INTERNATIONAL CARPET WHOLESALE

RS

COSTE Paul (305)GARCIA Etienne (305)

OVERVIEWInternational Carpet Wholesalers is an American large rug importer and distributor based in New York

• Different agreements :

Carpet Manufacturer/Exporter in Rabat, Morocco : SOMARTA

Wool supplier in Australia : HEATHERSTONE

• Substantial order for a variety handmade rugs to be produced over the next year

HEATHERSTONE

ICW

SOMARTA

Names and positions

• International Carpet Wholesalers

Ms. Paula Feldman : President of International Carpet Wholesalers

Mr. James McHenry : International Buyer

• Societe Maroc Tapis (SOMARTA)

Mr. Abdelhadi Hachad : Managing Director

• Other actors

Young employees in Morocco

Heatherstone: provider of wool for the carpet company

Mr. James McHenry’s wife

Dates

• 1970’s : Raise of the export of carpets in Morocco becomes the first North African rugs exporter

• 1988 : Study conducted in Morocco- 1/3 of all employees are at the legal age of employment (12 years old)- Half of the factories studied excess the legal 48-hour maximum workweek

• February 13, 1994 : Fax from McHenry to Paula Feldman

• February 14, 1994 : Telex from Feldman to McHenry

Synopsis of Exhibit

• Rug agreement from McHenry to Paula Feldman (Maroc and Australia)

• Reponse from Feldman to McHenry (Problem with heatherstone, Ask for prices for morrocan/australian wool)

• Letter to his wife : McHenry’s guilt about Manufacturer employing very young children and regarding the work conditions

• Note to Hachad from McHenry : Prices too high, wants to renegociate

Existing Situation

STRENGHTS

Communication : Quick communication

Management/Personnel : Free hand of a qualified buyer

Policy : Export and Import duties in Morocco are free for this market

Intercultural differences: Maalema system

Supplier reliability : SOMARTA is currently doing business with Germans

Ethics : McHenry’s conscience about employing young girls

WEAKNESSES

Communication: Jetlag

Management: Production problem / Delay

Ethics: Work of young girls

Intercultural differences: Different way of thinking

Logistics : Too many distances bewteen different actors of the chain

Statement of Problems

1) Delay of carpet delivery is longer than planned :

It clearly appears that the production capacity of SOMARTA is too low to reach Mr. McHenry’s expectations. Indeed, already having customers to serve as the German ones, Mr. Hachad’s firm is not able to produce as much Carpets as McHenry ordered within the 45 days originally agreed in the agreement without boosting his production. The delay has consequently increased to 90 days and only a part of the order can be delivered on time.

2) Children employment / Bad working conditions

As McHenry found out when traveling to Morocco to sign the agreement with SOMARTA, young children are being employed to produce the Carpets ICW is buying from them. It raises an ethical issue in McHenry’s conscience about his involvment in the exploitation of children and especially because Hachad plans to boost the production while it already is critical and with bad working conditions (5 on a loom).

3) Australian supplier (Heatherstone) can’t provide the resquested quantity of wool

Until April, the Australian supplier won’t be able to provide the total quantity of wool needed to produce what ICW need in terms of Carpets. Hachad’s firm will have to use French wool to produce the carpets until it arrives, that will considerably increase the costs.

Solution 1Maintain the Status Quo

• Advantages

- Maintain good relations with Mr. Hachad and the firm

- Avoid finding an other wool supplier

• Disadvantages

- Delay would be doubled than initially

- Costs would be increased until April because the Australian Supplier can’t provide as much wool as required

- Encourage the exploitation of children without doing anything

Solution 2Find a new rug manufacturer in

Morocco• Advantages

- Avoid being involved in children exploitation

- Would be easy to find because of the market situation in Morocco

• Disadvantages

- Risk not to find on time a new supplier with the same features (delays, costs)

- Loss of time

- Destroy the relationships with SOMARTA and Mr. Hachad

- Wouldn’t change anything about the logistics issues

Solution 3Relocate the rugs production in the US (still import wool from Australia)

• Advantages

- Gain of time : Less travel for contents

- Avoid being involved in children exploitation

• Disadvantages

- Would create bad relations with SOMARTA

- Would considerably increase the costs

- Complicated to settle (requires money, time, workforce..)

Solution 4Buy their company to create new rules in the

Morrocan industry

• Advantages

- We can introduce the American culture and the American know-how

- It will be easier for the orders and the delays

- The end of the labor of children

• Disadvantages

- It will cost a lot of money

- The procedure would set too much time , what is sorely lacking to the company

Solution 5Try to deal with them to avoid labor of

children:• Advantages

- Children will not have to work anymore

- It will allow the young people to work and will favor their employment

• Disadvantages

- Very difficult to set up in a country where we have no influence

- Could create bad relations with SOMARTA if we oppose their ways of working