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Transcript of Porsche Case
Xian Xiao (11918404)
Xiaofang Wang (11932605)
Lauren Aliferis (11985708)
Peter Lagos (11992043)
Porsche - Manufacture cars in Germany & Finland, but generates 40-45% of sales in the U.S.
Porsche's rivals are better positioned on the input.
Market side to handle unexpected exchange rate fluctuations.
high operating exposure.
BMW - sets up plants in US - used it as a base for producing parts & materials for its German -made which cheaper than domestic parts.
By incurring costs in North America, BMW adopted strategies to against operating exposure.
What process Porsche have in place to manage this exposure?
Porsche has always been concerned about operating exposures which have arisen from unstable exchange rates of the dollar. In order to minimize the problem,Porsche implemented various exposure management strategies.
Porsche uses 2 major strategies to manage its exposure:
Strategy at Porsche is to compete not on price but on quality.
An aggressive "put options" hedging strategy.
B M W
What did BMW do to manage their exposure within the US?
BMW's profits were affected by exchange rates.The company's calculations in its annual reports suggested the negative effect of exchange rates totalled 2.4 billion Euro between 2005&2009.
Natural hedge strategy implemented in 2 years.
BMW in the 1990s became one of the first premium car makers to set up a plant in the US.
CFO Stefan Krause states that BMW has typically hedged about two-thirds of its currency exposure in recent years.
2008 BMW announced it was investing 750 million to expand the Carolina plant.
Regional treasury centres were instructed to evaluate the exchange rate exposure in their regions.
The group treasurer then assesses risk figures globally and suggests actions to lessen the risk.
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HAVE A NICE DAY!!
Michael H. Moffett, Arthur I. Stonehill and David K Eiteman, Fundamentals of Multinational Finance(Boston,Mass:Pearson Education),244
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