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Chapter 23

ECO 211 Chapter Notes - Chapter 23: American Furniture Warehouse, Global Sourcing, Collegehumor

Course Code
ECO 211
Lorca Maria

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MKT 320: Retailing
Case #23: American Furniture Warehouse Sources Globally
1. Factories in many developing nations have lower cost structures, but that is often
attributes to fewer benefits and lower wages for workers. What are the ethical
tradeoffs for retailers and shoppers when merchandise is sourced from countries
where labor practices fall short of standards Americans deem acceptable? Do
shoppers really care about workers halfway around the globe, or are hey more
concerned about how many dollars are flowing out of their own pockets?
The ethical tradeoffs for the retailers is that they are knowingly
outsourcing their products to countries where wages and working
conditions are below standards provided in the states. However, to many
companies, lower production costs are more important than these ethical
Shoppers do not really care about where their products are being made and
the conditions that those workers and in, mostly because they are unaware
or ignorant about these facts. When purchases an item, most shoppers look
for the best deal and lowest price and don’t pay attention to where it was
made. If they do, however, they tend to not care as much.
2. The world is our marketplace. AFW employs global sourcing, uses many
negotiating tactics and shifts channel tasks to keep is costs as low as possible.
Enumerate the tactics AFW uses to keep its prices low. What other strategies and
tactics could a furniture retailer use to hold the line on retail prices?
AFW is able to keep its prices low by buying products in huge bulk
quantities. Its buying staff is able to negotiate prices 30-60% lower than
competitors’ prices for comparable merchandise. Also, vendors will sell
products cheaper to AFW because they will purchase the items with a no-
return policy. Another way AFW reduces its costs is by having the
products delivered blanket-wrapped instead of carton-wrapped because
they blankets can be reused and it saves about 5% on the purchase price.
3. What criteria should AFW use when deciding whether to see a new vendor? How
might it apply some of its best practices with its biggest vendors to new, smaller
vendors? What strategies or innovations could it employ to stretch the
productivity of its buying staff?
To stretch the productivity of its buying staff AFW could locate their staff
in more countries that they regularly do business with in order to make
meeting with vendors easier and more accessible. AFW should continue to
take risks in discovering new upstart vendors because the benefits tends to
outweigh the costs and once they find a good vendor that no-one else has
discovered, they can reap full benefits. The criteria for whether to see a
vendor or not should be whether that vendor has the capabilities to offer
prices meeting the best they can get from other vendors.
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