BMW has pursued a strategy of "production follows the market" to address exchange rate risks. They established 31 production facilities across 14 countries to manufacture vehicles close to major markets in America, Europe, China, and Asia. This allowed BMW to use local currencies for expenses and sales, providing a natural hedge against exchange rate fluctuations. BMW also set up regional treasury centers to formally hedge currencies. Key steps taken included opening a US plant in 1990, a joint venture in China, and investing in an India production plant. While this strategy increased revenue and customer service, it also introduced complexity, quality risks, and potential loss of innovative capacity. However, the example shows how pursuing global production can help companies penetrate new markets and gain competitive advantages

1. BMW
Strategy
Amel BENDAHBIA
Sepideh RAYEGAN
International Risk Management
Spring 2017

2. BRIEF HISTORY
• BMW : Bayerische Motoren Werke (Bavarian Motor Works)
31 production
facilities in 14
countries
- South Africa
- US
- China
- Brazil
- Mexico
- India
- …

3. Emerging Problem Concerning Exchange Rate
America
Europe
China
Asia and
the rest
SALES
America Europe China Asia and the
rest
GROWTH RATE

4. STRATEGIES
“Production Follows the Market”
NATURAL HEDGE
spend money on the same
currency as where sales were
taking place
Formal Financial Hedge
set up regional treasury centers
in US, UK, and Singapore

5. IMPLEMENTATION PHASE
1- Establishing factories in the markets where it sold products
- Facilitate access to new markets
- long-term growth potential
- offer products at competitive prices
2- Making more purchases dominated in the currencies of its main market
- adding locally produced parts
- fulfil the respective government’s local content requirements

6. ADVANTAGES
Revenue
Increase
Shortening
Supply chain
Improving
Customer
Service
Save
on Trade
Tariffs
Become a
local player

7. Set up a plant in the US in 1990, use the US dollar
and benefits of the American free trade agreement.
Create a joint venture in China with Brillance
China Automotive where half of the BMW cars
for sale are manufactured
invest 1.8bn rupees in its production plan in India
Three
Major
Steps
Taken
By
BMW
Concerning
Their
Strategy

8. Complexity & Hidden
Costs
Risk Factors still exist
Quality management &
Loss of Innovative
Capacity.
DISADVANTAGES

9. CONCLUSION
With this example In mind we think…
every company which is aiming to be global, can use this strategy
It will facilitate initial steps specially the penetration phase and
help them to have some competitive advantages over their rivals
although we should analyze the risk factors carefully in order to
avoid any major losses.
THANK YOU !