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In the year of 2004, New Balance Corporation was stated one of the third largest athletic shoes manufacturing company in the United States. New Balance manufactures varieties of shoe product to compete against the global market. Thus, the footwear manufactured by New Balance is the only company came out with broad range of width sizes shoes. New Balance, compared giant competitors, manufactured almost all of its footwear in the United States, as contrasting to manufacturing its merchandise overseas. Besides that, New Balance also produces a variety of athletic apparel.
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In the another hand, The company came up with its only one of its kind set of rules that included an “endorsed by no one” stand, retention of 25% manufacturing in the US, and a middle-aged customer or older generation as its primary target customers. New Balance Company was the only company excessively to grow well during the economy down trend shoe industry in the mid 1990s. Despite huge advertising expenses and celebrity endorsements from the major competitors such as Nike, Reebok and Adidas, the company started to grow and gained market share in the global market. This case study discusses the job design and method of work employed by New Balance Corporation to regain their status in the competitive world. Not only that, this case study will also converse the advantages and disadvantages not to mentioned the strategy, financial analysis taken by New Balance to remain in the global market.
New Balance Corporation only start as a Boston-based arch support company in the early 1900’s, well urbanized into a specialized shoe manufacturer in the year 1970’s, and has keep growing day by day to become one of the leading athletic products company. In today world, New Balance is one of the family brands including New Balance, Dunham, PF Flyers, Aravon, Warrior and Brine.
In terms of everyday needs for athletes, New Balance has always been a brand concerned. The company produced better-quality footwear and athletic apparel and purposely manufactured it to fit all widths and sizes, due to a better fit produces greater performance.
Furthermore, the best fitting and performance in shoe apparel is ensured by focusing more on improving our technology and production methods. Thus, the big part of that is by maintaining five manufacturing facilities here in the United States where the company will continue to produce shoes and apparel that meet the requirement and standards that New Balance employed for more over 100 years. Not only that, the company has also keep their promises and fully committed to set values in term of teamwork, integrity and importantly customer satisfaction throughout.
Besides that, New Balance Corporation has growth and helped to expand internationally over the decades, with almost 3000 associates around the globe and products in approximately 120 countries. The company has taken full charge in the UK, France, Germany, Sweden, Hong Kong, Singapore, Australia, New Zealand, Mexico, Canada, Japan, Brazil and South Africa. Not only have that, the company also had a number of licensees, joint ventures, and distributors throughout the world. New Balance has grown to be one of the largest athletic footwear and apparel companies in the world competing with other competitors such as Nike, Reebok and Adidas.
3.1 Marketing Perspective
3.1.1 Discuss the job design and method of work organization employed by New Balance Corporation for both local and global market to remain competitive. Critically derive the advantages and disadvantages of going global.
New Balance Corporation stays strong in the global market by implementing or using several job designs which is practically used in the company. Process designs were used to compete worldwide. The process organisation is commonly used in manufacturing purposes which leads to New Balance Corporation. New Balance Company has different units for production, distribution and exploration. Therefore, these types of process organisation enable each of the units to have its own specialists.
Furthermore, New Balance also uses Organisation design in the company. In organisation design, analysis and planning focusing on maintaining the design and organisational structure of the company and not to mention the relationships and behaviour of individuals within the organizations is used. There are two types of organisational used in the company that is analysis and planning. Organisational planning is nothing but dividing up the responsibilities of an organisation taking part in the design of the organisational structure of the company. Organisational analysis analyse the design and give feedback to the organisation and bring any changes throughout to provide better flexibility and effectiveness.
New Balance Company also uses SWOT analysis that is strength, weakness, opportunities and threats of the company. The strength of the company includes the brand name, quality product and global recognition. The weakness of the company is high manufacturing cost and lack of celebrity endorsement. The opportunities is sales and profit growth. The threats are nothing but competition against other competitors and down trend of the economy.
New Balance Corporation remains competitive in the global market through several methods of works which is used by the company organisation. First of all, work method is used by the company in order to stay long with other competitors. The company will train their employees in teams as long as 23 hours to get familiar with the task given. An employee that is well trained will make an easy $15 an hour if the teamwork gather is small.
Besides that, the company also uses job method technique. The complete task of the job production will be handled by a single worker or a group of workers so called teamwork. The job scale could be small or big. In another hand, the company uses batch method technique if the production volumes or business growth increases. Thus, the batch method requires the work of any task to be divided into parts or operations. Not only that, batch method main aim used to concentrate skills and achieve a high utilization of equipment. This technique is most probably implemented for organising manufactures. Flow method is another method used in New Balance. This method is carried out to sustain the company in the global market. Flow method is nothing but method of production where task is worked on continuously or the processing of material is continuous. Thus, the aim of the flow method is to improved the work and material flow, reduces the need for labour and work can be done faster. Finally, this few methods joined to become as one method that is the production method. The batch, flow and job method is the main process of production method. New Balance must have all the method above in order to succeed worldwide.
New Balance Corporation always has their advantages and disadvantages when talking about going globally. The strength of the company is nothing but their added advantage that the company is holding to in order to compete in the competitive market against giant industry such as Nike, Reebok and Adidas. Thus, the New Balance advantages include its brand name, quality product and global recognition. The company do not only hold the branding name but the process of providing a high-end quality athletic shoes and apparel for world athletes. New Balance Company can also be said providing a strong grip in the global world as the company has already marketed products in approximately 130 various countries all over the world.
Other than that, the strong in terms of distribution system has given an easy passage through for New Balance to ease profits, efficiency in their product sales and the strength in distribution. Not only have that, New Balance also represented on the web as a good distribution system with strong retailer network. All the customers can get their products by just referring through some websites which retail New Balance’s products. The other advantage on New Balance is brand loyal customer and offering special products. New Balance will offer new products to customer satisfaction and always be a brand which is loyal to its customer due to customer come first. Competition, product development and sales and profit growth is an added advantage to New Balance in order to stay and compete with other giant companies.
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Regardless this, New Balance Corporation also faces major difficulties which than added as a disadvantage to its company. First of all, the company falls way behind with its other major competitors such as Nike in terms of marketing. Thus, New Balance does not take celebrity endorsement seriously. Therefore, the company is in agony when it comes to brand building. Due to this matter, the company loses its touch because most of the global brands generate strong celebrity endorsements to carry out their brand names into further global market. Another disadvantage face by New Balance Corporation is the manufacturing cost of a product. Brand such as Nike, Reebok and Adidas do not have to worry much due to the outsourcing into other countries such as China which then able to minimize their manufacturing cost consistently due to cheap labour compare to New Balance that manage to outsource approximately about 70% of its US volume while the remaining for assembly which will maximize the cost of manufacturing.
In the other hand, New Balance Corporation faces limited production line. This is cause by new younger generation which is more to fashion oriented design and New Balance is producing shoes and apparel more to the middle age group. The Company only prepared itself for the older crowd that resulting in the limitation of the company to expand new product designs in order to remain competitive throughout the world. This is added as a disadvantage of New Balance Corporation to exploit in both local and global market.
3.1.2 Observe the strategy formulation and processes to continuously improve to meet the customer needs, and quality at lower cost.
New Balance Corporation falls behind to other major competitor due to lack of strategic plan implemented towards the company. The company does not undertake celebrity endorsements which cause the company to lose out in gaining strong recognition towards major sporting events which will contribute much in the global market. The company should take this matter as a strategic plan to find a celebrity to endorse in their product line resulting in maximization of sales and profit growth to compete later on with other brand names.
Not only that, New Balance Corporation should reconsider in lowering down their final product pricing although manufacturing cost of New Balance is high. This will improve the customer needs in terms of pricing and sooner will buy the product. New Balance should also reconsidering to outsource them-self to countries like China following Nike footsteps to minimize the manufacturing cost but he quality of the final products is excellent at lower cost. New Balance should come out with more advertising and promotion like become a sponsorship for big tournament like the Olympics. The company should also conduct a fashion show on new apparel in order to attract more customers and remaining competitive.
Besides that, training and development should be part of the strategy plan so that employees or workers may improve their production and management skills. New Balance should also hire a market research like Japan to study the buying habits in Asian consumers. In another hand, New Balance Corporation should come out with marketing slogans just like the Nike Company to sustain in the global market.
New Balance also came out with a strategy formulation to continuously improve to meet customer requirement and quality at lower cost. The first step is by formulating a business strategy. This includes the organisation vision or mission statement and a range of factors internal toward the organisation. Not only that, one result of developing a business strategy is to identify the organisation core competencies and capabilities that provide products to customer. Another strategy formulation is by outsourcing or off shoring. Outsourcing can be important when they require highly knowledge and skills that is a core capability. Outsourcing would not lead to loses on competitiveness because of lower cost or higher quality.
Balance scorecard is used in New Balance to help the company translate their mission and strategy into appropriate performance measures. As a result, this strategy implementation has benefit the company a lot including a way to make sure those strategic objectives are well linked with the annual budget. Strategy maps are used in the company to show the cause and effect of the relationship of the organisation. The strategy maps consist of four different perspective that includes the financial perspective, customer perspective, internal business process perspective and finally learning and growing perspective. With this, the strategy map will help increase the customer needs and the quality at lower cost.
3.2 Manufacturing Perspective
3.2.1 Critically observe the shoe manufacturing processes and examines the key factors in the designs of the products and services.
3.2.2 Discuss and elaborate the necessity of quality planning and quality control processes in achieving high performance products and services for the company.
3.3 Financial Perspective
3.3.1 Carefully observed how to reduced-quality product would affect the company financially. Discuss the financial analysis to justify the use of technology in the shoe manufacturing operation
New Balance Corporation got no choice but only the quality which they committed and provide to the customer. In another hand, reducing the quality of the product will definitely bring much negative impact for the company itself but not the key towards success. Reduce the quality product will directly affect or even may increase the cost, and this will become the influence not even in financial but also the reputation of the company. One of the type of cost is the rework cost, which is nothing but the poor quality product that will have the highest rejected and the company itself need to take on all the cost to repair the product or even reproduce again for the effective product in order to launch it to the market. Therefore, the cost of labour and material used will also increases in order to solve the reproduction and repair work done by the company.
Furthermore, those final products with poor quality within the factory specification could not be marketed out or sold, resulting it to be made as a scrap and it sooner becomes as a waste. Thus, this will lead to the lost in profit to the company. Despite that, the poor quality of the products will causes the product price market to be lower due to the unsatisfied or complaint from the customers which buy the product.
New Balance Corporation will face the consequences for losing their customer confidence and loyalty. For an example, New Balance was facing the problem counterfeit in china earlier years ago, and New balance spent millions of dollars in this case in order to maintain the loyalty and confidence by the consumer which bought the counterfeit product with poor quality. The increase of poor quality product may drive away customer and the company will suffer a great loss due to the product quality.
3.3.2 Discuss the financial implication to the running shoe business, which includes (i) current profit/loss (ii) profit/loss after venturing into new market and, (iii) payback of investment.
New Balance Corporation left us disappointed, but that doesn’t lead to say that they made a cheap shoe out of it. We just feel that they should have and could have, done better. On one hand, it is clear that New Balance is jumping on the green bandwagon, but on the other hand, isn’t that what we want, for everyone to move towards sustainable practices, tree hugger or not? It’s a good first step that we look forward to seeing them reach their true potential for the eco-consumer.
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