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 from the volatility ever present within the exchange 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 ***** associated with international business. Many hedging instruments or techniques ***** available and w*****k well to ensure a company manages risk reasonably.

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

BMW Primary ***** Management Techniques

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

***** ventures or partnerships and mergers are also a solid method f***** minimizing glob*****l ***** risks (Choi & Prasad, 1995). Joint ventures have also benefited BMW. In early 1994 the ***** 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 ***** purc*****es from suppliers" (Kim & McElre*****h, 21). This merger boosted BMW's ***** ***** doubled the company's size, giving it a lot more weight and negotiating power in the long run. ***** ventures also help BMW access other grow*****g and or promising markets ***** al***** the company to share 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 of these actions help mitig*****e ***** global


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