International Trade and Blades Net Income

Topics: International trade, Economics, Export Pages: 2 (611 words) Published: January 28, 2011
What are the advantages Blades could gain from importing from and or exporting to a foreign country such as Thailand? In recent years Thailand experience economy downturn and due to weak economic conditions Blades can gain the followings: •Low prices. Lowering Blades’ cost of goods sold. If the inputs (rubber and plastic) are cheaper when imported from a foreign country such as Thailand, this would increase Blades’ net income. •Import raw material and supplies will be cheap as compare to USA. • Cost reduction in material can achieve economies of scale. •As far as exporting is concerned, Blades, Inc. could be one of the first firms to sell roller blades in Thailand. Since Blades is considering longer range plans in Thailand, importing from and exporting to Thailand may present it with an opportunity to establish initial relationships with some Thai suppliers. •Can increase competitiveness. Competitors are also importing and exporting from Thailand •To survive in its own country it is very necessary to import from Thailand. While on the other hand it can export the ready goods to Thailand as their economy is very weak and there are lot of opportunities for organization like Blades. What are some disadvantages Blades could face as a result of foreign trade in the short run? In the long run?

There are several potential disadvantages Blades, Inc. should consider:
Θ First of all, Blades would be exposed to exchange rate risk. The appreciation of Thai currency may hamper their business.

Θ Blades, Inc. would also be exposed to the economic conditions in Thailand. For example, if there is a recession, Blades would suffer from decreased sales to Thailand.

Θ In the long run, Blades should be aware of any regulatory and environmental constraints the Thai government may impose on it (such as pollution controls).

Θ In addition, the company should be aware of the political risk involved in operating in Thailand.

Θ This corporation should be...
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