Palliser Has High Brand Name Recognition Especially Domestically In Canada With The Majority Of Its Revenues Are Generated And It Is Known For Its Innovation, High Quality, And Contemporary Design

1476 words - 6 pages

Palliser Furniture LTD. : The China QuestionMia HughesDr. OverbyMGT 6300Case 1 of 2Executive Summary Palliser Furniture Ltd., formed in 1944, is Canada's second largest furniture company. With production facilities in Canada, Mexico and Indonesia, Palliser's strategy since 1998 has included: cost leadership, quick delivery, value enhancement, new marketing initiatives and the motion business. Due to increased competitive pressures from Asia, Palliser Furniture must decide if, and how to expand their relationship into the Chinese market. Since Palliser opened production, China has risen to become one of the largest competitors in the world furniture market, affecting most furniture firm's profits negatively. Cheap labor, as well as quality product designs were large contributors to China's success. Like many western manufactures Palliser sees potential in moving production to China, but not without apprehension. Most firms in the U.S. have already moved their manufacturing sites offshore, mainly to China, but many have been unsuccessful. Although successful firms are few, contracting work and joint ventures can and have worked, as long as trust and exclusivity are included in the deal. The alternatives considered in this analysis include keeping Mexican operations, but moving all Canadian production to Indonesia, Mexico, or China. I do not believe that staying status quo will benefit Palliser at all - something needs to change. To improve operational excellence, process efficiency and raise customer satisfaction through cost savings and quality, I have determined Palliser should move the majority of its Canadian production into China. While Canada can rely on notable assets such as large wood availability and long established expertise, China's production costs cannot be beat.Background Information and Problem StatementA particular challenge facing Palliser is the fact that most of the competing firms have gone abroad and are taking advantage of Chinese labor. With so many companies able to sell products at a lower price point due to lower wages and lower component costs such as wood, foam and packaging materials, if Palliser doesn't find a way to decrease their costs, they will eventually become too expensive for their market. With their newest product lines, EQ3 and Motion, both growing within their company, and industry wide, the search for cheaper product and labor is imperative. These lines involve more labor-intensive work, and the cost to produce those products in Canada will only increase, therefore causing retail prices to increase in the long run. By moving Canadian production to China, these new lines that are doing well for the company now, can continue to produce a positive revenue stream.Analysis of the SituationInternal Analysis:Strengths:Well established brand and reputationHiring of top managers and designers from around the world including Sweden, Hong Kong and ItalyNew distribution channel of dealer owned stores, selling EQ3...

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