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Blades Case

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BLADES, INC. CASE
How could a higher level of inflation in Thai affect Blades (assume U.S. inflation remains constant)?
When Thailand have higher level of inflation, it will bring bad impact towards the U.S. Blades Company, because higher level of inflation in Thailand will make the currency of Thai Bath become weaker and the price of the local products will increase. As we know that Blades import the raw material from Thailand to lower the cost of production, and when the price of local products (raw material) increase, it will increase Blade’s cost of production and hence, it will make the selling price of Blades increase.
From the export and import point of view, when the inflation in Thailand is high, the price of the local product will be higher because Thai Bath will be weaker, and thus, people will prefer more imported goods because the price of import and export goods will be more likely the same.

How could competition from firms in Thailand and from U.S. firms conducting business in Thailand affect Blades?
The local Thai companies get protection from the Thailand’s government and it creates difficulties for Blades to compete with the local Thai companies. The local Thai company might get some more privileges such as: Subsidy from the government, tax assistant and so on, and it will result to more competitive price.
In the other side, the U.S firm which conducting business in Thailand but supply their material from else where might be better of, in term of finding more efficient supplier and does not bound to some contract with the Thailand firm, and when the inflation happened, they can somehow manage to minimize the effect in their raw material price.
However, Blades which stuck in the middle, can be better off or worse off depend on the situation, to be better off, they can prevent the government regulation on trade barriers, in the other hand, Blades will be worse off when the inflation is happened in Thailand, where the price of their material is increase. That’s why it might be better for Blades to search for another supplier with lower price from another country that can produce the same raw material as Thailand, and thus, by doing so, Blades might be able to lower the price of production and can compete with the local companies in Thailand. Kayaknya ini ngak perlu deh? hahhaXD

How could a decreasing level of national income Thailand affect Blades?
National income reflects the Purchasing Power Parity (PPP) of the country, so if the national income in Thailand decrease, it means that Thai’s people’s PPP decrease and it will affect the demand of Blades in Thailand. People will tend to try to fulfill their primary needs first rather than purchasing Blades product. That is why the demand of Blades will be decreased as well.

How could a continued depreciation of the Thailand affect Blades? How would it affect Blades relative to exporters invoicing their roller Blades in U.S. dollars.
When the Thai Batch depreciate, for example, before the currency rate is 1 US$ = 30 THB, but now the currency rate is 1 US$ = 40 THB, of course Blades can gain because Blades have a stable price because Blades charge their product in Thailand in Thai Bath not in US$, while the other competitors are not opening the subsidiary in Thailand and just do the international trade (exporting to Thailand). That is why those competitors will suffer from the continued depreciation. On the other hand, despite of the gain that Blades can enjoy from the stable price, Blades will suffer from the continued depreciation also, because Blades need to pay dividend, others material, and production cost to their parents company in US$.

If Blades increases its business in Thailand are experiences serious financial problems, are there international agencies that the company could approach for loans or other financial assistance?
Yes They could
Asian Development Bank and Bank for International settlements.

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