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 business in a global marketplace. F*****tunately there are very clear ***** decisive steps organizations can take to minimize the risks associated with international business. Many hedging instruments or techniques are available and w*****k well to ensure a company manages risk reasonably.

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

BMW Primary ***** Management Techniques

Location is a prim*****ry influencer ***** global financial risk. One of the biggest ***** BMW took to minimize financial risk was deciding to build an assembly plant in the U.S ***** in o*****r global 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 ***** the inexpensive labor and high quality *****fered in Mexico (Kim ***** McElreath, *****). Being able to produce ***** product in multiple countries enables BMW ***** 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 other and thus increase the number of "exports to countries where the real exchange rate has risen" (***** & *****, 21).

***** ventures or partnerships ***** mergers are also a solid method for minimizing global ***** risks (Choi & Prasad, 1995). Joint ventures have also benefited BMW. In early 1994 the ***** 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" (Kim & McElreath, 21). This merger boosted BMW's production and doubled the company's size, giving it a lot more weight and negotiating power in ***** long run. Jo*****t ventures also help BMW access other growing and or promising markets ***** allow the company to sh***** costs ***** 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 ***** these actions help mitigate *****'s global

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