Aurora Textile Company

Introduction Aurora Textile Company having over 100 years history has been producing cotton and synthetic/cotton blend yarns to textile industry consisting of U.S. and the international market. The majority of the company’s revenue came from the domestic market and revenue sources for Aurora consist of the hosiery market accounting for 0.43, the knitted-outwear market accounting for 0.35, the wovens market accounting for 0.13, and industrial and specialty products accounting for remaining 0.09 of Aurora’s revenue. The Term-Mill Industry has been developing through three stages: cotton stage, the industrial revolution stage, and the post industrial revolution stage. In the last stage, the companies operating in U.S. textile industry faced difficulties due to globalization, trade policies, cheaper production costs oversees, and consumer choices. First of all, because of globalization, yarn producers needed to decrease costs using cheaper labor and raw materials in order to survive in competitive market. In the current stage, approximately 150 textile manufacturers had been stopped their operation and Aurora had retained main manufacturing operations by eliminating inefficient operations. Next, the U.S. government had accomplished free-trade policies by signed on two agreements: American Free Trade Agreement (NAFTA) and the Caribbean Basin Initiative (BSI). Due to the fact that these agreements allow foreign textile manufacturers having benefits of lower labor cost and government subsidized operations to export their products in U.S. market, domestic producers had to make more effort in order to compete against them for textile industry. As a result, Aurora had opportunity to keep its operation by cutting approximately four million dollars of SG&A expenses since 2000. Finally, customer preferences leaded textile manufacturers to produce high-quality products with the minimum defects. Because of these reasons, Aurora is considering whether or not they will buy the