Sarah Hollister - Cory Scheuer - Josh Packard

Capstone Consulting Firm

Who we are:
Senior Consultants from various business administration
backgrounds
Our firm specializes in consulting various segments in the
tire and rubber industry
Companies we have successfully supported:
Lululemon, J. Crew, Walt Disney, Southwest Airlines
 Executive Summary
Cooper Tires Vision
Troubled Waters
SWOT
Primary Issues
Solutions
Evaluation
Chosen Strategy
Implementation
Questions?
Coopers Business
Primary focus is passenger
car and light truck
replacement tires in North
America
The 11th largest global tire
manufacturer
The 4th largest tire
manufacturer in North
America
The Cooper
Way
Cooper Tire In 2013
Strengths Weaknesses
Strong Relationships with Minimal presence in Brazil, India,
Replacement Tire Dealers South Africa (developing countries)
High profit margins Political Challenges with Overseas
Employee Loyalty Joint Venture
Global presence High raw material costs
High Quality, Low Cost
Capcity
Driving Forces of Change
Product Innovation
Shift in Buyer Demographics
Government Policy Changes
Societal Changes
 Expanding the Waters
Previous successful joint venture Competitors looking to enter new
with Chinese Chengshan markets as well
Cooper looking to expand into new Putting more resources into
international markets replacement tire industry
International markets in new Competitors creating new products
developing countries to compete
Driving forces trending towards
Coopers industry
First mover advantages into these
new markets

Need a way to stay relevant among competitors

 Troubled Waters
In 2013, Apollo proposed a merger with Cooper Tire at $35
per share
Issues subsequently arose, threatening the merger
United Steelworkers union filed grievances with Cooper
Apollo agreed to renegotiate with the union, but as a
concession, wanted to reduce price per share offer
 Troubled Waters
One of Cooper Tires joint venture Chinese partners,
Chengshan, sold Cooper Tire a sizeable portion of their stake
in the joint venture
Later tried to extract a higher cost by stopping the
manufacturing of Cooper Tires in China, and denying access to
financial records
Costly legal issues that resulted increased Apollos concern,
who then insisted on an even lower price offer.
Ultimately, Cooper terminated the joint venture agreement
with Apollo
Cooper Post Trouble Waters
Strengths Weaknesses
Strong Relationships with Minimal presence in Brazil, India,
Replacement Tire Dealers South Africa, China (developing
High profit margins countries)
Employee Loyalty Political Challenges with Overseas
Less Global presence Joint Venture
High Quality, Low Cost Reduced R&D investment
Capcity HIgh raw material costs
Cooper Post Trouble Waters
Opportunities
Growth rate high in emerging
economies
India, China & Brazil
Eco-friendly tire company brand
image
Strategic Diversification
Growing demand for replacement
tires
Threats
Strong competition from national
and international brands
Emerging new competitors
Government policies
Volatility of raw material prices
Major competitor invests 10x in R&D
(Goodyear)
Free cash flow depleting
 Resulting Issues
1. Damaged relationship with
the United Steelworkers
union
2. Loss of sales and increased
expenses incurred due to the
failed Apollo merger
3. Lower volumes &
manufacturing inefficiencies in
the international business
segment
4. Unfavorable price and
product mix has substantially
reduced profit
Issue #1
Damaged relationship with the United Steelworkers union

Critical misunderstanding between the United Steelworkers

union and Cooper Tires
Steelworkers union believes they had the right to approve
any merger (i.e. the Apollo merger)
For decades Cooper has had excellent relationships with the
workers of the union and now with one wrong move they have
been damaged
Issue #2
Loss of sales and increased expenses incurred due to the failed
Apollo merger

Sales were off 18.1 percent and down to $3.44 billion

4th quarter profits were down by $27 million
Why?
Issue #3
Lower volumes and manufacturing inefficiencies in the
international business segment

$25 million from lower volumes and $2 million of manufacturing

inefficiencies in international business segments
Related to the negative effects of the Cooper Tire & Rubber
Chengshan joint venture issues
Issue #4
Unfavorable price and product mix has substantially reduced
profit

Reduced profits by $68 million

Despite $31 million of lower raw-material costs
 Calming the Storm
1. Repair relationship with the union
Modify the terms of the unions contract to clarify whether they have
the right to approve an ownership deal and put terms in the Unions
favor

2. Consider forming a new joint venture with Asian/Middle

Eastern Company
Chengshan basically attempted to blackmail Cooper Tire into a higher
price for a completed sale of a portion of their stake in the joint
venture to Cooper Tire
 Calming the Storm
3. Introduce new product line
Coopers sales have gone up in the past when new models
were introduced

4. Focus on Lean Six Sigma capabilities to identify new

efficiencies in the business
Employees embrace and use the Six Sigma methodology to
improve the companys overall business
 Evaluative Criteria
1. Increase Market Share
2. Preserve Excellent
Relationships with Dealers
3. Improve Product Quality &
Value
4. Increase Sales & Revenue
5. Improve Distribution
 Evaluation Criteria #1:
Increase Market Share
Continued growth of our business requires increasing our market
share in both Cooper Brand and Re-branded tires
New products must always be created to compete with OEM
brands
70% of tire replacements were with the same OEM brand
New products that improve on OEM tire design are critical to maintaining
Coopers market share in the replacement tire market
Developing a competitive pricing structure
Expanding the sales base geographically (domestically and
internationally) increases market share
 Evaluation Criteria #2:
Preserve Excellent Relationships with Dealers
Relationships with independent dealers enable competitive
advantage
Increasing percentage of replacement tires were sold by large
regional and national tire retailers
Focuses on strong network of independent dealers
 Evaluation Criteria #3:
Product Quality & Value
Quantity is important, but Quality is MORE important

Customers look for how long tires are going to last when
purchasing replacement tires
 Evaluation Criteria #4:
Increase Sales & Revenue
Recover from Q3/Q4 2013 losses
Allows Cooper to allocate more capital into activities that will
further sales growth
Used to expand on capabilities
 Evaluation Criteria #5:
Improve Distribution
No retailers means that Cooper must rely on dealers to sell
product
Efficient and effective distribution is necessary
Strong distribution to dealers creates a competitive advantage
in the replacement tire market
Main rivals distribution is stronger than Cooper
By implementing the evaluative
criteria to the problem we can
generate a successful solution
New Product Line
Joshs Pick
 Advantages
Diversifying products to compete in new markets
Adding a new revenue stream
Cultivate new product for dealers

Disadvantages
Could hurt overall productivity and value
Could be to costly
Would require more funds in research and development
Repair Relationship with
the Union
Sarahs Pick
 Advantages
Increase sales and revenue
Improves employee engagement in generating production efficiencies, improving bottom line
Improve product quality and value
Encourages employee participation in innovation and product line improvement
Increase market share
Improved sales, product quality, and value will likely increase market share

Disadvantages
This solution has no impact on the following criteria:
Preserve excellent relationship with dealers
Improve distribution
 Focus on Lean Six Sigma
Capabilities to identify New
Efficiencies in the Business
Corys Pick
 Advantages
Improve relationships
Improve Product Quality
Cost-effective

Disadvantages
Long-term
No direct improvement to market share
Forming a new joint venture with
Asian/Middle Eastern Company
Advantages
Increase Market Share
Expansion into new Asian or Middle Eastern markets
Takes away leverage from Chengshan
Relationships with Dealers
New relationships with new independent dealers
Improve Product Quality & Value
Opportunity to improve product quality and value with new joint venture
Increase Sales & Revenue
New joint venture will lead to more sales in new geographic location resulting in increased revenue
Improve Distribution
New joint venture will lead to new distribution sites
How did we arrive at this solution?
Strength Rating Scale
Ranked each solution with a strength rating 1-5
1-2 hurt the company
3 remained the same
4-5 improvement
Weighted Evaluative Criteria
Each evaluative criteria was given a factor based off of importance of industry success

Strength Rating X Weighted Evaluative Criteria = SOLUTION!

Implementation
Key Value Chain Activities
Service
Operations
Distribution
Secondary Activities
Research & Development
Human Resources
 Service Implementation
Critical Business Factors
Knowledge Management
Help improve international efficiencies
 Operations Implementation
New facilities to accommodate
Updating new company with production processes
Obtaining and training on machinery for employees
Placing Cooper managers to prevent previous issues
Meeting legal and ethical requirements of home country
 Distribution Implementation
Analyze location PESTEL factors in the new location
Secure independent dealers in new location
Develop new manufacturing facilities
Obtain additional warehouse space for product storage in new location
Secure transportation services between warehouses and dealerships
 Research and Development
Applying money to find more efficient production processes
Further product development for higher quality in replacement
tire market
 Human Resources
Implementation
Hiring and Training of capable employees
Finding and placing managers familiar with operations
and employees
Past organizational performance
The Calm After the Storm
A new joint venture in the Middle East or Asian market will lead to
progress in a competitive market
Relationship with the Union will be repaired because we will allow them to
approve merger
Improved Sales and Revenue
Increased volumes and manufacturing efficiencies in the international business
segment
Created a favorable price and product mix that will result in increased profits