Harvard Case - New Balance Athletic Shoes
"New Balance Athletic Shoes" Harvard business case study is written by Kim B. Clark. It deals with the challenges in the field of Operations Management. The case study is 15 page(s) long and it was first published on : Jan 1, 1980
At Fern Fort University, we recommend that New Balance implement a comprehensive strategic plan focused on operational excellence, innovation, and strategic growth. This plan should address the company's core competencies, prioritize customer satisfaction, and leverage its strong brand identity to navigate the increasingly competitive athletic footwear market.
2. Background
The New Balance case study highlights a company facing several challenges:
- Declining market share: New Balance's market share in the athletic footwear market is declining, particularly in the US, due to increased competition from global brands like Nike and Adidas.
- Limited product innovation: New Balance has been criticized for its lack of innovation in product design and technology compared to its competitors.
- Operational inefficiencies: The company faces challenges with its production processes, supply chain management, and inventory control, leading to higher costs and slower response times.
- Growing global demand: New Balance is experiencing increasing demand in international markets, requiring a more robust and responsive global supply chain.
The main protagonists of the case study are Jim Davis, the CEO of New Balance, and Rob DeMartini, the company's president. They are tasked with navigating the company through these challenges and developing a strategy for future growth.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand reputation for quality and durability
- Loyal customer base
- Focus on niche markets (running, walking, etc.)
- Strong manufacturing capabilities in the US
- Commitment to ethical sourcing and manufacturing practices
Weaknesses:
- Limited product innovation
- Declining market share
- Operational inefficiencies
- High production costs
- Limited global reach
Opportunities:
- Growing global demand for athletic footwear
- Emerging markets with high growth potential
- Increasing consumer interest in sustainable and ethical products
- Technological advancements in product design and manufacturing
Threats:
- Intense competition from global brands
- Fluctuating raw material prices
- Economic downturns
- Changing consumer preferences
Porter's Five Forces Analysis:
- Threat of new entrants: Moderate, due to the high barriers to entry in the athletic footwear industry, including brand building, manufacturing capabilities, and distribution networks.
- Bargaining power of buyers: Moderate, as consumers have numerous choices in the market, but brand loyalty and product differentiation can influence purchasing decisions.
- Bargaining power of suppliers: Moderate, as raw material prices can fluctuate, but New Balance can mitigate this risk through strategic sourcing and long-term contracts.
- Threat of substitute products: High, as consumers can choose from various alternatives, including casual footwear, sports apparel, and other leisure activities.
- Competitive rivalry: Very high, with intense competition from established global brands like Nike and Adidas, as well as emerging competitors.
Key Findings:
- New Balance needs to address its declining market share and limited product innovation to remain competitive.
- The company must improve its operational efficiency and supply chain management to reduce costs and enhance responsiveness.
- New Balance needs to capitalize on the growing global demand for athletic footwear by expanding its international presence.
4. Recommendations
1. Operational Excellence:
- Implement Lean Manufacturing: Implement lean manufacturing principles to streamline production processes, reduce waste, and improve efficiency. This includes value stream mapping, Kaizen events, and Kanban systems.
- Optimize Supply Chain: Implement a robust supply chain management strategy, focusing on inventory control, demand forecasting, and efficient logistics. This may involve adopting an Enterprise Resource Planning (ERP) system and implementing advanced forecasting methods.
- Invest in Technology: Utilize technology to improve operational efficiency, including automation, robotics, and data analytics. This can help optimize production processes, improve inventory management, and enhance supply chain visibility.
2. Innovation and Product Development:
- Focus on Niche Markets: Continue to focus on niche markets like running and walking, where New Balance has a strong brand reputation.
- Invest in R&D: Increase investment in research and development to create innovative products that meet evolving consumer needs and preferences. This includes exploring new materials, technologies, and design concepts.
- Partner with Technology Companies: Collaborate with technology companies to develop innovative products and enhance product functionality. This can include integrating smart technology, wearable devices, and personalized fitness tracking features.
3. Strategic Growth:
- Expand Global Presence: Focus on expanding into key international markets with high growth potential, such as China, India, and emerging markets in Latin America and Africa.
- Develop a Multi-Channel Strategy: Embrace a multi-channel distribution strategy, including online sales, retail partnerships, and direct-to-consumer channels.
- Build Brand Awareness: Invest in marketing and advertising campaigns to enhance brand awareness and build a stronger connection with consumers. This includes utilizing digital marketing channels, social media platforms, and targeted advertising campaigns.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of New Balance's strengths, weaknesses, opportunities, and threats. They are aligned with the company's core competencies and mission, focusing on providing high-quality athletic footwear that meets the needs of its target customers. The recommendations also consider the competitive landscape and the evolving consumer preferences in the athletic footwear market.
Quantitative Measures:
- Increased market share: Implementing the recommended strategies is expected to increase New Balance's market share in both domestic and international markets.
- Improved profitability: Optimizing operations, reducing costs, and expanding into new markets will contribute to increased profitability.
- Enhanced customer satisfaction: Investing in product innovation, improving service quality, and providing a seamless customer experience will enhance customer satisfaction and loyalty.
Assumptions:
- The athletic footwear market will continue to grow globally.
- Consumers will continue to value quality, durability, and ethical sourcing in their athletic footwear choices.
- New Balance will be able to successfully implement its operational improvements and innovation initiatives.
6. Conclusion
New Balance has a strong brand identity and a loyal customer base. By focusing on operational excellence, product innovation, and strategic growth, the company can overcome its current challenges and regain its position as a leading player in the athletic footwear market. Implementing the recommended strategies will enable New Balance to capitalize on emerging opportunities, enhance its competitiveness, and achieve sustainable growth in the long term.
7. Discussion
Alternatives:
- Merging with a larger competitor: While this could provide access to resources and distribution channels, it could also dilute New Balance's brand identity and compromise its commitment to ethical manufacturing.
- Focusing solely on niche markets: This could limit growth potential and make the company vulnerable to market fluctuations in specific segments.
Risks:
- Implementation challenges: Implementing the recommended strategies requires significant resources and commitment from all stakeholders.
- Competition: The athletic footwear market is highly competitive, and new competitors may emerge.
- Economic downturns: Economic fluctuations could impact consumer spending and demand for athletic footwear.
Key Assumptions:
- The recommendations assume that New Balance has the resources and commitment to implement the necessary changes.
- The recommendations assume that consumer preferences for quality, durability, and ethical sourcing will remain strong.
- The recommendations assume that the global athletic footwear market will continue to grow.
8. Next Steps
Timeline:
- Year 1: Implement lean manufacturing principles, optimize supply chain management, and invest in key technologies.
- Year 2: Launch new innovative products, expand into key international markets, and develop a multi-channel distribution strategy.
- Year 3: Continue to enhance operational efficiency, expand global presence, and build brand awareness through targeted marketing campaigns.
Key Milestones:
- Q1 2024: Implement a pilot program for lean manufacturing in a selected production facility.
- Q2 2024: Launch a new product line featuring innovative technologies.
- Q3 2024: Open a new distribution center in a key international market.
- Q4 2024: Launch a major marketing campaign to promote the new product line and expand brand awareness.
By following these recommendations and implementing the proposed next steps, New Balance can position itself for long-term success in the dynamic and competitive athletic footwear market.
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Case Description
Faced with growth exceeding 100% per year, James Davis, president of New Balance, must decide how to meet the need for additional capacity. Several factors contribute to a climate of extreme uncertainty. Several options are considered, ranging from a second shift to acquiring a plant in Ireland. Sufficient information is provided to allow an analysis of forecasted demand as well as the strategic financial and organizational implications of alternative courses of action.
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