The risk of
multinational currency of BMW Group
The foreign exchange can be
one of the aspects that international company like BMW group should considered,
because the rate of the currency in this world could be change every hour or
maybe every minute. The groups of BMW are consisting of three famous car brands
in the world, which are BMW, Mini, and Rolls Royce. BMW Group operates for
almost in 30 countries worldwide, and there should be a good management for
their multinational currency.
China has become the fastest
BMW growing market with 14 percent from the global sales of BMW Group, while
the sales of BMW Group in their origin country Germany only 17% from their
total worldwide sales. The exchange rate of currency had takes the attention
from the BMW Group, because this company aware that some of their profits was
diminished due to the different rate of currency in every Country. The rate of
the currency can be predicted from the economy of the country.
In the 2005 – 2009 annual
report of BMW Group, it is stated there are reduction €2.4 billion due to the
negative impact from the exchange rates. BMW Group does not want to cover this
loss by increasing their car’s price, because they see from the case of
Porsche. The sales of Porsche were drop immediately in Unites States of America
in 1980’s after this company increase the price of the car, in sequence to
cover their loss in the exchange rates.
In dealing with the risk of
the exchange rates of the currency, BMW Group use “Natural hedge” strategy. By
using this strategy, BMW Group will use the same currency as the business takes
place or the revenue would also be the same currency as their origin currency.
The factory (Spare parts) of BMW Group nowadays has increased to 13 countries
in order to reduce the supply chain risk in the company.
The process of natural hedge
is involving the founding of factories in the market, where the products want
to be sold. In the late 90’s, BMW Group is the first company of premium car who
wants to open the factory in South Carolina, United States of America. Seeing
the potential from this factory, BMW Group decided to invest $750 million for
factory expansion in the South Carolina. Besides the expansion in the United
States of America, BMW Group also joint venture with Brilliance China
Automotive, this joint venture deal is to help BMW Group in selecting the
potential supplier for their car in China. In 2010, BMW Group also declared
about the investment in India with 1.8 billion rupees for the production plant.
To conclude, all this things are the strategy from BMW Group in order to reduce
their supply chain risk from German to each country of their business and
automatically there will be lesser risk for the foreign exchange in their
company, since the production process is now closer to the consumer. In my opinion,
in the future if I have international company like BMW Group, I would like to
do the same strategy like BMW Group has done.
No comments:
Post a Comment