please see file attached Decision to Expand Internationally Blades, Inc., is a U.S.-based company that has been incorporated in the United States for 3 years. Blades

Decision to Expand Internationally

Blades, Inc., is a U.S.-based company that has been incorporated in the United States for 3 years. Blades is a relatively small company, with total assets of only $200 million. The company produces a single type of product, roller blades. Due to the booming roller blades market in the United States at the time of the company’s establishment, Blades has been quite successful. For example, in its first year of operation, it reported a net income of $3.5 million. Recently, however, the demand for Blades’ “Speedos,” the company’s primary product in the United States, has been slowly tapering off, and Blades has not been performing well. Last year, it reported a return on assets of only 7 percent. In response to the company’s annual report for its most recent year of operations, Blades’ shareholders have been pressuring the company to improve its performance; its stock price has fallen from a high of $20 per share 3 years ago to $12 last year. Blades produces high-quality roller blades and employs a unique production process, but the prices it charges are among the top 5 percent in the industry.

In light of these circumstances, Ben Holt, the company’s chief financial officer (CFO), is contemplating alternative courses to take for Blades’ future. Blades cannot implement any additional cost-cutting measures in the United States without affecting the quality of its product. Also, production of alternative products would require major modifications to the existing plant setup. Furthermore, and because of these limitations, expansion within the United States at this time seems pointless.

Holt is considering the following: If Blades cannot penetrate the U.S. market further or reduce costs here, why not import some parts from overseas and/or expand the company’s sales to foreign countries? Similar strategies have proved successful for numerous companies that expanded into Asia in recent years, allowing them to increase their profit margins. The CFO’s initial focus is on Thailand. Thailand has recently experienced weak economic conditions, and Blades could purchase components there at a low cost. Holt is aware that many of Blades’ competitors have begun importing production components from Thailand.

Not only would Blades be able to reduce costs by importing rubber and/or plastic from Thailand due to the low costs of these imports, but it might also be able to augment its weak U.S. sales by exporting its finished products to Thailand, an economy still in its infancy and just beginning to appreciate leisure products such as roller blades. Although several of Blades’ competitors import components from Thailand, few are exporting to the country. Long-term decisions would also eventually have to be made: Perhaps Blades could establish a subsidiary in Thailand and gradually shift its focus away from the United States if its U.S. sales do not rebound. Establishing a