1. The Setting: BMW and the Global Automotive Industry. Analyze BMW AG and 100 the economic environment in which they are operating. Pay particular attention to the companys performance from the early 1990s to the 2010s, its growth strategy, and the global financial markets which affect the Group.

(a) How well has the company been doing? Propose an appropriate metric and assess the Groups overall performance since it embarked on its ambitious globalization plans.

(b) What is BMWs strategy? How has it expanded and grown internationally? How successful has this growth strategy been and how is it affecting the current performance of its major divisions?

(c) The automotive industry has always be at the forefront of globalization and risk management. Reconcile the stylized facts that shareholder returns in this industry do not seem to systematically vary with FX rates with the significant foreign-currency exposures which global car manufacturers face. How can that be?

(d) The academic literature identifies several factors which might have contribute to the neutralization of foreign-exchange exposure in global automotive operations. What are these factors and what is their relative importance in reducing or eliminating the con- sequences of foreign-currency exposures? You might want to consult Bartram et al. (2010).

(e) For planning purposes, it is very important to estimate long-term equilibrium FX rates. Taking into account the evolution of the USD/EUR exchange rate during the 2000s, would you consider a range of $1.15 to 1.17/EUR to be an appropriate equilibrium rate? How would you define such an equilibrium FX rate?