Suppose you live in the United States and want to invest $100,000 to set up a language
Question:
Suppose you live in the United States and want to invest $100,000 to set up a language school in South Africa. You can set up a small subsidiary in South Africa by renting an office and rooms as classrooms. You will hire local people in South Africa who can speak English and teach it to others. Your school offers two types of courses: a one-month training course for beginners and a one-week intensive course for individuals who want to improve their level and skills before visiting the United States. You can advertise both types of tutoring services in the local newspaper. All income and expenses associated with your business are in South African Rand. Your affiliate sends most of the earnings from the South African organization at the end of each month. Although your expenses are more or less stable, your revenue may vary with the number of clients who sign up for the courses.
• Explain how the theory of competitive advantage would justify your investment in South Africa.
• Suppose your business is in South Africa. It grows and thrives, explain how the global financial markets can help you in financing the growth of your business and what criteria you can use to make the right financing decisions.
• Explain the type of economic or other conditions in South Africa that may lead to a weakening of the South African rand, which will negatively affect your business.
• Under these circumstances, what are your recommendations on appropriate financial instruments that your management can apply to mitigate the negative impact of the change in the value of the South African Rand? add to that Explain how your organization's business activities relate to the balance of payments between the United States and South Africa