International Finance - Assignment Example

The economy of Thailand is still in its nascent stage. The managed floating rate of exchange along with the Inflation Targeting framework has worked well for the country under consideration. The flexibility in the exchange rate helps the economy in absorbing shocks. With the adoption of the above exchange rate, Thai Baht moves in line with the economic fundamental. It was seen that the Baht/US dollar exchange rate have fluctuated widely from 36-56 Baht/US dollar. But the exchange rate in the past few years.

Blades Inc. wants to import many raw materials like plastic and/or rubber from Thailand. This would enable Blades to import them at much cheaper rate. Hence this would enable Blades Inc. to lower the cost of goods sold. Thailand is a weak economy and they are recovering from the effects which results in lower cost of goods. Importing from Thailand will help Blades Inc. in establishing long term relationship with the Thai suppliers. The company will definitely want to build a long term relationship so that they can make agreements with the suppliers in importing the costs at low prices.

Blades Inc. by importing raw materials from Thailand will help achieve economies of scale in the production process such that it enjoys special advantages from them. Again by achieving specialization in production efficiency, Blades Inc. will be able to achieve economies of scale and which will in turn lead to lower cost of the products. This will in turn increase the net income of Blades, Inc. With increase in sales, Blades, Inc. will have an impact on profitability together with lowering the unit costs.

Blades, Inc. will be able to sell roller blades in Thailand as the first firm. This will help the company to penetrate Thai market and thus they will be able to earn more profit for the company. If a situation comes where the US roller blades is saturated then exports in other countries will provide more opportunities