International finance - Assignment Example

Consideration of Direct foreign Investment By engaging in DFI in Thailand, Blades Inc. will have a number of benefits. First, the economy is still emerging and has a greater potential of growth because of the high growth status of the Thailand economy. The company will therefore have large market share for their products. Second, the company will generate more profit margins from their sales. Even though they will sell at lower prices due to the poor state of the economy, it has a potential of generating high profit margins because the cost of production in Thailand particularly the cost of raw materials is relatively low.

Further, their customers in Thailand have committed themselves to purchase a fixed amount of Blade’s products hence ensuring that the sales volume is fixed and does not therefore fluctuate. Finally, the country has a high potential of stabilizing in future hence promises high returns to the company due to the high growth potential in the whole of Asia.Due to the unpredicted nature of economic performances, the company should take the investment now and not wait until next year. Further, it will more expensive to take the investment by next year in case the Thailand’s economic conditions improve by next year due to the eminent appreciation of baht and the increase in value of the firms to be acquired.

In addition, many of the Blade’s competitors shall have also moved to Thailand thus reducing the returns to the company. The company will therefore get more returns if the economic conditions subsided or will face great losses in case the condition worsens.Blades should renew the contract with the Thai retailer so that it can increase its market share and hence sales volume. This is because the retailer purchases a fixed amount of its products regardless of the economic condition. Renewing the product has a potential of increasing the company’s market share while not renewing g it reduces its market share.

Contract renewal will increase profit margins for the company because the retailer has already attracted and commands a substantial marketThe establishment of the subsidiary will be greatly supported by the government because it has a potential of providing employment opportunities in the country thereby increasing the living standards of the employees which in turn increases economic growth of the country as a whole.Work citedCohen, Stephen D. Multinational Corporations and Foreign Direct Investment: Avoiding Simplicity, Embracing Complexity.

Oxford: Oxford University Press, 2007. Internet resource.