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New Balance Athletic Shoes is a Harvard Business (HBR) Case Study on Technology & Operations , Fern Fort University provides HBR case study assignment help for just $11. Our case solution is based on Case Study Method expertise & our global insights.

Technology & Operations Case Study | Authors :: Kim B. Clark

Case study 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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Introduction New Balance was established by William J. Riley in 1906 in the city of Boston. Riley began by making arch supports for customers who needed to spend all the time on their feet. In time the structure of arch supports led to the development of his first running shoe in 1925. As part of a regional running club, Riley took advantage of an opportunity to enhance running shoes of the time and his styles ended up being widely popular.

His brand-new running shoes ended up being so popular that by the 1940’s that production spread from running to numerous other sports.

Then the expansion of the manufacturing substantially increased as he realized a need to running shoes with more choice for wider feet, and the business grew significantly through the 1960’s (Veleva, 2010).

James Davis purchased New Balance in 1972, from Paul Kidd, after looking into a number of business chances and trying the New Balance tennis shoes for himself. Davis currently owns New Balance in addition to his wife, Anne Davis, who holds the position of vice-chairman and executive vice-president (Veleva, 2010).


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By the 1990s, rising labor costs and changes in customer need pushed much of the manufacturing processes overseas. Although the growth into foreign production opened unlimited opportunities, it likewise exposed the industry to intense examination for numerous human rights problems in the supply chain (Veleva, 2010). New Balance, among other business, recognized an increasing requirement to concentrate on sustainable company strategies that incorporated internal Business Social Duty programs. Strengths and Weak points

Overall Governance New Balance has focused on a sustainable service model and responsible business management for several years before CSR ended up being a hot subject.

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Before CSR was had actually formed roots at New Balance, they currently had a program they referred to as “Accountable Leadership Steering Committee (RLSC). The RLSC was charged with driving modification in 4 areas of social duty: community investing, environmental, compliance, and the product life cycle (Veleva, 2010).

Most of the employees and senior staff agreed the company was committed to doing the right things for the right reasons, but most of the senior management still believed RL was more of a cost than a, “strategic business driver with measurable social and business benefits” (Velvea, 2012). Even once the company began to make changes at New Balance, they did not do a very good job at communicating their efforts to the employees or the community.

The root of the CSR issues at New Balance could be attributed to the lack of clear leadership and direction from the top. When the employees are constantly feeling pulled in various directions and trying to balance, profitability, performance, manager expectations, and social responsibility – strong leadership and clear direction need to be made abundantly clear. This was not happening effectively at the highest levels at New Balance (Veleva, 2010). Products and Services

New Balance continues to impress critics throughout the running world, with magazines like Runner’s World rankings showing rave reviews of the newly developed 320 (Chang, 2012). New Balance has led in areas of innovation by working with athletes to improve their technology and design. They were able to reduce the sole thickness of the 320, while maintaining the comfort level to the runner, lowering weight and fatigue (Chang, 2012).

Recent design successes, along with the trademark success of the larger range of width of their products, are just a few examples of how New Balance continues to be a forerunner in athletic shoe design.

By deciding to establish an “Endorsed by No One” campaign, New Balance has decided to embrace the concept of not having professional athletes or celebrities endorse their products (Velvea, 2010). Although some would attribute some of New Balance’s success to this campaign, Nike and Reebok have seen tremendous success with celebrity athletes such as Michael Jordan, Andre Agassi, and Tiger Woods just to name a few.

One could easily argue that Nike’s success is a direct reflection of their commitment to their celebrity sponsorships, and while New Balance has found a niche by staying clear of these expenses, it could also be a root cause for why they dominate less than eight percent of the market share (Veleva, 2010).

Operations New Balance decided to improve their operations by implementing a “lean production system” in all of their domestic facilities. The lean production system was taken from Toyota’s manufacturing processes to, “deliver goods on demand, minimize inventory, maximize the use of multi-skilled employees, flatten management structure, and focus resources when and where they are needed” (Veleva, 2010).

These improvements helped significantly improve vast processes across New Balance manufacturing, and in one example reduced the time to make a pair of shoes in the Lawrence facility from eight days down to three hours (Veleva, 2010). New Balance has a significant opportunity to expand its operations in the western region.

While the commitment to northeastern operations may have provided an early advantage, there is certainly an opportunity to capitalize on the explosive growth within the western market (Chang, 2012). It is important to balance growth across various markets, to ensure market share is captured, in order to get ahead of the expanding market culture before brand dominance is established by the competition.

Community Support New Balance continues to stay committed to social responsibility by donating employee volunteer hours and funding to various organizations. The flagship of community support provided by New Balance is through its New Balance Foundation. The New Balance Foundation is committed to building healthier and stronger communities – with considerable focus on helping to prevent childhood obesity (NewBalance.com, 2013). Annual grants from the foundation in 1981 were approximately $30,000 and have grown to over $6.4 million in 2011.

New Balance commits to, “a holistic approach that includes medical, academic and grassroots nonprofit partnerships and work with partners who engage kids and their families through exercise and play as well as nutrition (NewBalance.com, 2013)”.

Another challenge facing New Balance, has been the Non-Governmental Organization (NGO) campaigns taking a direct aim at athletic shoe manufacturing, with initial issues such as codes of conduct and improvements with supplier monitoring (Veleva, 2010). In recent years, the focus has shifted to, “maximum work hours, health and safety in overseas factories, use of temporary workers, transparency, responsible purchasing practices and ‘exit strategies’ when closing factories overseas (Veleva, 2010)”.

New Balance has to contend with these direct transparency issues and incorporate policies to take into account different cultural differences; such as, some Asian workers prefer to work longer hours in order to earn enough to return to their families sooner (Veleva, 2010). Analysis

The review of New Balance operations exposed opportunities and challenges to improve the company’s overall execution of an effective CSR policy. Some of the company’s strengths are: Long term commitment to responsible corporate leadership;

Strong product line to help contribute to funding of research and philanthropy; Sustainable commitment to process improvements through innovative measures; Established programs to continue to monitor and improve CST processes. During the analysis of New Balance there were opportunities uncovered that will need to be addressed in order to accomplish a stronger CSR foundation. Those opportunities are: Improved communication from top level executives with clear direction; A reevaluation of celebrity endorsements of their top products; Continued evaluation of western operations and expansion;

Industry leading examples for cultural and human rights policies. Implementing CSR In order for New Balance to become a world leader in CSR, it will need to focus on and improve the humanitarian treatment of all workers that come in contact, with all levels, of the manufacturing and supply chain. In order for New Balance to truly set an example in sustainable leadership, in a responsible way, it needs to keep human rights at the top of the priority list.

The government places strict guidelines for the treatment of US workers, but it is the unprotected worker that needs to have a voice within an effective CSR policy. Key leadership needs to seek out feedback from any and all supply chain companies, and seek assistance from local government and NGOs, to get feedback from overseas employees. The information should be collected and made readily available and transparent to all invested parties. Supply chain companies that have exemplary processes in place should be rewarded, and companies that are found to be lacking the highest standards should be reprimanded, and should be replaced if immediate changes are not implemented.

The annual RL Report should be reevaluated to allocate adequate resources, to ensure the ethical treatment of employees is held to a higher standard as popular environmental projects. Open evaluation of the results from these evaluations will lead to stronger and truly sustainable operations as improvements are made. Supply chain human rights improvements should have immediate expectations, with limited turn times for corrections within a 30 day timeframe.

More complex issues should be evaluated on a quarterly basis, with senior leadership action plans communicated when more time is deemed necessary. Again, prudence and transparency is key to a successful CSR implementation plan.

In addition, the New Balance Foundation should continue to build value in its efforts to prevent child obesity. As health care in America continues to be plagued with the ill effects of obesity, the focus on healthy athletic alternatives is in perfect alignment with the vision of New Balance. Contribution funds should strive to reach an excess of $7 million by 2014, through awareness campaigns, employee contribution efforts, and community action committees in partnership with New Balance

. Also, New Balance should leverage their political influence to seek government contributions and assistance in their health based community programs, as these programs can certainly provide a service to the greater population. Conclusion

New Balance has set itself apart, as a company that strives to sustain its business operations through responsible contributions to its people and communities in which it operates. But in order to be a truly great company that sets an example for all corporations to strive for, it needs to ensure the efforts made are not a mask for profit.

If the end goal is only to improve the bottom line through community efforts, then the win-win strategy will only maintain the appearance for so long before the true intentions are known. People run companies – companies are not responsible or irresponsible – people are, and the leadership of the company determines the vision and direction. In order to maintain a genuine CSR policy, the leaders need to hold each other accountable to each other and themselves.

References Chang, C. (2012). New Balance Athletic Shoes Case. StudyMode.com. Retrieved 11, 2012, from http://www.studymode.com/essays/New-Balance-Athletic-Shoes-Case-1241026.html  ewBalance.com. (2012). New Balance Responsible Leadership Report. Retrieved October 13, 2013, from assets.newbalance.com/nb-us/rl_flipbook/files/inc/171206508.pdf NewBalance.com. (2013). Responsible Leadership. Philanthropy and Community Investment Foundation.

Retrieved October 14, 2013, from http://www.newbalance.com/ Responsible-Leadership_Philanthropy-and-Community-Investment_Foundation/ about_responsible_leadership_philanthropy_foundation,default,pg.html Veleva, V. (2010). New Balance: Developing an Integrated CSR Strategy. In R. Ramadan (Ed.), Organizational Leadership 690: Responsible Corporate Leadership. Course Package: Harvard Business Review Articles: Coursepack. Manchester, NH: Southern New Hampshire University Bookstore. (Reprinted from Richard Ivey School of Business.)

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Case Study: New Balance Athletic Shoes

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New Balance Athletic Shoe, Inc. – Case Solution

New Balance is one of the world's five largest manufacturers of athletic shoes. It is considering if it should respond to Adidas' planned acquisition of Reebok. The acquisition would result in the consolidation of the second and third-largest companies in the footwear industry. This case study discusses the unique sides of New Balance's strategy which highlights fit and performance. Now, New Balance is facing the challenge of whether to change strategy in light of the recent development in its competitors' consolidation move.

​H. Kent Bowen; Robert S. Huckman; Carin-Isabel Knoop Harvard Business Review ( 606094-PDF-ENG ) April 20, 2006

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New Balance Athletic Shoe, Inc. Case Answers

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1. What are the key elements of New Balance Athletic Shoe, Inc.’s current operations strategy? What are the key assumptions and decisions implicit in this strategy? Please be specific.

We know that an operations strategy is a framework/plan for utilizing the available resources that will drive the business execution. It basically is a way to align your resources according to your strategy. New Balance Athletic Shoe, Inc. was committed to delivering high-quality products that meet the demands of performance-oriented runners, unlike the industry norm, which was more focused on the fashion trend of the shoes.

Thus, they align their operations accordingly by committing to operations and manufactured-based strategy to deliver high-quality products that performance-oriented individuals can rely on and use reliably for a longer time.

Some of the key elements and the inherent assumptions and decisions in their operations strategy are as follows:

1. Unlike their competitors (Nike and Adidas), New Balance Athletic Shoe, Inc. was spending very little on marketing its products and was more focused on the cutting-edge R&D and manufacturing aspects of its products.

Because it believed (assumption) that its customers were performance-oriented and would want high-quality products and less focused on the fashion aspects of the shoes.

This is also why it did not endorse sports personalities. It did not want to spend extra money on advertising the product rather than deliver a high product to its distributors and retailers, who can then have a loyal customer base because of the high-quality product.

2. New Balance Athletic Shoe, Inc. acquires 75% of its finished goods from China, and the remaining 25% are assembled in its USA-based factories. However, the raw material for in-house shoes was also procured from china but was assembled here.

The two variants that were made in-house were much more expensive than those procured from China ( $13 and $0.5). We believe that reason for this is that New Balance wanted some control over a certain portion of its finished goods. Also, the lead times associated with in-house products were much lower than the ones sourced from China.

Furthermore, New Balance Athletic Shoe, Inc. was also constantly updating its foreign vendors with the learnings that it got by producing in-house, thus enhancing its suppliers’ capabilities.

3. Although one must have lower inventories for low costs, at times, a business can lose out on a significant portion of its sales, it does have a certain product in stock when it is in high demand.

Thus catering to this aspect, New Balance Athletic Shoe, Inc. stocked huge inventories to meet the retailers’ uncertain demands. We also believe that this strategy is also enhancing the relationship between retailers and New Balance, as they rely on them for providing products anytime.

New Balance Athletic Shoe, Inc. was also looking to further improve its value proposition by reducing the overall lead times.

4. NB had an entrepreneurial culture and wanted to improve and innovate continuously, thus keeping this in view. They outsourced a network of expert Salesforce, with an entrepreneurial mindset to improve their sales and distribution processes.

2. What key OMT philosophies, concepts, frameworks, tools, and insights can be used to analyze the situation at New Balance? Please be precise and remember to use the appropriate terminology and related case references.

If we analyze the sense of purpose, i.e., their objectives, Vision, and Mission, we note that they want to deliver high-quality products by emphasizing R&D and meeting the needs of performance-oriented runners. Their product strategy was clear that they would not cater to fashion trends of the industry but rather focus on the product’s performance aspect.

Although we do notice that in the shoe market, customers value “Time to market” very high because they want up-to-date trendy products, this is unlike Sports Obermeyer, where we saw that it was more focused on meeting the fashion trends of the market on time by managing the production of its products in several stages to get more information about the demand.

New Balance Athletic Shoe, Inc. has differentiated itself from competitors (Nike and Adidas) by focusing on the shoe business’s manufacturing and operations aspect and not on the marketing side.

Because they believe that they cannot overtake these marketing giants by following a marketing-based strategy as these big players possess more financial resources than New Balance.

Thus they have focused on their core competencies to achieve differentiation through manufacturing and operations-based strategy. Thus, through this focused strategy, New Balance Athletic Shoe, Inc. can achieve process efficiencies and learn by limiting its scope and thus leading to specialization.

From Toyota Production Systems’ philosophy, we have learned that “People (workforce) are the most important assets.” It is important to inculcate a problem-solving mindset in your employees to not rely on individual heroics when a problem arises. Rather, every employee should be prepared to deal with contingencies and resolve the problem’s root cause.

New Balance Athletic Shoe, Inc. has instilled an entrepreneurial culture and empowered its employees, ultimately resulting in quick decision-making. They have also developed a “Teamwork” culture because they have cross-functional teams. Thus, people with different skills must be able to solve problems together and add to every other individual’s overall learning on the team.

They also believe in the “continuous improvement” mantra, which is kaizen, as they want to take risks and build upon what they have already done and performed.

On analyzing their “Product design and development ” strategy, we noticed that they worked along two dimensions. One was further to enhance the quality aspects of the existing models. The second effort was made towards incorporating new technologies and features into the upcoming products.

Thus, New Balance Athletic Shoe, Inc. was trying to

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new balance athletic shoes case study analysis ppt

New Balance Athletic Shoes Case Study

Problems In reviewing the case of New Balance Athletic Shoe, Inc. it is clear that there are a few major problems that the company is facing. First of all, New Balance falls behind its other major competitors, Nike, Adidas and Reebok, in the area of marketing. Unlike its competitors, New Balance does not undertake celebrity endorsements. This puts them at a disadvantage when it comes to brand building. This also causes the company to lose out somewhat on gaining awareness on a global scale as it lacks endorsements in major sporting events. Most global brand names generate strong brand recognition through celebrity endorsements in sporting events that would give them the needed momentum to carry their brand name further into the global market. A second problem that New Balance faces is its limited product line. New Balance prides itself on providing quality athletic shoes for the serious athlete. However, the market has been shifting to not only include serious athletes, but it now also caters to the more fashion-oriented crowd. This crowd tends to be from the younger generation, the part of the population that New Balance has so far not been focusing on. New Balance has geared itself toward the older crowd, which has severely limited the company as far as its ability to expand into new product areas and remain competitive in the changing market. Another problem that New Balance has been facing is manufacturing costs. With its competitors outsourcing most of their manufacturing to other countries such as China, Nike, Adidas and Reebok have been able to cut their manufacturing costs significantly. New Balance on the other hand only outsources 75% of its U.S. volume while retaining the remaining 25% for final assembly in one of its five factories. Strategies In dealing with New Balance’s weakness in the area of marketing it would be beneficial for the company to find a celebrity to endorse their product line. New Balance has always been against celebrity endorsements which emphasize fashion trends and sway potential customers more by popular personalities than by performance and function. This has severely limited the company’s ability to reach the same kind of global awareness as its competitors. New Balance should find a serious, yet well known athlete who holds to the same kind of ideals as the company, to endorse their brand. This will create the type of brand recognition that they need in order to stay competitive.

In this essay, the author

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