Issue identification
Martin’s Textiles is a firm that has been doing a profitable business that involves the design, production and selling of cotton-made underwear. However, in the recent past, things have not been working for the company. Canada, Mexico and the US have agreed on removing all tariffs that could negatively impact business transactions among the three countries. Removal of tariffs is important in facilitating business activities among nations. However, tariffs on textile products would be removed in a period of ten years.
In the mid 1980s, the firm was faced by stiff competition from established business establishments from Asia, which entered the US on the premises of a weak dollar. Even after the US dollar improved, the foreign companies did not lower prices of textile goods. The clothing industry in the US is characterized by low skills of workers. Thus, a high number of workers are needed to accomplish tasks that could be done by a relatively small number of personnel. This leads to increased production costs, which negatively impact the amount of profits made by Martin’s Textiles.
Analysis
The current situation has been precipitated by increased competition from foreign companies that manufacture their products in countries with cheap labor such as Mexico. Although customers of Martin’s Textiles assert that the organization produces high quality underwear, they are not willing to continue buying the products due to their relatively high prices.
In the future, the underwear manufacturer might be forced to close because of increased business losses and continued stiff competition from rivals. In fact, the business enterprise would not be expected to lower its prices so that it can attract and retain customers because that would lead to more losses.
Recommendations
If I were John, the CEO, I would recommend several options that could be adopted to help the family business. It is inevitable that production operations will have to be shifted to Mexico, which is characterized by relatively low labor costs. In addition, the country does not have labor unions that set wages of workers. This is a great impediment of operations in the US, which has many unions that set the minimum wage at between 8USD and 12.5USD per hour.
The workers of the firm should be encouraged to retire because their payment requirements can no longer be met. However, those who might be willing to go to Mexico to work on new terms and conditions will not be prevented from doing so. It is important for the top management workers, marketers and designers to be left in New York.
There have been fears that Mexico does not have dedicated workers who are committed to producing excellent performance outcomes. Personnel who will work for Martin’s Textiles in Mexico should be motivated in order to yield better results. An effective HR team would help to make Mexican personnel loyal. This would greatly reduce the high rates of absenteeism, poor workmanship and turnover. In addition, while in the foreign country, the management should not compromise the culture of high quality of underwear that has been built for four generations.
New markets might also be used to help the organization to prevent future problems that might characterize a single market. For example, the firm should look for markets for its products in regions such as Africa and Asia, which have markets that are growing at high rates.