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(Solution) - Consideration of Direct Foreign Investment

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1. Identify and discuss some of the benefits that Blades, Inc., could obtain from DFI.
2. Do you think Blades should wait until next year to undertake DFI in Thailand? What is the tradeoff if Blades undertakes the DFI now?
3. Do you think Blades should renew its agreement with the Thai retailer for another 3 years? What is the tradeoff if Blades renews the agreement?
4. Assume a high level of unemployment in Thailand and a unique production process employed by Blades, Inc. How do you think the Thai government would view the establishment of a subsidiary in Thailand by firms such as Blades? Do you think the Thai government would be more or less supportive if firms such as Blades acquired existing businesses in Thailand? Why?

 



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For the last year, Blades, Inc., has been exporting to Thailand in order to supplement its declining U.S. sales. Under the existing arrangement, Blades sells 180,000 pairs of roller blades annually to Entertainment Products, a Thai retailer, for a fixed price denominated in Thai baht. The agreement will last for another 2 years. Furthermore, to diversify internationally and to take advantage of an attractive offer by Jogs, Ltd., a British retailer, Blades has recently begun exporting to the United Kingdom. Under the resulting agreement, Jogs will purchase 200,000 pairs of ?Speedos,? Blades? primary product, annually at a fixed price of £80 per pair.

 

 







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