Key Messages
How An American Family Business Fought Offshoring And Revived The Furniture Industry
In Factory Man, readers will get a thorough look at how offshoring can hurt furniture companies in the United States.
For example, many American factories had to close due to the cheaper prices of furniture made in China, Taiwan and Indonesia that was supported by the government.
Entire towns were decimated due to the layoffs and this book reveals why making prices as low as possible is not a viable strategy for competing globally – something which came at great cost for many American companies.
But one family-run Virginia furniture business found success fighting offshoring head-on.
Through this example, readers will learn how to fight offshoring and why it’s important to remember that a brand is more than just a sticker on the bottom of a kitchen table.
Furthermore, you’ll also get some insight into how Chinese manufacturers use their government-backed resources to stay ahead of competitors.
The Early 1900S: When Cheap Labor Allowed The Basset Furniture Factory To Prosper
In the early to mid 1900s, American furniture manufacturing experienced a golden age.
The growth of technology and manufacturing at this time meant that people could break into new potentials with their skills and labour.
This also meant that as people moved from rural areas to towns and cities, so did their demand for mass-produced furniture.
With the expansion of the railroad networks, furniture manufacturers were now able to transport these large pieces of furniture easily, making them accessible across the United States.
John David Basset Sr., who began making bedroom furniture in Virginia in 1902, took advantage of this newfound opportunity by using his family’s land and forests.
To do so he procured a loan from his uncle and started production while taking advantage of cheap labor which kept costs low.
He hired African-American workers at five cents an hour – a fraction compared to what his white counterparts were paid – until 1933 when social unrest sparked better pay for laborers.
Thanks to the industrial revolution in America during this time period, many furniture makers like John David Basset Sr.
flourished and profited greatly off this era’s economic climate.
The American Furniture Industry’S Downfall: How Offshoring To Asia Led To Its Rapid Decline
Since the early 1980s, Asia has been gradually overtaking the furniture-making business.
This began when American companies started offshoring to Asia in order to take advantage of cheaper labor costs.
In no time at all, Asian factories began producing furniture entirely independently and exporting it to America.
Larry Moh was one of the first entrepreneurs to build a factory in Hong Kong and export furniture to the US market.
His Universal Furniture company eventually became the fourth largest furniture-maker in the world!
With their ability to produce models just like Basset but at 20–30 percent cheaper, they were initially able to outcompete American factories.
In 2001, when China joined the World Trade Organization, this only propelled the dominance of the Asian furniture-making business further as exports from China jumped by 121 percent in just two years!
Since then, Asian manufacturers have continued to lead in production quality and value for money.
The Trouble With Offshoring And Importing: Pitting American Consumers Against American Companies
When Asian companies started producing and selling their products in America, consumers welcomed them with open arms due to the lower prices, disregarding the quality of the goods.
As a result, even American companies began embracing Asian products as these cheaper items helped offset higher shipment costs.
The disposability of Asian-made furniture deeply infiltrated people’s purchasing behaviour.
After all, most people didn’t expect to leave the bed frame or bookshelf behind for future generations, so why pay more than necessary? Furniture imports from Asia had grown to such an extent that by 1998 one third of all wooden furniture sold in the US was imported.
American businesses were likewise tempted by Asia’s potential as they were able to manufacture much cheaper while greatly increasing their own profits through offshoring.
This also enabled them to compete with their Asian rivals in terms of price.
The offshoring process meant being able to pass on lower production costs directly to customers, thus offering them low-cost products.
The Unfairness Of Global Trade: Chinese Companies Have An Unsustainable Advantage Over American Counterparts
When it comes to competition, importing often excludes fair competition.
This is especially true when it comes to foreign imports from China appearing in the American market.
With government subsidies providing extra incentive to keep prices low and the economic advantage of having access to cheaper labor, Chinese companies have an upper-hand when it comes to competing with domestic businesses.
Take Kincaid Furniture for example.
They had 12 factories and employed over 4,000 workers in the early eighties but were ultimately driven out of businesses because they couldn’t compete with Universal’s $39 dining room chair (compared to their $220).
Even after Kincaid started importing they still couldn’t keep up – this is a direct result of unfair price competition caused by having to import materials without receiving government support like Chinese companies do.
It’s clear that American companies are at an immense disadvantage when competing against foreign imports – the nature of this competition often isn’t even an level playing field due to the advantages provided by government sponsored policies in other countries.
The Real Victims Of Globalization: The American Factory Worker
Offshoring and importing have had dreadful effects on the plight of American workers.
Due to the competition posed by other countries, many American manufacturers have found themselves struggling to keep their businesses running.
This has led to a number of closures, leaving factory workers across the country without jobs.
It’s estimated that since China joined the World Trade Organization in 2001, 63,300 American factories have been forced to close their doors – resulting in five million factory workers being left without an income.
It doesn’t help that these displaced workers are unable to find another job easily.
While other professions may be able to fall back on training or furthering education, most former factory works don’t take advantage of these opportunities due to age or lack of skills and confidence needed for another job.
The situation is truly dire and it’s important that we continue conversations about foreign trade in order to come up with solutions that help alleviate this problem – instead of just focusing on management and board members.
It’s clear that something needs to change if America wants its factories back up on their feet again!
The Law Is On The Side Of American Businesses When It Comes To Illegal Dumping And Unfair Competition
When it comes to competing with cheap foreign imports, American businesses have the right to be protected by law.
The World Trade Organization has established a number of standards that make it illegal for any country’s government to actively try and run companies out of business in another country through unfair competition such as dumping.
Dumping is an instance when prices are set lower than production costs or lower than those set by its own local market.
If instances of dumping are proven to have led to factory closures in one country or higher rates of unemployment, then it is considered illegal under WTO standards.
This means that local factories can seek protection from artificially-priced Asian imports.
American businesses also have the chance to receive government aid if they can prove instances of illegal dumping by foreign companies.
Under the Continued Dumping and Subsidy Act of 2000, levies known as “duties” are imposed on the worst offenders and collected fees are then returned back to American business affected by these dumps.
For example, 20 American factories damaged due to the three largest Chinese factories engaging in dumping can get compensated with duties imposed on those Chinese factories, thus repairing the harm done their business.
How American Companies Can Compete Against Foreign Companies Using More Creative Strategies Than Just Moving Offshore
American producers can fight against the competition from Asian countries and come out on top.
John D.
Basset III proved this when he initiated a petition against the People’s Republic of China, despite mockings and cancellations from various people.
His goal was to keep as many American jobs as possible by proving that Chinese factories were dumping.
John spent hours of his time on phone calls, meetings, conferences in order to effectively rally others and make them passionate about keeping American jobs.
His work paid off in October 2003, when 57 percent of the remaining American furniture producers had filed a petition against the People’s Republic with him.
Thanks to John’s efforts, the Department of Commerce conducted an investigation which determined that Chinese factories were indeed dumping low-cost products onto the market.
The duties imposed on the biggest dumpers allowed John and other co-petitioners to compete further with foreign competition instead of immediately moving offshore like many companies usually do in these cases.
John D. Basset Iii Fought To Protect Jobs And Traditions In His Community
It’s no secret that offshoring production can be quite lucrative for a business.
After all, producing products in countries with lower costs of labor is often more cost-effective than producing them domestically.
But despite the potential gains offered by moving production offshore, there are also benefits to protecting local jobs and communities.
John D.
Basset III faced this dilemma when confronted with his family history and their furniture making business.
His uncle Vaughan-Basset Furniture wanted to go down the path of offshoring their product while John wanted to try and find a way to keep the company local and preserve those American jobs.
In the end, he was able to save 700 jobs by keeping factory production within Virginia.
Through hard work and determination, he was able to win the battle against offshoring production and preserve those jobs for generations of workers that were employed by his company.
This shows us that protecting and preserving local manufacturing jobs isn’t just an act of benevolence — it can also be good for business’s bottom line when done properly.
Offshore production has its benefits, but so does keeping companies locally rooted in order to ensure economic stability in their immediate area or community, as well as job security for the people employed there.
Wrap Up
Factory Man is an eye-opening account that deep dives into the negative effects of globalization, most notably in the furniture industry.
The book tells the story of how mass imports and outsourcing of made many American factories close while millions of Americans lost their jobs.
But Factory Man isn’t all doom and gloom.
It also provides hope for people who believe in putting people first, ahead of profit.
Companies can still fight back against global forces that threaten their workers and communities–they just need to have the courage to stand up for what’s right.
This book serves as a reminder that customer loyalty, hard work and dedication pays off in the long run, no matter how difficult change may seem at first.
