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

BMW Primary ***** Management Techniques

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

Joint 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 ***** ***** acquired a subst*****ntial portion of the automaker Rover, thus enabling ***** ***** capability at a low cost, which in turn resulted in larger "economies of scale ***** purchases from suppliers" (Kim & McElre*****h, 21). This merger boosted BMW's production and doubled the company's size, giving it a lot ***** weight ***** negotiating power in ***** long run. ***** ventures also help BMW access other growing and or promising markets ***** al***** 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 ***** may be pricey or unavailable. All ***** these actions help m*****igate ***** global

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