Blades, Inc. Case Essay

Published: 2020-04-22 15:06:56
511 words
2 pages
printer Print
essay essay

Category: Currency

Type of paper: Essay

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Hey! We can write a custom essay for you.

All possible types of assignments. Written by academics

Ben Holt, chief financial officer (CFO) of Blades, Inc., has decided to counteract the decreasing demand for Speedos roller blades by exporting this product to Thailand. Furthermore, due to the low cost of rubber and plastic in Southeast Asia, Holt has decided to import some of the components needed to manufacture Speedos from Thailand. Holt feels that importing rubber and plastic components from Thailand will provide Blades with a cost advantage ( the components im-ported from Thailand are about 20 percent cheaper than similar components in the United States). Currently, approximately $ 20 million, or 10 percent, of Blades sales are contributed by its sales in Thailand. Only about 4 percent of Blades cost of goods sold is attributable to rubber and plastic imported from Thailand. Blades faces little competition in Thailand from other U. S. roller blades manufacturers. Those competitors that export roller blades to Thailand invoice their exports in U. S. dollars.

Currently, Blades follows a policy of invoicing in Thai baht ( Thailands currency). Ben Holt felt that this strategy would give Blades a competitive advantage since Thai importers can plan more easily when they do not have to worry about paying differing amounts due to currency fluctuations. Furthermore, Blades primary customer in Thailand ( a retail store) has committed itself to purchasing a certain amount of Speedos annually if Blades will invoice in baht for a period of 3 years. Blades purchases of components from Thai exporters are currently invoiced in Thai baht. Ben Holt is rather content with current arrangements and believes the lack of competitors in Thailand, the quality of Blades products, and its approach to pricing will ensure Blades position in the Thai roller blade market in the future.

Holt also feels that Thai in the Thai roller blade market in the future. Holt also feels that Thai importers will prefer Blades over its competitors because Blades invoices in Thai baht. You, Blades financial analyst, have doubts as to Blades guaranteed future success. Although you believe Blades strategy for its Thai sales and imports are sound, you are concerned about current expectations for the Thai economy. Current forecasts indicate a high level of anticipated inflation, a decreasing level of national income, and a continued depreciation of the Thai baht.

In your opinion, all of these future developments could affect Blades financially given the companys current arrangements with its suppliers and with the Thai importers. Both Thai consumers and firms might adjust their spending habits should certain developments occur. In the past, you have had difficulty convincing Ben Holt that problems could arise in Thailand. Consequently, you have developed a list of questions for yourself, which you plan to present to the companys CFO after you have answered them. Your questions are listed here:

1. How could a higher level of inflation in Thailand than that of US affect Blades import and export respectively in the following two scenarios?
a. In the short term, US$ versus THB hold at fixed exchange rate due to a pegged exchange rate policy.
b. In the long run, the Thailand trade deficit causes the pegged exchange

Warning! This essay is not original. Get 100% unique essay within 45 seconds!


We can write your paper just for 11.99$

i want to copy...

This essay has been submitted by a student and contain not unique content

People also read