Palliser Furniture Ltd.: the China Question
Palliser Furniture Ltd: The China Question
IM – Session 8 Jahan Ara Peerally
#1
Palliser Furniture: The China Question
1. What is Palliser’s strategy - Global, MD, International or TN? 2. What changes in Palliser’s 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, China’s 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
IM – Session 8 Jahan Ara Peerally
#1
Palliser Furniture: The China Question
1. What is Palliser’s strategy - Global, MD, International or TN? 2. What changes in Palliser’s 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, China’s 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