Free New Balance Corporation Operation Management Recommendation Essay Sample
William J. Riley came to the United States from Britain and decided in 1906 to found a shoe company dedicated to assisting people who suffered with foot discomfort. He started by offering arch supports and custom shoes to provide the best fit possible. Sixty years ago, after Riley passed away, his partner sold the company to his daughter and her husband who expanded the product line to include the world’s first high-performance running shoe. Jim Davis purchased the company from the couple with very little experience in the shoe business. Regardless, he took New Balance from a business that operated primarily from mail order purchases to a global sales figure of $1500 million.
There is a concept associated with New Balance that sets it apart from its competitors: value of a superior product created from dedication to the customer. The current success of the corporation is a testimony to hard work and ingenuity, but by using 15 concepts to evaluate the operations of New Balance, I truly believe we can push the brand into the next phase of development without losing the integrity that has brought it to where it is today.
The organizational culture present in the New Balance workplace is second to none. In an effort to be sure each employee is a good fit with the company, he proceeds through an intensive selection process. Screening for workers who thrive in a team environment while possessing extreme flexibility is crucial for maintaining the high degree of productivity is needed for the company’s success. Since the day New Balance was started, an attitude of teamwork has been the basis of production. In addition, the business is committed to the idea of social responsibility and works with national and international organizations to display that commitment.
Consumers looking to buy a pair of athletic shoes have plenty of options on the market today. The most prominent company is Nike/Converse, followed by Adidas/Reebok, and Puma. New Balance is currently holding 3 percent the U.S. market. New Balance has decided to analyze operations in an effort to stay competitive in the market without succumbing to traditional methods of marketing that run against the standards of the owners. New Balance has several differences that stand out in the marketplace. First, they do not use endorsements from celebrities and athletes in their advertising. In fact, they actively state they are focused on superior operations and production rather than on marketing; the New Balance product doesn’t need a famous person to tell the customer the shoes are the best because they speak for themselves. The marketing plan for Nike states they are more oriented to supplying an inexpensive Japanese shoe to the American public in an effort to stop German domination of the market, encompassing all needs for all ages.
The age of the core customers for New Balance fall between 25 and 49 years old and they responded to the non-advertising advertising. The publicity attached to this decision is marketing in itself. In addition, New Balance is a privately-held company without union employees; this allows it to make the decisions needed to promote their projects for social responsibility. This includes assembling the shoes at five U.S. factories, supplying employment for Americans rather than outsourcing 100 percent of its production like Nike and Adidas.
Despite the ethical advantages of the company, a SWOT analysis of New Balance reveals some weaknesses related to operations. There is no doubt the major strength of the company is the quality of the product, especially in the ability to the consumer to choose from three different shoe widths to promote proper fit. In order to stay current with the large competitors, New Balance has to rely on innovative technology to continuously address the needs of the marketplace. The consumer profile for athletic shoes has changed from performance to fashion. Maintaining research and development focus on promoting new ideas for performance takes several years, but staying on top of fashion trends requires the ability to shift direction every two to three months. Historically, there has been a problem with staying current with style changes and the company is addressing this with a change in perspective on a branch focused on the needs of fashion rather than performance.
New Balance has also suffered from limitations on the ability to deliver the products to the fashion-oriented customer. Analysis of the production processes in the company will provide recommendations on remedying the situation. Another way to address the problem is to include retail locations as a partial solution. The stores have suffered from late deliveries, inadequate inventories, and problems with qualities as a result of the implementation of the Brute Force technique of distribution with accompanying huge inventories at the factories. It is vital we discover and fix the reasons for these short-comings from the production line. The use of channel marketing allows distribution of fashion-focused products with a shorter development and delivery time.
The New Balance reputation for fit has driven the design of its products from the day the company opened its doors. Today, research and development teams look to developing existing lines of shoes and implementing new applications such as ultimate cushioning and responsive cushioning. The width and depth of the market offering are small; the market is based on customers looking for quality performance, fashion, or both but the products are all footwear. In addition, there is not an expansive line to choose from. New Balance promotes market offering as relatively small selections, but top quality products. Quality management is occupied with guaranteeing the best possible athletic shoes on the market with pricing being a secondary consideration. At one time, New Balance was the first company to put a $100 athletic shoe in the stores when the closest competitor was selling its shoe for $50. Rather than driving away consumers, they perceived the product as superior due to the higher price tag and responded positively. The differences in product between New Balance and its competitors are what have set it apart and made it unique.
Distribution lines have previously be through smaller retail stores that are committed to superior service to customers in addition to shops dealing in family footwear; the largest retail customer was Foot Locker. Strong relationships with both types of outlets are critical for effective distribution. New Balance doesn’t have house accounts, but does depend on a sales force of independent agents driven by sales commissions. Although they are not employed directly by New Balance, they sell their products exclusively. These salesmen tend to stay with the company for years due to satisfactory compensation and an association with a business who treats its business partners with honesty and respect. The sales force for New Balance is included as part of the overall team, not simply as a distributor. This is another aspect of doing business successfully that is exclusive to New Balance.
Nike keeps its production next to the location for raw materials to lower costs. This means they also have little or no involvement in the creation of the final product. New Balance outsources 75 percent of the shoe production sold in the United States with the remaining 25 percent taking place in one of the five stateside factories. This control over manufacturing utilizes a cut-through-assembly process to meet the needs of domestic consumers. With China as primary suppliers of the soles and raw materials for uppers, this type of production has decreased the amount of lead time needed for orders. Although the cost of assembling the shoes in America is approximately $13 more than having it done in Asia, the payoff in improved order deliveries is worth the cost. Using lean management techniques, the decreased lead time has resulted in a goal of delivery within 24 hours of ordering while reducing inventory at the factories. Using the model of Toyota car manufacturing, New Balance has changed production for piece-meal construction at various stages to a more continuous flow. This has greatly reduced the amount of work in progress and keeps inventory low. When the order goes out within two days of coming into the factory, the expense of keeping massive inventories is avoided.
In order for New Balance to expand into foreign markets, it will be necessary to duplicate the current process in other countries. The intricacy of working with other currencies, labor differences, and regulatory agencies precludes the goal of global distribution at this time. It is more feasible to concentrate on garnering a larger share of the American market before looking at branching out overseas.
I would like to close with stating that I firmly believe New Balance Athletic Shoes is an all-American product that stands for integrity and value in a marketplace where competitors are constantly jockeying for position in the mind of the consumer. Using these 15 concepts to fine-tune the operations of the company will improve production and promote expansion of this already successful corporation. The unique concept of NB2E puts the customer first and that is exactly where they need to be, not stuck in the middle of a profit-focused, intensive marketing plan. New Balance Athletic Shoes is a company representing the current American ideal of efficiency and quality by reducing waste, more-than-sufficient inventories, top quality, shorter lead time, and optimum productivity.