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Case Study Marks 10 Decision to Expand Internationally Made In US based company that has been posted in the United States for 3 yeart Blades y mall company, with totales of only mit The company produces a single type of product rollerblade thee to the booming roller blade market in the United States at the time of the com establishment. Nodes has been quite successful emple, in its first year of operation, it reported a come of 35 million Recently, however, the demand for Blades "Speedos, the company's primary product in the United States, has been slowly tapering off and lades has not been performing well. Last year, reported 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 perfor mance its stock price has fallen from high of $20 pe share 3 years ago to $12 last year. Blades produces high-quality roller blades and employs a unique pro- duction process, but the prices it charges are among the top 5 percent in the industry. In light of these circumstances, Ben Holt, the com- pany's chief financial officer (CFO). is contemplating has alternatives for Blades' future. There are no other cost-cutting measures that Blades can implement 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. Further more, 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? Simi- lar strategies have proved successful for numerous companies that expanded into Asia in recent years to increase their profit margins. The com on Thailand Thailand has recently experienced economic conditions, and Blades could puchom ponents there at a low cou. Holt it 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 costs of these inputs, but it might also be able to augment weak US sales by exporting to Thailand. an economy still in its infancy and just beginning to appreciate leisure products such as roller blades While several of Blades' competitors import compo nents from Thailand, few are exporting to the country Long-term decisions would also eventually have to be made, maybe Blades, Inc., could establish a subsidiary in Thailand and gradually shift its focus away from the United States if its U.S. sales do not rebound. Establish ing a subsidiary in Thailand would also make sense for Blades due to its superior production process. Holt is reasonably sure that Thai firms could not 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 to penetrate the Thai market. As a financial analyst for Blades, Inc., you are assigned to analyze international opportunities and risk resulting from international business. Your initial assessment should focus on the barriers and opportu- nities that international trade may offer. Holt has never been involved in international business in any form and is unfamiliar with any constraints that may inhibit his plan to export to and import from a foreign coun try. Holt has presented you with a list of initial ques tions you should answer Answer following questions after going through the above case: i). Whey Mr. Holt is adamant to expand in the US market? What alternatives CFO of the Company is considering to go for to turn around the Company and how they may be beneficial for the company? ii). State the relevant theory (ies) which has motivated the CFO to expand Case Study Marks 10 Decision to Expand Internationally Made In US based company that has been posted in the United States for 3 yeart Blades y mall company, with totales of only mit The company produces a single type of product rollerblade thee to the booming roller blade market in the United States at the time of the com establishment. Nodes has been quite successful emple, in its first year of operation, it reported a come of 35 million Recently, however, the demand for Blades "Speedos, the company's primary product in the United States, has been slowly tapering off and lades has not been performing well. Last year, reported 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 perfor mance its stock price has fallen from high of $20 pe share 3 years ago to $12 last year. Blades produces high-quality roller blades and employs a unique pro- duction process, but the prices it charges are among the top 5 percent in the industry. In light of these circumstances, Ben Holt, the com- pany's chief financial officer (CFO). is contemplating has alternatives for Blades' future. There are no other cost-cutting measures that Blades can implement 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. Further more, 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? Simi- lar strategies have proved successful for numerous companies that expanded into Asia in recent years to increase their profit margins. The com on Thailand Thailand has recently experienced economic conditions, and Blades could puchom ponents there at a low cou. Holt it 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 costs of these inputs, but it might also be able to augment weak US sales by exporting to Thailand. an economy still in its infancy and just beginning to appreciate leisure products such as roller blades While several of Blades' competitors import compo nents from Thailand, few are exporting to the country Long-term decisions would also eventually have to be made, maybe Blades, Inc., could establish a subsidiary in Thailand and gradually shift its focus away from the United States if its U.S. sales do not rebound. Establish ing a subsidiary in Thailand would also make sense for Blades due to its superior production process. Holt is reasonably sure that Thai firms could not 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 to penetrate the Thai market. As a financial analyst for Blades, Inc., you are assigned to analyze international opportunities and risk resulting from international business. Your initial assessment should focus on the barriers and opportu- nities that international trade may offer. Holt has never been involved in international business in any form and is unfamiliar with any constraints that may inhibit his plan to export to and import from a foreign coun try. Holt has presented you with a list of initial ques tions you should answer Answer following questions after going through the above case: i). Whey Mr. Holt is adamant to expand in the US market? What alternatives CFO of the Company is considering to go for to turn around the Company and how they may be beneficial for the company? ii). State the relevant theory (ies) which has motivated the CFO to expand