Cooper Tire & Rubber – Manufacturing in China & the US

The risk of operating in China

For manufacturing companies, China represents a land of opportunities still it hides many threats and risks. On the one hand, the Chinese government protects its own producers by imposing double-digit import tariffs. When China entered WTO these policies were reduced in order to meet international regulations and rules. China develops its tariff system and its classification according to the International Conventions including such tariffs as protective and revenue tariffs. On the other hand, the main problem for China is an increased rate of protective barriers used by European countries and the USA against Chinese goods. The main tariffs include the Customs tariff and duty rates. As nations become more economically integrated as a result of ongoing efforts to promote trade and investment liberalization, they need institutional support to promote collective action in response to global-scale risks of market failure. Politically, China is a stable country but it suffers greatly from the current economic crisis and economic decline (Chase and Jacobs 2003; Harding) 2006. In China, there are no currency restrictions placed on the repatriation of funds. Thus, in some cases, repatriation may have tax consequences. In China, exchange rates are stable, so a foreign company will avoid these risks. The main legal regulations for international companies are Tax rate for resident companies and tax rate on long-term capital gains. VAT rates are based on standardized procedures: ‘there is a Goods and Services sales tax which rate varies depending on the states between 6 and 14%. In some cases, the threat has been enough to induce the government to change its regulation. Cultural differences and religious traditions can be perceived as risks for international manufacturers.

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Manufacturing in China & the US

Cooper Tire & Rubber manufacturing is a special area of production that demands a skillful workforce and high-quality raw materials. Special attention should be given to the process. In China, supply chain decisions influence prices, middlemen activities, and margins. They strongly affect inventory situations and production fluctuations, as well as marketing policies in such areas as advertising, branding, product lines, personnel selling, and physical distribution. Yet channel selection often receives less attention than such areas as the allocation of advertising budgets or the motivating of salesmen. Although a continuing task, channel selection is often treated as a decision to be made once for a relatively long period of time. Whereas channel decisions usually involve long-run commitments, channel policy is not irrevocable. It must be reviewed and changed to improve efficiency (Naylor 2002).

Cooper Tire & Rubber Company manufactures tires of different types. In this industry, the wrong channel choice can severely handicap a program, especially for a new product, and yet switching channels is not likely to be a frequent occurrence because it is a disruptive and costly undertaking. Conscious distribution-channel decisions are usually made early in the formulation of a marketing program. Though channel selection is not entirely rational, relevant factors are usually considered. These decisions govern and affect other aspects of the marketing mix, including physical distribution, personal selling, advertising, credit, sales promotion, and product service. Through time, changes in the channels of distribution are not readily made, though, in theory, managers should continuously evaluate pertinent factors and select and shift channels accordingly (Naylor 2002).

The company is externally focused. Notwithstanding, manufacturing operations are shaped by changing demand configurations and current business structures. The alternative policy for Cooper Tire & Rubber is to join short time and long time product lines and propose them in one menu. It will help to meet the contract and deliver the heist possible quality of services. The concentration or diffusion of states and customer wants and needs affect menu selection. In most situations, the choice is neither direct nor simple. Workable rather than optimal choices must be made because of the lack of complete information (Naylor 2002).

The operating strategy of Cooper Tire & Rubber is to manufacture quality tires using innovative approaches. Since existing alternatives present limitations and the wisdom of decisions is determined by unpredictable future events and long-run commitments, management must deal with expectations. Nevertheless, the consideration of channel factors can make the decision a very logical one. Thus, channel analysis and evaluation are important; it is part of the marketing audit. Adjustments must be made continuously, based on criteria of channel performance.

The trade-offs of the company are to use cheaper raw materials and cheap labor in order to make products available to diverse customers with limited financial resources. In China, developing a balanced, smoothly functioning, and the efficient channel is a demanding task. It is based on considerations of markets, products, customers, company constraints, information about the competition, current business practice, and feasible alternatives. Basic to all factors are cost-revenue considerations. A distribution channel may be a complex network. It can comprise a number of separate and distinct organizations that have independent legal and functional status. Yet their activities are coordinated to form a vertical system that seeks joint opportunities in the marketplace. A channel is thus a super organization, an ecosystem, governed not only by the desires of producers and middlemen but also by consumers and the socioeconomic environment. Because the supply chain involves changes in numerous functions and organizations, it is important to consider the sensitivities involved with this controversial subject matter. As a result, in an economy of abundance, a heavy burden moves from the physical production of goods to their marketing. Such marketing facets as the supermarket and the discount house; television, magazine, and newspaper advertising; and consumer credit and the distribution center are part of the mass-marketing technology designed to support mass-productive systems. It must be expected that costs of marketing products will increase relative to the costs of physically producing them. However, the availability of mass markets permits a drop in production costs.

The Internet has the company to sell its products and generate publicity. Internet- changed traditional marketing channels and demand new ways of doing business based on Internet services. For Cooper Tire & Rubber Company, the Internet is one of the main marketing tools of mass selling and buying leveling geographical and national differences. Internet helps to create a global marketplace without limits and barriers but is marked by strong competition and legal regulations. In developing countries, markets will tend to be imperfect and the supply and demand for Internet services might be limited by infrastructure and other variables. Consideration of penetration will also involve consideration of the quality of connectivity in terms of bandwidth, service quality, and reliability (Schniederjans, 1998).

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Impact on the bottom line

Robust quality helps minimize the quality loss (that is, the cost of subsequently rectifying the product to suit customers’ needs and other stakeholders’ requirements). While the important transition from quality’s-designed to quality-as-delivered is beyond dispute, we are not so sure we support the implied conclusions that:

  1. if the quality is to be improved, it is best to focus on the product’s design and, as a corollary,
  2. any enhancement achieved in quality during the operations phase (stage of the value chain) is marginal and not deserving of all the attention showered on it by writers and managers alike.

Value delivered lies not only in what is done at each stage but equally in how the stages are connected to each other. Undoubtedly, the early stages of the chain limit the potential of later stages. A poorly designed product severely constrains how much value can be built into it, just as there is only so much marketing one can do with a poorly-made product. However (and this is the core of our argument) a well-designed product does not necessarily result in a well manufactured and made one. Even if ninety percent of a product’s or service’s quality sprang from its concept and design, the other ten percent could mean the difference between the top-notch and second-rate final quality. To be sure, quality is not simply or solely a matter of putting parts together right or serving customers with speed, accuracy, and courtesy. Product design, whether it be room service, a restaurant’s atmosphere, an amusement park’s rides, or a seamless aluminum can for soft drinks, is tremendously important in the quality actually built into the product (Schniederjans, 1998).

Future implications and opportunities

The best possible solution for further development is to restructure manufacturing and use franchising as the entry strategy. The fulcrum of supply activity is the customer. Without some form of hierarchy, most firms would quickly descend to a chaotic state for lack of both a focus for their actions and a glue to hold them together. Anyone who has been in collegial groups where everyone enjoys about equal levels of power will not question this statement–nor forget the agonizing experience! Quality is the main priority of the food and restaurant industry. Service quality improvements are an almost natural outcome of attaining the time reductions and balance shown above. Granted, quality, as designed, is an important determinant of final quality and it could be crucial to newly-introduced products since unexpected defects and malfunctions may have to be designed out. But as products mature, competitors come out with copycat offerings, and in general, design know-how gets diffused across the industry, value construction tends to emerge as the determinant both of quality delivered to customers and of quality differences among competitors. A poorly designed product will almost certainly be deficient in quality. A well-designed product, on the other hand, is no guarantee of superior quality. Having stated our stand on the strategic importance of quality constructed into the product, we return to our assertion that the nexus of setup, processing, or scheduling times can have a strong impact on quality (Schniederjans, 1998). Procurement management and choice of suppliers influence profitability because they allow organizations to build customer value by offering customers both a wider range of channels and more personalized treatment through the integration of channels. Getting this role right, and to a standard of expertise that is superior to that of competitors and sustainable in the longer term, requires an in-depth understanding of the nature and nuance of customer service. The wider use of real-time data-sharing systems has undoubtedly helped strengthen the linkages among disparate activity areas and dispersed locations Areas in which the construction company value performance is deficient need to be targeted for improvement, focusing resources where most effective. The company tries to achieve a cost reduction through a coordinated effort between R&D and manufacturing; analyzing and addressing the environmental impact of the firm’s product, processes and philosophy.

References

Chase R.B., Jacobs R.F. (2003), Operations Management for Competitive Advantage, Hill/Irwin; 10 edition.

Harding, H. China Risks. (2006). Web.

Naylor J. (2002). Introduction to Operations Management, 2nd Edition Pearson Education.

Schniederjans, M.J. (1998). Operations Management in a Global Context, NY: Quorum Books.

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