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 ***** the volatility ever present within the exchange rate and among interest rates. There are always other risks though associated with conducting business 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 ***** available and work 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). BMW is an example of ***** international au*****maker that mitigates financial risks successfully. ***** *****s multiple steps to manage ***** ***** ***** risk associated with doing ***** in an ***** and competitive climate. Among the strategies the automaker adopts to minimize and ***** 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

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

***** ventures or partnerships ***** mergers are also a solid method f***** minimizing global financial risks (Choi & Prasad, 1995). Joint ventures ***** also benefited BMW. In early 1994 ***** company 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 purchases from s*****pliers" (Kim & *****, 21). This merger boosted BMW's production and doubled the company's size, giving it a lot more weight and negoti*****ing power in ***** long run. Jo*****t ventures also help BMW access other growing and or promising markets ***** allow 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 resources may be pricey or unavailable. All of these actions help mitig*****e BMW's global

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