2. 1
Proposed Globalization of Ferrer
Table of Contents
Who we are........................................................................................................................................2
Go Global or No? ...............................................................................................................................2
Oh Canada!........................................................................................................................................3
Changing the Game ............................................................................................................................4
Money! Money! Money!.....................................................................................................................5
Hour Glass Theory..............................................................................................................................6
As American as Apple Pie...................................................................................................................7
Grow, baby, Grow!.............................................................................................................................8
Adverse reaction.................................................................................................................................8
3. 2
Proposed Globalization of Ferrer
Who we are
Ferrer Furniture runs 10 manufacturing plants and distribution facilities in the United
States. Their primary outlets for sales are catalogue orders online, they produce custom
furnishings. Two retail stores offer product to the public, Boston and Phoenix locations. The
ability of Ferrer to keep the process fully integrated is renown, in house designers have
contemporary designs that appeal to a broad upper middle class clientele demographic, and play
a civic role in communities that they exist in.
Go Globalor No?
The option for globalization is one that Ferrer Furniture should not take. The size
business and types of products made do not justify the costs to develop manufacturing in an
emerging country to save on production costs. The ability to produce product at a higher end
price point is not a bad thing. There is definite segregation and classification of the consumer
into two groupings, the high end and the price point groups. Strategic moves into higher end
markets could result in great advances for Ferrer that are parallel to global expansion.
I see this as the best plan for Ferrer for a number of reasons, not only for the above
mentioned, but in addition, marketing of an American made brand is worth something.
Expansion into a higher end market over that of the mass production market gives Ferrer the
ability to stay unique in a fully saturated, totally plagiarized market. I see great value to being
4. 3
able to keep Ferrer’s dynamic designs monopolized, in marketing of a brand that keeps jobs in
the US, in reducing distribution costs by staying local. I see great value in expansion for Ferrer
as well. I believe the Canadian market place offers the best place to integrate initially. Should the
integration go as planned and takes root well, the ability to research additional markets is
expected.
Oh Canada!
Development of an international relationship with Canada’s higher end provinces, such as
Alberta, which offers a market similar to NYC, offers the exposure to the correct demographic to
expand vertically in price point not volume . The top 10% income level bracket earners in
Canada bring in 191,000+ per year, (News, 2013) Alberta is home to the highest percentage of
these Canadians, 1 in every 50. In Calgary the number increases to one in every 30, with the
highest income earners reported in Canada living here as well. Above average income levels are
also normal in Vancouver (the Canadian Seattle) Toronto and Edmonton.
Business costs are lower in Canada when compared to the US, down 14.5% to be exact.
Production costs are also lowered, while quality of worker remains high and relatively skilled.
Construction costs are 15% lower, electricity 24%, transportation costs 13%, (Donlyres, 2012)
even internet services are reported to be lower. While the top 10% make income levels that
desire higher end products and demographics how look for quality over price point, the Canadian
market screams out for Ferrer.
Subsidy to do business in Canada are additional perks to product that can be produced
state side and shipped until production is rolling, unlike any other global outlets, business can be
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going as early as tomorrow with benefits in pocket asap! A subsidy can be a cash payment, tax
credit, wage credit, or loan in bad markets. Currently Canada passed a wage subsidy program to
insure that employees pay Canadian workers comparable living wages, this wage subsidy passed
June 2014 to the tune of $684 Billion dollars.
Changing the Game
Transforming the brand into a higher end brand will require efforts from the company as
a whole. Quality of manufacturing is something that Ferrer is well known for, as well as
independent design, these building blocks make a fantastic foundation to expand into luxury
material and rebrand as designer. The name doesn’t have to be rebranded, the transition may
even be slow and only begin with a key collection that is only available in NYC and Calgary
with blast advertisements allover both sides of the boarder driving attention to the store. More
aggressive advertising can push the brand quicker, ad space in high end catalogue and attending
home show, as well as boutique stores in key markets, can all pay off to refocus the brand to
higher end.
Globalization has made it possible to produce a wide variety of products at a rate today
that 40 years ago would have been unheard of. Technological advances have made it possible to
conceptualize a product in one hemisphere and produce it almost same day in another. With the
great advances too many industries such as aerospace and defense, there are markets that are
greatly impacted in a negative way. Industries such as house hold beauty can health care, people
who make light bulbs and the furniture business.
6. 5
The apex of the last American economic depression in 2008 saw almost all domestic
furniture manufactures shut their doors. (Kennon, 2012)More than not have moved production to
China or Vietnam, exportation of raw lumber to these nations is at an all-time high. The radical
ramifications of globalization are the decline of the American crafted good. The approximate
cost for employ a skilled furniture craftsman in the US runs $25.00 per hour; with the applicable
business cost this employee accrues the firm can pay upwards of $60.00 per hour for this skilled
laborer to build chairs. The same cost for a Chinese worker is $0.50 per hour, no benefits, and no
extra costs. If the firm employs 50 employees, this rate for an 8 hour day, the cost to the
company is $24,000; same days’ work in China is $200.00, leaving the cost of raw goods
transport and distribution to be the biggest expense. It is easy to see why the desire to go global
exists.
Money! Money! Money!
If production equals profits, then the ability to work many people in a factory that can
afford to be highly automated will make the manufacturer highly profitable. The ability of a
machine to replace the skilled worker and a line of assembly workers to replace a single or small
team of craftsmen is an attractive idea. One skilled worker is required to run each programmable
machine that cuts out the shapes needed for a single item, a worker pulls the cuts and pushes
them down the line to the next person who assembles their part and so on. The cost of the
machines needed can run upwards of a million dollars each, but with manufacturing labor costs
reduced by almost 95%, the ability to afford goods to replace the skilled worker become a
reality. The biggest trade off seen by manufacturers is now the inability to obtain hand crafted
solid items, MDF has replaced solid wood, hollow core is easier to drill, dove tail joints are cut
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more like chicken nuggets, less like precision fits. The days of the inset hinge or hidden seams
are a thing of the past, the hand crafted furniture item comes with a hand crafted price that is not
attracted to all consumers.
Hour Glass Theory
The demand for goods at a lowered cost is not a new trend; however, the economic
phenome known as consumer hourglass is new. The theory is that business should focus on the
high end or the low end. (Groth, 2011)It has come from the consumer desire to obtain the best
good at the best price and forgo long term quality over price point. When given free choice,
consumer makes poor choices. Why would consumer Sally Jones choose to purchase a $5,000
American made leather sofa, when she can choose to buy a similar sofa for $1,000? The lesser
sofa is just a pretty, feels just as nice, but due to production cuts to hinges, joints and foundation
materials will just not last, leaving the consumer back in the market for a new piece sooner than
the higher price tag item would have.
This new theory ties back into the globalization and the loose rules about reproductions in
China. One prime example would be from 2004, Basset furniture was just as susceptible as every
other domestic producer. Even with the strength that the Basset name and its subsidiaries of
Vaughns, Hookers, and Stanley Basset saw one of their key items, a Louis Philippe dresser
replicated and sold back to American furniture stores at a crippling cost that took Basset right out
of the mix. Poor Sally Jones walks into Rooms!Rooms1Rooms! or some other independent
furniture store who carries a line through Coaster or another Chinese brand and she gets the same
dresser she’s drooled over in better homes and gardens at a lower price. Score she thinks! Not
understanding that the purchase of a reproduction item is causing thousands out of jobs. One
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Sally turns into two Sally’s then three, then four, and then Basset closes another factory. John
Bassett took his son and together they went on a search for the facility that produced his dresser.
While the laws in China do not protect the American manufacturer, US law did and John Bassett
won a law suit that drew damages and stopped the production of his dynamic product.
(Burrough, 2014)
As American as Apple Pie
Ferrer is an American company; it should remain that way as much as possible while
expanding areas for sales. Ferrer is much like Bassett, willing to make a go against China. The
ability to keep unique designs or textile prints to ourselves is paramount in this industry. If it
happened to Basset with the dresser, what is keeping someone from ripping off a key Ferrer
piece? What if they already have? Business in the states protects against such acts, Canada as
well, China? Not so much. The foundation of the business model is rooted in giving back to the
community, it seems not only against better judgment from a financial aspect but from a mission
statement conflict stand point.
The companies who thrive going global are those who mass produce, not those who do
small to order custom projects. The ability to ship internationally and have presence in the
United Kingdom is a fantastic possibility as a future step without total integration into the
country with production and distribution. These type options are available to expand areas for
sales, shipping points from Canada are direct to the UK and as we know, are 13% cheaper.
Options exist to keep Ferrer American made or at least continental North America made.
9. 8
Grow, baby, Grow!
Over all company growth as a higher end designer with new marketing campaigns to
attract clientele in wider markets is the next logical step for the firm, as they are already
servicing the high end custom market, the ability to have a home line in stores as seen in print ad
will boost sales allowing satisfaction of growth desires. Going global sounds nice and fancy, and
that is great and all, but it is just not right for Ferrer, domestic growth and international growth is
far more important for the firm at this point.
Adverse reaction
To those who would contest that globalization is the best move for Ferrer I would tell
them to go ahead, invest the money and see what happens. Development of a facility to fulfill
catalogue orders sounds like a recipe for disaster in the market as it stands. I would tell them that
I prefer to play conservative cards and ere on the side of caution over going for broke, but that is
my business style, one in the hand worth two in the bush and all.
Word Count 1980
10. 9
Sourced
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http://www.nytimes.com/2014/07/06/business/a-game-of-chairs-and-globalization.html?_r=0
Donlyres,R.(2012). Advantagesof DoingBusinessinCanada. InternationalBusiness,59-65.
Groth, A.(2011, September24). THe COnsumerHourglassTheory.RetrievedDecemebr22, 2014, from
BuisnessInsider:http://www.businessinsider.com/hourglass-consumer-theory-pg-citigroup-
2011-9
Kennon,J.(2012, Febuary5). Ramificationsof Globalization through theeyesof teh Domestic Furniture
Market.RetrievedDecember22, 2014, from JoshuaKennon:
http://www.joshuakennon.com/the-ramifications-of-globalization-through-the-eyes-of-the-
domestic-furniture-market/
News,C.(2013, September13). Who are Canada'stop 1%.RetrievedDecember22, 2014, from CBC
NewsCanada:http://www.cbc.ca/news/canada/who-are-canada-s-top-1-1.1703321
