The U.S. floorcovering industry--2006.

Helms, Marilyn M. ; Baxter, Joseph T.

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.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 continues to grow 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 insights.

Main Features of the Case

The authors analyzed the industry's situation and strategic alternatives to determine which growth avenues were best for the industry. The case provides insights into strategic and managerial issues and included detailed market and financial information on the industry and Mohawk, the only publicly-traded major player with separate industry data. The case study was developed from extensive use of secondary research from readings, articles, and reports from trade organizations on the carpet and floorcovering industry as well as interviews and personal experience working with the industry.

Learning Objectives

After studying and discussing the industry case study, students should attain the following learning:

* Recognize growth issues in a mature company and industry

* Describe strategies for vertical and horizontal integration

* Comprehend the benefits of industry consolidation

* Discuss the problems with merging companies

* Review how economic conditions and rising material costs affect industry strategies

* Profile an entrepreneurial-based industry and review the "cluster" effect of industry growth and location within a region

* Consider the impact outsourcing has on the ability to retain market share

* Practice balancing the interplay of strategic alternatives, financial outcomes, and the industry implications of possible continued mergers and acquisitions.

Potential Curriculum Uses

This case is suitable for an undergraduate strategic management course and can be used later in the course when material related to industry mergers and consolidation for mature industries is discussed. It also fits with a discussion of maturity strategies. It can also be used in an international economics or managerial economics course since it presents issues related to international mergers, fuel and other rising raw material costs (particularly oil which is a key component of carpet yarn and backing), outsourcing and expansion strategies, NAFTA and CAFTA discussions, and vertical integration. The case can be taught in a single session of approximately 1.5 hours, but a two-session sequence or a double session could delve deeper into industry structure, conduct, and performance. A longer time is also recommended if calculations and other details are computed. The case is also suitable for a take-home examination of the financial and market data with strategic issues. A team presentation is also possible as is a follow-up analysis of other industry players. An outside experiential activity can be to interview a carpet retailer in the area to learn about changing consumer preferences in the industry (i.e., shift to hard surface flooring, replacement cycle for flooring, absorption of energy costs, costs patterns and trends, etc.).

Class Assignment Questions and Answers

1. What are the pros and cons of the industry leaders maintaining their rapid acquisition rate of competitors and consolidation of the carpet industry?

Pros of Growth and Consolidation Cons of Growth and Consolidation

Economies of scale and scope Acquisitions may fail to recognize
 their intended benefits

Justification for further Difficulty in integrating
backward integration toward the diverging corporate cultures
source of raw material inputs

Move toward higher market share Can be expensive
and potential monopoly status in
some floorcovering categories

Less risky than internal new Insufficient or inadequate
ventures screening of acquisition targets
 may result in problems

Preferred entry mode (in new Acquisition may fail to add value
product categories) in
well-established industries like
floorcovering

Faster growth than through May overestimate the economic
internal development benefits of the acquisition

2. Will the recent acquisitions guarantee Shaw and Mohawk a strong position for further expansion within the flooring category? Should they consider other growth avenues including joint ventures, partnerships, or internal growth?

While the purchase of Unilin does provide Mohawk a presence in Europe, particularly in laminated flooring, this is no guarantee of a strong position. It does extend the company's reach into Europe and adds more non-carpet flooring to their offerings. Belgium's location in Western Europe is also a good position for further expansion into continental Europe. Business is in Europe and Mohawk's acquisition strategy gives them knowledge of the culture and flooring buying habits of this market. Unilin is a strong brand name and has experience and a set of customers and suppliers in place. This acquisition is a fast entry strategy rather than starting a company. Hard surfaces not comprise over 30% of Mohawk's total revenues in 2004 up from 5% in 2001.

An "A" answer might include a discussion of international expansion. International expansion is complex and involves weighing the benefits of new markets vs. the loss of operational size and efficiency in the US.

Shaw Industries, Inc. also is positioned to have a larger access of fiber and backing materials and should be better able to squeeze more profits or at least reduce petroleum-dependent raw material costs.

While all these choices represent ways to grow, their acquisitions have left few partners for joint ventures. Growth internally is possible and an on-going strategy. Their production output and number of employees steadily increases. The rivalry with Shaw Industries, Inc. has put continued pressure on the company for size. Joint ventures or partnerships might be appropriate for recycling. It is difficult for companies to recycle and reclaim used carpeting on their own (due to the capital costs to enter). Thus forming a recycling and distribution channel (for reverse supply chain logistics) might be appropriate. Design is another area of internal growth. Offering customer specialty and custom designs are appealing to customers who are growing more interested in "mass customization" choices.

An "A" solution will note that regardless of the growth avenue, market share growth is the goal. Market share growth encompasses a number of strategies. Further internal growth is through process improvements and leveraging knowledge across all lines supported by real-time information systems. Quick reaction time is also important for growth as is cost management.

For Mohawk and Shaw, the two leaders in the carpet and floorcovering industry, growth by acquisition has historically been the norm. Most mid-sized players have been acquired. They will probably not increase their horizontal presence by acquisition as they are already selling or manufacturing flooring in every hard and soft surface category. Mohawk's goal, according to the 2004 annual report, is to sell floorcovering and textiles for every use in the home and for every commercial application. Thus, other vertical acquisitions are possible moving backward toward the source of supply (raw materials, backing, and dyes) or forward toward retail outlets. Shaw, however, expanded into retail outlets five years ago and realized they were competing with their own retail customers. Further global expansion is also possible. With the rising fuel costs, it makes sense to have a manufacturing presence in Europe and Asia to reach these markets faster and cheaper. European buyers are concerned more about recycled content and one avenue for growth to make them appealing in the international market is to further adapt their manufacturing processes toward this goal. While they have environmental programs in place, the acquisition of other "green" companies could further this goal. Still other home or office textiles might also be acquisition targets (i.e., wall coverings, sheets, towels, etc.).

An "A" answer will note that growth by acquisition is important to gain market share, it offers immediate leadership and a strong position along with backward integration and represents a stronger point of control in the supply chain. Acquisition allows companies in general to broaden their product line and offering and consolidate fragmented markets. Acquisition is also a means to achieve a strategic goal. Acquisition offers a fast way to gain existing infrastructure including transportation and distribution centers. Purchasing sole source suppliers allows firms to have an uninterrupted source of raw materials.

Mohawk's acquisition of Lee's carpet moved the firm into a new line of modular carpet. It is a fast growing category in the carpet industry and is easy for do-it-yourself installers. Consumers like carpet tiles (for homes and offices) because only the soiled squares or wear areas need to be replaced--thus extending the life of the carpet flooring.

3. Are the top firms expanding too quickly? If so, what challenges face management?

Analysts seem positive about the acquisitions of the carpet industry and of Mohawk in particularly. With each acquisition, the stock price increases and each year (except 1996 and 2002) the company has made acquisitions. This is typical of companies in the late-growth, early-maturity stage of the life cycle. Beginning in 1992 a series of strategic mergers and acquisitions redefined Mohawk and the entire floorcovering industry. As in any merger or acquisition, management faces challenges of assimilation of the various corporate cultures into one organization. There is an issue of changing or redefining management structure. Problems exist due to the nature of the various computer software packages and hardware. The programming staff is left to combine data and information. While the IT issues are beyond the scope and coverage of this case, they do represent an important point. This would represent an "A" answer. These students should note that the data flow, as in the communication flow, means they will either create one huge company and realign all the systems with the large company or leave the entitles as stand-alone strategic business units operating their own systems (with probably compromised efficiency).

4. How will smaller companies be able to carve out a lucrative niche in this industry? Do these firms represent a threat or an opportunity to Shaw and Mohawk and why?

While the small companies are neither a threat to Mohawk or Shaw, small companies can survive in this industry as a niche player. These smaller companies offer a limited line of specialized products. Firms like Niche, Inc. (at http://www.nicheworld.com), for example specialize in products like mats, wall coverings, custom carpet, and logo carpet for business and industry. Such players offer small runs or lot sizes and customized, one-of-a-kind designs that cost more but offer extreme choice options to the customer. As another competitor, J&J Industries, while not small, is a niche player in that they concentrate only on the commercial segment of the market. An "A" answer will mention possible niche strategies including niche-differentiation (specialized and customized products) as well as niche-low cost (serving small price sensitive customers).

5. What are the pros and cons of diversifying outside the floorcovering industry?

Pros of Diversification Cons of Diversification

Reduce risk of concentrating in Bureaucratic costs of
only one industry or market diversification may exceed the
 costs of diversification as a
 value strategy

Take advantage of differing Difficulty in managing a number
business patterns, trends, of different industries, markets,
or cycles and customers

Can enter an industry or market Companies may diversity for the
at another stage of the life wrong reason
cycle (add products at the
entry-level of the life cycle
to offset the shrinking of other
markets)

Gain production, distribution, Investors may prefer to diversity
sales or marketing efficiencies their portfolio of investments
and scale economies on their own rather than having
 a company diversity for them

Gain technical expertise Tends to depress rather than
(knowledge base, technology, improve company profitability
personnel) from the
diversification that may help
the parent company

6. How will raw material and energy price increases (particularly oil) and the need to remain environmentally responsible continue to affect the industry in the future?

An "A" answer to this question should include additional analysis beyond the case itself to focus on current world events and the energy situation. Oil shortages due to industrialization in Asia, particularly China, increased the demand for oil. The shortages and increased prices for both the raw material input and for distribution (trucking) will cause costs to increase, thereby lowering profits, or they will have to pass the costs along to the consumer. With economic uncertainty and consumer's budgets strained by their rising fuel costs (for automobiles, natural gas for heating and cooking, etc.), consumers may delay replacement purchases of flooring. New housing starts are starting to slow. Builders and specifiers (architects, designers, builders, etc.) may switch to lower-cost flooring options. Yet, consumers are demanding more hard-surface flooring. Thus there may be a shift from carpet (petroleum-based) to hard surfaces (wood or ceramic tile). Yet, the shipping costs to transport the flooring remain.

Raw material inputs for carpet production include nylon, polyester, and polypropylene resins and fibers and carpet backings used exclusively in the carpet and rug production. All these inputs are derivatives of petroleum.

7. Will sales of laminate and other hard surfaces continue to grow?

As with a growing number of consumer products, there is a demand for more choices and options. Carpeting, while offering a range of colors and textures, is a more mature product than the newer hard surfaces. Consumers are shifting to hard surfaces to offer more choices in flooring. While carpeting remains some 63% of market share for the industry, customers are demanding hard surfaces in kitchens, baths, and other high traffic areas. Hard surfaces have grown almost 21% (laminate) over a five year period (1998-2003). This trend suggests hard surfaces are growing in popularity. Several links, while unfounded, exist between carpet and allergies. Students with an "A" answer should also note some of the trends in laminate flooring. For example, laminates are seen as easier to clean by consumers and the number of cleaning products (Swifter duster and wet or dry disposable sheets that attract dust electrostatically) indicates the popularity of the category. While hard surfaces are growing, most customers continue to use area rugs.

8. What effect will low-cost imports, particularly from Asia, have on the industry?

Almost every consumer goods industry faces competition from Asia. However the shipping costs and transportation time from Asia offer some advantages to US carpet producers. Carpet is capital intensive but not labor intensive (as all the tufting, coating, and processing is fully automated and often vertically integrated in a seamless process). The less labor intensive industries are not as vulnerable to low-cost imports. More of the competition from imports has been at the high quality end of the carpet spectrum in silk Oriental hand-woven rugs. An "A" answer should draw parallels to other textile industries, particularly the glut of Asian clothing that has entered the US market since import quotas were lifted.

Teaching Approach and Plan

It is recommended the class begin with an introduction to the industry and its history. The class can consider the questions above as an in-class assignment. A review of major industry players is also recommended particularly to understand the parallel changes at Shaw, Inc. who has also grown through a number of acquisitions. Consolidation of the industry should be discussed as well as consolidation of the retail outlets (now largely limited to big-box home improvement retailers) as well.

Another teaching plan is to direct students to the Carpet and Rug Industry's website at: http://www.carpet-rug.com to read about the history of the carpet industry as well as highlight current trends in the industry. This is particularly important for students with limited experience in or knowledge of the industry.

Industry Analysis

A starting question for an industry analysis might be: "What are key events in the structure and growth of the floorcovering industry? Also how did the industry change from carpeting to floorcovering and what is the next revolution in the industry (Griner, 1988). Exhibit 1 summarizes the findings of a "Porter Five Forces Analysis" (Porter, 1980). An Industry Life Cycle Stage analysis is offered in Exhibit 2 (Porter, 1980; Oster, 1990; Grant, 1995 et seq.) Exhibit 3 illustrates the Industry Value Chain (Porter, 1985).

The floorcovering would be recognized by most analysts as an attractive industry when examined using the Porter's Five Forces framework. The purchase of Shaw Industries Inc. by Berkshire Hathaway attests to the hidden value of this "old world" industry by Warren Buffet, founder of Berkshire Hathaway. With the vertical integration of the industry, most firms are dependent on suppliers for nylon pellets and other petroleum-based raw materials but Mohawk, like other large manufacturers, extrude their own yarn. They purchase dye and use a large source of water for carpet dyeing. Entry barriers are high due to the size necessary to be competitive. With few manufacturers customers have a number of color and texture choices, but have little choice of manufacturer. Most manufacturers make a number of floorcovering products and most retail outlets sell the products of multiple manufacturers. Switching costs between companies by customers is low and few buy carpet based on brand name or manufacturer but rather rely on information provided by sales representatives in the retail outlets.

[ILLUSTRATION OMITTED]

The relatively large market share of the two industry leaders (Mohawk and Shaw) is evident yet further mergers and acquisitions seem likely as the industry continues their consolidation. Small players that remain are likely niche players offering custom, one-of-a-kind, customized products for an up-scale customer or market. Other small players may also be low-end producers of entry-level floorcovering products.

The floorcovering industry, with a continual customer replacement cycle and a growth in housing starts in the US in recent years (2004-2005) with a slowing in 2006 has extended the growth of this industry. The industry seems to be experiencing a prolonged growth pattern due to mergers and the addition of new floorcovering products. The industry is very much linked to general economic conditions. Housing starts are a key leading economic indicator. When housing starts fall, the industry must either lower costs or shift their customer base to institutional, governmental, and other non-residential customers. These institutional customers, particularly schools and hotels, follow a cyclic and seasonal pattern for renovation schedules. Exhibit 3 portrays the Floorcovering Industry's Value Chain.

Retail carpet is a fragmented industry, requiring a high level of customer service to assist the end user in choosing colors, textures, and options. Carpet has not enjoyed a branded status and few outside the N. GA region know the Shaw or Mohawk name. Consumers are often more familiar with the coatings use to make carpet stain-free. Carpeting represents major consumer expenditure and requires much marketing and consumer education. The popularity of home redecorating has helped to advance frequent floorcovering changes. Educated customers can make a more informed choice. Marketing at the retail level requires a knowledgeable, well-trained sales force and coordination with installers since most carpet is not a do-it-yourself project. Because more people own homes and home size is increasing, floorcovering sales should continue to grow. Interest in home decor continues to rise. Ceramic tile, stone, wood, vinyl, and laminate products are growing due to increased consumer demand and will shift marketing efforts and expenditures.

Since Mohawk is the only publicly traded company with separate financial data, students can compute ratios using balance sheet and income statement data for the company. In addition students can develop a SWOT analysis for Mohawk. Exhibit 4 outlines the Strengths, Weaknesses, Opportunities, and Threats (SWOT) for Mohawk.

Annual Operating Revenue $6,620,009
Operating Profit Before Depreciation $ 627,272
Pre-tax Income $ 577,091
Total Net Income $ 358,195
Quick Ratio (FY) 0.8
Current Ratio 2.2
Debt to Equity Ratio 33.43%
Price to Revenue Ratio 0.97
Price to Book Ratio 2.00

REFERENCES

Theoretical Readings:

Adams, Walter. (1990) The Structure of American Industry. New York: Collier Macmillan.

Grant, R. M., (1995), Contemporary Strategy Analysis, Blackwell, Oxford, England

Greiner, Larry E. (1998) "Evolution and Revolution as Organizations Grow," Harvard Business Review, May 1.

Higgins, R. C., (1995), Analysis for Financial Management, Irwin, Boston

Oster, S. M. (1990), Modern Competitive Analysis, Oxford University Press, Oxford, England

Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York.

Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press, New York.

Porter, M.E. (1990) Competitive Advantage of Nations. New York: Free Press.

Associated Readings:

"Carpet Maker Looks to Europe," Atlanta Journal Constitution, July 5, 2005 at www.ajc.com/business/content/business/0705/05bizmohawk.html.

Grillo, J., Reese, K, Marill, M.C., Young, B. and Percy, S. (2005) "Twenty Years, Twenty Leaders: Robert E. Shaw, Magic Carpet Ride," Georgia Trend, September, 34-35.

Helm, Darius (2005). "Top 15 Specified Carpet Manufacturers" Floor Focus, 14(5), June, p. 25-49.

Jones, Jamie (2005). "Mohawk Acquisition to Boost Company," The Daily Citizen (Dalton, GA), Friday, A1, A3.

Jones, Jamie (2005). "Mohawk Forms Partnership," The Daily Citizen (Dalton, GA), Sunday, December 4, p. 12 A.

Oliver, Charles (2005) "American Products Have an Edge on the Overseas Competition," The Daily Citizen, Dalton, Georgia, Friday, March 25, p. 3.

Pare, Mike (2005) "Investors React Favorably to Mohawk's Venture into Laminates," Chattanooga Times Free Press, July 5, 2005, D1.

Patton, Randall L. (2004). Shaw Industries: A History, The University of Georgia Press.

"Scoring Flooring Industry Stats for 2004" Floor Covering News, July 11/18. 2005, 20(9). 1-18.

Tucker, K. H. (2005) "The Long Run: At Every Turn, the Road to Success is Covered with Carpet," Georgia Trend, September 67-76.

Websites

Mohawk Websites

http://www.mohawk-flooring.com http://www.mohawkind.com

Carpet Industry History http://www.daltonchamber.org

Competitors

http://www.shawfloors.com http://www.jjindustries.com http://www.armstrong.com http://www.beaulieu-usa.com http://www.mannington.com http://www.interfaceinc.com http://www.cafloorcoverings.com http://www.berkshirehathaway.com

Trade Associations

http://www.carpet-rug.org/ http://www.americanfloor.org/

Cluster Analysis

http://www.isc.hbs.edu/MetaStudy2002Bib.pdf

Marilyn M. Helms, Dalton State College

Joseph T. Baxter, Dalton State College

Exhibit 1 Summary Porter's Five Forces Analysis for the
Floorcovering Industry

 Very favorable Favorable Neutral

Customers X
Suppliers
Barriers
Substitutes X
Rivalry
 Unfavorable Very unfavorable

Customers
Suppliers X
Barriers X
Substitutes
Rivalry X

Conclusion: Consolidation to a smaller number of players is due to
the high barriers to entry (cost and size of manufacturing and
distribution coverage). There is a significant investment to
breakeven. Rivalry is strong due to the two main players and their
major market share. The industry is clustered and concentrated with
U.S. manufacturing based near Dalton, GA in the SE U.S. Most
full-scale competitors offer all floorcovering choices (hardwood,
vinyl, tile, ceramic, carpet, rugs, laminates) and there are few
substitutes not included within the industry coverage. The cost
of fuel means suppliers costs for raw materials is increasing. The
threat of substitutes is low since the leading manufacturers produce
or distribute the entire line of floorcovering products.

Exhibit 2: Life Cycle Stage Analysis: Carpet Industry

Factor Emerging Growing

Growth Rate Increasing > GNP

Growth Potential Unknown Uncertain
 >> Present Volume

Product Lines Basic Proliferating

Role of Concept Product line
Technology development. refinement and
 Product extension
 engineering

Number of Increasing Shakeout
Competitors

Market Share Volatile Progressive
 concentration

Barriers to Entry Low Increasing

Customer Loyalty Little or none Increasing

Supplier Loyalty Little or none Increasing

Importance of Low Increasing
Cost

Factor Mature Aging

Growth Rate < = GNP < 0

Growth Potential Well known Well known
 > Present Volume < Present
 Volume

Product Lines Renewal Reduction

Role of Evolution of Process
Technology process/materials development
 Product line and cost
 renewal reduction

Number of Stable Declining
Competitors

Market Share Leaders entrenched Concentrated

Barriers to Entry High High

Customer Loyalty High High and
 stable

Supplier Loyalty High High and
 stable

Importance of High High
Cost

Exhibit 4 Mohawk SWOT Analysis, 2006

STRENGTHS

Largest market share in the industry
providing market power with
suppliers and operating economies

Complete portfolio of flooring
products

Strong liquidity (cash and
investments and ratios)

OPPORTUNITIES

Concentrate on other geographic
areas and international markets

Acquire still other firms to build scale
and market power

Increased negotiating power with
suppliers

Access to less expensive capital

More professional management

Cross elasticity between different
products

Increased lobbying power

Scale and market economies

Rugs and carpet tiles

Aging population

WEAKNESSES

Size could be a potential weakness

Few acquisition partners

Inability to merge the cultures of the
acquired companies

Loss of control due to size

Possibly an inefficient organizational
structure

THREATS

Increasingly powerful competitor--Shaw
Industries

Rising fuel costs for distribution as
well as a raw material input

Cheaper imports

Government mandated recycling or
recycled content

Poor carpet image--health/indoor
air/ and environmental concerns

Overproduction