EYK1-1 . Model Manufacturing is a company that specializes in producing model ca

Question

EYK1-1. Model Manufacturing is a company that specializes in producing model cars, trains, and airplanes for customers of all ages. Model has been in business for over 50 years, and has provided generations of detailed models which can be customized by color, type of metal, size, and numerous other features. The company sells its completed models to merchandising companies, which then advertise and sell the products to the end consumer. Because Model produces mass quantities of models, it requires efficient operations to ensure timely delivery of quality products to merchandisers.  

a. Model can obtain varying qualities of metal and other materials that it uses to produce models.

Why would the company choose to spend more for materials of higher quality when it can pro-

duce cheaper, similar models with lower-quality materials?

b. Model’s customers are mainly merchandising companies. Is Model more or less likely to enter

into long-term contracts with these companies than Model would with an end consumer? Why

Explanation / Answer

Why would the company choose to spend more for materials of higher quality?

1. Quality system: Modern manufacturing would have understood the importance and need for a quality system in place. Only good quality raw materials would turn into quality finished product which would then meet the high quality standards.

2. Automobile manufacturers: Being an automobile manufacturer, Model cannot compromise on quality. It involves people's life and model manufacturing would have understood that clearly.

3. Specialization: Model manufacturing has specialized in this automobiles field for quality time only through emphasizing on the quality of raw materials. Low quality material would not have stood in the market.

4. Brand: Model manufacturing has a good brand name around 50 years in the market and they couldn't have achieved this by buying low quality raw materials and in turn producing low quality products.

B. Motel would enter into contract with merchandising companies:

- Time consuming: Being an automobile manufacturer, it would be time consuming for Models to sell to the end customers directly.

- Bulk orders: Models needs to concentrate on merchandisers who buys in bulk orders than customers who buys one or two for their individual uses

- Focus: Since Models core business is manufacturing, the focus has to be on manufacturing quality products than on selling to individuals

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