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 ***** results from the volatility ever present within ***** 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 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.

Multiple factors affect a ********** exposure to financial ***** including operational activities ***** the strength of the dollar compared with foreign currency (Kim & McElreath, 2001). BMW is an example of ***** international automaker that mitigates financial ***** successfully. BMW *****s multiple steps to manage the global financial risk associated with doing ***** in an international and competitive climate. Among the strategies the automaker adopts to minimize ***** ***** financial risk include optimizing plant location, product sourcing, improvements in productivity, pricing 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 *****. One of the biggest ***** BMW took to minimize financial risk was deciding to build an assembly pl*****t in the U.S and in o*****r ***** areas (BMW USA, 2005). By diversifying their manufacturing **********, BMW minimized currency fluctuation. BMW also set up shop in Mexico ***** 1994. Multiple other carmakers followed suit, in part due ***** the inexpensive lab***** ***** high quality offered in Mexico (Kim ***** McElreath, *****). Be*****g able to produce their product in multiple countries enables BMW to have better economic exposure; ***** addition by having a manufacturing plant in more than one country if the ***** rate declines in ***** place, like the US, ***** can easily shift ***** of its production to the o*****r and thus increase the number ***** "exports to ***** where the real exchange rate has risen" (Kim & McElreath, 21).

***** ventures or partnerships ***** mergers are also a solid method f***** 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 & *****, 21). This merger boosted BMW's production and doubled ***** company's size, giving it a lot ***** weight ***** negotiating power in the long run. Joint ventures also help BMW access other growing and or promising markets ***** allow the company to share costs w*****h partners as ***** 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 of these actions help mitigate *****'s global


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