New Balance Athletic Shoe, Inc. – Case Solution

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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 its 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 the 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 highly 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, 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