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8/11/2019 Case Presentation Blade
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ACase Presentation
on
Presented by:-
Kinjal Trivedi
Arati Patel
Presented to:-
Prof. Sushil Mohnthy
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Introduction about case
Blades, Inc., is a USA based company that has been incorporate in the United States for three years. Bladerelatively is a small Company, with total assets of only$200 million. The company produces only a single type
of roller blade. Ben Holt the CFO of the Blades Inc.
Bladesshareholders have been pressuring the companyto improve its performance since Blades has not beenperforming well recently. Ben Holt, the companyschief financial officer (CFO), is contemplating hisalternatives for Bladesfuture. There are no other cross-cutting measures that Blades can implement in theUnited States without affecting the quality of its product.
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Financial Information
Total assets of was only $200 million andfirst year net income of $3.5 million.Return on asset is 7%. It stock price hasfallen from high of $20 per share threeyears ago to $12 last year.
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Q.1 What are the advantages Blades could
gain from importing from and/or
exporting to a foreign country such asThailand?
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Solution 1
In recent years Thailand experience economydownturn and due to weak economic conditionsBlades can gain the followings:
Low prices. Lowering Bladescost of goods sold. If theinputs (rubber and plastic) are cheaper when importedfrom a foreign country such as Thailand, this wouldincrease Bladesnet income.
Import raw material and supplies will be cheap ascompare to USA.
Cost reduction in material can achieve economies ofscale.
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As far as exporting is concerned, Blades, Inc. couldbe one of the first firms to sell roller blades inThailand. Since Blades is considering longer rangeplans in Thailand, importing from and exportingto Thailand may present it with an opportunity toestablish initial relationships with some Thaisuppliers.
Can increase competitiveness. Competitors arealso importing and exporting from Thailand
To survive in its own country
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Q. 2 What are some of the
disadvantages Blades could face as aresult of foreign trade in the short
run? In the long run?
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Solution 2
The disadvantages Blades could face as a result of
foreign trade in the
short run are: Exchange rate risk. Blades would be
exposed to currency fluctuation in the Thai baht if
importation cost increase without Thai suppliers
adjusting their price. International economic
condition; if Thailandseconomy undergoes recession,
Blades would suffer from sales decrease in Thailand.
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In the long run, Blades should be aware of thepolitical risk involved in operating in Thailand,
such as any regulatory changes or tax increasemay impact on Blades subsidiary.
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Q. 3 Which theories of international
business described in this chapter
apply to Blades, Inc., in the shortrun? In the long run?
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Solution 3 In this chapter multinational financial management three
theories are given, Theory of comparative advantage Imperfect market theory Product cycle theory
Imperfect Market
A market where costs are too high, encouraging producers either tostop producing or to find ways to lower costs. For example, if laborcosts are too high in an imperfect market, producers have anincentive to lower salaries, lay off employees, or cease operationsaltogether.
In short run apply theory of imperfect market theory becausein U.S the input available at high cost as compared toThailand. So, purchase input from Thailand, few seller of
roller blades. So, its completely apply theory of imperfect market.
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Comparative Advantage
The ability of a firm or individual to produce goods and/or servicesat a lower opportunity cost than other firms or individuals. A
comparative advantage gives a company the ability to sell goodsand services at a lower price than its competitors and realizestronger sales margins.
In long run apply two theories which are the comparativeadvantage and product cycle theory because the input available atcheaper cost and the roller blades business in early stage in theThailand. so the chance to expand the business in Thailand thereforethe comparative advantage is best for long run.
Product Cycle Theory
Theory suggesting that a firm initially establish itself locally and
expand into foreign markets in response to foreign demand for itsproduct; over time, the MNC will grow in foreign markets; aftersome point, its foreign business may decline unless it candifferentiate its product from competitors.
In product cycle theory the Blades incorporated in U.S salesdeclining in the country. So, that time product cycle theory is apply
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Q. 4 What long-range plans other
than establishment of a subsidiary in
Thailand are an option for Bladesand may be more suitable for the
company?
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Solution 4
Blades can benefit from a joint venture becauseof the benefits of the partner's politicalconnections and distribution channel access.Blades can extend their marketing reach and
access needed information and resources. Also,it would be easier for Blades to build credibilitywith the Thai target market and even access newmarkets such as the southern Asian markets thatwould be inaccessible without the partner.
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Ben Holt the Chief Financial Officers Analyzeinternational opportunities and Risk Resulting
From international Business.
To Known about the cultural environment andmoral values of Thailand citizens then after the
Established a market is good for both Thailandand U.S
If sells Roller Blades In Thailand Probably notProper Sells in Thailand so, that it is main Riskfor Company.
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on lusion
Based on the discussion above, Ben Holt is very unfamiliar with
international business, and Blades has never operated outside the United
States, hence, establishment of a subsidiary in Thailand is probably not the
best way for Blades, Inc. to gain a foothold in Thailand in the long run.
However, the company can import products from Thailand for their
business operation since Thailands product are cheaper and more
affordable compared to the products of United States. Moreover, Blades
Company should initially consider a joint venture with Thai firms that
manufacture roller blades. With this, the company will be familiarized with
Thais firms, customs and ethics. Thus, the Company is able to analyze
more of their production process in the longer run (during and after the
joint venture).
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