BLADES INC., is a U$.$S$.$ based company that has been incorporated in the United States for $3$ years. Blades is a relatively small company, with total assets of only $$200$ million. The company produces a single type of product, roller blades. Due to the booming roller blades market in the United States at the time of the company$$s establishment, Blades has been quite successful. For example, in its first year of operation, it reported a net income of $$3\mathrm{.}5$ million. Recently, however, the demand for Blades$$speedos$,$ the company$$s primary product in the United States, has been slowly tapering off, and Blades has not been performing well. Last year, it reported a return on assets of only $7$ percent. In response to the company$$s annual report for its most recent year of operations, Blades$$ shareholders have been pressuring the company to improve its performance; its stock price has fallen from a high of $$20$ per share three years ago to $$12$ last year. Blades produces high$-$quality roller blades and employs a unique production process, but the price it charges are among the top $5$ percent in the industry

In light of these circumstances, Ben Holt, the company$$s Chief Financial Officer $($CFO$)$ is contemplating alternative courses to take Blades$$ future. Blades cannot implement any additional cost$-$cutting measures in the United States without affecting the quality of its product. Also production of alternative products would require major modifications to the existing plant setup. Furthermore, and because of these limitations$,$ expansion within the United States at this time seems pointless.

Holt is considering the following: If Blades cannot penetrate the U$.$S$.$ market further or reduce costs here, why not import some parts from overseas and$/$or expand the company$$s sales to foreign countries? Similar strategies have proved successful for numerous companies that expanded into Asia in recent years, allowing them to increase their profit margins. The CFO$$s initial focus is on Thailand. Thailand has recently experienced weak economic conditions, and Blades could purchase components at low cost. Holt is aware that many of Blades$$ competitors have begun importing production components from Thailand.

Not only would Blades be able to reduce costs by importing rubber and$/$or plastic from Thailand due to the low cost of these imports, but it might also be able to augment its weak U$.$S$.$ sales by exporting its finished products to Thailand, an economy still in its infancy and just beginning to appreciate leisure products such as roller blades. Although several of Blades$$ competitors import components from Thailand, few are exporting to the country. Long$-$term decisions would also have to be made: Perhaps Blades could establish a subsidiary in Thailand and gradually shift its focus away from the United States if its U$.$S$.$ sales do not rebound. Establishing a subsidiary in Thailand would also make sense to Blades due to its superior production process. Holt is reasonably sure that Thai firms could duplicate the high$-$quality production process employed by Blades. Furthermore, if the company$$s initial approach of exporting works well, establishing a subsidiary in Thailand would preserve Blades$$ sales before Thai competitors are able penetrate the Thai market.

As a financial analyst for Blades, Inc., you are assigned to analyse international opportunities and risk resulting from international business. You initial assessment should focus on the barriers and opportunities that international trade may offer. Hold has never been involved in international business in any form and is unfamiliar with any constraints that may negatively affect his plan to export to and import from a foreign country.

Holt has presented you with a list of initial questions that you should answer.

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

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

Which theories of international business described in your class notes would apply to Blades in the short$-$run? In the long$-$run?

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?