Presentation

On
Solving Case Studies
 PRESENTED BY
Group: Vikings
(Major: F&B, MBA Program)
Department Of Business Administration,
Leading University, Sylhet.
 Presented For
Dr. Mohammad Shahansha Molla
Associate Professor & Head
Department Of Business Administration,
Leading University, Sylhet.
 Group Members
ID Number Name of The Students
2011017012 Jakia Akther Mitu
2011017013 Bably Akther Chowdhury Moury
2011017027 Bibekananda Raut
2011017029 Himel Mondol
2011017036 Fahmida Rahman Taiba
2011017037 Aklima Yeasmin

Department of Business Administration, Leading

University, Sylhet.
BLADES, INC. CASE
 Part 1: Decision to Expand Internationally

1. What are the advantages Blades could gain from importing from and/or
exporting to a foreign country such as Thailand?
• Low cost of goods sold
• Increase competitiveness
• An opportunity to establish initial relationships with some Thai suppliers
• Gaining competitive advantage.
 Part 1: Decision to Expand Internationally
Cont…

2. What are some of the disadvantages Blades could face as a result of foreign trade in
the short run? In the long run?

• exposure to currency fluctuations

• exposed to the economic conditions

• regulatory and environmental constraints imposed by the Thai government

• Exposure to political risk

• Difficultness in monitoring foreign subsidiaries

 Part 1: Decision to Expand Internationally
Cont…

3. Which theories of international business described in this chapter apply to

Blades, Inc. in the short run? In the long run?
• In the short run:
• The imperfect markets theory
• In the long run:
• Theory of comparative advantage
• The product cycle theory
 Part 1: Decision to Expand Internationally
Cont…

4. What long-range plans other than establishing a subsidiary in Thailand are

possible for Blades? Would these other options be more suitable for the
company?

• joint venture with Thai firms

• Licensing

• Franchising
 Part 2: Exposure to International Flow of
Funds

1. How could a higher level of inflation in Thailand affect Blades (assume U.S.
inflation remains constant)?

• High level of inflation in Thailand relative to the United States could affect
Blades favourably

• High inflation in the Thailand could cause a shift in the demand for U.S.
products instead of Thai products which will boost Blades sales.
 Part 2: Exposure to International Flow of
Funds Cont…

2. How could competition from firms in Thailand and from U.S. firms conducting business in
Thailand affect Blades?

• Blades would be favourably affected comparative to Thai roller blade manufacturers and
other U.S. roller blade manufacturers with operations in Thailand.

• Both groups of firms will likely be forced to raise their prices if they want to maintain the
profit margin.

• Blades with a small cost of goods sold, Blades will probably not have to raise its prices to
the same extent as its competitors.

• Blades follows a policy of invoicing in Thai baht, which its competitors does not.
 Part 2: Exposure to International Flow of
Funds Cont…

3. How could a decreasing level of national income in Thailand affect Blades?

• Low national income in Thailand could decrease the amount of spending by Thai
consumers, and would therefore cause a decrease in the demand for Speedos roller
blades produced by Blades.

• Blades manufactures a leisure product, which is probably one of the first products Thai
consumers will stop buying.

• However, the arrangement Blades has with its primary Thai importer mitigates this
effect somewhat, But still, the importer may not offer to renew this arrangement in
excess of the original three years if the Thai economy does not improve.
 Part 2: Exposure to International Flow of
Funds Cont…

4. How could a continued depreciation of the Thai baht affect Blades? How would it
affect Blades relative to U.S. exporters invoicing their roller blades in U.S. dollars?

• Currency depreciation is a fall in the value of a currency in a floating exchange

rate system.

• A continued depreciation of the baht means that the baht- denominated revenue
in Thailand will convert to fewer U.S dollars.

• But the demand for Blades' products may increase relative to that of its U.S.
competitors exporting to Thailand.
 Part 2: Exposure to International Flow of
Funds Cont…

5. If Blades increases its business in Thailand and experiences serious financial

problems, are there any international agencies that the company could approach
for loans or other financial assistance?

• A variety of agencies have been established to facilitate international trade and

financial transactions. These agencies often represent a group of nations

• International Monetary Fund (IMF)

• International Finance Corporation (IFC)

• International Development Association (IDA)

CASE: SMALL BUSINESS DILEMMA
 Part 1: Developing a multinational sporting goods corporation

1. Is Sports Exports Company a multinational corporation?

• Sports Exports Company is a multinational corporation because it sells

products to foreign countries.

2. Why are the agency costs lower for Sports Exports Company than for most
MNCs?

• Agency costs are lower because the owner and manager are the same. The
owner does not have managers who are based in other countries.
 Part 1: Developing a multinational sporting goods corporation
Cont…

3. Does Sports Exports Company have any comparative advantage over potential
competitors in foreign countries that could produce and sell footballs there?

• If football becomes a popular idea in foreign countries, the Sports Exports Company
will be the first firm to benefit from the popularity.

• While other firms may then attempt to copy the idea, the Sports Exports Company will
have established itself as the most well-known company for selling footballs in foreign
markets by then.

• Sports Exports Company has a comparative advantage of selling the footballs at a low
price than its U.S. based competitors.
 Part 1: Developing a multinational sporting goods corporation
Cont…

4. How would Jim Logan decide which foreign markets he would attempt to enter? Should he
initially focus on one or many foreign markets?

• Jim would need to consider various factors, such as the potential demand for footballs in
each country and the potential degree of competition in that country.

• He may also consider the volatility of the foreign currency in each country relative to the
dollar.

• Jim initially may focus on one specific country when establishing his international business.

• It is possible that he could find a distributor of sporting goods that would sell the footballs to
retail stores in various countries.
 Part 1: Developing a multinational sporting goods corporation
Cont…

5. The Sports Exports Company has no immediate plans to conduct direct foreign
investment. However, it might consider other less costly methods of establishing its business
in foreign markets. What methods might the Sports Exports Company use to increase its
presence in foreign markets by working with one or more foreign companies?

• The Sports Exports Company may consider a licensing agreement whereby it has a
foreign firm produce its footballs and sell them; this would avoid the cost of exporting,
but would result in expenses charged by the foreign company.

• An alternative method would be a joint venture in which the Sports Exports Company
produces and exports the footballs exclusively to a specific foreign firm that focuses on
distributing sporting goods to retail stores in various countries.
 Part 2: Identifying Factors That Will Affect the Foreign Demand
at the Sports Exports Company

1. Identify the factors that affect the current account balance between the United
States and the United Kingdom. Explain how each factor may possibly affect the
British demand for the footballs that are produced by the Sports Exports Company.

• Inflation Rate

• National income

• Government restrictions

• The exchange rate