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New Balance
Md Nazmus Shakib CPR No: 251182-4071 MSc in Economics and Business Administration Copenhagen Business School Date of Submission: 30th March, 2012
Fitwith
Course Teacher: Nicolai Pogrebnyako Course Name: Strategy Execution Course No: CM J41 Course Type: Elective (cand. Merc.)
Table of Contents
Introduction Core competitive Strategy of New Balance Shoe Inc. Implementation of key Strategic elements and their assessments Mergers and Acquisition decision Suggesting an implementation Plan Appendix A Appendix B
Indeed for Davises, its no more just wondering to have what in the desert rather a big time asking for a
palatable success recipe to rewrite their future at this very crunching time; especially when the shoe manufacturing industry is actually taking the toll of crafting another mammoth story in USA. So far the good part is there hasnt been much of a reactive acts from New Balance but on the flip side there hasnt been any reaction at all cited, which is not good either. Remaining quite offed or action less pragmatism can lead to a severe dent both in revenue and in market share for a player like New Balance who has been in industry for so many years. Responding to the issue of Adidass purchase of Reebok is therefore very crucial. So it can broadly be streamlined into two different approaches; needless to say that success can still be very much achieved by New Balance through:
strategic tipping point to a whole lot of operational stuffs where we see as such no surprises of minimum errors. What we see is a player struggling with maneuvering efficiency in the zone of production and supply chain channels over time only due to the fact of Economies of Scale. Its just a happy problem to have for any companies in the market. All that matters for this was to have firefighters who can maneuver these issues but do New Balance needs any more hands on its new journey- is another assessment. And last but not the least actions speak louder than words-we would like to suggest an implementation plan covering its core entities intact and yet capacitating the amplifying versions of needful changes.
completely different, New Balance has taken steps to go for less on marketing but to have a crucial presence as a whole. Reasoning the presence is not the fashion or the style or the iconic momentum, it has always been the Fitting and longevity which are portrayed in different narratives with quite an unconventional ways. The finest example is where every other market players tried to tag their products with some iconic figures around as if SKUs had been endorsed by the icons; New Balance has played it quite tricky. The subtle yet clearly pinned down the basic facts is what endorsed by no one campaign is just all about. Netting the small alive through Different Sales & Distribution approach: Unlike others New Balance has not confined its distribution framework to opening up BOs at different strategic points rather it has firmly focused on the small retailers who are somehow left outs by all big players in the industry. It has seamlessly worked for availability of the product of New Balance through using the best resources of independent and active field forces. FF model combined with relevant resource optimization eventually grossed a great mileage from a Brands TOM (top of the mind awareness) point of view, with registering a staggering better appeal than any of the competitors available in the market then.
pass the test of time; which a brand must have in distinction to a product. Image was there but due to the absence of activities of creating a value proposition for Brands; New Balance just missed the timing to make a recipe of success in the consumers are the king era.
Starting with matrix it is comprised of 3 elements and these are: A. Financial health B. Available options C. CBA approach (cost and benefits analysis) All these major points have some very basic yet effective questions based on two different parameters; one is own responsiveness to the issue and external responsiveness alignment. All thoughts are as below: Financial Health Available options
Players current share in the market? Growth opportunities with the option? Control and Innovation mechanism.
Does it have enough cash cycles to run the business? Assets against to liabilities condition? Capacity of financing and credit risk?
Financial Health Concerns: Based on the case what is available we can say that New Balance has been going with good numbers in terms of revenues and the cash cycle looks pretty alright. It seems company has a strong back up on its assets against to its liabilities which is 7:1 now. This is a fantastic result but it has come with the expense of low budget in Marketing and R&D arena, which will be bigger in the year ahead. Therefore, no straight complex factors have seemingly seen after analyzing its finances. So HH would be the options. Available options for M&A: Well after having tag team of Adidas and Rebook there hasnt been many options left in the market. A player like Puma is known quite a bit but yet to register a growth in USA market. And Asics from Japan can also be an interesting duo in terms of product design and innovation. But the concerning fact is there has not been much market share that New Balance can readily gain right on top after M&A; merely a raise of 2%2 share may be handy & expensive deal in the end. Costs and benefits: Every single M&A has its stakes be its from own or from the others. A company which values more on its core strengths may have to trade its own ingredients in turn when it has to come up with more internationalism. In a sense it can be critically harmful for the overall health of the
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company. Since its not a one way, there will still be real possibilities that NB can settle the score with its supply chain through sourcing more than doing less manufacturing. Therefore the matrix3 citation would be as following: Financial Health High-High Available options Low-Low Costs and Benefits Low-High
We would like to comment based on the examined facts that New Balance would rather not opt for any M&A right at this moment. It would severely concentrate on its own strengths to leverage them to gain additional market share; which is very much possible and an effective choice.
Creative Initiatives for product development Long term Planning Single thread channel from supply chain to end product Structural changes in the company
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Create Brand muscles in the market and disseminate that its just different
24-48 months
Short term Plan: Currently what matters most is the lead time problems in supply chain management and to fix it up there has been some initiative from the company named as NB2E. Its just not enough when there would be a chance of visible growth issues in the market. To maintain the core fundamentals intact and at the same time reacting to the markets needs the followings: A. 60-40 implementation: A plan where NB will phase out their only manufacturing option to more flexible outsourcing through different customized vendors. Currently it is 100% of manufacturing, we are suggesting for reducing it to 60%. B. Leverage of Cash Surplus: while sourcing 40% from vendors would allow NB have less priced products still maintaining the inherent brand image, which is likely to shoot up the revenue. In turn we can see major cash revenue with a market share gain. The surplus then can be put to R&D and better marketing activities. C. Better off with Marketing Channels: Havent yet marked anything does not mean that NB wont go for extra mile. With some solid trade marketing in the surface, NB can strengthen its values giving an edge to consumer to pride for VFM. (Value for money). Long term Plan: Once the short term plans are working at a full swing we should cover the followings: A. Adding one more operational vertical: Its marketing at this age even if you have the best of the lot so ignoring it would be disaster. A global Marketing vertical is the answer now. B. Showcasing Difference: Once there have been initiatives from R&D and product teams NB can then play in different segments at a time with its age old solely USAish factors. C. Brand Muscles: To create brand identity evident in the mind of consumers NB has to play like others in the fashion and basic products but without lofty things since it owns widths and longevity. D. Single thread in Creating End products: Once sourcing has been reshaped, we can expect to leverage of experienced labor force in the market. Thus the availability will be ensured in retails. E. Maneuvering Resistance: Long term incentive plans for labor force can mitigate if there has been any resistance at all although it seems quite impossible from these labor forces. In an ever growing industry one should not be complacent with a little gain in the market share in a very short time frame. But it has to be reminded here that we expect that having all the above said facts are joined into the forces of NB they will reshape their future. Its just can be sensed right away with a minimum of 5% growth in market share. This will lead to grow a company from just being fitting widths to a great company which still can be proud of what it has because none possess that virtue. And finally it is what both Davises would like to have in desert, I believe.
Appendix A
Appendix B
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Appendix B