Joint ventures also help BMW access other growing and/or promising markets and allow the company to share costs with 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 mitigate BMW's global financial risk and increase their long-term profitability and competitiveness.
BMW also uses product sourcing and input mix to rise above financial risk (BMW INT, 2005). BMW for example often procured parts and materials for its vehicles in the U.S. before it established a plant location in the U.S., in part because the exchange rates and production costs were much lower in the U.S. (Kim & McElreath, 2001). This allowed the German automaker to import necessary products inexpensively. BMW also diversifies its product offering three brands including the BMW, MINI and Rolls-Royce increasing the strength and efficiency with which it conducts business and minimizing the financial risks associated with owning or providing a single product (BMW, 2005).
Conclusions
Any company conducting business internationally faces particularly global financial risks, especially those associated with a volatile exchange market. Companies that successfully adopt hedging techniques or other strategies to mitigate risk are more likely to succeed and establish a strong global presence. Once such company that has succeeded in mitigating financial risks is BMW...
The global German based automaker has succeeded despite multiple financial risk factors in an ever-competitive industry.
BMW Corporation has taken multiple steps to mitigate the risks associated with foreign exchange. The company has aligned their business and financial strategies and analyzed the types of risk they are subject to conducting business in an international market. They have also examined how these risks can be controlled and hedged.
Some of the techniques the company has adopted to successfully mitigate risks include diversifying their product and market segmentation, optimizing their location, merging and product sourcing. Investing in multiple avenues has enabled BMW to reduce the financial risks associated with fluctuating currencies and other global financial factors tremendously, propelling them above the competition and helping them establish a reputable name in the automobile industry.
