Question

Maximus Motor Company is a British automobile manufacturer that builds high-end luxury cars for sale around the world. Maximus managers recognize they are missing opportunities in emerging markets, such as India, which have an increasing number of middle-class people ready to purchase affordable cars. Competitors have entered the Indian market and have experienced significant profits over the last two years. Maximus managers have been assigned the task of determining the best strategy for Maximus to do business in India.

1) Which of the following will be most beneficial to Maximus if it builds a manufacturing facility in India?

A) legal precedents

B) low-cost labor pool

C) government regulations

D) solid infrastructure

2. Which of the following would Maximus managers most likely cite as a reason to market Maximus cars to the Indian government?

Group of answer choices

A) The Indian government needs large numbers of automobiles.

B) Indian government employees can afford automobiles.

C) India's private sector influences government acquisitions.

D) The Indian government has a surplus of used automobiles.

3. Which of the following suggests Maximus should raise funds through equity stocks locally in India

Group of answer choices

A) Investors will be advocates for Maximum’s product

B) Important investors will bring beneficial networks to do business in India

C) Local investment will help receive favorable policies from the government

D) All of the above

4. Which of the following supports Maximus to borrow funds from local lenders in India

Group of answer choices

A) Interest rate is higher in India

B) Indian banks have more strict restrictions regarding loan applications

C) Borrowing locally can mitigate foreign exchange risks

D) India’s financial system is very immature

Answer 1

1.Option B low cost labor pool.

Low-cost country sourcing is procurement strategy in which a company sources materials from countries with lower labour and production costs in order to cut operating expenses. India has huge availability of low cost labor.

2.Option A

Indian government requires large numbers of automobiles.

India is a highly populated country and the expenditure of government is huge.The government requires large number of automobiles and this increased demand will help in increasing sales and profits of Maximus.

3.Option D all of the above

Investors will support Maximus products as they have invested their money in the company. Such an investment provides employment to local people, stimulate economy, thus attract many government benefits like tax exemptions.Local networks of investors will help to boost the business of Maximus.

Apart from being a critical driver of economic growth, foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc.

4.Option C

A company can avoid forex exposure by only operating in its domestic market and transacting in local currency. Otherwise, it must attempt to match foreign currency receipts with outflows (a natural hedge), build protection into commercial contracts, or take out a financial instrument such as a forward contract.

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