. Fortunately there are very clear and 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.

***** factors affect a *****'s exposure to financial risk including operational activities ***** the strength of the dollar comp*****d with foreign currency (Kim & McElreath, 2001). BMW is an example of ***** international au*****maker that mitigates financial *****s successfully. ***** *****s multiple steps to manage the ***** financial risk associated with doing business in an international and competitive climate. Among the strategies ***** automaker adopts to minimize ***** ***** financial risk 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 ***** Management Techniques

***** is a prim*****ry influencer ***** global financial *****. One of the biggest steps BMW took to ***** financial risk was deciding ***** build an assembly plant 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 ***** 1994. Multiple other carmakers followed suit, in part due to the inexpensive labor ***** high quality offered in Mexico (Kim & McElreath, 2001). Being able to produce their ***** in multiple countries enables BMW to have better economic exposure; in addition by having a m*****nufacturing ***** in more than one country if the exchange rate declines in ***** place, like the US, ***** can easily sh*****t ***** of its production to the o*****r and thus increase the number of "exports to ***** where the real exchange rate has risen" (Kim & McElreath, 21).

Joint ventures or partnerships ***** mergers are ***** a solid method f***** minimizing global ***** risks (Choi & Prasad, 1995). Joint ventures ***** also benefited BMW. In early 1994 the ***** acquired a subst*****ntial portion of the automaker Rover, thus enabling greater ***** 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 production and doubled the company's size, giving it a lot ***** weight ***** negotiating power in ***** long run. Jo*****t ventures also help BMW access other growing and or promising markets and allow the company to share costs ***** partners as ***** 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 of *****se actions help mitig*****e *****'s global

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