Blades Case Study

590 Words3 Pages
Patrick Reeds 11/2/2011 Chapter 13 Blades 1) There are all sorts of benefits to be gained for engaging in direct foreign investment. In this case the most prominent in my opinion is the potential market growth. Attracting new sources of demand is vital and I believe the possibility of doing that is greater in Thailand as compared to the United States and definitely greater than in England. The next greatest benefit Blades would incur for engaging in DFI would be the decrease in costs. I believe producing the goods in Thailand would lead to benefits from a larger economy of scale, foreign factors of production, foreign raw materials, and foreign exchange rates. These could all be achieved through the mentioned decrease in labor costs, the increased market, the increase in the quality of rubber and also the decreased reliance on U.S. products. 2) To answer the first part of this question the second part has to be answered first. That being the pros in cons of waiting a year to engage in either buying an existing plant or establishing a subsidiary in Thailand. The benefits of either buying or building now compared to a year include the increase in revenue throughout the period as opposed to nothing. Secondly they include the benefit of a renewed contract if they establish operations in Thailand. On top of that if the Thai baht appreciates it will be in the companies favor. The negatives include a decrease in consumer spending because the economy of Thailand shadows the U.S. economy in which there was a downturn not yet experienced in Thailand. The Thai baht could depreciate decreasing property value. All things considered I believe that operating in Thailand sooner than later is better because benefits and negatives equally weigh each other out in my opinion with the exception of the value of the renewed contract vrs the quality of information concerning

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