Blades Inc. Full Case Summary

Blades Inc. Full Case Summary

Blades Incorporation : Case Summary

Blades Incorporation is one of the US based company which produces “Speedos” and exports them to Thailand. Recently the company has started exporting in UK to a retailer. Both of the countries (United States and Thailand) have the suppliers that supply the components for the production of rollerblade. Considering the cost and quality of the components from the suppliers, Blades Inc. made a decision to have a contract with the Thai suppliers regarding the components for the production of roller blades.

The company Blades Inc. has dominated all of its imports and the exports in the foreign currency of the respective country. For all of the Thai imports made by the company it pays in Thai Currency (THB). The company found a Thai importer for Speedos who was ready to purchase 180,000 pairs of Speedos annually for the next three years. After the year of the commitment the Blades is still selling rollerblades at a $100 per pair which could be sold at $120 per pair if the commitment was not made earlier. Along with this one of the retailers from UK made a commitment to purchase 200,000 pairs of Speedos for a fixed price (£80) per pair on an annual basis.

From the next year, the company is expecting to produce around 80,000 pairs of Speedos with a cost of THB 3,000 per pair by importing the plastic and rubber components from Thailand. Recently there has been various events in the Asian countries which includes Thailand as well that affected the economic condition over there. Because of these economic conditions there has been confusion regarding the commitments and Ben Holt wants me to analyze and assess the company’s exposure to economy of Thailand for understanding the how THB value affects the earnings in the coming year.

Given Information

  • At regular prices, sales forecasted by Blades Inc. in US = 520,000 Speedos pairs
  • Pairs of Speedos exported to Thailand = 180,000 @THB 4594
  • Pairs of Speedos exported to United Kingdom = 200,000 @ £80
  • COGS for 80,000 pairs of Speedos incurred in Thailand and remaining in US @70
  • Fixed Costs (FC) = $ 2 Million = $2,000,000
  • Variable Operating expenses = 11% of Sales in US.
  • Current Spot rate of Baht(THB) = $0.22
  • Current Spot rate of Pound(GBP) = $1.50

Table 1: Possible scenarios for Exchange Rates of Baht and Pound

Effect on the average Average Value of Average Value of
Scenarios value of Baht Baht(in$) Pound(in $)
1 No change 0.022 1.530
2 Depreciate by 5% 0.0209 1.485
3 Depreciation by 10% 0.0198 1.500

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