Download - Blades 2003
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Agenda
Introduction to Blades
Difficulties to deal with
Alternativeproducts
Costdown in US
Foreign trade
Whats next step?
Expandinternationally
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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
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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
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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
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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)
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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
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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 .
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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.
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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.
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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.
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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
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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
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ThailandU.S
labor materialmoney tech
Compatative advantage
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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
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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?
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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.
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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
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JIMS DREAM0 Jim Logan has gotten his undergraduate degree.
0 He decided to pursue his dream.
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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 -
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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.
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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.
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Questions &
Group Discussion
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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.
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2. Why are the agency costs lower for Sports
Exports Company than for most MNCS ?
0 Boss, Manager, Worker are one person, Jim Logan.
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3. How would Jim Logan decide which
country to enterComparative Advantage Product Cycle Theory
Production Factors
Labor
Materials
Technology
High expected growingdemand
Reliable marketresearch
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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
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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
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What method to increase its
presence in foreign country ?
International
tradeLicensing
Without DFI