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NEW
GP032)
PRAJAKTA NALAWADE (15P
6)
VIKRAM SINGH (15PGP05
126)
ABHISHEK SOLANKI (15PGP
SAAD KHAN (15PGP131)
3)
ANURAG SARODE (15PGP14
ROHIT KUMAR (15PGP154)
Q1. EVALUATE NEW BALANCES CURRENT OPERATIONS STRATEGY. WHAT ARE THE KEY
DECISIONS IMPLICIT IN THIS STRATEGY?
OPERATION STRATEGY
OUTSOURCING, SELECTIVELY DONE FROM CHINA
FOCUS ON DESIGN, DOMESTIC MANUFACTURING RATHER THAN ON MARKETING, INVESTMENT IN R&D, US BASED COMPANY
WORK CULTURE CROSS FUNCTIONALITY , TEAM BASED
DECISIONS
FOCUS ON INDEPENDENT SALES DUE TO MANUFACTURING FOCUS
IN-ORDER TO PROMOTE TEAM WORK, FOCUS ON HIRING AND COMPENSATION
FOCUSING ON INDIVIDUAL DEVELOPMENT WILL LEAD TO INCREASE IN EMPLOYEE KNOWLEDGE AND
CONTRIBUTION OF EACH EMPLOYEE
CONTINUOUS IMPROVEMENT TO REDUCE LEAD TIME
Q2. ASSUMING THAT THE TOTAL U.S. MARKET FOR ATHLETIC FOOTWEAR WAS 400 MILLION PAIRS IN 2005, HOW COSTLY
WAS NEW BALANCE DECISION TO MAINTAIN 25% OF ITS MANUFACTURING IN THE UNITED STATES? WHAT IS YOUR
ASSESSMENT OF THAT DECISION?
CALCULATING MARKET SHARE FOR NB IN US
TOTAL US MARKET SALES = $9 BILLION (EXHIBIT 2)
NB SHARE IN SALES = $1022 MILLION (EXHIBIT 2)
NB MARKET SHARE - 11.35%
ASSUMING THE SHARE OF SOLD PAIRS = SHARE OF THE SALES
NB SHARE OF THE PAIRS SOLD IN US = 400 MILLION * 11.35% = 45.4 MILLION
CUT-THROUGH-ASSEMBLY
1/3 OF LOCAL US PRODUCTION IS CUT-THROUGH-ASSEMBLY
CUT-THROUGH-ASSEMBLY PAIRS = 45.4 MILLION / 3 = 15.133 MILLION CUT-THROUGH-ASSEMBLY PAIRS
INCREASE IN COST PER PAIR = $13 (GIVEN)
INCREASED COST DUE TO CUT-THROUGH-ASSEMBLY PAIRS = 15.133 MILLION * $13 = $196.729 MILLION
RD
SOURCED-UPPER
2/3 OF LOCAL US PRODUCTION IS SOURCED-UPPER
SOURCED-UPPER PAIRS = 45.4 MILLION * 2/3 = 30.266 MILLION SOURCED-UPPER PAIRS
INCREASE IN COST PER PAIR WHEN PRODUCING SOURCED-UPPER = $0.5
INCREASED COST DUE TO SOURCED-UPPER PAIRS = 30.266 MILLION * $0.5 = $15.133 MILLION
RD
TOTAL INCREASED COST DUE TO THE DECISION OF PRODUCING 25% OF TOTAL SALES IN US = $211.862
MILLION
PROS
PRIVATELY OWNED COMPANY RETAINS CONTROL OVER LOCAL MANUFACTURING
MORE LIKELY TO AVOID LABOR VIOLATIONS
GOOD CORPORATE SOCIAL RESPONSIBILITY RELATIONSHIP WITH AMERICAN WORKERS
DONT HAVE TO RESPOND TO SHAREHOLDERS
CONS
100% ASIAN MANUFACTURING IS AN OPPORTUNITY TO INCREASE PROFIT MARGINS
INCREASED LABOUR COST
FORCED TO INCREASE PRODUCT RETAIL COST FOR THE SAKE OF INCREASING MARGINS
Q3. HOW SHOULD DAVISES REACT TO ADIDAS PLANNED ACQUISITION OF REEBOK? WHAT
ASPECTS OF NEW BALANCES OPERATIONS STRATEGY SHOULD THEY CHANGE?
STICK TO NICHE RUNNER MARKET
INVEST IN FEMALE SPECIALTY SHOES
MANUFACTURING FOR FUNCTION
INVEST IN DESIGN
PROMOTE THE GOOD IN PURCHASING NB
DIFFERENTIATE FROM THE BIG GUYS
CONTINUE TO REDUCE INVENTORY WITH JUST-IN-TIME PROMOTION
Q4. MOVING FORWARD, HOW IMPORTANT IS THE NB2E INITIATIVE FOR NEW BALANCE?
NB2E IS A CRUCIALLY IMPORTANT INITIATIVE OF NB
ADIDAS/REEBOK MERGER = INCREASED COMPETITION AND NEED FOR INCREASED EFFICIENCY
INCREASES AGILITY AND ON-TIME DELIVERY
PLATEAUING SALES NEED TO INCREASE OPERATIONAL EFFICIENCY
2005 WAS A BAD OPERATIONS YEAR NB2E WILL IMPROVE QUALITY, ON-TIME DELIVERY AND ON-TIME
SAMPLES
THANK YOU
