[Love] Textile industry Case write-up (Analyze curren situation, SWOT, offer solution) - Essay Example

The current case relates to the after effects of removing trade barriers in the wake of NAFTA (North American Free Trade Agreement). More specifically this case deals with the decline of textile industry in the United States that was unable to withstand competition first from Asia and then from Mexico. Both Asia and Mexico were able to oust competition from United States based textile industries because they could afford far cheaper labor rates. In the current case John Martin can be seen troubled first due to competition from Asia and then from Mexico.

Asian competition in the mid eighties effectively drove Martin’s Textiles to loss for three consecutive years. The introduction of NAFTA can be seen as the final straw on the camel’s back that threatened to dismantle Martin’s Textiles due to unbearable competition. In the presented situation, it would make perfect sense to pursue a SWOT (strengths, weaknesses, threats and opportunities) analysis in order to substantiate if Martin’s Textiles should keep operating in the United States or if it should move further south to Mexico.

One of Martin’s Textiles strength is its established and trusted brand name. The family like working environment and the manufacturing expertise that spans decades are other strengths. In contrast, the reluctance to change business operations in the wake of increasing competition is the company’s primary weakness. Also, the company is facing losses that indicate that the capital base is decreasing. Currently the business is under threat from unrelenting competition from Asia and there are chances that Mexico will provide cutthroat competition too.

Sustaining business activities in the United States would only lead to further loss and possible bankruptcy. The issue of training new labor force in Mexico would also represent a large effort that might lead to business stagnation in the early stage. On the other hand, the business can lower its operating costs by moving to Mexico. Similarly, the business can use the reduced input costs to support its previous employee base from the United States. In the given circumstances, it would be best if John Martin relocated his business to Mexico.

Further delays and reluctance in moving operations to Mexico would result in greater loss and eventual bankruptcy only. In order to move to Mexico, it would be advisable to classify the existing staff as per their age and adaptability. Martin’s Textiles should retain staff members who are under fifty years of age and should relocate them to Mexico as supervisors and trainers. This is necessary given that labor in Mexico is yet untrained and undisciplined so using previously trained and experienced staff could resolve this problem to a large degree.

In addition, it would be beneficial to both Martin’s Textiles and its older staff (ages fifty and above) if the pension funds could be used to establish the new manufacturing facilities in Mexico. In this manner, the staff would be provided holdings in the company proportional to their investment while the company’s financial woes would decrease as well. Furthermore, operations in Mexico would provide the company with greater profits that could be siphoned to rehabilitate employees that need to be laid off.