New Balance Athletic Shoe Inc-An

“Strategic Innovation Case Study ”

GROUP
9
The value of strategy depends not only on
the elegance of its conception but fully as
much as whether the company proposing
the strategy can really execute it.

SOURCE- 7 ELEMENTS OF STRATEGIC FIT

Introduction
❑It was founded in Boston in the year 1906 by William J. Riley under the name New Balance Arch.

❑They particularly operated in making arch supports for prescription footwear.

❑Focusing on fit and performance.

❑In 1980’s it setup a new manufacturing facility in New England and signed many international distributors.

❑Advertising and marketing were not their strong suit and their spending on marketing and advertisements.
was quite low as compared to the competitors.

❑US footwear industry was highly competitive with multiple players in the market.

❑Majorly the market was dominated by Nike and followed by Adidas and Reebok. In 2005, acquisition of
Reebok by Adidas was set to change the market dynamics.

❑ New balance now had to compete with two big competitors instead of one. This posed question for the
company on how to react to the change in the market.
 Strategy

Skills Structure

Shared
Values

Objective of New Balance Style Systems

Staff

Improve the performance of a company

Examine the likely effects of future changes within a company

Align departments and processes during a merger or acquisition

Determine how best to implement a proposed strategy - (NB2E Program)

 Case Summary
Manufacturing and operations based rather than marketing based

Two fronts in design and development – Incremental development, disruptive

technologies

Flexibility among workers to push their limits and increase productivity

In 2004, proposal was to follow Toyota Production System (TPS) as per New
Balance Executional Excellence (NB2E). Instead of batch basis production to
follow pair-by –pair / continuous flow.

Product focused strategy - Energies and investment into research, design and
domestic manufacturing

Two fronts in design and development – Incremental development, disruptive

technologies

Flexibility among workers to push their limits and increase productivity

 Case Summary

With the merger US Sales: $790 M | Worldwide: $8,057 M

US Sales: $3,225 M | Worldwide: $13,739.7 M of Adidas –
Reebok, New
Balance has to
be more
responsive to
trends and
customer needs

US Sales: $1,087 M | Worldwide: $3,785 M

US Sales: $1,022 M | Worldwide: $1,500 M
 Strategy

Skills Structure

Shared
Values

Case Analysis - McKinsey 7S Framework Style Systems

Staff

Strategy Structure Systems

• New Balance Suspension System to telegraph • Approx. 60 people are in product design ,development • Sales force automation system for supply
Hard •
its emphasis on cutting-edge R&D
Brand’s iconic marketing logo of three
and new technologies focusing on younger customer
base.
chain process to improve sales
performance.
Elements •
differently sized feet
Great percentage of our product in inventory-
• Sales and Distributions- Focused mainly in small
retailer’s ,specialty stores and family footwear shop’s
• Compensation is based on knowledge and
initiatives workforces involved in.
Helping retailer to deliver items to customer and • Retailer’s – Divided into 2 group (Key Account & • Moved out from Team based piece of work
increase their loyalty. Specialty dealer’s ) compensation to individual based
• Company remained Private Entity • Larger retail account has -10 sales agents , specialty /hourly rate compensations.
• Product Strategy –Dedicated design focusing on accounts are managed by 100 agents. • Hourly compensations encourage
width sizing and fit. workforce trainings

Shared Values Skills Staff Style

• Company’s founding values are fit,

Soft •
performance and manufacturing’s
Endorsement not done by athletes
• Unique in manufacturing and
operations based not marking
•
•
Team is oriented and empowered
Employees are organized and in
• Continuous improvement is the
mantra at management level.
based. • Buddy concept adopted for
Elements • Shoe in multiple width-fit is a critical
performance characteristic. • Company's culture is
entrepreneurial
•
cross functional team’s
New Balance screened employees mentoring new professionals
for their professional and personal withhold one for 6/8 week’s
• Strong focus on R&D,Designs and experience in team-based • Team based organisation of work
Domestic manufacturing environments. force.
• Endorsed by No One. • Flexible to take up multitasking
• 75% outsourced production activities based on hourly
activities’ compensation model.
 Case Analysis -SWOT
INTERNAL FACTORS New Balance Opportunities Threats
STRENGTHS (+) WEAKNESSES (–) TOWS
US Branding – New Balance manufactures its Expensive – Manufacturing in America is costlier
shoes in America, unlike its competitors compared to outsourcing it
Strength Strength Opportunities (SO) Strength Threats (ST) Strategy
Strategy
Customization & Differentiation – One of the Customization Cost – Feature rich shoes are
first brands to manufacture customized shoes. more expensive to manufacture
Customers can custom design their shoes and
✓Consolidate and expand the ✓NB can build on present
have them delivered within a day Influencer preferences – Teenagers are more
market position. strengths
inclined towards pop culture and internet
Strong Association with Top Players – influences. They are turning towards European
✓Superior product and services ✓Analyze the trend and build
Association with major baseball leagues and brands more now than ever, which affects New
quality can help NB to further processes to two pronged
sponsoring prestigious sporting events has balance sales
increase its market share as the market penetration approach.
increased New Balance’s popularity
current customer are particularly
loyal to it.
Brand Placement – Strategic brand placement in
movies has improved popularity
Weakness Weakness Opportunity (WO) Weakness Threats (WT)
Strategy Strategy
EXTERNAL FACTORS
OPPORTUNITIES (+) THREATS (–) ✓Building strategies based on ✓NB should get out of the
Changing preferences - With a growing Competition: New Balance competitors are Nike, consumer oriented product business areas which do not
power to spend, the customer preferences Adidas, and Puma development and marketing have a good ROI and focus on
are also changing. Customers are willing to approach. strength and threats box , or on
invest more in custom-designed shoes. Piracy: Cheap fake imitations of leading footwear weakness and opportunities
New Balance is one of the first companies brands which are sold at a very low price has always box.
to make custom shoes and they have ✓NB should incorporate
been a threat. Most customers want the look and not
fundamental changes to
captured this trend proficiently which makes the quality and they purchase the fakes which leads to
business model rather than
them a forerunner the brand missing out.
cosmetic changes.
 Case Analysis – VRIN MODEL
Resource/ Capability Is it Valuable? Is it Rare? Is it Inimitable? Is it Non- Substitutable? Comments
Core Competency th at provide competitive advantages?

Tangible (T) / Intangible (IT) V R I N

Financial Resources (T)
NO
Borrowi ng Capaci ty YES NO YES NO
-T he fi nanci al si tuati on cannot be a core com pe te ncy.
Ge ne rate i nte rnal funds
Organizational Resources (T)
Re porti ng structure YES
Planni ng YES YES YES YES - T e am base d organi sati on of work force .Fle xi ble to tak e up
Coordi nati on m ulti task i ng acti vi ti e s base d on hourly com pe nsati on m ode l.

Physical Resources (T)

Sophi sti cati on and locati on of a fi rm ’s plant and M AY BE
e qui pm e nt YES NO YES MAY BE
- It m ay or m ay not gi ve com pe ti ati ve advantage s of Ne w Balance

Technological Resources(T)
YES
Pate nts, trade m ark s
-Uni que i n m anufacturi ng and ope rati ons base d not m ark i ng
Copyri ghts
base d.
Producti on te chnology
YES YES YES YES -Sale s force autom ati on syste m for supply chai n proce ss to
i m prove sale s pe rform ance .
-Product Strate gy –De di cate d de si gn focusi ng on wi dth si zi ng and
fi t.

Reputational Resources (IT)

Re putati on wi th custom e rs YES
Brand nam e -Bui ld loyalty am ong core se t of custom e r for i ts hi gh m argi ns
YES YES YES YES
-T wo fronts i n de si gn and de ve lopm e nt – Incre m e ntal
de ve lopm e nt, di srupti ve te chnologi e s

Relationships (IT) NO
T he trust e stabli she d wi th vari ous partne rs -Sale s and Di stri buti ons- Focuse d m ai nly i n sm all re tai le r’s
Re tai le rs YES NO YES NO ,spe ci alty store s and fam i ly footwe ar shop’s
Sale s Age nts -Re tai le r’s – Di vi de d i nto 2 group (Ke y Account & Spe ci alty de ale r’s
De ale rs )

Company Culture (IT)

YES
Norm s of be havi or, busi ne ss pri nci ple s
-Com pany’s foundi ng value s are fi t, pe rform ance and
YES YES YES YES m anufacturi ng’s
-Com pe nsati on i s base d on k nowle dge and i ni ti ati ve s work force s
i nvolve d i n.

Human Resources (IT)

Manage ri al capabi li ti e s YES
Cre ati vi ty and i nnovati on -Conti nuous i m prove m e nt i s the m antra at m anage m e nt le ve l.
YES YES YES YES -T e am i s ori e nte d and e m powe re d
-Em ploye e s are organi ze d and i n cross functi onal te am ’s
 Recommendation
• Business Model-New Balance should focused on scaling its current business model.
• Improve its operational performance via NB2E initiatives -This program drives employees to develop “Problem-Solving
attitude” and encourages to continuously improvements
• Cost Reduction Initiatives –
• NB2E initiative will reduce the cost of manufacturing which will help to bring down the $13 premium paid for domestic
production.
• Reduced manufacturing cycle time & Inventory levels will bring down further costs. This will help in staying competitive
in the market.
• Partnerships :NB2E initiative will also bring down the time for delivery – which will foster better partnerships with retail
channels.
• Budget Allocation- Sufficient budget should be allocated promotional campaign and advertisement by including print, TV
campaign's featuring celebrity athlete’s.
• Product Design-Conservative in its style and presentations . They should focus on future growth in the light of industry
consolidations
• Time to market – Fashion industry cares less on product width and more about time to market.
• Focus on large and small retailers for their volumetric growth in sales.
• Commission mode - New balance should move out from independent sales agencies’ and sales based commission mode to
inhouse accounts to mange the sales volume properly.
• E-Commerce - Company to venture into E-Commerce in a rapid and efficient way.
 Group -9
Roll No Name Email I’d

EPGP-12A-008 Akash Ashokkumar Jakkan akashjakkan12a@iimk.edu.in

EPGP-12A-117 Sushovan Mohapatra sushovan12a@iimk.edu.in

EPGP-12A-053 Kunal Sailesh Kapadia kunal12a@iimk.edu.in

EPGP-12A-132 Vivek Roshan Dev vivek12a@iimk.edu.in

EPGP-12A-069 Pallavi Ganguly pallaviganguly12a@iimk.edu.in

EPGP-12A-006 Ajitava Deb ajitava12a@iimk.edu.in

EPGP-12A-072 Pooja Deepak Chatwani pooja12a@iimk.edu.in

EPGP-12A-110 Subhakanta Mohanty subhakanta12a@iimk.edu.in

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