Masterson Carpet Mills

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Group Case Study for Masterton Carpet Mills, Inc. Definition of Problem The Problem Masterton Carpet Mills must decide whether a change in distribution practices for fiscal 2001 is necessary. Company Background: Masterton Carpet Mills, Inc. is a privately held manufacturer of a full line of medium to high-priced carpet primarily for the residential segment. The company markets its products under the Masterton and Chesterton brand names. MCM currently distributes its line through seven floor covering wholesalers located throughout the United States (Kerin & Peterson, 2004). U.S. Carpet and Rug Industry: U.S. consumers and businesses spend about $50 billion annually for floor coverings. The largest category of floor coveringsis carpet and rugs, followed by resilient coverings (vinyl), hardwood, ceramic tile, and laminates. The U.S. carpet and rug industry recorded sales of $11.69 billion at manufacturer’s prices in 1999. Carpet and rug retail sales were estimated to be $17.9 billion. Industry sales are divided between “contract,” or commercial, sales for institutions and businesses and residential sales for household replacement carpets (Kerin & Peterson, 2004). Competitors: The U.S. carpet and rug industry is undergoing a period of consolidation begun in the mid-1980s. Mergers, acquisitions, and bankruptcies among manufacturers brought about by declining demand for carpet and rugs, excess manufacturing capacity, and dwindling profit margins reduced the number of carpet and rug manufacturers from more than 300 in the mid-1980s to about 100 companies in early 2000. By 1999, it was estimated that 10 companies in the industry produced 91 percent of carpet and rug sales in the United States. Three companies: Shaw Industry, Mohawk Industries, and Beaulieu of America accounted for about 85 percent of U.S.

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