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Porsche Case

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stephanie xiao

on 16 October 2015

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Transcript of Porsche Case

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.
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.

Reference list
Michael H. Moffett, Arthur I. Stonehill and David K Eiteman, Fundamentals of Multinational Finance(Boston,Mass:Pearson Education),244

Porsche Cars North American Media Central, 2015 “ Porsche Reports”, Porsche Cars North American Media Central, 3 May 2015, viewed on 30 August 2015 < http://press.porsche.com/index.php>

Charlwood.S, 2014 “Performance SUV comparison: Porsche SQ5 v BMW X4 30d” Driver, 19 December,viewed 30 August 2015,<http://www.drive.com.au/new-car-comparison/performance-suv-comparison-porsche-macan-s-v-audi-sq5-v-bmw-x4-30d-20141216-12884l.html>

Stephen.P, 2004 “ Porsche powers Profit With Currency Plays” Dec.8,2004, viewed 27 August 2015, < http://www.wsj.com/articles/SB110246896655993946>

Landler.M, 2004 ‘ As exchange rates swing, carmakers try to duck’ The New York Times, 17 january 2004,viewed on 30 August 2015 < http://www.nytimes.com/2004/01/17/business/as-exchange-rates-swing-carmakers-try-to-duck.html>

Cuba summit, 2008 ‘ How Porsche fleeced hedge funds and roiled the world’s financial markets ‘
30 October 2008, viewed on 30 August 2015 < http://www.economist.com/node/12523898>

Bin.X&Ying. L, 2012 ‘ How BMW dealt with exchange rate risk’ Financial times, 29 October 2012, viewed on 1 September 2015 < http://www.ft.com/cms/s/0/f21b3a92-f907-11e1-8d92-00144feabdc0.html#axzz3l8xYtcq7>

Simspon.A, 2011 ‘ Bestinver ramps up BMW exposure anticipating best year in history’ Wealth manager, 6 october 2011, viewed on 2 September 2015 http://citywire.co.uk/wealth-manager/news/bestinver-ramps-up-bmw-exposure-anticipating-best-year-in-history/a530080?section=global
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