Palliser Furniture
Background and Problem Palliser Furniture Ltd. is Canada’s second largest furniture company. They currently have production facilities in Canada, Mexico, and Indonesia. Due to increasing competitive pressures from Asia, Palliser Furniture must decide whether to expand into the Chinese market, and if so through which entry strategy?
External Analysis: (Industry) Porters 5 Forces/SWOT Analysis
• -Opportunity: China’s total furniture output value was $20 billion and accounted for 10 per cent of world’s total furniture output value.
• China’s furniture export was growing at an annual rate of over 30 per cent.
• China could offer Palliser lower labor costs and high-quality workers. Along with minimum income tax and social costs giving China a solid competitive position.
• Producing the same product in China was up to 30 per cent cheaper compared to North America.
• China offered cheaper supplies including leather, wood, foam, and packaging.
• -Threat: Increased Competition: America, Japanese, and Italian firms had established factories in China. Strong competition that will compete for the same skilled employees.
• -Threat: Chinese language and cultural barriers.
Industry Attractiveness: China has made significant progress in the furniture market and will likely continue to see further growth due to its low labour costs and low tariffs making this a very attractive market for Palliser.
Internal Analysis: (Firm)
• -Strengths: Recruited product managers/designers from all across the world including Sweden, Hong Kong, and Italy.
• New distribution channel through the “EQ3” dealer-owned stores was very successful.
• -Weakness: Employees laid off at the Winnipeg factory. Downsizing activities such as this often decrease employee morale, impact employees’ perception of job security, and increase turnover rates.
Strategic Alternatives
A) Maintain status quo (Do not invest in China) Pro: Simple Con: Lost market potential and possible cost
External Analysis: (Industry) Porters 5 Forces/SWOT Analysis
• -Opportunity: China’s total furniture output value was $20 billion and accounted for 10 per cent of world’s total furniture output value.
• China’s furniture export was growing at an annual rate of over 30 per cent.
• China could offer Palliser lower labor costs and high-quality workers. Along with minimum income tax and social costs giving China a solid competitive position.
• Producing the same product in China was up to 30 per cent cheaper compared to North America.
• China offered cheaper supplies including leather, wood, foam, and packaging.
• -Threat: Increased Competition: America, Japanese, and Italian firms had established factories in China. Strong competition that will compete for the same skilled employees.
• -Threat: Chinese language and cultural barriers.
Industry Attractiveness: China has made significant progress in the furniture market and will likely continue to see further growth due to its low labour costs and low tariffs making this a very attractive market for Palliser.
Internal Analysis: (Firm)
• -Strengths: Recruited product managers/designers from all across the world including Sweden, Hong Kong, and Italy.
• New distribution channel through the “EQ3” dealer-owned stores was very successful.
• -Weakness: Employees laid off at the Winnipeg factory. Downsizing activities such as this often decrease employee morale, impact employees’ perception of job security, and increase turnover rates.
Strategic Alternatives
A) Maintain status quo (Do not invest in China) Pro: Simple Con: Lost market potential and possible cost