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 ***** ***** rate and among interest rates. There are always other risks though associated with conducting business in a global marketplace. Fortunately there are very clear and decisive steps organizations can take to m*****imize the risks associated with international business. Many hedging instruments or techniques ***** available and w*****k 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 automaker that mitigates financial risks successfully. BMW takes multiple steps to manage ***** ***** financial risk associated with doing ***** in an international ***** competitive climate. Among the strategies ***** automaker adopts to minimize *****d manage financial risk include optimizing plant location, product sourcing, improvements in productivity, pric*****g and product strategy, joint ventures and market segmentation (***** & *****, 2001). These ideas are discussed in greater detail below.

BMW Primary Risk Management Techniques

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

***** ventures or partnerships and mergers are also a solid method f***** minimizing global ***** risks (Choi & Prasad, 1995). Joint ventures have also benefited BMW. In early 1994 ***** ***** acquired a subst*****ntial portion of the automaker Rover, thus enabling ***** production capability at a low cost, which in turn resulted in larger "economies of scale ***** purchases from suppliers" (***** & *****, 21). This merger boosted BMW's production and 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 *****'s global

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