Dixon Ticonderoga is one of the oldest public companies in the United States. The company’s flagship product is the ubiquitous No. 2 yellow pencil, introduced in 1913, which is known to almost anyone who went to school or took standardized tests in the United States. With annual revenue of a little more than $100 million, Dixon Ticonderoga is the second largest pencil manufacturer in the country. For most of its history, Dixon Ticonderoga has been a prosperous company, but the 1990s proved to be a very difficult decade. It’s not that people are no longer buying pencils – in fact demand for pencils in the United States has soared. Americans bought an estimated 4.2 billion pencils in 1999, a 53% jump from 1991. But an increasing proportion of these pencils have been from China.
The problem began in the early 1990s when Chinese manufacturers entered the market with low-priced pencils. The pencil industry fought back, arguing that the Chinese were dumping pencils on the U.S. market at below cost and lobbying Washington for protection. In 1994, when foreign pencil imports accounted for 16% of the market, the United States enacted heavy antidumping duties on Chinese pencils, effectively raising their price. Imports fell dramatically, but the Chinese kept making better, cheaper pencils, and after a couple of years imports returned to the levels attained before the imposition of duties. Nor did it stop there. In 1999, U.S. manufacturers shipped some 2.2 billion pencils domestically, down from 2.4 billion in 1991. During that time, imports jumped from 16% to more than 50% of the market, with China leading the importers. The pencil industry continued to lobby for protection, and in mid-2000, the United States renewed duties on pencil imports from China, imposing import tariffs as high as 53% on some brands.
In the meantime, Dixon Ticonderoga was not standing still. To try to meet the foreign competition on price, Dixon Ticonderoga...
Please join StudyMode to read the full document