Martins Fabrics: MARTIN’S TEXTILES Case Study

MARTIN’S TEXTILES Summary:

This case is about the dilemma facing by John Martin, the CEO of Martin Textiles, a New York based textiles company. On August 2, 1992, which the day that the U. S. , Canada, and Mexico agreed in principle to the North American Free Trade Agreement (NAFTA). Martin Textiles is a family business over four generation, which was started by John’s great-grandfather in 1910. Today, the company employs 1,500 people in three New York facilities. John’s dilemma, which is particularly troublesome to him because he feels a sense of loyalty to his company’s longtime employees, is this.

NAFTA will remove all tariffs on the trade of textiles between the U. S. , Canada, and Mexico within 10 years. Textiles manufacturing is a low-skilled, labor-intensive business. As a result, the simple economics of the industry suggests that the under the auspices of NAFTA, the majority of textile manufacturing in the U.

S. will move to Mexico, where wage rates are considerably lower than in the U. S. When he first realized the full implications of the NAFTA agreement, John thought to himself, “My God!

Now I’m going to have to decide about moving my plants to Mexico. ” John dilemma is how to cope with this realization. If he moves his plants to Mexico, he’ll have to let go many of his loyal employees. If he doesn’t move, he risks going out of business.

Case Discussion

Question: 1. What are the economic costs and benefits to Martin’s Textiles of shifting production to Mexico?

Answer: The benefit for Martin’s Textiles moving to Mexico is whereby wages rate pay to the labour can be much lower than before and then might lead lower cost of production.

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It can give chance for Martin’s Textiles to compete with the other business competitor which ran in the same industries.

2. What are the social costs and benefits to Martin’s Textiles of shifting production to Mexico?

Anwer: The benefit is Martin’s Textiles may satisfy the needs and maintain the loyalthy by his customers because the company giving low price of product where all his customers may affordable to buy it.

3. Are the economic and social costs and benefits of moving production to Mexico independent of each other?

Anwer: No, it is dependent to each other. Both economic and social perspective in Martin’s Textiles have the same objectives towards its goals of business. When Martin’s Textile can provide lower cost of products and yet maintain it product’s quality, it might encourage its customers to stay loyal to use and buy its products.

4. What seems to be the most ethical action?

Anwer: The most ethical action is where Martin may move to Mexico by bring together his existing young labour at United States.

While his loyal labour who have worked with his company for long years can stay with the company that situated in United States which their duty is like in sales force, design function and some management function seem they are already had lots of experience since started working with the company.

5. What would you do if you were John Martin?

Anwer: In my opinion, for the sack of maintaining the business of four generation, I would rather moves to Mexico. As one of the characteristic of being a business man is must be brave and being risks taker.

So, I would try to run the business in the new environment with the different types of approach in leading the business. In Mexico, the cost of labour is cheaper. I must take that as an opportunity. The cost of product that will be market might be reduced and will attract the customers to buy. When the cost of product is lower, it have the opportunity to compete with other product in the market. Besides, in order to improve the labour productivity in Mexico, I would give bonus to those labour who show the best performance in the company.

The bonus will attract the labours to work harder and increase their effort to compete each others where it makes the production of the company growing up. While in United States, to those who already worked with the company in long period, I will asked them to choose either want to work in Mexico or United States. If they choose to work in United States, then they would be in the position of design function and other management duty, not in the production anymore. Besides, as a token of appreciation from the company, those who have worked for long period with the company will be given a compensation.