I. Situation Analysis
i. In the United States carpet and rug industry, wholesale and retail distribution has experienced several changes. The industry has undergone three distinct changes since the mid-1980s. The first change, which occurred during the mid-1980s, occurred in the form of direct distribution. The largest carpet and rug manufacturers began bypassing floorcovering wholesalers and sell directly to retailers in larger numbers. The second changes, which occurred during the mid-1990s, occurred in the form of wholesale and retail consolidation. Department stores, furniture outlets, and independent retail stores were being replaced by large mass-merchandise and discount stores. This created a new phenomenon among specialty outlets: the buying group. A retail buying group is an organization of similar retailers that combine their purchases to obtain price discounts from manufacturers. The third change, which occurred during the mid-1990s, occurred in the form of forward integration into retailing. Carpet and rug manufacturers announced plans to engage themselves directly in the residential and contact segments of the floorcovering industry. b. Company
ii. Cardon Carpet Mills, Inc. is a privately held manufacturer of a full line of medium- to high-priced carpet primarily for the residential segment. Cardon Carpet Mills, Inc. markets its products under the Masterton and Chesterton brand names. The company currently distributes its line through seven floorcovering wholesalers located throughout the United States. These seven wholesalers supply 4,000 retail accounts that include department stores, furniture stores, and floorcovering specialty stores. II. Problem
c. Mr. Robert Meadows, president of Cardon Carpet Mills, Inc. wants to consider the possibility of Cardon Carpet Mills, Inc. establishing distribution centers or wholesale operations. III....