Advantages And Disadvantages Of Blades

780 Words 4 Pages
Blades Case Chapter 1

1. What are the advantages Blades could gain from importing from and/ or exporting to a foreign country such as Thailand?

By importing raw material like rubber and/ or plastic from Thailand at a cheaper price, will reduce Blades’ cost of production and thus increasing Blades’ profits. Given that many of Blades’ competitors have been importing production components from Thailand, if Blades also import from Thailand, it would increase its competitiveness in the U.S. This is especially important as the price it charges is among the top 5 percent in U.S.

Since Blades is thinking about venturing into the Thailand’s market, importing and exporting to Thailand is a good opportunity to build relationships with the suppliers
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This gives Blades a competitive advantage in the future by having some form of brand awareness in Thailand before they establish a subsidiary in Thailand.

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

In the short run, Blades may face exchange rate risk. They are exposed to fluctuations of the Thai Baht. For example, when Thai Baht appreciate, the cost of imported raw material become more expensive as Blades would need more U.S. dollar to buy the same amount of raw material. However, a stronger Baht would also mean that Blades would experience higher sales in terms of dollar value.

In the short run, Blades may also be exposed to the economic conditions in Thailand. If there is a recession in Thailand, Blades’ sales in Thailand will deteriorate.

In the long run, Blades may face political risk. The Thai government may increase taxes or impose barriers on Blades’ subsidiary in the future. Thai consumers may also boycott
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firms conducting business is beneficial to Blades. If both groups of firms get their raw material from Thailand, the high level of anticipated inflation in Thailand will have a great impact on them. They may be forced to increase price to maintain the same profit margin. On the other hand, only a small percentage of Blades’ cost of good sold is attributed to the raw material imported from Thailand. Thus Blades’ cost of production would not be greatly impacted by the higher level of inflation in Thailand. Blades would not need to increase prices as much as the firms in Thailand and U.S. firms conducting business in Thailand. As such Blades can enjoy price

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