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Finance

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Submitted By faith09
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DIXON TICONDEROGA- Victim of Globalization?

In today’s world, national economies are no longer self-contained with restrictions of the past whether it is by time zones, language, culture and differences in government restrictions.
Dixon Ticonderoga Company being one of the oldest public companies in the United States is known predominantly for its No. 2 yellow pencil which was introduced in 1913. They were recognized as the second largest pencil manufacturer in the country at that time with annual revenues amounting to a little over $100 million dollars. (fundinguniverse.com)
Within the 1990’s, Dixon was threatened with foreign competition where the Chinese began dumping pencils on the U.S market. Eventually, antidumping duties were placed on Chinese pencils, raising their prices in the process. This tactic by the American government proved futile as the Chinese produced a better product which continued to flood the US market. Trading has become much easier as barriers keep falling and businesses are now finding more opportunities internationally with the shift towards globalization. The Dixon Ticonderoga Company realized that this venture was going to improve sales and open new avenues for their slowly declining business.
The company lost over $200 million dollars worth of business between the period of 1991 and 1999 leading them to explore cheaper ways in which to produce pencils, lower costs and eventually improve overall business. Steps included finding wood for production of pencils at a cheaper purchase price, making pencils out of recycled paper cases, purchasing erasers from a Korean supplier and lastly establishing a manufacturing operation in Mexico. An entirely owned subsidiary was created in 2000 and eventually Dixon decided to globalize their productions conducting operations out of Mexico and China. As a result of this move, the company showed a vast improvement in performance by 2002. The company was eventually rewarded for its decade of outstanding financial performance in 2004 after five years of losses. In 2005, they acquired writing implements by Fabbrica Italiana of Italy. (Hill)
Dixon had a product know to everyone and they had little competition in the beginning but with the rise in technology, they should have made improvements on their product proactively rather that reactively. Also, with the rise in cheap labor in countries like China, they took too long to take advantage of those opportunities as well as their trust in trade barriers was too high as foreign competition could not be prevented. Losing their pencil empire could have been a reality as foreign markets posed threats for Dixon.

More and more, the economy is becoming globalized and Dixon Ticonderoga had to come to the realization of this modernized phenomenon happening between global markets. In other words, it is becoming easier to sell internationally. With this, it only made sense for the company to move production where it would be much cheaper.
In my opinion, the Chinese pencils which bore the similar qualities as the American pencils was impossible to compete with, therefore Dixon, outfitted with strong product knowledge could have used this to their advantage. The quality of their pencils could have been improved by emphasizing on marketing where “American Made” would have been the emphasis in light of the patriotism in that period, advertising , and having an exclusive distribution agreement. Greater tariffs could have been implemented by the US Government and Dixon could have fought harder to prevent the dumping of Chinese pencils leading to a less persistent endeavor for the Chinese to market their pencils in the US.…...

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