Palliser Furniture
Palliser Furniture

Palliser Furniture

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  • Pages: 2 (739 words)
  • Published: October 26, 2017
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History: In 1944, A. A.

DeFehr began creating household furniture from his woodworking shop in the basement of his home. This solo operation soon turned into a booming business with expansion opportunities, but also encountered challenges along the way. In 1964, this one man business, turned into DeFehr Manufacturing Ltd (DML), consisting of 50 employees working out of a 45,000 square foot building. The firm’s sales and annual revenue continued to grow between the 1960’s – 1970’s, with 20% of the sales coming from exports to the United States (U.

S. ).However, in 1975 they had to withdraw from exporting to the US due to the rising Canadian (CDN): US ratio. The 1980s were good years for this company. After merging all of the company’s operations and changing the name from DML to Palliser Furniture Ltd, they began expanding to locations in the U. S, and achieved annual sales of over CDN$ 135 million by the end of the decade.

By 1997 total annual sales reached CDN$ 325 million. In order to keep up with competition and continue to increase annual sales, Palliser Furniture Ltd. needs to decide whether to expand operations in to Asia, and/or Latin America, mainly Mexico.If so, what types of strategies will they need to take? The Canadian and U. S Furniture Industry: The Canadian furniture industry consisted of a few large operations and many small ones, with a general agreement among manufacturers and retailers that the key success factors were: -overall product quality- customer service -quick delivery- price -innovative design The U. S furniture industry, in contrast, consisted of seven times as many plants, twelve times the number of emplo

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yees, and fifteen times the shipments of the Canadian industry.

Their keys to success also differed, as they believed the factors were: -quality of raw materials- quality of showrooms -product design- extent of marketing activity -location- price Expansion Opportunities: Since the Free Trade Agreement (FTA), later referred to as North American Free Trade Agreement (NAFTA), between the U. S. and Canada, a couple of things have happened in the Canadian furniture industry to make both Asia and Mexico attractive expansion possibilities. Exporting from Canada increased dramatically between 1997 and 1998 •Labor intensive industry; workers make CDN$ 16. 83/hour in Canada Palliser in particular felt pressure to lower prices, and decrease its product line, in order to maximize the production efficiency by concentrating on bedroom and living room markets.

As they continued to become affected by what was going on in the furniture industry, expansion would soon become inevitable, however they would need to weigh the pros and cons of each market. Mexican Furniture Industry:Pros •Lower wage rates $1 to $1. 5/hour •Opportunity to make authentic popular “rustic” furniture •No trade barriers (tariffs) to export to the U. S and Canada •Mexico consumed $3.

35 billion worth of home furnishings in 1997—huge market •Saltillo home to many manufacturers including possible suppliers for Palliser (Garden State Tanning leather, Lear Seating Inc) •Close to North American markets (lower shipping costs) •Most Mexican retailers were frustrated with delivery delays and looking for alternativesCons •Retailers have preference to purchase from Mexican plant

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China Furniture Industry: Pros •Massive market opportunities •Cheap labor •Palliser World Trade had already established a solid import business in Chinese furniture and maintained good relationships with Chinese furniture manufactures •Already have a trading company in Taipei for furniture imports Cons •Rising ocean freight costs, port congestion, and inadequate inland infrastructure •Producers in Taiwan do not want brokers Lower quality products due to lack of indigenous wood in China, which would require wood to be shipped from North America •Long delivery time to North America (up to 45 days) Possible solutions: Since Mexico is so close to the North American market and there are no trade barriers with exporting, Palliser should definitely consider making an immediate investment before any of their competitors. However, that does not necessarily mean that should rule out expansion into China. The quality of Chinese furniture products is continuing to improve, and soon Palliser’s consumers would be purchasing them.Perhaps Palliser could compete with the Chinese competitors by increasing their leather products, since that is where they have a competitive advantage. They could also enter into joint ventures with Chinese manufacturers for making leather products and other lower cost products for exporting to other markets, such as Europe, Japan, Australia, etc. Mexico appears to be the best investment in the present time, but Palliser should continue to consider China in their mid to long term plans.

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