INTERNATIONAL FLOW OF FUNDS: A Case Study

BLADES PLC
Kristelle B. Jarabelo
August 2, 2013

CASE BACKGROUND
Blades PLC is the U.K. based manufacturer of the Speedos Roller Skates Ben Holt, the companys 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.

BLADES PLC

THE IDENTIFIED PROBLEMS

PROBLEM OF THE CASE

How will Thailands economic forecast affect Blades financially given their current arrangements with their supplier and customers?

BLADES PLC

AREAS TO CONSIDER

CONSIDERATIONS

1. Thailands Trade Flow 2. Blades Financial Position 3.Competition

CONSIDERATION

THAILANDS FLOW OF TRADE

International trade can significantly affect a countrys economy.

CONSIDERATION

THAILANDS FLOW OF TRADE Inflation

If a countrys 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 countrys 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.

CONSIDERATION

THAILANDS FLOW OF TRADE Government Restrictions

A countrys government can prevent or discourage imports from other countries. By imposing such restrictions, the government disrupts trade flows.

Exchange Rate
If a countrys currency begins to rise in value against other currencies, its current account balance should decrease, other things being equal.

Thailands Adjusted National Income

GBP vs THB

Thailands Development Indicator

CONSIDERATION

BLADE INCS FINANCIAL CONDITIONS

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.

CONSIDERATION

COMPETITION 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.

BLADES PLC

ALTERNATIVE COURSES OF ACTION

ALTERNATIVES

1.Status Quo 2.Withdraw Investment 3.Expand Investment

BLADES PLC

RECOMMENDATION

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

REFERENCES
www.tradingeconomics.com www.databank.worldbank.org www.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