ABA Group Cars, owner of the Lao and Pack brands, has been based in Barcelona since its founding in 1916. But by 2019, only 17 per cent of the cars it sold were bought in Spain. In recent years, China has become ABAs fastest-growing market, accounting for 14 per cent of ABAs global sales volume in 2019. India, Russia and eastern Europe have also become key markets. Despite rising sales revenues, ABA was conscious that its profits were often severely eroded by changes in exchange rates. The companys own calculations in its annual reports suggest that the negative effect of exchange rates totalled 1.1bn between 2005 and 2019.

ABA did not want to pass on its exchange rate costs to consumers through price increases. Its rival KARS had done this at the end of the 2018s in the US and sales had plunged.

1- What approaches could ABA take to manage its exposure to foreign exchange? Explain the implications of each approach for the Company. (33 points)

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