2. Presentation on:
Multinational Financial Management: An Overview
Case Study on:
1. Blades, Inc. Case
Decision to Expand Internationally
2. Small Business Dilemma
Developing a Multinational Sporting Goods Corporation
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3. Presented by-
Mithun Kumar Gayen
ID No: PG 16-01-11-003
Program: EMBA (Friday)
School of Business Studies
State University of Bangladesh
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4. Presented for-
Prof. Dr. Md. Ali Noor
Honorable Course Teacher
International Financial Management
School of Business Studies
State University of Bangladesh
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5. Blades, Inc. Case
Decision to Expand Internationally
Advantages:
1. 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.
2. Import raw material and supplies will be cheap as compare to USA.
3. Cost reduction in material can achieve economies of scale.
4. If Blades, Inc. establish subsidiary in Thailand, though this firms’ expansion
can be possible.
5. As far as exporting is concerned, Blades, Inc. could be one of the first firms to
sell roller blades in Thailand.
6. Can increase competitiveness. Competitors are also importing and exporting
from Thailand
7. To survive in its own country.
8. Blades, Inc. can get international trade opportunities.
9. There is a chance to get marginal market share in Thailand, as because of the
US firm can be use better technology then the similar competitors in Thailand.5
6. Potential disadvantages Blades, Inc. :
First of all,
Blades would be exposed to currency fluctuations in the Thai baht.
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.
Long run disadvantages:
Blades should be aware of any regulatory and environmental constraints the
Thai government may impose on it (such as pollution controls).
Blades should be aware of the political risk(of expropriation by the Thai govt.)
involved in operating in Thailand.
Another important issue involved in Blades’ long-run plans is how the foreign
subsidiary would be monitored.
Geographical distance may make monitoring very difficult.
This is an especially important point since Thai managers may conform to
goals other than the maximization of shareholder wealth. 6
7. Theories of international business would apply to
Blades, Inc.
Short run:
Imperfect markets theory
Because Blades wants to import their inputs such as rubber and plastic from Thailand
because the cost of them are cheaper there.
Long run:
Theory of comparative advantage
The goal is to possibly establish a subsidiary in Thailand and to be one of the first roller
blade manufacturers in Thailand.
The product cycle theory
Because, sales are declining and Blades feels that it must eventually establish a
subsidiary in Thailand in order to preserve its competitive advantage over Thai
competitors.
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8. Long-range plans for Blades Inc. other than
the establishment of a subsidiary
Blades should initially consider a joint venture with Thai firms-
Why?
Blades has never operated outside the United States, establishment of a
subsidiary in Thailand is probably not the best way for Blades, Inc. to
gain a foothold in Thailand in the long run.
Advantage:
The advantage would be access to Thai distribution channels, familiarity
of the Thai firm with customs and ethics in Thailand, and an
established market. Of course, since Blades’ production process is
unique, a joint venture would provide the Thai subsidiary with
knowledge of the production purposes, which it may duplicate after the
joint venture terminates.
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9. Small Business Dilemma
Developing a Multinational Sporting Goods Corporation
Definition on MNCs:
Multinational corporations (MNCs) are defined as firms that engage in
some form of international business.
As the Sports Export Company sales it products to foreign countries & face to
global environment. So, the Sports Exports Company is a multinational
corporation.
Cause of lower agency costs for Sports Exports Company
The costs of ensuring that managers maximize shareholder wealth (referred
to as agency cost) are normally higher for MNCs than the agency cost of
Sports Export Company.
Agency costs are lower for Sports Export Company simply because the
owner and manager are the same. The owner does not have managers
who are based in other countries or even in the same country at very
early stage. 9
10. Comparative advantage over potential competitors in
foreign countries
Producing low cost football and at the same time selling those items on
a wholesale basis was become very successful in the U.S. Market.
As the Sports Exports Company are producing the item for a long time,
the company will certainly enjoy some benefits like the first mover and
at the same time will be able to build a rapport with customers.
The Sports Exports Company will be the first firm to benefit from the
popularity, a first mover and enough market shares.
Sports Exports Company has a comparative advantage over
the U.S. firms that produce the top-of-the-line footballs in
the U.S. market and it also sells the footballs at a low price.
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11. Markets initially focus by Jim Logan in foreign
Factors considered by Jim:
Potential demand for footballs in each country.
The potential degree of competition in that country.
The volatility of the foreign currency in each country relative to the
dollar.
To spread business across several different countries:
Jim initially may focus on one specific country when establishing his
international business.
It is possible that he could find a distributor of sporting goods that
would sell the footballs to retail stores in various countries.
Yet, he could focus on providing the footballs to the distributor, and
would not have to be traveling to various countries.
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12. Less costly methods of Sports Exports Company
establishing its business in foreign markets
Sports Exports Company may consider
A licensing agreement whereby it has a foreign firm produce its footballs
and sell them; this would avoid the cost of exporting, but would result in
expenses charged by the foreign company.
An alternative method would be a joint venture in which the Sports Exports
Company produces and exports the footballs exclusively to a specific foreign
firm that focuses on distributing sporting goods to retail stores in various
countries. That foreign firm would charge a mark-up beyond the price that it
is charged when purchasing the footballs.
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