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  • Case Session7

    Transféré par

    Manav Khurana
    274 vues9 pages
    Palliser Furniture Ltd considered expanding into China due to its growing share of the American furniture import market and low labor costs. However, issues around long-term stability of labor costs, unionization, and currency appreciation posed risks. Instead, Palliser opted to import some components from China while focusing on developing its existing production facilities in Mexico, where it benefited from skilled labor and lower costs.

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    Palliser Furniture Ltd considered expanding into China due to its growing share of the American furniture import market and low labor costs. However, issues around long-term stability of labor costs, unionization, and currency appreciation posed risks. Instead, Palliser opted to import some components from China while focusing on developing its existing production facilities in Mexico, where it benefited from skilled labor and lower costs.

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    Attribution Non-Commercial (BY-NC)
    Téléchargez comme PDF, TXT ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    274 vues9 pages

    Case Session7

    Transféré par

    Manav Khurana
    Palliser Furniture Ltd considered expanding into China due to its growing share of the American furniture import market and low labor costs. However, issues around long-term stability of labor costs, unionization, and currency appreciation posed risks. Instead, Palliser opted to import some components from China while focusing on developing its existing production facilities in Mexico, where it benefited from skilled labor and lower costs.

    Droits d'auteur :

    Attribution Non-Commercial (BY-NC)
    Téléchargez comme PDF, TXT ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    sur 9

    Palliser Furniture Ltd: The China Question

    IM Session 8 Jahan Ara Peerally

    #1

    Palliser Furniture: The China Question


    1. What is Pallisers strategy - Global, MD, International or TN? 2. What changes in Pallisers competitive environment may call for a change in its location strategy? 3. Is investing in China a viable long-term strategy for Palliser? 4. Should Palliser go to China or should it expand in Mexico? Why?
    IM Session 8 Jahan Ara Peerally
    #2

    Between 1995 and 2004, Chinas exports of furniture have grown 33% per year.
    10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 8679

    millions

    682 1995 2004


    #3

    IM Session 8 Jahan Ara Peerally

    Share of American furniture imports that come from China.


    50 45 40 35 30 25 20 15 10 5 0

    20 00

    20 02

    IM Session 8 Jahan Ara Peerally

    20 04
    #4

    19 90

    19 92

    19 94

    19 96

    19 98

    Provide fashion forward and always fresh modern home furnishings to meet globally positioned group of consumers The style is hip and contemporary. The colors are bold. The lines are sleek. And the look is clean and functional. Twenty free-standing showrooms in USA and Canada

    IM Session 8 - 2007 Jahan Ara Peerally

    #5

    Is China viable in the long-term?


    Issues to consider: Follow-the-competitor strategy and its effects on Palliser. Labour cost advantages in China may change in the future. Chinese workers may become unionised. Anti-dumping factor (post-case issues). Chinese yuan may eventually appreciate.
    #6

    Should Palliser invest in China?


    Low costs Yes Environment: Industry trend Low labor costs Comparable quality Economies of scale
    IM Session 8 Jahan Ara Peerally

    Product differentiation No Environment: High transportation costs Long delivery time Uncertainty Difficult to find partner
    #7

    Should Palliser invest in China?


    Low costs Yes
    Firm resources: Asian presence China is developing its own competencies and expertise FDI experience due to Mexico experience
    GI Sance 8 Jahan Ara Peerally

    Product differentiation No
    Firm resources: Palliser is already present in Mexico, engaging in FDI in China may impose major organisational, financial and country challenges.

    #8

    What Happened?
    Opted against FDI in China. But opted for imports from China. Cutting and sewing work, some furniture/components. Aimed to develop full potential of Mexicos plant. Opened second Mexican plant in 2003 and third in 2006. Benefited from skilled labour and low-cost plant in Saltillo due to FDI flight to China. The case is essentially about how a firm chooses to address make-or-buy decisions.
    #9

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