Q1 Answer
Palliser Company had to options of expanding its business to either Mexico or to China. The issue presented the company with a dilemma. However, the company considered various factors in making its decision that saw it prefer Mexico to China. First, the company saw Mexico as a strategic location for establishing a manufacturing plant rather than in China. The argument behind the decision was that the nation was closer to Texas border hence the company will enjoy reduced costs due to lower delivery and distribution costs.
Besides, Palliser saw a better opportunity in Mexico than in China as far as marketing and production are concerned. The company discovered that Mexico’s leather furniture was more developed compared to China’s growing leather furniture sector of China. Most of the furniture in China was imported, and its workers did not a good experience.
Additionally, Palliser failed to consider the China option because the foreign investments provision in China required a company to enter into a joint venture with a China company to enjoy the market services. Palliser opinion was to expand to a region whereby it would operate as a sole company rather than entering into a joint venture. As a matter of fact, the company did not want any discomfort from China regulatory framework concerning the issue. Finally, Palliser saw Mexico as the suitable option because it was very close to its products manufacturing plant which was in Canada. It was a closer route that could help the company to reduce costs.
There are various ways through which the two options would influence business opportunities. First, investment in Mexico presented the company with good opportunities to connect easily with U.S., Canada and Brazil. The area’s strategic location determined much about the company’s acquiring of raw materials as well as easy access to available markets. It is thus a business opportunity that the company would enjoy since it leads to increased revenues due to diverse markets and reduced cost of production.
Also, the option would also allow the company to take advantage of the established markets in Northern America. Established furniture market could help the company enhance the quality of products. Still, the company had the opportunity to enjoy the free trade zone in the northern America which would assist in reducing costs.
Q2 Answer
After several years, the company expanded its operations to China. Palliser had profound information about the advantages and disadvantages of investing in Canada, Mexico, and China after a long working experience in Canada and Mexico. The company expanded its operations in China after considering various factors that seemed to be of a great success to its operation in the nation. First, the company came to realize that investing in China was economical for its operation. Palliser realized that by operating in China, the cost of shipment and transaction would decrease as compared to that of working in Mexico.
Besides, the company expanded to China because it realized that China presented an export opportunity for the products it produced. It is worth noting that China’s Furniture export was on an upward trade and took a big portion of the world’s furniture production value. The company saw that by expanding its products and services in China will enjoy a larger market. Consequently, the large market would help the company to increase its sales revenue and profits as well.
Furthermore, Palliser learned that China had a knowledgeable and skilled workforce. The company wanted to take advantage of the skilled labor in China that would help it in designing quality furniture that would sale in various markets of the world. China had a well-organized workforce as compared to other areas that the company operated. Therefore, the company had a feeling that investing in China would help the company to take advantage of such labor.
Moreover, the company expanded its operations to China because China had cheaper supplies than Mexico. Palliser’s research on China indicated that China was one of those nations with cheap supplies of foam, leather and wood which are used in making furniture. Also, its packaging services were also cheaper as compared to the other nation where the company operated. Expanding to China would thus help the company reduce its cost due to the cheaper supplies. Reduced cost of supplies was vital in assisting the company to lower production cost.
As a matter of fact, Palliser move to China was subject to attractive market presented by the nation. China had for a long time taken various steps in the furniture market. Also, the company anticipated that the nation furniture market would further continue to grow and develop to greater heights. It is from that perspective where Palliser saw it worth to expand to China and take advantage of the future economies of scale that would see the company enjoy low labor costs and low levies (Burrow and Kleindl, 2012).
Based on the information discussed above, it is true that expanding to China was the best decision for the company. Looking at the data provided in the above paragraphs, China presented various advantages for the company, and its furniture market was on an upward trend with a lot of strength.
Q3 Answer
It was not a wrong decision for Palliser to invest in Mexico. However, lack of the required business understanding of the region presented the company with problems later. Investing in Mexico was beneficial for the company because the facility worked well. The company enjoyed some economies of scale in operating in this nation. For instance, the company enjoyed shipping some of its products to the United States for marketing. This means that the investment opened markets for the company. Also, the cost of the transaction was low helping the company to attract more customers for its products since they were affordable (Palliser, 1998).
Furthermore, it was a good decision for Palliser to expand to Mexico to take advantage of the free trade agreement due to the establishment of North American Free Trade Agreement. The free trade within the region would allow the company to enjoy reduced costs of the transaction. Free trade plays a role in reducing the barriers to entry in the market. This implies that the cost of the transaction is reduced when a free trade agreement comes in the act. As a matter of fact, its investment in Mexico was subject to cost leadership economies just as discussed.
Nonetheless, the decision is good because it provided the company with the opportunity to quick delivery of raw materials within the region. The comparison of Mexico and China by the company indicated that raw materials would take more time in China than in Mexico. However, after the terrorist tragedy that occurred in the United States the delivery in China became easier and cheaper than in Mexico. The tragedy struck some of the aircraft that connected U.S. and Brazil making it hard for the raw materials to reach Mexico from Brazil.
On the other hand, the decision can be seen to be wrong since the company failed to have enough information about the nation something led to various problems later. For instance, the company suffered various blows when it entered into disputes with the nation’s taxation practices and local taxation provisions. The company faced a difficult in make adjustments for inflation in the course of its operations in Mexico.
Besides, the company did not have clear information about business costs that it was to face in its operations in the nation. It is worth noting that Palliser had no clear information concerning all the tariff fees for the shipment of the products leaving Mexico. Still, the company was not aware of high costs of shipping products in the United States. The company later realized that the cost was cheaper in China than Mexico.
In conclusion, Palliser’s business decision to invest in furniture in various nations was strategic. It is worth noting that, the company focused on various strategies that would ensure increased efficiency. Most of its strategies in focused on reducing costs and taking advantage of the existing markets. Palliser’s main aim to invest in Mexico was to take advantage of the free trade zone and reducing costs of getting raw materials as well. On the other hand, the company invested in China in taking advantage of various economies of scale that existed in the nation. An outstanding example is the taking advantage of the growing market in the nation which was recognized in World.
Reference List
Burrow, J. L., and Kleindl, B., 2012. Business Management. Mason, US: Cengage Learning.
Palliser Funiture LTD, 1998. Richard Ivey School of Business : The University of Western Ontarion.
