Cultural Economies of Competitive Advantage and Sustainable
Development: Toward sustainable furniture production networks in
Mexico
**Submitted to Journal of Economic Geography. April 20, 2011**
Dan Klooster
Professor of Latin American Studies
University of Redlands
Redlands, CA 92373
Daniel_klooster@redlands.edu (alternate email: danklooster6b@gmail.com)
(909) 793-5640
Dr. Alejandro Mercado
Universidad Autónoma Metropolitana
Unidad Cuajimalpa
División de Ciencias Sociales y Humanidades
Pedro Antonio de los Santos No. 84, Delegación Miguel Hidalgo, C.P. 11850, México, D.F.
Teléfono 55-16-67-33 Ext. 119 y 120
alejandromer@gmail.com
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Cultural Economies of Competitive Advantage and Sustainable
Development: Toward sustainable furniture production networks in
Mexico
Summary
To confront global competition, Mexican low-technology producers try to construct
competitive advantages by using place-based social and aesthetic resources such as regional craft
traditions, cooperation between firms, certified environmental and social qualities, and many
other aspects of an increasingly cultural economy. We analyze value generation and value
distribution strategies among two Mexican furniture production networks. The first, Tlaquepaque
and Tonala, in the city of Guadalajara, comprises a dynamic artisan-industrial district of small
firms producing furniture and home décor in Mexican styles. In a second example, from Oaxaca,
three indigenous, forest-owning communities with their own furniture factories formed a joint
venture that shares design and marketing costs and collectively owns several retail outlets and a
brand name. Independently, groups of carpenters in Oaxaca have also formed a dozen small
firms in order to access capital, develop infrastructure, engage in assembly-line production, and
jointly address their collective design and marketing challenges. The carpenters’ firms also form
part of the production network. For producers in both cases, failure to compete in a cultural
economy of quality implies bottomless price competition, restricted incomes, increasingly
marginal livelihoods for workers, and greatly diminished possibilities of environmental
conservation. We contend that sustainable production networks ought to increase value
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generation and improve value distribution to nature and labor. The Oaxacan case is strong in
value distribution strategies, including mechanisms to channel value to the maintenance of
environmental services and rural livelihoods. The Tlaquepaque and Tonala case is strong in
value-generation strategies. Currently, neither represents a sustainable production network.
Key words: Latin America, Mexico, certification, furniture, global production network
Introduction
The globalization of markets threatens regional traditional industries such as shoes,
clothing, home décor, jewelry, and furniture which are typically low-technology, labor-intensive
industries dependent on natural resource inputs. One strategy to maintain competitiveness is to
squeeze value out of labor and nature by lowering wages, over-exploiting renewable resources,
degrading the ability of ecosystems to provide necessary environmental services, and generally
shifting the social and environmental costs of production to the future or to other places. On the
other hand, a growing body of scholarship argues that such sectors can survive and even thrive if
they can use locally-constructed practices and relationships to successfully compete in a cultural
economy of quality (see public summaries posted to Scott, 2000; Storper, Lavinas, & Mercado
Celis, 2007). By cultural economy of quality, we mean an amalgam of characteristics such as
design, branding, the successful mobilization of regional aesthetic resources, the regional
distinctiveness and quality control associated with regional appellations and other certifications,
the social networks of production and distribution that permit low-cost, high-quality, or
constantly innovative production strategies, among other factors. These kinds of activities may
add value to production. Cultural economies also contain value-distributing aspects, such as the
rents of monopolies and branding, the minimum prices of Fair Trade, the short supply chains of
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some alternative agricultural marketing strategies, and even the formal regulations and informal
practices which protect social well-being and environmental attributes. In many regions, the
failure to successfully compete in a cultural economy of quality implies bottomless price
competition, restricted incomes, and diminished possibilities for investments in environmental
management or social wellbeing.
In this paper we examine the implicit competitive strategies of two furniture and home
décor production networks in Mexico. We identify the mechanisms of value-generation and
value-distribution in these cases and we develop the concept of sustainable production networks,
which are able to channel sufficient value to workers and managed ecosystems to support social
well being and the conservation of environmental services.
We construct this argument as follows. First, we build on commodity chain theory and
concepts of value-chain upgrading to underline the importance of both value-generation and
value-distribution in commodity networks, and to outline the concept of sustainable production
networks. Second, we describe the production networks and identify value generation and value
distribution strategies in each. Finally, we discuss the implications for the reproduction of labor
and nature.
Sustainable Production Networks
Commodity chains link nature, producers, distributors , designers, NGOs, government
agents, consumers, and others in production networks which generate and distribute value.
Commodity chain analysis illuminates the connections between consumers, producers, and
workers, maintaining a focus on the unequal distribution of power between actors and on the
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social relations of production (Hartwick, 2000). Increasingly, commodity chains reach across the
globe. Analysts define a Global Commodity Chain (GCC) as a network of organizations and
production processes resulting in a finished commodity (Gereffi & Korzeniewicz, 1994; Ponte,
2002; Raikes, Jensen, & Ponte, 2000).
The concept of governance helps explain coordination in commodity production. This
concept recognizes that trade in goods and services along a chain is often more than a series of
arm's-length, market-based transactions. In many cases, lead firms strongly influence what is to
be produced, how, where, and by whom. In buyer-driven chains, for example, powerful retailers
largely determine what is to be produced and at what price (Gereffi, 1994; Gereffi, Humphrey,
Kaplinsky, & Sturgeon, 2001). Understanding these governance structures becomes increasingly
important as systems of production become globally fragmented and less affected by the
regulation of nation-states (Gereffi, Humphrey, & Sturgeon, 2005).
When production processes are conceptualized to include both furniture manufacturers
and fashion magazines (Leslie & Reimer, 2003), or supermarkets and ethical campaigners
(Freidberg, 2004), or forest product retailers and environmental campaigns (Klooster, 2005),
governance can be seen as a phenomenon of networks containing multiple actors, new spheres of
authority, and novel instruments such as certification (Eden, 2009; Gereffi, 2001; Humphrey &
Schmitz, 2001; Ponte & Gibbon, 2005).
Commodity network governance is important for regional development because it affects
the generation and distribution of value. A commodity’s value ideally increases at each step of its
transformation along the commodity chain. Design, for example, can add significant value to a
product by increasing its aesthetic or utilitarian qualities. Upgrading is the process of improving
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the ability of a firm or regional economy to move to more profitable and/or technologically
sophisticated capital and skill-intensive economic niches. The value of production can be
enhanced (upgraded) by technology transfer, coordination leading to quality enhancement,
upgrading labor skills, and acquiring rents derived from various forms of branding (Gereffi,
1999). Depending on the distribution of power between firms at different stages of production,
however, the value added in one stage of production may be captured by firms at other stages, as
the case of coffee illustrates (Fitter & Kaplinsky, 2001; Ponte, 2002). Frequently, the
globalization of commodity networks brings falling prices for products from low-technology,
labor-intensive industries dependent on natural resource inputs, such as shoes, textiles, and
tropical agricultural commodities (Gwynne, 1999; Humphrey & Schmitz, 2001), see also
(Gibbon, 2001; Watts, 1996). Monopolies, cartels, labor unions, and Fair Trade are other clear
examples of organizational strategies that attempt to capture and redistribute some of the value
generated in a chain. Value can also be captured for the benefit of locations through government
policies, patterns of firm ownership, and internal aspects of corporate governance (Henderson,
Dicken, Hess, Coe, & Wai-Chung Yeung, 2002).
When concepts of social reproduction and the maintenance of ecosystem services are
considered to be parts of networks of production, it becomes possible to consider the
implications of production networks for sustainable development. Global Production Network
theory, for example, calls for attention to the environmental rootedness of specific production
systems, the creation of value in the network, and the capture of value. This work suggests the
importance of examining the evolution of regional networks, especially in the global south,
where groupings of firms and affiliate organizations may be carving out niches amidst globalized
production systems (Coe, Dicken, & Hess, 2008; Henderson, et al., 2002). We propose that
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sustainable production networks produce and channel sufficient value to labor and nature to
permit their reproduction and improvement
Panorama of the Forestry/Wood Furniture Sector
In general, the implicit competitive strategy for forestry and wooden furniture production
in Mexico is based on squeezing value out of labor and nature by limiting wages and evading
necessary investments in forests. Furniture imports, wood imports, and boards from illegally
harvested wood challenge responsible Mexican producers and forest managers, many of which
are communities.
Mexican forests are extremely diverse biologically, and are similar in extent to the forest
areas of Colombia or India (Dinerstein, et al., 1995; Palacio-Prieto, et al., 2000). About 7,000 to
9,000 communities, called ejidos and comunidades agrarias, own as much as 80% of forests in
Mexico, ranging in size from 100 ha to 450,000 ha, with the majority very small. Solid data on
the extent of community forestry in Mexico is lacking. In the 10 most forested states, there are
2,912 communities with more than 300 ha of forests, and 918 communities with regular timber
sales (Antinori & Rausser, 2010). There might be a thousand more which sell timber sporadically
(Bray, Merino-Pérez, & Barry, 2005/2009). Some sell logging rights to private logging
companies, while others own and operate logging and milling operations and are able to sell logs
or even boards. A very small, but important, minority even manufacture furniture from their own
wood. By 2007, 41 communities and two private companies managing 767,000 ha of forests had
been certified using the Forest Stewardship Council principles and criteria.
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Researchers increasingly recognize that Mexican community forestry more effectively
integrates forest use, rural development, and biological conservation than the large concessions
and regional logging bans that community forestry replaced, and often conserves forest cover
better even than parks (Bray, et al., 2005/2009; Bray, et al., 2003; Bray & Merino Pérez, 2004;
Klooster, 2003). Unfortunately, legal forest management, especially community forestry, fails to
reach Mexican forests where it could contribute to forest conservation and social wellbeing.
The low price of wood provides a substantial challenge for community forestry. The
illegal cut – wood harvested without management plan or logging permits – nearly matches the
legal cut, and this illegal wood lowers the price of wood, disadvantaging producers who have
higher costs because they invest in forest management, comply with expensive and timeconsuming forest management regulations, and pay taxes (Zuñiga & CCMSS, 2007a, 2007b).
Imports from Chile, the USA, Canada, and furniture from China reinforce low wood prices. In
2008, Mexico’s forest products deficit was 5.8 billion dollars. Most of that was cellulose
products and wood pulp, but wood and manufactured wood products contributed nearly a fifth of
the deficit. Similarly, the balance of trade in wood furniture was positive, but dropped steadily
from 367 million dollars in 1999 to 14 million in 2008 (Zuñiga, 2009).
About 40% of the sawn wood in Mexico supplies the furniture industry. Some 80% of
furniture businesses in Mexico are micro businesses, with less than 10 employees. On average
they use only 60% of installed capacity, and much of their output is artisanal. Even pieces that
could be machine-manufactured are often produced by hand, making it extremely difficult to
compete in terms of price and quality (Comisión Nacional Forestal, 2001). Together with textiles
and clothing, the furniture and wood manufacturing sectors have some of the lowest
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average values for worker compensation in the Mexican manufacturing sector. In 2009, the per
capita worker compensation in furniture (NAIC 337) was 43,478 pesos per year
(US$3,344). The wood industry (NAIC 321) was even lower, with 28,351 pesos (US$2,180 a
year) remuneration per worker (INEGI, 2009).
The 2009 economic census recorded 26,972 furniture firms, of which 8.7% (2,344) were
in Jalisco and 5% (1,331) in Oaxaca. The Jalisco firms generated much more value than Oaxaca
firms did: Jalisco generated 14.5% of the furniture GDP compared to 0.42% in Oaxaca and
13.3% of the value-added of production compared to 0.5% in Oaxaca. The furniture sector of
Oaxaca is dominated by micro sized firms with an average of 2.2 employees, while in Jalisco
furniture manufacturing firms are merely small, with an average nine employees. More than half
of Jalisco’s furniture manufacturing firms are in the city of Guadalajara, where they employee
13,665 workers (INEGI, 2009).
Large scale furniture manufacture in Mexico mostly consists of maquiladoras found in
the border area. These firms produce large quantities of furniture using standardized, stable
styles that change very little over time. Production is oriented toward mass markets, principally
in the United States. This sector generates little more than low-wage employment with minimal
linkages to other firms in Mexico (Mercado Celis, 2006).
The Tlaquepaque and Tonala Home Décor Value Network
Tlaquepaque and Tonala are neighborhoods of Guadalajara which we consider as a single
craft-industrial district because they are linked in a dynamic network of home décor
commercialization, design, and artisanal manufacture. Research relied on interviews and direct
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observations to follow furniture and related production chains comprising the complex home
décor production network (see Mercado Celis, 2006). Additional field visits in 2009 funded by a
Canada Research Linkages Grant also contributed to our findings.
Furniture manufacture is a relative newcomer to a suite of low-technology, laborintensive home décor industries in Tlaquepaque and Tonala, including glass, ceramics,
ironworks, and others. Home décor production in Tlaquepaque and Tonala mostly contributes to
a “Mexican look” – an esthetic liked to an image of Mexico built on craft production and the
diffusion of icons and images such as the iconography of the painter Frida Kahlo. Although
furniture design in the district has changed over the years, the main furniture styles share the
“Mexican look” of being hand-made, solid wood furniture.
The organization of production is tightly linked to personal relationships, and
subcontracting is often between an established firm and a new one formed by a former employee.
The owner of a firm helps their employees start new firms, either through a loan or the supply of
equipment, advanced purchases, and even personal support for unforeseen situations. In this way,
subcontracting tends to reflect a close personal relationship, and usually a certain paternalistic
loyalty between the craft producer and the firm which subcontracts production to him or her.
Designers, artists, and entrepreneurs have come to Tlaquepaque and Tonala from all over
Mexico and North America. They created leading firms whose innovations cascade through the
district. The firm Antigua de Mexico, for example, catalyzed furniture manufacture in the
district. Founded by Alberto Alfaro in 1970, it began as a retail vendor of antique furniture
purchased from the haciendas (historic rural estates) surrounding Guadalajara. Shortly
afterwards other retailers began to imitate this furniture, introducing a more rustic style and
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inducing its manufacture in local workshops, which quickly took up furniture manufacture.
Antigua de Mexico continues to produce high-quality, made to order furniture, which inspires
the designs of other firms in the district.
Another example is Martha Figueroa and David Luna’s firm, Adobe Diseño. Rooted in a
Tlaquepaque retail boutique, the firm now specializes in the production of equipales -traditional round stools woven from strips of flexible wood and leather, maguey fiber, or rattanlike bark. Figueroa and Luna innovated new designs and materials for equipales, (see figure 1)
and contracts their manufacture to traditional workshops on the outskirts of Guadalajara (see
figure 2). Other firms have also adopted the manufacture of traditional equipales incorporating
contemporary designs.
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Figure 1: Display in a Tlaquepaque retail boutique integrating re-designed traditional equipal
furniture, ironworks, and wooden furniture.
12
Figure 2: Equipal furniture manufacture in Zacoalco, Jalisco, producing for the Tlaquepaque and
Tonala district. Once available locally, the traditional woods and fibres used to manufacture
equipales must now be imported from other Mexican states.
Design goes beyond the influence of leading artists and entrepreneurs working in the
district, however. Design and the formation of styles, fashions, and tendencies result from an
informal collective process, which takes place outside of market transactions. Design and styles
move not only between producers of similar products, but also between dissimilar home décor
elements. A pottery workshop may imitate the work of another potter, but also paper mache or
wall art. In this way we can see similar applications of motifs and icons in glass, ceramics, paper
mache, and wood furniture. Such design spillovers are possible because of the close spatial
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proximity of diverse producers and sellers, and the formal and informal commercial relationships
between networked firms and individuals.
Esthetic resources and skills in the district have also diversified and added value to
furniture production. The successful introduction of a line of colonial -- religious inspired
products brought expert wood carvers into the production network, and their work adds value to
some lines of furniture as well. Similarly, new lines of furniture integrate ironwork and ceramics
with wood (see figure 3).
Figure 3: Furniture display in Tlaquepaque retail, showing furniture which integrates glass and
metalwork, displayed with ceramic tableware which is also from the sector.
Consolidators are essential in the operation of the district because they connect producers
with export markets. They play multiple functions including the diffusion of information
between buyers and artisan-manufacturers, distributing large orders among numerous small
workshops, and controlling the quality of workmanship among multiple producers. Without
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them, foreign buyers would face problems with the initial negotiation of purchases, following-up
on the orders they place, and generally communicating their needs for subsequent orders.
Although export data by locality and product are unavailable in Mexico, the success of
rustic furniture exports has been recognized. Based on 1998 research, Harner (2002) mentions
the importance of Tlaquepaque and Tonala in the export of rustic furniture to the United States.
Mercado also noted this export link in 2001 (Mercado Celis, 2006) and in 2009, we noted the
continued export vocation of the district, although at that time consolidators were having more
success linking producers to national markets – especially hotels – than to depressed
international markets.
A Oaxaca Furniture Value Network
Approximately 90% of Oaxaca’s forests are owned as collective private properties by
rural, usually indigenous, communities, and the last half century of commercial forestry in
Oaxaca can be read as a long struggle of these communities to appropriate a larger share of the
value their forests produce. In the 1980s, as 25-year concessions were coming to an end,
communities in Oaxaca and elsewhere in Mexico organized and blocked renewal of the
concessions. By the early 1980s, of 83 communities with commercial quality forests in the state
of Oaxaca, 60 were engaged in logging, 43 owned their own mechanized logging equipment, and
17 had sawmills (Klooster, 2006b).
By 1997, 95 communities in Oaxaca were producing timber commercially, and many had
upgraded from selling standing timber to selling cut logs or boards. Although no communities
sold finished wood products in 1987, by 1997 seven had reached that level (Antinori, 2000).
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Starting in the early 1990s, as the North American Free Trade Agreement was coming
into force, a network of NGOs, Mexican government agencies, foundations, bilateral donors, and
transnational retailers galvanized the spread of forest certification in Mexico (Anta Fonseca,
2004; Klooster, 2003; Madrid & Chapela, 2003; Taylor, 2005). Community forestry supporters
hoped that forest certification would permit domestic producers – especially communities – to
compete in the globalized wood market (Anta Fonseca, 2004; Gerez Fernández & AlatorreGuzmán, 2005; Klooster, 2006a). Certification had limited direct impacts on markets in Oaxaca,
but it helped facilitate investments in community forestry such as wood-drying kilns, and
sawmill improvements (Klooster, In press; Klooster 2006a) see figure 4.
Figure 4: Upgrading in the Oaxaca community forestry included the acquisition of milling and
drying equipment as well as improvements in the skills of personnel to classify boards in a
manner that increases the production of highest quality boards. The furniture factory is designed
to make best use of knotty, low quality boards.
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ICOFOSA – an integration of three forest communities.
By 2005, upgrading had prepared a handful of communities in Oaxaca to try furniture
manufacture. The community of Ixtlan de Juarez had recently invested in a door-making factory,
which could also be used for furniture manufacture. The communities of Pueblos
Mancomunados were also beginning to make furniture using refurbished equipment in an
improvised, but flexible industrial space. Research examining this case of community-based
value chain upgrading took place over a 10-month period from 2007-2008, and consisted of
repeated open-ended interviews with key informants, triangulated with additional interviews
contacted through snowball sampling, and follow-up interviews and site visits in 2009.
An opportunity to supply school furniture facilitated the transition from board vendors to
furniture manufacturers. In 2005, the Oaxaca state governor’s office and the state department of
forest development facilitated a contract with the state department of education (Instituto Estatal
de Educación Pública de Oaxaca-IEEPO) for school furniture produced from certified wood
from the state of Oaxaca, displacing the annual purchases of steel and plastic furniture
manufactured outside of the state.
At the insistence of personnel in the state Secretariat of Economy which had been
promoting the formation of small corporations comprised of formerly independent carpentry
workshops, the contract was divided between the community forestry sector (initially the
communities of Ixtlan and Pueblos Mancomunados) and the Association of Furniture
Manufacturing Firms of Oaxaca (AOEFM). In 2006, a third community forest enterprise,
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Textitlan, acquired furniture-making ability. The school furniture contract was then divided 10%
for Textitlan, 20% for Ixtlan, 20% for Pueblos Mancomunados, , and 50% for the AOEFM.
That year, however, government repression of a teachers’ strike triggered social protest
from a loose coalition of social movements, the Popular Assembly of the Peoples of Oaxaca
(APPO), which shut down the IEEPO, causing a sales crisis for the three communities. Months
passed, the conflict showed no signs of ending. Desperate, the communities decided to make
other kinds of furniture and open a store to sell it themselves.
And since all three of our communities were in the same dynamic, we decided well, why
should we each put up a store if we’d just be competing with each other? Instead of being
divided, lets multiply ourselves. Let’s decrease our common problems and multiply our
efforts! Let’s rent a store between the three of us! (Manuel Ignacio Garcia Nunez, plant
manager Pueblos Mancomunados.)
The communities rented a store, stocked it with lines of solid wood home and office
furniture using many of the parts designed for school furniture, and began to sell their products.
TIP, now a registered brand name for furniture based on the first letters of the names of the three
community members, began as a gentleman’s agreement between the business managers of the
three community forest enterprises (figure 5)
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Figure 5: Furniture offered for sale in the TIP factory retail outlet, Oaxaca City.
Cooperation among the three communities is based on commonality of interests,
background, and approaches. All three members are indigenous communities of Zapotec
heritage. All three have experience logging communal forests and managing sawmills. All three
are certified, or in the process of becoming certified. All three have abandoned the previous
cargo system of communal business management based on rotating posts between community
members in favor of the more business-like model, in which professional managers serve
indefinite terms at the service of the community, which replaces them as needed. All are large
communities with substantial forest areas.
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After several months of successful sales, the communities decided to formalize their
relationship through an integradora, a kind of legal consortium designed to raise the
competitiveness of small and medium sized businesses by providing administrative services to its
members, joint purchasing, and joint sales (PYME, n.d.). The Integradora Comunal Forestal de
Oaxaca S.A. de C.V. (ICOFOSA) was legally formed in February of 2007. ICOFOSA opened
two more TIP stores in Oaxaca. In 2008, the three TIP stores in Oaxaca City sold between 450
and 500 thousand pesos every month, on average ($40-45,000 US dollars).
According to Alberto Belmonte, business manager for Ixtlan de Juarez, there are great
advantages of associating with the other communities.
First, you share the cost of experimenting; both success and failure are shared. Risk is
divided by three. Second, you share knowledge. Each community has its strengths and
weaknesses. Another advantage is if we win the lottery (with a large order from a major
retailer) we can respond to it. We can supply anybody who comes.
In addition, the integradora is an effective liaison between government agencies and the
communities. It also facilitates sharing of resources informally; if one factory is running short on
a given type of raw material, it can ask a partner for a loan. It is common to find experts from
one of the member factories on the floor of another, identifying problems with production
processes and pointing out areas for improvement.
ICOFOSA shares furniture designs between its members so that the TIP showrooms can
display complete lines of furniture, from dining room sets to kitchens to office furniture.
Individual factories couldn’t do this on their own without sacrificing economies of scale in
production and raising prices. Because the sales staff in the store are employees of the
consortium, they can provide quick feedback to factory managers on customer interest in display
models.
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The integradora does not subsume the independence of the member communities,
however. All three communities maintain their separate business structures. Individually,
communities continue their main line of business: the sale of boards to clients in Oaxaca,
elsewhere in southern Mexico, Mexico City, and as far north as San Luis Potosi. Furniture
contributes only about 20% of total sales.
The communities sell most of their high grade wood as kiln-dried boards. Only 30% of
their communities’ boards go into their furniture factories, which are equipped with finger joint
equipment to make use of knotty boards. Finger joint equipment is a value-adding activity which
converts material worth about seven pesos a board foot to something which can replace the top
grade, knotless boards in furniture manufacture. Top grade boards can then be sold to external
clients for about fourteen pesos a board foot, increasing the value from a limited, sustainable,
timber harvest.
Each furniture factory has three main sales outputs for furniture. One is the contract for
school furniture, which is crucial for helping to overcome the substantial, short-term challenges
of upgrading. The second is the sales each community makes to its own set of wholesale
furniture buyers, and the third are the TIP factory outlet stores (see figure 6). TIP, however,
holds a number of interesting advantages.
(With TIP) we have control of the market. We have control of production. TIP is us. In
addition, TIP is a lot of clients. If one client doesn’t come through for us in TIP, the loss
is fragmented. If IEEPO doesn’t buy from us, on the other hand, we lose 30% to 40% of
our market. … Right now we have three stores, but we are trying to increase them. Our
vision is to bet on TIP. (Manuel Ignacio Garcia Nunez, plant manager Pueblos
Mancomunados.)
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Figure 6: The supply network of certified furniture production in Oaxaca. The ICOFOSA
consortium links certified communal forests to a shared furniture brand and retail outlet.
Carpenter corporations of the Association of Oaxaca Furniture Manufacturers (AOEFM) are
required to use certified wood when supplying the school furniture contract, and often buy from
ICOFOSA members (based on author, In press).
Certification and the carpenter’s integration
The certified communities of ICOFOSA actively promoted the idea of making
certification a condition of the school furniture contract. Business managers from the
communities gave power point presentations on certification to the teachers’ union and to
representatives of the governor’s office. Promoters from the state and federal forest departments
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also pushed for certification as a condition of the school furniture contracts because they saw it
as a way to avoid illegally cut wood and to favor sound forest management. Without this
guarantee, it was thought, promoting forestry could damage the environment and rural society
through forest degradation. Unlike community forest enterprises, carpenters’ firms do not have
their own sources of wood, and small carpentry workshops are sometimes implicated in
production chains involving illegally cut wood. The requirement to use certified wood, therefore,
is a form of supply chain governance of great importance to government promoters of rural
development and government buyers of furniture because it inoculates them from potential
negative publicity of any association between school furniture and illegal logging. When
manufacturing school furniture, AOEFM member firms buy boards from certified producers,
including those in ICOFOSA (Klooster, In press) (figure 6).
ICOFOSA business managers say that they are making certification play a role in the
growth of their community forest enterprises (Klooster, In press). Certification has not added any
value on its own, they explain. Instead, certification brings with it significant costs for
inspections, audits, and required management changes. The furniture price is still set by the
quality of the wood, not whether it is certified. A survey of 475 pedestrians in commercial areas
of Oaxaca City prepared for ICOFOSA found little understanding of forest certification; most
did not relate the idea to forest conservation, but thought it had to do with the durability of
furniture (Perez Ramirez, 2007).
Although certification adds little value currently, TIP uses certification as part of a
broader strategy to build their brand. They use certification to reinforce their promotion of the
socio-environmental qualities of their products. Banners behind furniture displays show smiling
23
indigenous children holding pine seedlings, or explain the meaning of forest certification
(Klooster, In press).
We want Oaxaca to make furniture, that it have a furniture-making vocation. We may not
have the best designs. Maybe we don’t have the very highest quality or the best price. But
I can assure you that when you buy furniture from us you are helping avoid global
warming. This is furniture that helps you conserve the world! Because we, in the
communities, we care about the forest, the plants, the animals, the social benefit, the
economic benefit. We have the principles of the Forest Stewardship Council. … We
aren’t Italians. We can’t make the prettiest furniture. We aren’t China. We can’t make
extremely cheap furniture. But we can make sustainability. Manuel Ignacio Garcia
Nunez, plant manager for Pueblos Mancomunados.
To a lesser extent, the carpenters’ firms also make use of certification to differentiate
their production. In a statement to the local newspaper, Raúl Mingo Gómez, secretary for the 13
firms in the AOEFM mentioned it. “We have established our presence with quality furniture,
with certification,” he told the press (Martinez, 2008). Leaders of individual carpenters’ firms in
the association also refer to certification to justify why consumers should prefer their products
over imports or the work of other producers.
Discussion: Value-generation and distribution in Oaxaca and
Tlaquepaque / Tonala.
Value-generation
The Tlaquepaque/Tonala case illustrates multiple value-generation strategies, while the
Oaxaca case is stronger in value-distribution strategies. Tlaquepaque and Tonala demonstrates
impressive value-added dynamics. A complex social network enables innovation and made-toorder production that is highly responsive to market demands. The district has great capacity to
incorporate new designs, to offer a wide variety of products, and to coordinate production in
24
order to export. Value added production in the district is the combined result of the capacity of
workshops and firms to absorb designs and techniques. A complex division of labor permits a
greater generation of value than if individual craft sectors were isolated from each other and if
dispersed small producers had little guidance in meeting export demands. In Tlaquepaque and
Tonala, competitive strategy cannot be reduced to price competition, but rather is based on
quality and design which involves the generation of home décor fashions and the constant
adaptation and rapid change of product design.
Furniture has catalyzed crossovers and spillovers of design between different sectors of
the district. It is more than a simple addition to the crafts produced there but rather helps to
integrate them and to define the fashion-producing possibilities of the district. The market for
furniture relies on well-established firms, circuits, and shows, and the home décor industry
revolves around it. Decorative styles involve multiple products, and furniture creates the
opportunity to compose packages of products, such as bedroom or livingroom sets, together with
all the supporting elements of home décor. Furniture broadens export channels by integrating
multiple crafts into displays at international furniture shows, adding value to the production
network.
For Oaxaca community forest enterprises, value chain upgrading has been almost
synonymous with vertical integration. Over 50 years, communities improved personnel skills,
developed logging and milling capacity, acquired wood-drying kilns, and – in the cases of
Textitlan, Ixtlan, and Pueblos Mancomunados – established furniture factories. These three most
integrated communities have also established a consortium which owns a chain of factory outlet
stores and a brand name for furniture. Groups of carpenters have also upgraded their equipment,
25
production, and marketing capacity. Together with the big communities, they transform certified
wood into school furniture.
Unlike the situation in Tlaquepaque and Tonala, however, there are few brokers
translating the demand of diverse foreign and domestic buyers into orders from networks of local
producers. Instead, this important function of identifying demand and communicating design
requirements to factory floors is the responsibility of personnel within the AOEFM and
ICOFOSA. Both organizations are still focused on supplying local markets, although ICOFOSA
has plans to eventually expand to Puebla and other southern Mexican markets. Meanwhile, the
state of Oaxaca remains marginal to export markets for wood or wood furniture.
Another difference from Tlaquepaque and Tonala is the lack of integration between
furniture and local folk art products. Despite the wealth of craft production in Oaxaca, furniture
is not tied into a Oaxacan home décor sector. Indeed, Oaxaca folk arts are more often sold by
category and are rarely presented as part of a “Oaxacan Look” in home décor. Nor did we find
the kinds of artist-entrepreneurs present in Tlaquepaque. Although Oaxaca has a number of
painters known nationally and internationally, they have not introduced new crafts or design
elements or synergized existing craft traditions into new product lines.
Similar to the situation in Tlaquepaque and Tonala, design is ad hoc and rudimentary in
Oaxaca; professional designers have had no role beyond the presentation of utilitarian designs
for school furniture. When not occupied with school furniture, carpenter’s firms use their small
factories to produce the same kind of traditional armoires they previously produced in their
individual workshops. When TIP began operations, lines of furniture were initially designed to
make use of the parts already being made for school furniture, for example. Since then, furniture
26
lines are essentially copied from magazines, catalogs, and competitor’s showrooms, or adapted
from existing lines based on consumer feedback in the TIP outlet stores. Both the AOEFM and
ICOFOSA have plans to introduce professional designers who would work for member
carpenter-firms and community-forest-enterprises. In both cases, however, the conception of
design is that of a designer in an office using autocad, not that of an artist proposing high-value
designs, perhaps based on local aesthetic resources and folk-art traditions.
Value-distribution
The distribution of value in Tlaquepaque/Tonala is more problematic. Our fieldwork
confirms that there is still a segment of artisans unconnected to external markets who confront
intense cost pressures while producing for the market segments of lowest quality and design. At
the same time, workers we interviewed in 2000 received salaries similar to those of maquiladora
workers on the northern border: salaries around 2300 pesos a month, equivalent to 2.3 to 2.5
minimum salaries, or about US$240 a month. These are low wages earned under precarious
work conditions.
In contrast with Oaxaca, communitarian organization in Tlaquepaque-Tonala is weak or
lacking. Past attempts at organizations of artisans have tended to fail and disappear. Furthermore,
the goals of many of these artisans’ organizations have been to eliminate intermediaries, but this
is problematic because the market-linking function of intermediaries requires networks and
specific forms of market knowledge that are difficult to imitate and reproduce. Such
organizations have been able to generate spaces for retail sale, but without intermediaries, they
have had little success accessing wider or better paying markets.
27
Nor does the Tlaquepaque and Tonala furniture and home décor district take steps to
protect the ecosystems generating the raw materials on which it depends. Wood sources are not
tracked or certified; the wood furniture sector relies uncritically on imports and the products of a
national forest sector which does a poor job of stewarding resources. Similarly, in interviews in
2001, equipal producers were already noting the difficulty supplying themselves with the
traditional woods needed for equipal manufacture, especially palo dulce and rosa panal
(eyshenartia polystarchia). Originally available locally, these materials are now imported from
neighboring states, despite efforts at local reforestation (Redacción, 2010).
Oaxaca is much richer in value-distributing strategies than Tlaquepaque and Tonala. TIP
is an obvious example of value chain upgrading because it moves the ICOFOSA member firms
up the value chain to retailing and branding. But it also functions as a value distribution strategy
and a competitive strategy because TIP factory outlet stores reduce the break-even price at retail
while channeling profits from retail to manufacture.
The community nature of the forest enterprises in ICOFOSA and the communities which
augment their supply also have potential value-distribution effects. Santiago Textitlan has 4,000
inhabitants and 650 comuneros. Forestry there directly provides 250 jobs. In Ixtlan de Juarez,
there are 4,500 inhabitants and 384 comuneros. Forestry directly provides 284 jobs. Pueblos
Mancomunados is a commonwealth of 8 communities comprising 15,000 inhabitants and 1,200
comuneros, and forestry directly provides 300 jobs. Comuneros are community members
formally vested with rights of voice and voting in the community assemblies which make
decisions about communal resources. They are conceptually similar to shareholders in these
communal enterprises, and receive direct payments and indirect benefits from the communal
28
firms they collectively own. Assuming five family members per comunero, TIP directly benefits
the 11,170 rural Oaxacans which collectively own it (Perez Ramirez, 2007).
The integrated forestry businesses provide important benefits to the communities which
collectively own them. In Textitlan, for example, the community’s rules require that proceeds
equivalent to stumpage fees be distributed among the comuneros, while profits from industry go
to reinvestments, including at least 15% which must be channeled to productive projects in the
outlying settlements of the community, such as greenhouses for cut flowers, and tens of
thousands of fruit trees. The forestry business there also runs a school bus service. Forestry
businesses also generate funds for important celebrations. Community members have preference
for employment, although many employees are not community members. Other community
forest enterprises which also sell logs or boards to members of ICOFOSA or AOEFM have
generally similar structures. They too use forestry revenues to provide local employment and
social benefits.
Forestry communities in Oaxaca also invest in forest management. Even before
certification, the communities made substantial investments and production sacrifices to
conserve their forest resources, but certification requires and makes visible additional
investments. In Textitlan, for example, foresters invest in thinning cuts, pruning cuts, fire
breaks, sanitation cuts, and the installation of culverts on logging roads, among many other
activities. FSC forest certification standards prohibit conversion of forests, require respect for
workers rights and indigenous peoples, and require that culturally important sites and high
conservation value forests be specifically identified and carefully managed. These standards
affect forest management practice through a system of independent inspections and audits..
29
Certified communities are typically required to reduce erosion impacts of logging roads, to
improve management plans and mapping, monitor the effects of logging on soil erosion and
species composition, to conduct basic ecological baseline studies, to establish conservation areas
and biological corridors, and to eliminate hazardous chemicals, such as certain fungicides used to
keep sawn wood from mildewing. Certification also affects conditions for workers. Mexican
CARs have also included incorporating forest laborers in the national social security system,
improving sanitary conditions in temporary logging camps, and increasing the availability and
use of safety equipment (Klooster, 2006a; Mutersbaugh & Klooster, 2010; SmartWood, 2009).
Conclusion
In this article we compared value generation and value distribution strategies in furniture
production networks in Tlaquepaque-Tonala and Oaxaca. We noted several general and
overlapping strategies for value enhancement. These include place-based strategies drawing on
regional identity and aesthetic resources, environmental branding through the environmental
certification of wood, physical aspects of quality such as wood and woodcraft, and of course
design. Design is a particularly important aspect of value enhancement strategy. Depending on
how it is inspired, catalyzed and shared, design can also reinforce regional identities and
regionally differentiate home décor products. Design-catalysis, therefore, can be part of regional
development strategy.
We also observed strategies which distribute value up-chain. Environmental certification,
for example is a voluntary regulatory mechanism that requires investments in the productivity of
the forest resource and working conditions for forest laborers. Community-owned enterprises
also take specific actions to invest the returns from forest businesses into alternative economic
30
activities and improvements in the social wellbeing of forest communities. The example of
ICOFOSA and the TIP brand name and furniture factory outlet stores explicitly channel value
from retail functions up the value chain to furniture factories and certified forest management
operations.
The Oaxaca example emphasizes such strategies which distribute value up-stream to the
social wellbeing of workers and to the conservation of forest resources, but it is less strong in
value-generation strategies, such as design and the integration of place-based aesthetic resources
to create a Oaxaca “look” or “feel.” In Guadalajara, the Tlaquepaque-Tonala furniture/home
décor sector illustrates value-generation strategies missing in the Oaxaca case. It is especially
good at using place-based cultural and aesthetic resources to generate a dynamic home décor
style which is shared among the competing producers in the district. It also illustrates the role of
designer-entrepreneurs who introduce new designs, products, and styles into the sector and who
work closely with small producers up chain to improve quality and meet specifications. In
Tlaquepaque and Tonala, however, the network of production has few mechanisms to channel
value to the workers or the environment.
In the context of trade agreements and increasing competition from China, globalized
commodity chains threaten the viability of furniture production districts in Mexico.
Unfortunately, Mexico has adopted a low value-added strategy in which a main competitive
strategy is price. This strategy pits competitive success upon the degradation of the forest
resource and against returns to labor. It undermines possibilities for environmental conservation
and improvements of social wellbeing. A better strategy is required in which the value of
production is increased through a variety of quality strategies, in which the share of the chain’s
31
value captured by producers is also enhanced, and in which resources for labor equity and
environmental quality are protected. The cases analyzed here illustrate elements that could be
incorporated in that strategy.
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