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. Fortunately there are very clear ***** decisive steps organizations can take to m*****imize the ***** ***** with international business. Many hedging instruments or techniques are available and work well to ensure a company manages risk reasonably.

***** factors affect a ********** exposure to financial ***** including operational activities and the strength of the dollar comp*****d with foreign currency (Kim & McElreath, 2001). BMW is an example of ***** international au*****maker that mitigates financial risks successfully. ***** takes multiple steps to manage the global ***** risk associated with doing ***** in an international 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

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

Joint ventures or partnerships ***** mergers are ***** a solid method for minimizing glob*****l ***** risks (Choi & Prasad, 1995). Joint ventures ***** also benefited BMW. In early 1994 ***** ***** acquired a substantial portion of the automaker Rover, thus enabling greater ***** 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 the company's size, giving it a lot ***** weight and negotiating power in the long run. Joint ventures also help BMW access other growing and or promising markets ***** allow 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 ***** may be pricey or unavailable. All ***** these actions help m*****igate ***** global

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