Background and Problem
Palliser Furniture Ltd. is Canadian 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? SWOT ANALYSIS
Internal Analysis: (Firm)
1. Brand Name Recognition: Palliser has high brand name recognition especially domestically in Canada with the majority of its revenues are generated and it is known for its innovation, high quality, and contemporary design. 2. Recruited product managers/designers from all across the world including Sweden, Hong Kong, and Italy. 3. New distribution channel through the dealer-owned stores was very successful. Weakness:
1. Employees lay off at the Winnipeg factory. Downsizing activities such as this often decrease employee morale, impact employees’ perception of job security, and increase turnover rates. External Analysis: (Industry)
1. China’s total furniture output value was $20 billion and accounted for 10 per cent of world total furniture output value. 2. China’s furniture export was growing at an annual rate of over 30 per cent. 3. China could offer Palliser lower labor costs and high-quality workers. Along with minimum income tax and social costs is giving China a solid competitive position. 4. Producing the same product in China was up to 30 per cent cheaper compared to North America. 5. China offered cheaper supplies including leather, wood, foam, and packaging. Threat:
1. Increased Competition: America, Japanese, and Italian firms had established factories in China. Strong competition that will compete for the same skilled employees. 2. Chinese language and cultural barriers.
China has made significant progress in the furniture market and will likely...