The U.S. Floorcovering Industry-2006.(instructor's Note)

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case is a study of the U.S. carpet and floorcovering industry. Secondary issues include consolidation of mature industries, global pressures, mergers and acquisitions, and rising raw material and fuel costs. The case permits in-depth discussion of the various externalities facing this changing industry including internationalization and consolidation pressures as well as shifting customer preferences away from carpet and toward hard surface flooring. It is designed for senior-level classes in strategic planning and business policy. It is expected to require two to three hours of outside preparation by students.

CASE SYNOPSIS

Dalton, Georgia is the carpet capital of the world and is home to the area's leading floor covering and carpet producers. The old world industry attracted the interest of Warren Buffet prompting him to purchase Shaw Industries, Inc. in 2001. Shaw and their key competitor, Mohawk Industries, Inc. has a rich history of growth through acquisitions. The industry giants have consolidated much of the formerly fragmented flooring industry they helped establish. Each is a full-line flooring producer manufacturing carpet, rugs, ceramic tile, laminate flooring, wood flooring vinyl, and other surfaces for commercial and residential customers and both continue to battle for the number one position in the U.S. The industry has experienced recent fiscal growth from the U.S. housing market boom and higher product sales prices exceeding analysts' expectations. However, rising fuel prices, competition from low-price Asian imports and actions by competitors continue to challenge the industry. Small suppliers exiting the industry have caused raw material prices to rise. Changes also include a shifting product mix driven by consumer preferences toward laminate, wood and ceramic tile flooring and away from carpet and vinyl products. The rug segment is growing along with hard surface flooring. Even with wood or laminate floors, consumers decorate with area and scatter rugs. The industry is changing and the leaders must consider additional ways to grow. Interviews with industry analysts, trade associations, and consultants provide additional insights.

INSTRUCTORS' NOTES

Recommendation for Teaching Approaches

Dalton, Georgia has been recognized as the carpet capital of the world and is home to the area's leading floor covering and carpet producers. Mohawk and Shaw, the industry leaders have a rich history of growth through acquisitions and have consolidated much of the formerly fragmented flooring industry they helped established. Both are full-line flooring producers manufacturing carpet, rugs, ceramic tile, laminate flooring, hardwood flooring, vinyl, and other surfaces for both commercial and residential customers. Their products are sold through an extensive dealer network. While the industry experienced recent growth and on-going profitability, rising fuel prices, competition from low-price Asian imports and actions by competitors continue to challenge the industry. The case asks students how recent acquisition will change the industry and how the industry can continue to grow.

Decision Focus

Dalton, Georgia is the carpet capital of the world and is home to the area's leading floor covering and carpet producers. The old world industry attracted the interest of Warren Buffet prompting him to purchase Shaw Industries, Inc. in 2001. Shaw and their key competitor, Mohawk Industries, Inc. has a rich history of growth through acquisitions. The industry giants have consolidated much of the formerly fragmented flooring industry they helped establish. Each is a full-line flooring producer manufacturing carpet, rugs, ceramic tile, laminate flooring, wood flooring vinyl, and other surfaces for commercial and residential customers and both continue to battle for the number one position in the U.S. The industry has experienced recent fiscal growth from the U. …