Why would a firm cross-subsidized business B with profits from business A

Honda has been the world's largest motorcycle manufacturer since 1959. After succeeding in the automobile industry in Eastern Asia since 1949, Honda started to expand its business by registering as a corporation in different parts of the world resulting in huge growth in the vehicle segment. However, itstruggled to establish their corporation in many countries as they were unable to comply with the rules and regulation of the country. Honda thereafter took up separate methods of operation to expand worldwide. One of the key marketeyed by Honda in Asia was India but India proved to be a difficult destination for Honda to enter and hence, the company opted to proceed with a joint venture plan.Initially, the company tried to reach an agreement with Bajaj Auto Ltd thereafter concluding a deal with the Hero Group. Honda's entry plan for India's two wheeler market was divided into two segments. Firstly, the joint venture with the Ludhiana based Munial family's Hero group for motor cycles,…

Until 2007, CrossRock was seen by insiders, customers and many in the wider financial community as a successful financial services company offering mortgage products to the United Kingdom market and providing a portfolio of savings products. Initially, like other traditional building societies, CrossRock relied on its saving products to fund much of its lending but over time, it started to source more and more of its funding through wholesale borrowing on capital markets, bonds and securitized loans. These new sources of funding provided a platform for expansion and the development of a new profitable business model that involved lending higher risk mortgages product (loans of more than 100% of the property value) and making these loans available to a wider customer base, including some customers who, by industry standards, would not have been judged as able to afford the repayments. While property value continued to increase, this business model was very successful and CrossRock…

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