Internal and external factors effecting the cost position Essay

The increased imports of the European as rise up as the Nipponese achieve of gos in the United States significantly impact the demand of the gos manu situationured by the US manufacturers. Imports of sub-compact cars from Europe and Ja scrap move steadily in the 1950s, often as families second cars but US manufacturers retained their hold on the lucrative merchandises for larger vehicles. (French, 1997, p142) The US manufactures aphorism their market shrink as the more aware and price conscious consumers shifted to the European and Japanese counter parts for their automobiles, while the US manufacturers were go forth with making large, excessive fuel consuming vehicles that denoted social status and individual(prenominal) style.Aside from this the increasing prices of crude anoint in the international market in the 1970s also significantly changed the demand of the automobiles as envisioned by the consumers. A crisis in the US car-market developed as a result of sudden unforeseen shifts in the general environment which allowed foreign hitrs to expand market share rapidly. New car sales faltered in the 1970s and excess capacity increased.At the same time the bounciness in fuel prices shifted the consumer preference towards smoother, more fuel efficient cars which Japanese and European makers already supplied in their domestic markets and were better able to produce that were the US manufacturers apply to making larger, more up-market gas-guzzlers (French, 1997, p142) The automobiles of French and Japanese make were smaller, more fuel efficient as well as more stylish yet cheaper than the those manufactured by the big tierce US automobile manufactures.As a result the consumers opted for purchasing the imported cars instead of those manufactured by the Unites States manufacturers. The recession of the 1970s also further trim back the disposal income and the propensity to save for the people in the United States which do purchasing the impor ted European and Japanese models of automobiles much more lovely to the consumers instead of opting for those models manufactured by the big three US automobile manufacturers.In the same period the perception of the consumers also significantly changed as was marked by the baby boomer generation and the hippy era. In this period, the consumer became more aware of the environment, the increasing pollution and the contribution that automobiles made towards adding to the pollution levels. As a result the consumers started to look for cheaper alternatives of travel and those which were more environmental friendly that the vehicles manufactured by the big three US automobile manufacturers.The internal factors that contributed to the changing cost position of the Bridgestone Industries, specifically at the launch pertained to the decreasing demand of the US manufactured cars and increased demand for cheaper cars that was reflected un the constricting cost based purchases being made by the big three manufactures form the Bridgestone Industries.As the volume of sales decreased for Bridgestone Industries, along with the permissiveness for profits on sales made due(p) to the rising crash be the cost position of the Bridgestone Industries significantly changed to become negative and resulted in the closing of the automotive component and fabrication facility by the Bridgestone Industries. command smasher Burden outrank The Bridgestone Industries had a specific method for determining the operating cost load rate for the harvestings that was proposed and set on an stratumly basis.The budgeted unit costs provided by the plant for the 1987 model year body of work included budget items ( upshot) applied to products as a percentage of direct labor buck cost. The overhead percentage was calculated at the budget time and used throughout the model year to allocate overhead to products using a single overhead pool. The overhead rate used in the study was 435% of direct labor cost (Patricia & Cooper, 1993) The following table depicts the overhead burden rate for the eld starting 1987 through to 1990. command processing overhead time Burden Rate (000) 1987 1988 1989 1990 Total Overheads 107,954 109,890 78,157 79,393Total Direct Labor Dollar Cost 24,682 25,294 13,537 14,102 Overhead Burden Rate 437 434 577 562 The analysis of the overhead burden that was determined for the years, 1987, 1988, 1989 and 1990 showed that the check over heads increased from 1987 to 1988. However in 1989, there was a pull down in the overhead level as the damper exhausts and the oil pan based product lines were merged with the other three product lines. This cut back the overheads significantly. In 1990 however the drift shows that the overheads for the Bridgestone Industries increased again on an annual basis.The direct labor dollar cost showed a similar trend as well reflecting the increasing expenses along with the effect that the closure of the muffler/ex haust and oil pan lines had on the labor cost. The overhead burden rate that was determined pertained to approximately 437 percent in 1987, 434 percent in 1988, 577 percent in 1989 and 562 percent in 1990. The following table depicts the overhead burden shared by the respective product lines at the Bridgestone Industries for the years starting 1987 through to 1990. Overhead Burden Share per Product greenback (000) Overhead Burden 1987 1988 1989 1990Fuel Tanks 18,234. 35 18,412. 03 25,490. 37 25,891. 96 Manifolds 25,744. 16 26,184. 35 36,246. 56 36,819. 62 Doors 11,463. 72 11,864. 85 16,420. 07 16,681. 43 Mufflers/Exhausts 24,646. 33 25,050. 44 0 0 Oil Pans 27,865. 45 28,378. 33 0 0 107,954 109,890 78,157 79,393 The overheads shared by the respective product lines also visualised significant change in the years from 1987 to 1990. On average the oil pans product line had the largest overheads allocated to its while the product line for the front and heighten doors had the lowest ov erhead levels for the years 1987 and 1988.When the product lines were merged in 1989, the manifolds product line had the largest level of overheads allocated to it, while the product line for front and order doors had the lowest level of overheads assigned to it. On a year to year basis, the overhead burden level has decreased by a small gradual percentage over the quaternion years highlighted. This is not due to the fact that the overheads for the company have been decreasing instead this has occurred due to the fact that the dollar cost of the direct labor has incrementally increased over the four year period as well resulting in the decrease in the overhead burden rate.