Palliser Furniture Upholstery Ltd (Palliser), located in Winnipeg is the largest furniture manufacturer in Canada with facilities in Canada and Mexico. These centrally and strategically located plants allow Palliser to provide prompt, cost efficient service and delivery to its customers. In order to remain a successful company, Palliser needs to assess their current strategies and evoke on new ideas to compete in a economy that maximizes on cost. Several alternatives are available to Palliser, including: Opening more factories in Mexico and sell the products in North America, Opening factories in an Asian country and sell the products to the Asian market or Initiate a joint venture with an Asian company and sell the products to North America. It is recommended that Palliser opens factories in an Asian country and sell the products to the Asian market. This will allow Palliser to enter into a new market, thus avoiding over saturations in current areas, and allowing the company to grow. The Asian market has reduced labour costs, which will allow for an overall cost reduction to Palliser’s consolidated financial statements.
Palliser Furniture’s profitability is threatened as it deals with the challenges of a rising Canadian dollar and international low cost competitors. Palliser needs to take a more proactive approach and evaluate its production locations strategy to ensure they allow the company to reduce costs, increase revenues and effectively compete with other international manufacturers while maintaining quality.
A Successful tradition
Palliser had its humble beginnings in the 1940’s in its founder’s basement, Abram Albert DeFehr. A tradition of quality craftsmanship and exceptional value continue to ensure success for Palliser. By effectively managing the following objectives; cost and quality, differentiation and strategic planning, Palliser has been able to compete internationally. 1. Cost & Quality – Costs & quality are controlled through: Vertical integration – Palliser has been able to reduce costs and increase quality, thereby establishing more value for their customers by acquiring upholsterers, particle board factories, furniture factories and wholesale/retail facilities. By vertically integrating these operations, the reduction in cost facilitates lower or more competitive pricing in the marketplace against global competitors. The management of these vertically integrated operations allow for control of the quality of the inputs used in the production of furniture.
Transportation of Goods – Palliser strategically selected Mexico for furniture factories for two reasons; first, there are no duties to ship into the US or to Canada from Mexico and secondly this location facilitates faster delivery time to customers – not only do transportation costs reduce but the goods get to their destination, the final customer, faster. 2. Differentiation – Palliser also competes with international competitors through differentiation. The differentiation strategies used are identified as follows: Customization – by providing customization Palliser is offering customers unique furniture that cannot be sold by competitors; the customer’s furniture is truly unique and authentic as per their own specification.
Delivery – Palliser’s delivery time is much lower than East Asian competitors by strategically locating factory facilities that allow for 2-4 week delivery times rather than 6-8 weeks for international competitors.
Product Development – Palliser has also remained competitive by continually assessing market...