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Customer Service

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Environmental Anaylsis

Environmental Analysis

Introduction

The study of macroeconomics is filled with several competing theories. The dominant theory used in modern macroeconomic analysis is the aggregate market. This paper is to give a brief yet insightful look into the macroeconomic and internal operating environment of Mohawk Industries in particular their floor covering division, focusing in the area of carpeting while analyzing these cyclical processes, we will also take a slightly more in-depth look at the macroeconomic factors of the textile industry which birthed Mohawk Carpets.

Mohawk Corporation

Mohawk Carpet Corporation is a one of the three subsidiaries of Mohawk Industries, MCC markets and distributes carpets and rugs in a variety of patterns, textures, colors and styles across the United States and globally to retail markets, commercial markets and more, in pricing they range moderate-expensive, marketing to demographics of varying degrees. MCC is well branded through the use of effective advertising quality carpets such as Horizon, Galaxy, Mohawk, and Karastan to name a few, enables them to keep their competitive edge. The Carpet and Rug Mills Industry in the US manufactures and finishes carpets and rugs for the domestic, commercial and industrial sectors. These products are generally woven or tufted from cotton, and made from nylon or other synthetic materials; most carpets and rugs are used by the final purchaser as a final good. Some of the industry's products are used as intermediate inputs in automobiles and boats. MCC decimates the competition through fleet ownership of delivery trucks on both sides of the globe, they constantly scan the competitive landscape of their industry and they are environmentally conscious and are prominently respected as being so, they stay innovative and visionary as they have been from the very outset, they remain abreast about industrial productivity technologically; among companies like Shaw Industries their most fierce competitor of the others operating at Mohawks' level of consumer adoration in dollars, a lot of them.

Macroeconomic Variables

"The carpet and rug mills industry (NAIC Code 31411), falls within the manufacturing industry, and comprises establishments primarily engaged in (1) manufacturing woven, tufted, and other carpets and rugs, such as art squares, floor matting, needle punch carpeting, and door mats and matting, from textile materials or from twisted paper, grasses, reeds, sisal, jute, or rags and/or (2) finishing carpets and rugs (US Census Bureau, 2002)."

For the last five years, Mohawk has continued to expand its business more than ever. There have, however, been some macroeconomic variables that Mohawk has had to weather in order to achieve this success. These macroeconomic variables are gross domestic product (GDP), inflation, and unemployment. As the GDP fluctuates, it will impact inflation and unemployment which will ultimately impact the business.

Mohawk has gained its status in the carpet and rug mills industry through its numerous acquisitions. In 2000 and 2001, the acquisition of Crown Crafts and Dal-Tile were merely two more acquisitions that helped to further substantiate Mohawk's status as an industry leader. In 2002, there was an economic slump and oil prices were on the rise. Mohawk implemented an ongoing effort to reduce costs in manufacturing variances and operating expenses (Mohawk, 2003). Despite the obstacle of the sluggish economy and inflation of oil prices, Mohawk managed to reach an incredible $4.5 billion in sales in 2002 (Answer.com, 2007).

Mohawk experienced weak business conditions during the first half of 2003, although economic conditions were generally favorable. Mohawk offset the inflation of raw materials by increasing customer prices. In 2003, Mohawk added Lee Carpet to its long list of acquisitions and continued to excel in net sales by 1.5 billion. After the Lee Carpet acquisition, Mohawk announced that it would close its manufacturing facility in Talladega, Alabama. This closure resulted in a mass lay off of 125 workers (Answer.com, 2007). Although the economy was fairly stable in 2004, inflation of raw materials was still on the rise. Mohawk had to implement more price increases to customer, in effort to combat the increasing inflation. In 2004, Mohawk still experienced an increase in net sales. Mohawk boasted strong internal growth of Mohawk and Dal-Tile products, and the Lee Carpet acquisition (Mohawk, 2005).

In 2005, Mohawk acquired Unilin, and reduced its operating costs while increasing its sales growth. The economy was good with employment increasing as interest rates leveled out. Net sales for quarter four of 2005 increase 22% as a result of unit growth, price increases, and the acquisition of Unilin (Mohawk, 2006). In 2006, inflation of raw materials was still a factor, and Mohawk continued to shift the cost to its customers through price increases. Advertising and promotion became the focus of the company, as it attempted to increase net sales and cost reduction. The Unilin acquisition increased net sales by 5% in 2006. Mohawk also benefited from the hard surfaces sales growth and price increases (Mohawk, 2007).

The following charts compare macroeconomic variables against corresponding industry variables. The first chart shows national unemployment and industry unemployment. The second chart shows inflation (Consumer Price Index) and industry inflation

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