Shaw Industries: overview and operations

Shaw Industries

The existence of Shaw Industries, the largest broadloom tufted carpet producer in the world, is due to the visionary and innovative ideas of its founder, Julius Clarence Shaw. The company was founded in 1946 in Dalton, Georgia. However based in a relatively small town, Shaw has had the capability of expanding his business through the constant improvements he brought to the products. The company has significantly contributed to the urban development of Dalton and also to the development of the carpet industry. "The men who built Shaw drew upon Dalton's skilled workers, complementary enterprises, and local support networks. But the company's growth also reflected the maturation of the tufted carpet industry."

The years that passed since 1946 represent the company's transition from a small size rural carpet manufacturer to an international conglomerate. In 2000, Shaw Industries was acquired by Berkshire Hathaway, and according to some, the transaction represented the completion of Shaw's transformation. "The recent acquisition of Shaw by Warren Buffett's Berkshire Hathaway Corporation has furthered, if not yet completed, Dalton's transition from entrepreneurial powerhouse to corporate outpost."

Today, Shaw Industries, part of the Berkshire Hathaway conglomerate, is one of the strongest companies of the globe, with unique features and competencies, well established goals, strong financial highlights, creative and committed personnel and high quality products.

2. Company Description

Shaw Industries is part of the Berkshire Hathaway Corporation and it is the international leader on the carpet market. Aside from tufted broadloom carpets, the company also produces rugs and hard floor surfaces, which they sell on the United States market, as well as onto international markets. "Shaw has more than 70 manufacturing facilities in 32 communities and seven states and modern distribution in 25 metropolitan areas throughout the United States."

The company's success is due to the dedication and commitment towards creating high quality products, the company's innovative spirit, their policies and values. Among their most renowned brands, one could point out Couture by Sutton, Philadelphia Carpets, Shaw Hardwoods, Designweave or Shaw Tek.

Shaw's key people are CEO Vance C. Bell, President Randy Merritt and EVP and CFO Kenneth G. Jackson. "Shaw is a full-service flooring company with more than $5 billion in annual sales and approximately 30,000 employees. The employees' daily efforts illustrate their commitment and their determination to stay on top in an ever-changing and highly competitive marketplace."

3. Strategic Focus and Plan

Shaw Industries is generally focused on maintaining its position as international leader on the rugs and carpet industry, increasing customer satisfaction and its revenues. In order to achieve these, they first have to resolve two major issues that hold them back. As such, the first strategic focus is on increasing employees' loyalty to the organization and limiting the personnel fluctuation. The second strategic focus is on reducing the bad publicity linked to their usage of chemical compounds and implementing more environment friendly procedures.

4. Mission Statement (Current)

Given that Shaw Industries is no longer an independent company, but has become part of an international conglomerate, the carpet manufacturer shares the conglomerate's overall mission. As such, as a subsidy of Berkshire Hathaway, the mission is that of one hundred percent customer satisfaction through the manufacturing of high quality products and through the implementation of strict but fair legal, political, economic and ethics norms.

5. New or Revised Mission Statement

The Shaw Industries mission statement reveals the company's strong commitment to:

Exceed our customers' expectations in quality, service and value, while continually increasing our value to our stakeholders; and provide growth opportunities for our people. We will accomplish this in an environment that values and respects the varied backgrounds of all people.

6. Vision Statement (Current)

Similar to the company's mission, Shaw Industries' vision is in full accordance with the conglomerate's vision. In this order of ideas, the manufacturer is dedicated to maintaining its world class leading position, further expanding and increasing its revenues.

7. New or Revised Vision Statement

Shaw Industries revised vision statement is:

Shaw Industries' vision is to continue to be the industry's leader and a world class company as defined by the customers it serves while promoting strong values of honesty, integrity and hard work. For four consecutive years, the top 500 commercial facility managers were asked to rate commercial manufacturers in five categories, and Shaw was named number one in all categories: quality, service, styling, value and performance.

8. Goals

A. Non-financial Goals

Increase customer satisfaction

Improve operations and activities

Minimize the negative impact upon the environment and develop production processes that protect the nature

Reduce waste and increase quality of life in the community

Improve the recycling process

Increase number of employees from 31,469 in 2006 to 50,000 in 2011

Increase market share from 33% to 47%.

B. Financial Goals

Increase revenues from $5,834 million in 2006 to $9,554 million in 2011

Increase earnings before taxes and minority interests from $594 million in 2006 to $950 million by 2011

Increase capital expenditures from $189 million in 2006 to $350 million in 2011

9. Core Competency and Sustainable Competitive Advantage

The company's core competency is that of "efficient manufacturing and effective service to retailers," alongside with their commitment and dedication towards creating the best products to the satisfaction of customers. In addition, another core competency is that of using the latest technologies on the market. Shaw Industries has always manufactured their carpets with the latest fibres and using cutting-edge technologies and machineries.

Shaw Industries' advantage in comparison to the competitors on the market is given by the international spreading and territorial expansion of the organization, generating ease of customers' access to the Shaw facilities.

10. Situation Analysis

A. SWOT Analysis

Strengths international recognition leading position on the international market high technologies used in the manufacturing process wide array of high quality products highly skilled and trained personnel

Weaknesses involvement in law suits (such as Heller v. Shaw Industries) usage of chemical compounds that are believed to have negative impacts upon individuals' health and the environment reduced employee loyalty to the employer

Opportunities

However this is a tragic situation, hurricanes and other natural calamities affect people's houses, forcing them to redecorate, leading to an increased demand of rugs, carpets and hard floor surfaces

The growing number of rich individuals, who desire to remain on trend and constantly redecorate, buying the most expensive products

Threats fierce competition on the rug and carpet market increased concern for environmental protection, generating additional costs for Shaw Industries the ongoing devaluation of the dollar in report to the European currency, EURO generally reduced demand for carpets and rugs increased prices for raw materials and manual labour

B. Industry Analysis

Even after so many years, the rug and carpet industry remains focused in Georgia, an American state that has long benefited from the industry, managing to increase the population's lifestyle standards, their economy and reducing unemployment rates (among the lowest). The prosperity in the state, due to the manufacturing of carpets, has attracted large numbers of immigrants, especially Hispanics, who contributed to further development by "allowing the mills to remain in Dalton and keeping labor costs in check."

The carpet industry is currently focused on developing new technologies and practices that have reduced negative impacts upon workers' heath and the environment, including the limitation of waste and the recycling of old or unused carpets.

C. Competitors

The primary players on the floor industry are based in Georgia and are represented by companies that sell their products within the United States and outside its borders. Shaw Industries' top competitors are:

Mohawk Industries Inc.: 37,100 employees and $7,905 million in revenues

Beaulieu Group L.L.C.: 8,300 employees

Interface Inc.: 4,873 employees and $1,075 million in revenues

Advanced Environmental Recycling Tech.: 664 employees and 97.84 million in revenues

D. Company Analysis

Shaw Industries is the international leader on the rugs and carpet market, with annual revenues of $5,834 million and a total of 31,496 employees, both figures following a continuously ascendant trend. The company encounters difficulties in regard to their employees' loyalty to the organization and bad publicity due to its involvement in law suits and usage of polluting chemicals.

E. Customer Analysis

The number of rugs and carpet buyers has decreased during the past decade, due to several reasons. A major tendency is that of eliminating large size rugs, and replacing them with small size rugs, placed in the centre of the room, instead of them occupying the entire surface. Some customers have totally eliminated the carpets and replaced them with laminated parquet floors or gritstone floors. As such, the consequence was that of an increased demand for hard surface floors, products also manufactured and sold by Shaw Industries.

Customers come from all economic and social backgrounds, as all classes use the products. Furthermore, the company produces a wide array of rugs, carpets and hard floor surfaces, at numerous retail prices and containing several features, as to meet the needs of as many customers as they possibly can.

11. Market-Product Focus

A. Marketing and Product Objectives

Product objectives:

implement environment friendly procedures reduce use of chemicals in the manufacturing process reduce wastes produce a final product of superior quality, using environmental procedures

Marketing objectives promote the new carpet by emphasizing on its benefits: reduced chemicals used in its production, environment-friendly procedures and increased ease of disposing of it, at the end of its life cycle launch an advertising campaign to attract customers

B. Target Markets

Given that the new product would be manufactured using better, but more expensive technologies that protect the environment, Shaw Industries' target market would have to simultaneously meet the following criteria:

present an increased interest towards preserving the environment possess sufficient financial resources in order to afford the higher prices of the products manufactured using superior technologies.

In this order of ideas, Shaw Industries' target market is formed of both American citizens as well as foreigners, with ages between 25 and 65 and who register above medium incomes. The age limit is imposed by the belief that the population younger than 25 rarely possesses their own houses, shows reduced interest in carpets and does not possess sufficient financial resources to afford the relatively high prices of the new carpets. On the other hand, the retired population generally spends their pension money on medicines or journey around the world and presents reduced interest in redecorating.

Given that aside from residential carpets and floors, Shaw Industries is also focused on manufacturing rugs and floors for commercial institutions, the second target market aimed by Shaw Industries will be formed of companies that are concerned with environmental protection and that possess sufficient financial resources to afford the relatively high prices of the new Shaw carpets. The primary segment is formed of the already existent corporate clients.

C. Points of Difference

The points of difference that make the Shaw carpets better than competitors' products are the results of a combination between particular product features and organizational characteristics. Among these advantages, one could point out the following:

The new carpet is manufactured through the usage of environment-friendly procedures

It produces less waste

It can be easily recycled

Through the reduced usage of chemicals, it pollutes less

The company's international recognition is a promise of high quality.

D. Positioning

In order to successfully position the new carpet onto the market, the marketing team at Shaw Industries has to analyze the product features from the customers' view points. Once this is done, the company will create a product image that perfectly fits clients' demands. As such, being familiar with the growing concern for environmental protection customers have forwarded, but also with the late fashion trends in regard to carpets, floors and internal decorations, the manufacturer will emphasise on:

The reduced usage on chemicals in the manufacturing process

The usage of superior technologies that protect the environment and create less waste

The high quality of the carpets

The modern design

The wide array of colours, sizes and shapes.

12. Marketing Program

A. Product Strategy

The new Shaw carpets will be sold under the manufacturer's residential as well as commercial brands. Shaw Industries residential brands include: Philadelphia Carpets, Cabin Crafts Carpets, Queen Carpets, Sutton Carpets, American Home Fashions of California, Shaw Home Foundations Flooring, Couture Elegant Floors by Shaw and Shaw Mark. The commercial brands include: Shaw Contract Group, Patcraft Commercial Carpet, Designweave, Shaw Hospitality and Design Origins by Shaw.

The Shaw carpets are designed with the specified functionality of keeping the floors warm while in the same time serving a decorative purpose

The Shaw carpets are produced using the latest technologies available on the market, and the manufacturing process is less polluting

The carpets present customers with high quality

The Shaw carpets will be available in a wide array of sizes, shapes and colours, as to suit all styling demands

The company considers that during a ten-year period, the carpets should not suffer any major damage due to usage, therefore, their warranty period is of ten years starting from the purchase date and it ensures customers of the high quality of the products while also being the manufacturer's promise of resolving any complaints

B. Product Line

The new Shaw carpets are part of both residential as well as commercial product lines

Due to the increased financial costs and additional efforts required in the production of the new carpets, they will be manufactured as a limited product line, as to test customer's response

If the limited product line is received with success by the market, Shaw Industries will expand it.

C. Unique Product Quality

The unique quality offered by the new Shaw carpets resides in their extended warranty period of ten years and the incorporation of high technologies that protect the environment by reduced consumption of energy and reduced levels of waste. In addition, the manufacturer uses high quality raw materials and skilled and specialized personnel to produce a highly satisfactory final product.

D. Packaging

The new carpets produced by Shaw Industries will be covered in transparent plastic bags and then packed in cart boxes. The boxes will be provided by Shaw Industries' purveyors and will have a brown colour. The boxes will be double layered and extremely resistant as to protect the carpet during storage and transportation. The packages will contain the product's name, its features (such as dimensions or colour), its brand, the company's name and contact information, including the manufacturer's location, email address and telephone numbers where customers can call in order to resolve any complaints they might have.

E. Price Strategy

The price of the new Shaw carpets will be superior to the prices of other carpets produced so far. The simple explanation of an increased price is the usage of superior technologies and personnel training that generated additional costs. Further on, the price has to cover the entire production costs, taxes paid by the company to the state budget, personnel wages and also ensure the producer with profits. The prices will vary based on the fibre used in the manufacturing process, the thickness of the rug and its size. Prices could vary from $15 per square meter up to $250 per square meter. Price reductions will be offered on discount sales, to customers that purchase larger quantities of carpets (over 50 square meters) and to loyal commercial clients.

F. Promotion Strategy

The new Shaw carpets will be promoted through all media channels, including internet and television advertisements and radio announcements

The products will also be promoted through street banners

They will be discussed and presented during industry conferences and within specialized magazines and journals

The public relations department at Shaw Industries will contact loyal customers (especially companies) and present them the features and advantages of the new carpets.

G. Place (Distribution) Strategy

The new Shaw carpets will be sold within the company's own stores, which are strategically placed and can easily be found in all American states

Customers will also be able to buy the carpets from Shaw's partners and retail distributors

Also, the products will be available to online purchases.

13. Financial Data and Projections

A. Past Sales Revenues

The sales revenues registered by Shaw Industries are highlighted in the Berkshire Hathaway Annual Report for 2006 and present a continuously ascendant trend:

2004: $5,174 million in revenues

2005: $5,723 million in revenues

2006: $5,834 million in revenues

B. Five-Year Projections

By 2011, the carpet manufacturer has set the financial goal of reaching $9,554 million in revenues, a 63.59% increase as compared to 2006. The projections for the next five years are presented below:

Fiscal Year

Total Revenues in millions of dollars)

Percentage Increase

14. Organization

Shaw Industries currently possesses the capability of implementing the product and marketing strategies that support the revenue increase. They possess the necessary technologies, raw materials, financial resources and a skilled and experienced management to supervise the production process, the marketing implementation and the results retrieved. However, in order to insure a successful outcome, they need to increase employees' loyalty to the organization and use superior technologies that protect the environment by consuming less energy and producing less waste.

15. Implementation Plan

As to successfully launch the new Shaw carpets onto the market, increase customer satisfaction and consequently sales and profits, while in the same time maintaining their leading position, the manufacturer has to implement the following procedures, in the given order: