Essay week 1 solutions

Submitted By bacon57
Words: 625
Pages: 3

Case Study
1. The advantages Blades, Inc. could profit from importing from Thailand include lowering Blades’ cost of goods sold. If the inputs are cheaper when importing from Thailand, this would increase Blades’ net income. Since numerous competitors of Blades are already importing components from Thailand, importing would increase Blades’ competitiveness in the U.S., especially since its prices are among the highest in the roller blade industry. Since Blades, Inc. is considering longer range plans in Thailand, importing from and exporting to Thailand may present it with an opportunity to establish relationships with some Thai suppliers. As far as exporting is concerned, Blades, Inc. could be one of the first firms to sell roller blades in Thailand. Considering that Blades is contemplating to eventually shift its sales to Thailand, this could be a major competitive advantage.
2. There are several potential disadvantages Blades, Inc. should consider. First of all, Blades would be exposed to currency fluctuations in the Thai baht. For example, the dollar cost of imported inputs may become more expensive over time if the baht appreciates even if Thai suppliers do not adjust their prices. However, Blades’ sales in Thailand would also increase in dollar terms if the baht appreciates, even if Blades does not increase its prices. Blades, Inc. would also be exposed to the economic conditions in Thailand. For example, if there is a recession, Blades would suffer from decreased sales to Thailand.
In the long run, Blades should be aware of any regulatory and environmental constraints the Thai government may impose on it (such as pollution controls). Furthermore, the company should be aware of the political risk involved in operating in Thailand. For example, the likelihood of expropriation by the Thai government should be assessed. Another important issue involved in Blades’ long-run plans is how the foreign subsidiary would be monitored. Geographical distance may make monitoring very difficult. This is an especially important point since Thai managers may conform to goals other than the maximization of shareholder wealth.
3. There are at least three theories of international business: the theory of comparative advantage, the imperfect markets theory, and the product cycle theory. In the short run, Blades would like to import from Thailand because inputs such as rubber and plastic are cheaper in Thailand. It would also like to export to Thailand to take advantage of the fact that few roller