Wickersham Mills Strategic Audit

Industry Analysis

Textile manufacturing is one of the oldest of man's technological accomplishments. The oldest known textiles process dates back to about 5000 B.C. Since then, the textile industry grew out of the industrial revolution in the 18th Century as mass production of clothing became a mainstream industry. Starting with the flying shuttle in 1733, inventions were made to speed up the manufacturing process to a industry now that is automated and machine driven.

In the 20th Century, the industry had developed a bad reputation, often involving immigrants in illegal sweat shops full of people working on textile manufacturing and sewing machines. These immigrants would receive compensation for the efforts, but the pay was very minimal. This trend has resulted due to attempts to protect existing industries which are being challenged by developing countries in Southeast Asia, India, and more recently, Central America.

Globalization has seen the manufacturing outsourced to overseas labor markets. Because of the low cost of labor, there has been a trend for the areas historically associated with the trade to shift focus to the more white-collar associated industries of fashion design and retail. The textile market today is worth more than $400 billion and it is still growing every year. As a result, the recent globalization of the textile trade has opened up highly demanding and evolving requirements for outsourcing of textiles.

Current Status

The case at Wickersham Mills is based on article that was written in 1960. Wickersham is a mill that is in the business of converting cotton and synthetic fibers into cloth that can be sold to manufacturers that will use the cloth to produce dresses, shirts, and other clothing. The former president of Wickersham Mills, David Wickersham, recently died which left the position of president needing to be filled. A special meeting of stockholders was held with the obligation of electing a new president. There are four candidates for the position which are all descendants of the original founder of Wickersham Mills.

The four possible candidates of Wickersham Mills are Alfred, Benjamin, David, and Charles. Each candidate has a very different view and opinion on how the company should be ran. The future of the organization rides on the very basis of this decision. Alfred believes that a business is a means of transforming an idea into reality. He believes in imagination, rational choice, and that a company's real strength is its inner spirit. Benjamin believes that a business is similar to a living organism; training, discipline, and incentives are what allow a business to survive and grow. Charles's approach to business is driven more by a sense of power and prediction. He believes it is important to be able to predict and control the market. He wants to control the business through knowledge and the use of an objective inquiry. David sees a business as a service to society. He insists on a method of responsiveness and even persuasion.

The performance of the mill has been very poor. Over the past nine years the mill has lost just over half a million dollars. From 1951 to 1960 the earned surplus has dropped from $721K to just under $200K. These losses over the past few years are due to the significant issues and problems the mill has faced. The loss of surplus is mainly due to adverse market conditions. This is a dying industry and many customers have migrated to larger companies for their business. The competition from big companies in the South is a major cause of poor performance. The mill has also failed to secure long term contracts with any customers, which is making business difficult to predict.

The current mission, objectives, and strategies of the company are dependent upon which candidate is chosen. David wants to continue business by making specialty products and fine goods. His mission is service to society. He wants to provide customers with the kind of cloth that they want. His strategy involves anticipating customer needs and even persuading customers to want what the mill has to sell. Benjamin's mission to stockholders is survival and growth. His strategy involves finding a correct mill balance in order to save money. His objective is to find more efficient ways of production and cut out as many costs as possible. Charles's mission is achieving the power to predict and control. His strategy involves better understanding the market and being able to better predict the future. His objective is to improve the business until he can sell it for a reasonable price. Alfred's mission is self-realization. His strategy involves bringing a sense of leadership to the company.

Analysis of Strategic Factors

Wickersham Mills' management has historically been hard-nosed, focusing on predicting important market changes, and being on the forefront of trends in the industry. They fought to keep their workforce from unionizing, but were eventually forced to allow them into the Mill. Perhaps their greatest strength in the past has been their ability to forecast the markets that are vital to their business. These include labor, cotton, and production machines on the development side and consumer tastes and economic conditions on the sell side. By correctly predicting World War I, management greatly expanded their production capabilities allowing Wickersham to generate high profits. A talented economist they shrewdly employed was responsible for making this prediction. Their structure is organized in a manner which allows them to make use of their employees and machinery in an efficient manner. This helps to keep their production costs as low as possible.

Though it has many opportunities on the horizon, the company also faces many threats from external forces. A possible opportunity available to Wickersham is expanding into more complex fibers and apparel. By entering these higher-end markets, they would be able to generate higher margins putting the company into a healthier financial position. This opportunity is heavily outweighed by the threats they face, however. The company is beholden to market forces they cannot control that greatly affect their operating results. If they are not able to accurately predict demand or the prices of their inputs such as labor and raw materials, the company will not be able to survive. Due to this, they obviously are under tremendous pressure from the threat of their suppliers increasing prices. There is a very low barrier to entry in the industry as well, so they could find themselves facing more competition in the near future which will put pressure on their ability to generate profits. This is particularly worrisome, as their competition level has already