RSA Manufacturer is a U.S based company with the supposition of their total assets of only $200 million.

Suppose, the company produces a single type of product, roller blades (Speedos). Steven, chief fifinancial

offificer (CFO) of company has decided to counteract the decreasing demand for "Speedos" roller blades

by exporting this product to Thailand. Furthermore, due to the low cost of rubber and plastic in

Southeast Asia, Steven has decided to import some of the components needed to manufacture

"Speedos" from Thailand. Steven feels that importing rubber and plastic components from Thailand will

provide RSA with a cost advantage (the components imported from Thailand are about 20 percent

cheaper than similar components in the United States). Currently, approximately $20 million, or 10

percent, of Company's sales are contributed by its sales in Thailand. Only about 4 percent of Company's

cost of goods sold is attributable to rubber and plastic imported from Thailand. RSA faces little

competition in Thailand from other U.S. roller blades manufacturers. Those competitors that export

roller blades to Thailand invoice their exports in U.S. dollars. Currently, This Company follows a policy of

invoicing in Thai baht (Thailand's currency). Steven felt that this strategy would give Company a

competitive advantage, since Thai importers can plan more easily when they do not have to worry about

paying differing amounts due to currency flfluctuations. Furthermore, Company's primary customer in

Thailand (a retail store) has committed itself to purchasing a certain amount of "Speedos" annually if

Company will invoice in baht for a period of three years. Company's purchases of components from Thai

exporters are currently invoiced in Thai baht. Steven is rather content with current arrangements and

believes the lack of competitors in Thailand, the quality of company's' products and its approach to

pricing will ensure company's position in the Thai roller blade market in the future. Steven also feels that

Thai importers will prefer this company over its competitors because company invoices in Thai baht.

You, Company's fifinancial analyst, have doubts as to Company' "guaranteed" future success. Although

you believe company's strategy for its Thai sales and imports is sound, you are concerned about current

expectations for the Thai economy. Current forecasts indicate a high level of anticipated inflflation, a

decreasing level of national income, and a continued depreciation of the Thai baht. In your opinion, all

of these future developments could affect company fifinancially given the company's current

arrangements with its suppliers and with the Thai importers. Both Thai consumers and fifirms might

adjust their spending habits should certain developments occur. In the past, you have had diffificulty

convincing Steven that problems could arise in Thailand. Consequently, you have developed a list of

questions for yourself, which you plan to present to the company's CFO after you have answered them.

Your questions are listed here: 1. How could a higher level of inflflation in Thailand affect RSA (assume U.S. inflflation remains constant)?

2. How could competition from fifirms in Thailand and from U.S. fifirms conducting business in Thailand

affect RSA?

3. How could a decreasing level of national income in Thailand affect RSA?

4. How could a continued depreciation of the Thai baht affect RSA? How would it affect this company

relative to U.S. exporters invoicing their roller blades in U.S. dollars?

5. If RSA increases its business in Thailand and experiences serious fifinancial problems, are there any

international agencies that the company could approach for loans or other fifinancial assistance?