Question

explain why many companies start up their operations in an emerging market even if they are certain that NPV of the operations is negative. Limit your answer to 50 words.

Answer 1

Followings are the reasons for start up operations in emerging market-

• It offers investment opportunity for future growth and potential returns. Effective strategy for role of market products is crucial to determine risk tolerance.
• Emerging market allows diversification of portfolio even though NPV of cash flow is negative. It is because of economic downturn.
• There is increase of demand for consumer goods particularly luxury goods. Hence organisation will get benefited from this.
• This market also facilitate buffer stocks. So that during the emergency period consumers demand can be fulfilled easily.

Hence these are the major advantages of emerging market.

All the best for your exam!