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Pallister Furniture: The Mexican Venture Essay

2647 words - 11 pages

Palliser Background Information.Palliser Furniture Ltd is a Canadian company created in 1944. Started by A. Defehr with the money he made selling his car, the company is currently the largest furniture manufacturer in Canada. By 1964 Palliser had a 45,000 sq ft operation with 50 employees and $1 Million CND in sales. The Canadian furniture industry is labour intensive, and employs mostly immigrants who are skilled and semi-skilled workers. The industry is becoming more high-tech and there is going to be a shortage of qualified labour supply. The wage costs in Canada are much higher then they are in the U.S., which is another reason for the company to look at going international. The Canadian industry is generally focussed on product quality, quick delivery, innovative design, customer service, and price. The U.S. market on the other hand is more focused towards the quality of raw materials, product design, location, quality of showrooms, extent of marketing activity, and price. It seems the Canadian market has reached its potential as seen by a much lower growth than the rest of Canadian goods (1.5%) as well as a much, much lower growth than the furniture industry in the U.S. (3%). Another comparison indicating a lack of international competitiveness is that of the two main furniture companies in Canada. Palliser generates 85 percent of it's revenues in Canada, a low growth and mature market, whereas Dorel Industries, Ltd., it's rivals, generates over 80 percent of their revenues internationally, in which a much higher growth exists. Asia and Europe also were going to have an advantage in terms of importing furniture parts, etc., because of the expected reduction in tariffs in the not-so-distant future. In 1996, there were 1406 firms that made up the furniture industry with an estimate product output of over 5.6 billion dollars. Household furniture wholesale sales were 2.1 billion dollars in 1997, and are expected to increase at 1 percent annually into the next century. This figure, however, is lower than the overall goods increase, which is expected to be 1.5 percent annually, and also much lower than the 3 percent annual increase which is expected in the U.S. household furniture market. Canada makes up only 2 percent of the world furniture market, compared to 28 percent in the U.S., 15 percent in Japan, and 10 percent in Germany. 95 percent of Canadian exports ended up in the U.S., which was 15 percent of their total imports. On the contrary, Canada imported $816 million of furniture, 60 percent of which came from the U.S.Growth history for the company is as follows:1968: Palliser enters the upholstered furniture market and buys a plant in Alberta.1960-70: Sales grow at an annual rate of 25%1973: US exports account for 20% of total sales.1975: Palliser withdraws from the export market due to the weak Canadian Dollar.1980: Palliser re-enter the US market by opening a plant in Fargo, North Dakota.1981: Fargo becomes the window into the US...

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