Super Sized Cycles specializes in making larger bicycles for overweight riders.

Question

Super Sized Cycles specializes in making larger bicycles for overweight riders. Thanks to Internet sales, the company has increased sales every year. However, profits have been razor thin. The problem is that the company currently obtains parts form U.S.-based companies. Though this allows for individualized customer service, it is also expensive, as each bike costs roughly $1,250 to produced. If, however, Super Sized Cycles were to source materials to Taiwan, it could pay just $400 to $500 for each bike.

Questions:

What are the advantages and disadvantages of working with U.S. suppliers? Of working with foreign suppliers?

What would be the best option for ensuring the continued success of Super Sized Cycles

Explanation / Answer

Answer: Following are the advantages of working with the U.S Companies and disadvantages of working with Foreign Countries.

Trust Worthy

                  The American market and products are trust worthy. They are really well reputed. In the present market people are more concerned about the quality of the products. As the American companies have state of the art manufacturing units so they produce best quality items. They maintain their quality and standards. This is one of the main reason of America’s being trust worthy and reliable around the world. So using parts made in U.S to make such cycles will attract more people and as a result the sale ratios will increase. Contrary to this Taiwan based companies don’t have a reputation like these. It can create a feeling of unreliability among the clients.

Innovation

                 American products are innovative and up to date. As the American industry accepts innovation rapidly so the designs and materials of American products are innovative that attracts people around the world. Innovation is a key factor to impress maximum number of clients. So the company should work with the U.S made products to lead the competing market. On the other hand Taiwan based companies cannot compete the level of innovation as compared to U.S.

Following are the disadvantages of working with the U.S Companies and advantages of working with Foreign Countries.

Higher Manufacturing Cost

                      If the company buys parts from U.S they will suffer high manufacturing cost as the parts obtained from them are far expensive as compared to Taiwan based companies. In this case the rate of profit per cycle will reduce. But if the company purchases parts from the foreign companies like Taiwan almost the manufacturing cost will reduce to half.

Heavy Import Duties

                      In order to work with U.S based companies and buying parts from them for the cycles will cost heavy import duties. Ultimately it will add into manufacturing cost of the cycles that can cause drastic decrease in expected profits of the company but if the same parts are imported from Taiwan less import duties will have to be paid and this will benefit the company.

Answer: In Order to insure the continued success of Super Sized Cycles the company should continue buying parts from U.S based companies as the American products are more reliable and durable. It is right that they are expensive as compared to peer companies but their credibility and market worth are far higher than others. People trust the U.S made products due to their superior technology and continuous innovation. So, in my opinion, the decision to keep working with the U.S. made parts to produce these cycles will bear great fortune.

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