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 risk results ***** the volatility ever present within ***** exchange rate and among interest rates. There are always other risks though associated with conducting ***** in a global marketplace. Fortunately there are very clear ***** decisive steps organizations can take to m*****imize the risks ***** with international business. Many hedging instruments or techniques ***** available and work well to ensure a company manages risk reasonably.

Multiple 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 the ***** ***** risk associated with doing ***** in an ***** and competitive climate. Among the strategies ***** automaker adopts to minimize ***** manage financial ***** 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 risk. One of the biggest ***** BMW took to minimize financial risk was deciding to build an assembly plant in the U.S and in o*****r global 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, in part due to the inexpensive lab***** ***** high quality *****fered in Mexico (Kim ***** McElreath, *****). Being able to produce their product in multiple countries enables BMW ***** have better economic exposure; in addition by having a manufacturing ***** in more than one country if the ***** rate declines in one place, like the US, BMW can easily shift ***** of its production to the o*****r and thus increase the number ***** "exports to countries where the real exchange rate has risen" (Kim & *****, 21).

***** ventures or partnerships and mergers are ***** a solid method for minimizing glob*****l ***** risks (Choi & Prasad, 1995). Joint ventures ***** also benefited BMW. In early 1994 the ***** acquired a substantial portion of the automaker Rover, thus enabling ***** production capability at a low cost, which in turn resulted in larger "economies of scale ***** purchases from s*****pliers" (Kim & McElreath, 21). This merger boosted BMW's ***** ***** doubled the company's size, giving it a lot more weight and negotiating power in the long run. Jo*****t ventures also help BMW access other growing and or promising markets ***** al***** the company to share costs ***** partners as ***** 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 m*****igate ***** global

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