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INTERNATIONAL FLOW OF FUNDS: A Case Study
BLADES PLCKristelle B. Jarabelo
August 2, 2013
CASE BACKGROUND
Blades PLC is the U.K. based manufacturer of the “Speedo’s Roller Skates”
Ben Holt, the company’s financial director is contemplating to increase their exports in Thailand.
Also, to import some components such as rubber and plastic from Thailand to the U.K.
CASE BACKGROUND
CASE BACKGROUND
Blades’ invoice is in THB Blades’ primary customer in Thailand has
committed to purchase a certain quantity of Speedos if the invoice remains as THB
Current forecasts are dismal: increase in inflation, decrease in national income, and depreciation of the Baht.
THE IDENTIFIED PROBLEMSBLADES PLC
PROBLEM OF THE CASE
How will Thailand’s economic forecast affect Blades’
financially given their current arrangements with their supplier and customers?
AREAS TO CONSIDERBLADES PLC
CONSIDERATIONS
1.Thailand’s Trade Flow2.Blades’ Financial Position3.Competition
CONSIDERATION
International trade can significantly affect a country’s economy.
THAILAND’S FLOW OF TRADE
CONSIDERATION
• Inflation– If a country’s inflation rate increases relative to the
countries with which it trades, its current account would be expected to decrease, other things being equal.
• National Income– If a country’s income level (national income)
increases by a higher percentage than those of other countries, its current account is expected to decrease, other things being equal.
THAILAND’S FLOW OF TRADE
CONSIDERATION
• Government Restrictions– A country’s government can prevent or discourage
imports from other countries. By imposing such restrictions, the government disrupts trade flows.
• Exchange Rate– If a country’s currency begins to rise in value
against other currencies, its current account balance should decrease, other things being equal.
THAILAND’S FLOW OF TRADE
Thailand’s Adjusted National Income
GBP vs THB
Thailand’s Development Indicator
CONSIDERATION
• Blades has not been performing well with their recent ROA at only 7%.
• Shares fell from a high of GBP20 per share three years ago to only GBP12 last year.
• If Blades increases its business in Thailand, it means increasing their investment.
BLADE INC’S FINANCIAL CONDITIONS
CONSIDERATION
• While Blades’ face little competition in Thailand from their fellow UK manufacturers, their invoicing strategy may negatively affected the company should both Thai consumers and firms adjust their spending habits if certain developments and economic factors occur.
COMPETITION
ALTERNATIVE COURSES OF ACTION
BLADES PLC
ALTERNATIVES
1.Status Quo2.Withdraw Investment3.Expand Investment
RECOMMENDATIONBLADES PLC
RECOMMENDATION
Expand Investment in Thailand
RECOMMENDATION
A high level of inflation in Thailand relative to the United Kingdom could affect Blades favorably
The arrangement Blades has with its primary Thai importer somewhat mitigates the effect of decreasing national income.
RECOMMENDATION
A continued depreciation of the Thai baht would hurt Blades
However, the demand for Blades’ products may increase relative to that of its U.K. competitors exporting to Thailand
RECOMMENDATION
For sources of capital, an agency extending direct loans to corporations involved in international trade is the International Financial Corporation (IFC).
END OF REPORT
REFERENCESwww.tradingeconomics.com
www.databank.worldbank.orgwww.cia.gov
www.oanda.com www.wikipedia.com
www.cengageasia.com
Feel free to ask questions!
Jarabelo, Kristelle B.International Flow of Funds
Case Study