Courtney Flinn

MEMORANDUMTo: Mr. ArmesFrom: Creative Juices, LLCSubject: Company Analysis

PurposeThe purpose of this report is to evaluate Cooper Tires and Rubber based on the current strategy and company standing, a SWOT analysis, competitors, and financial performance in order to uncover issues in the company and recommend solutions.

Section 1- Strategy EvaluationCurrent StrategyAs of 2014, Cooper Tires has operations in both North America and Internationally, with a total of 9 manufacturing facilities and 38 distribution centers, employing 13,280 people. Cooper Tires is the 4th-largest tire manufacturer in North America and 11th worldwide based on sales.Quality Control: Employees receive over 900 hours of quality training to ensure top quality in all Cooper Tires products. Market Positioning: Cooper Tire is confined within the replacement tire market. It is the only major U.S. tire producer to choose not to enter the original equipment market. Cooper Tires made about 5.6 percent of replacement tires sold in North America in 2013. Distribution and Marketing: Cooper Tires private label tires, which make up half of the company’s output, are marketed and distributed by private retailers. Private label companies are attracted to Cooper Tire because they do not have their own retail stores to compete. The other half of the output is sold through independent tire dealers through Cooper Tire owned brands. The marketing budget is focused on supporting the independent tire dealers. Plants: Plants are run at 100% capacity while competing firms only run at 80%. Plants are in small towns where the company is a master employer.Key Success Factors

Cost Leader Global brand image Employee loyalty

Porter’s Five ForcesRivalry among Competitive Sellers: The threat of rivalry is high. The tire industry is extremely competitive. There is not a high level of differentiation between products and competitive moves can be easily copied.New Entrants: The threat of new entrants is medium. There are no entrance barriers, but the top six companies own about 47% of the market share, so it is hard for new entrants to succeed. See Exhibit 1.Substitute Products from Other Industries: The threat of substitute products from other industries is low. There are no substitutes in other industries for tires. Suppliers: Threat from suppliers is medium because of the natural rubber (NR) shortage in 2012. Usage of more synthetic rubber and synthetic polyisoprene to replace NR is expected, and prices will rise.Buyers: Threat from buyers is high. The cost of switching to competitors is low and the industry’s products are relatively standard.

Driving Forces Increasing globalization- as economies such as China and India begin to grow and the

automobile market starts to emerge, the need for tires will grow. Technological changes and innovations- Companies are looking for ways to create more

sustainable tires. Changing societal concerns, attitudes, and lifestyles- As environmental concerns increase

and other forms of transportation (trains, subways, etc.) are being used more frequently, tire usage may go down.

Section 2- SWOT AnalysisSee Exhibit 2.

Section 3- Competitive AssessmentCooper Tire and Rubber Co. is 11th on the list of leading sellers of new tires worldwide, doing $3.2 billion in sales in 2013. See Exhibit 3. In 2014, Cooper Tire had the 4th largest production capacity per day for tire manufacturing plants in North America. See Exhibit 4.

Section 4- Financial PerformanceNet sales grew from 2009 to 2012 but fell by close to 20% in 2013. See Exhibit 5. At the end of 2013, gross profit margin is 15%.

Section 5- Issues and RecommendationsIssues

Need to bring revenue back to where it was before the failed expansion effort. Need to expand into original equipment market. Need for more prominent marketing.

Recommendations Complete a merger or acquisition- Cooper Tires already knew that acquiring a company

would be advantageous to the business. When the merger with Apollo fell through, Cooper Tire’s revenue and stock prices fell. In order to bring those stock prices back to where they were previously, as well as reap the benefits of an acquisition, the company should search for a new company to acquire or merge with. If Cooper Tires acquires an international company, it would help it break into the up and coming automobile markets in economies such as China and India.

Partner with a prominent vehicle manufacturer- By partnering with a prominent vehicle manufacturer, Cooper Tires can break into the original equipment market. This will increase profits not only with OE purchases, but also because in many cases, consumers will purchase what they know and put the same tires back on their car when it comes time for a replacement.

Expand marketing efforts- Cooper Tires has been a sponsor of Major League Baseball teams for decades. They can expand this sponsorship by taking on more teams in the MLB or even become the “Official Tire of the MLB.” Another approach is to focus on the sustainability of the company and being the “most eco-friendly tire” to appeal more to the environmentally conscious market.

References

Cooper Tires. 5 April 2016. Retrieved from: http://us.coopertire.com/

Thompson, Arthur. (2016). Crafting and Executing Strategy: The Quest for Competitive Advantage. New York. McGraw-Hill.

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