CEO Farooq Kathwari of Ethan Allen Discuss Selling ‘Made in the USA’ Products to China

CEO Farooq Kathwari of Ethan Allen

By William Kustiono

On June 25th 2013, CEO Farooq Kathwari of Ethan Allen discusses the possibility of selling products made in the USA to China. According to him, China is currently investing their money in South East Asia especially Vietnam and Indonesia. They are expanding to China because they see a potential for growth in those developing countries. The land values in those developing countries are still affordable for investment and also the areas have vast resources. In this discussion, Farooq explained about what is the measures taken by Ethan Allen to compete with leading interior design companies in Asia and how he successfully lead Ethan Allen to penetrate the Asian market.

Farooq explained about the current situation inside Ethan Allen. In this current economy, it is tough to find labor and it is expensive to compete. Ethan Allen has a manufacturing plant in New Jersey and is trying to expand to Central Mexico. Farooq believes that Mexico can compete with China. We have to establish a smart manufacturing system, when we get our parts; we have to send them back to U.S. for quality control. The other reason why Ethan Allen is expanding to Mexico is because the American brand is not really enduring if we do not expand our manufacturing plant to overseas. “We know that people’s taste over the brand is the same for everyone, meaning our design has become international. If China decides to copy our product then we have to become better in terms of quality.”

Farooq also discussed about the rising Generation Y, which has a different style in marketing strategy. He proposed a solution to increase the Generation Y people in the companies because they of their different mindset from other generations. These Generation Y or others call them Millennial Generations have different way of thinking and have a better adaptation to the current world situation. It is the best solution to increase the development of Ethan Allen by adding them to the current team.

The development of Ethan Allen is remarkably good. Even if there are uncertainties in the market such as stock drop, home value increasing, consumer becomes more confidence. “We have to make sure that we are expanding and targeting a larger group of people.” When Farooq talked about the foreign expansion, he mentioned the development of economy in China. It possesses slower growth compared to U.S. market because there is less demand for furniture. Farooq needs to think of a way to boost the demand. We have a lot of competition in China; therefore we have to excel in quality control and customer service.

CEO Farooq Kathwari of Ethan Allen

When Ethan Allen was facing a decreasing demand, Farooq believed in the exit strategy. There must be a way out of the recession and he finally found it. Farooq is willing to make a decision on Ethan Allen to give up margins, he said that low margins means live longer. If the margin is lower then he will have a better company durability and it can survive the recession. If he did not make this decision then this manufacturer will go out of business. Regarding of the overseas expansion, he decided to make sure to do things differently from other competitors, let’s be unique. He gathered key people and brief them about fifty different options and ask them to brainstorm about doing things hard to do in China. He also mentioned about the recent technology development will increase efficiency and reduces labor cost. The most challenging progress in China is about setting up the time, reducing the time by 50%-70% to make more products.

At the end of the session, Farooq answered the audience’s questions. Some of the questions directed to him were such as the immigration system, expansion to Mexico, and why it is better to expand externally (overseas) than internally. Farooq answered the questions one by one, for the immigration system, he believes that it is a broken system, but there is an opportunity in the future. Ethan Allen has a high demand in the labor, if the immigration reform is happening in the future, this will help Ethan Allen get more labors. About the expansion to Mexico, Farooq explained that they need to be competitive, find people to sell their products, and the cost in US is very high while in Mexico is cheaper. This also answered the last question about overseas expansion, because in U.S. there are extra costs that the company needs to cover, such as medical issues and insurance for transporting goods. Our strategy is to increase our margin in the future.

CEO Farooq Kathwari of Ethan Allen

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