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Consider a situation where a manufacturer from country A and a distributor based in country B are considering a relationship. To serve this market, the firm from A must invest in new equipment, which can be used only for the B market. The two firms transact infrequently, and there is significant uncertainty about the nature of the market demand. Trust between the two firms is low, and country B's legal system to be unsympathetic to foreign firms. How should the manufacturer choose to organize its transactions

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adefioyelaoye

Spot market is the most suitable in organizing its transactions.

What is Spot market?

This is defined as a public financial market in which financial instruments or commodities are traded for immediate delivery.

Deliveries aren't usually done later due to different factors such as uncertainties between the companies involved. This depicts the low trust talked about in this scenario hence why Spot market was chosen as the most appropriate choice.

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