2 What are some of the disadvantages Blades could face as a result of foreign trade in...
Question:
2 What are some of the disadvantages Blades could face as a result of foreign trade in the short run? In the long run?
Blades plc is a UK-based company that has been incorporated in the United Kingdom for three years.
Blades is a relatively small company, with total assets of only £15 million. The company produces a single type of product, roller blades. Due to the booming skateboard market in the United Kingdom at the time of the company’s establishment, Blades has been quite successful. For example, in its first year of operation, it reported a net income of £3.5 million. Recently, however, the demand for Blades’ ‘Speedos’, the company’s primary product in the United Kingdom, has been slowly tapering off, and Blades has not been performing well. Last year, it reported a return on assets of only 7%. In response to the company’s annual report for its most recent year of operations, Blades’
shareholders have been pressuring the company to improve its performance; its share price has fallen from a high of £20 per share three years ago to £12 last year. Blades produces high-quality skateboards and employs a unique production process, but the prices it charges are among the top 5% in the industry.
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