Welcome To My

Presentation1

Presentation on:Multinational Financial Management: An

Overview

Case Study on:1. Blades, Inc. CaseDecision to Expand Internationally

2. Small Business DilemmaDeveloping a Multinational Sporting Goods Corporation

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Presented by-Mithun Kumar Gayen

ID No: PG 16-01-11-003Program: EMBA (Friday)

School of Business StudiesState University of Bangladesh

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Presented for-

Prof. Dr. Md. Ali NoorHonorable Course Teacher

International Financial ManagementSchool of Business Studies

State University of Bangladesh

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Blades, Inc. CaseDecision 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 Thailand7. 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

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

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 theoryBecause, 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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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. 8

Small Business DilemmaDeveloping 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.

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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.  10

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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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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THANKS TO All

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