8/3/2019 Blades 2003

1/31

8/3/2019 Blades 2003

2/31

Agenda

Introduction to Blades

Difficulties to deal with

Alternativeproducts

Costdown in US

Foreign trade

Whats next step?

Expandinternationally

8/3/2019 Blades 2003

3/31

INC, brief introduction

0 Its a company that has been incorporated in the U.S.

for three years

0

Primary product

roller blades0 Net income (first year)3.5million

0 Advantage of Blades

0 High quality roller blades

0 Unique production process0 High price (top 5 percent)

Blades

8/3/2019 Blades 2003

4/31

0 Blades has not been performing well

0 Blades shareholders have been pressuring the

company to improve its performance.

0 So what would you do if you are the manager of this

company?

ROE

7 %only

8/3/2019 Blades 2003

5/31

Let we take a look

0 The companys CFO wanna to figure out whats the

alternatives of Blades future.

Blades ,INC

Alternativeproduct

Cost down

Expand

internationally

8/3/2019 Blades 2003

6/31

Measures to improve

performancesalternatives Cost down

0 Alternatives productsrequire major

modification to the

existing plant setup.

0

(cant work)

0 The only way to cutcost may affect

quality of products.

0 (Cant work)

8/3/2019 Blades 2003

7/31

CFO Final decision toward Blades future

First of all, reducing cost by importing materials

from foreign country.

Second,Exporting products to foreign country so

that it can make more revenues.

disadvantageAdvantage

8/3/2019 Blades 2003

8/31

0 Cutting-cost without affecting the quality of product

0 Distracting the risk of focusing on U.S . On the other hand ,it

can help them creat another market

0 Few competitors export their products to foreign countries .

8/3/2019 Blades 2003

9/31

Barriers & Disadvantages

0 Exposure to international economics condition

0 Europes debt troublefinancial crisis in 2008. Such

kind of situations might affect the price of materials,and

that will make the cost advantage gradually vanished.

0 Exposure to policital risk

0 Politics of thailand are often stay in chaos, and that

might make the trading situatuion more complicated

than expected.

0 Exposure to exchange rate risk

0 Thats most common risk we can see when making deal

with foreign countries.

8/3/2019 Blades 2003

10/31

Question 1

0 What are the advantages blades could gain from

importing from or/and exporting to a foreign country?

0

Ans

0 Cutting cost without affecting the quality of product.

0 Expand to new market and distract the risk from focus

on U.S market.

8/3/2019 Blades 2003

11/31

Question 2

0 What are some of the disadvantages blades could face

as a result of foreign trade in the short run ?in the

long run?

0 ANS

0 It might be facing the change of exchang rate in the short

run.

0 In the long run , there might be political problem in

Thailand and we can not expect the international

economics condition as well.

8/3/2019 Blades 2003

12/31Question 3

0 Which theories of international businessdescribed in this chapter apply to Blades, Inc., in

the short run? In the long run?

ThailandU.S

labor materialmoney tech

8/3/2019 Blades 2003

13/31Question 3

0 In the short run , the production factors areimmobile.As a result, the theory of imperfect

market can be applied to this case.

ThailandU.S

labor materialmoney tech

8/3/2019 Blades 2003

14/31Question 3

ThailandU.S

labor materialmoney tech

Compatative advantage

8/3/2019 Blades 2003

15/31

12

0 As you can see, Blades is under theperiod 2.For the development of Future,Blades is thinking about progressing

developing plan.

3

differentiates products

4a

eliminate competitiveadvantages

establish subsidaries

export product to

foreign country

Accommodate

local demand

4b

8/3/2019 Blades 2003

16/31

Question 4

group discussion

What long-range plans other than establishment of

a subsidiary in Thailand are an option for Blades

and may be more suitable for the company?

8/3/2019 Blades 2003

17/31

Terms Advantage Disadvantage DFI Risks

Internation

al Trade

Relatively conservative

Low cost

Minimal risk

Relatively conservative

Lose opportunity

Low

High

Low

High

LicensingWithout major investment

Without transportation costDifficult to control quality

Franchising Without major investmentDifficult to control quality,

but better than licensing

Joint

Venture

Combine respective

advantages your tech be stolen

Acquisition

s of Existing

Operations

Full control the foreign

business

Quickly obtain market share

Large loss because of large

investment

Establishing

New

Foreign

Subsidiaries

Exactly to the firms needsLarge investment, large

risk, large loss.

8/3/2019 Blades 2003

18/31

Q1. What are the advantages Blades could gain from importing from

and/or exporting to a foreign country such as Thailand?

Purchasing components at low price

Developing market, lots of opportunity to gain market share

Q2. What are some of the disadvantages Blades could face as a result of

foreign trade in the short run? In the long run?

Short Run Exchange Rate, Political Conditions

Long Run Economic Conditions

Q3. Which theories of international business described in this chapter

apply to Blades, Inc., in the short run? In the long run?

Short run Imperfect Markets Theory, Theory of comparative advantage,

Product cycle theory

Long run Product cycle theory

Q4. What long-range plans other than establishment of a subsidiary in

Thailand are an option for Blades and may be more suitable for the

company?

Joint venture

8/3/2019 Blades 2003

19/31

JIMS DREAM0 Jim Logan has gotten his undergraduate degree.

0 He decided to pursue his dream.

8/3/2019 Blades 2003

20/31

8/3/2019 Blades 2003

21/31

Jim didnt believe he could compete with the firm in the U.S.

Many stores began to sell low cost footballs.

The firm already provided many product to sporting goods stores.

It established relationship with these stores.

Low cost Sporting good store Find another way

http://free-extras.com/images/football_player-961.htmhttp://free-extras.com/images/football-954.htm

8/3/2019 Blades 2003

22/31

JIMS IDEA

His idea

Football is not a traditional sport in

other country.

However, it becomes more popularin some places.

The cable networks would allow

more exposure to the games.

This could be a hobby and results in

a demand for footballs.

8/3/2019 Blades 2003

23/31

8/3/2019 Blades 2003

24/31

JIMs WAYS0 Jim would expand his product line.

0 The name of the company is Sports Exports

Company.

0 Jim produced footballs by himself.

0 The main expenses is the materials and findingdistributors.

8/3/2019 Blades 2003

25/31

Questions &

Group Discussion

8/3/2019 Blades 2003

26/31

1. Is Sports Export Company a

multinational corporation ?0 Definition of MNCs :

0 Engage in international business

0 Involves international investing and financing

Export football to other country

May facing currency risk

Yes, It is a MNC.

8/3/2019 Blades 2003

27/31

2. Why are the agency costs lower for Sports

Exports Company than for most MNCS ?

0 Boss, Manager, Worker are one person, Jim Logan.

8/3/2019 Blades 2003

28/31

3. How would Jim Logan decide which

country to enterComparative Advantage Product Cycle Theory

Production Factors

Labor

Materials

Technology

High expected growingdemand

Reliable marketresearch

8/3/2019 Blades 2003

29/31

One Country or Many countries

0Pros0 Lower cost

0 Inventory0 Transaction cost

0 Advertisement or promotion

cost

0 Concentration of available

resource

Cons

Less opportunity

Lost the advantageof leading brand

Cant diversifycurrency risk

(Adv. Q: what otherrisk?)

One country

8/3/2019 Blades 2003

30/31

One Country or Many countriesMany countries

Cons

Higher cost

Inventory

Transaction cost

Advertisement or

promotion cost

Diversed resources

Pros

opportunities

advantage of leading

brand

diversify risk

8/3/2019 Blades 2003

31/31

What method to increase its

presence in foreign country ?

International

tradeLicensing

Without DFI