New Balance Corporation Strategy for Sustenance

New Balance Corporation is one of the largest shoes manufacturing company in United State and made up a greater change in shoe manufacturing industry. Discussion in this report shows that the method of work, advantage and disadvantage going globally, manufacturing process, quality planning, reduce quality product, profit and break-even that related to shoes manufacturing process especially to new balance corporation athletic shoe. “Endorsed By No One” is the philosophy used by this corporation, rather than using celebrities to promo their product, as they confident on their research, quality and design

1. Marketing Perspective

A most number of facts prove that changes in the approach employers direct the efforts of employees have significant allegations for the time allegations of work. A rise in the literature directs to the ‘greedy’ character which is also called as post-Fordist, post-industrial, post-modern or very effective presentation work .These concepts contribute to the statement that there has been a shift from work based on the authority from the higher level to the lower level will result in more flexible production technologies. Generally, the theory consists of some form of team-based work, advances in training structure and line of business progress, and performance-related compensation. [1]

These measures involve management giving up many restrictions imposed on employees and bringing in a variety of techniques which are aimed to increase employees’ work contentment and obligation. The penalty for this job proposed for the worker is heralded with phrases like ’employability’ and ’empowerment’. By facilitating employees to contribute and be appropriate to their acquaintance and proficiency more fully, a better output is achieved at working. When taken in a positive account this comes down to freeing employees from suppression on work from many years in the past and replacing them with difficult tasks, self-government and accomplishment. [2]

Experimental studies on the time squeeze show that these job characteristics lead to ‘time-greedy workplaces’, i.e. individuals in this department use up longer hours at work than in the more long-established workplaces. It is also recommended that increase in fight between individuals at the work place may correspond to this phenomenon. As per Thurow’s (1975) well known job-competition representation, which proposes that opposition shifts to superiority in terms when remuneration is inflexible or greater than the market-clearing level, it can also be taken in a way that competition may take the form of an enthusiasm to give over much time to work. This Time Competition encourages human resources to fiddle with long hours in view of the fact that for every worker who considers restraining his hours “there are generally many in number who is ready to give the organisation what all it requires”. As Leslie Perlow writes in an in-depth study of this phenomenon, ‘The gruelling schedules that used to be typical only for top corporate management and self-employed people are becoming more prevalent in one organisation after the other. [2]

Even after the economic model on labour supply has proven its worth in both theoretical and empirical examinations, it is always considered as a mystery:

All established theories of the labour promotion are based on the perception that an employer pay money for and a worker sells his time in the service convention which in other terminology can be told as, people work for the money. On the other hand, a noteworthy part of overtime is unpaid.

In the standard model of labour supply, it is assumed that employees work their most wanted number of hours, based on the most advantageous arrangement of their payment and preferred time. In theory human resources might work more than they would like, namely if employers do not leave them another choice (‘lumpiness’ of labour demand). When put into practice, however, employees also work more than they would like (i.e. are over-employed) without imposed restrictions from the employer.[3]

In the ordinary model, the individuals are expected to make coherent choices; they choose the combination of income and leisure time that maximizes their well-being (or ‘utility’). Working overtime, on the other hand, is often connected with feelings of time pressure and stress, an inability to combine work and care, and every now and then even with psychological problems in the long run. People thus “choose” to expose themselves to extensive diminution in their welfare, which is unusual from the point of view that utility maximization. [4]

Strategic management delivers the method for the firm. It provides a framework, which can guarantee that decisions regarding the future are taken in organised and purposeful way. Strategic management also functions as a hedge against improbability and totally unexpected growths on the business prospect. This lends a structure of suggestion for speculation decisions. It aids the absorption of possessions on vital areas of best impending. It offers a line of attack by which the organisation could look forward to and develop the future and be internally prepared to handle the operations. It assists to increase processes, systems, mechanisms and decision-making position that are indispensable for this principle. [4]

1.1 Strategic Business Area (SBA)

SBA is a unique segment in which the firm does want to do business. A firm instead of trying to enter in all the section, it chooses the area of its competitive advantage and capitalise its income and strategies Management Science. This helps the company to concentrate its strategies in a particular area and to reduce the unnecessary expenses in non-profitable area.

Functional Strategy: Strategy that is related to each functional area of business such as production, marketing and personnel is called functional strategy. It is designed and managed in a coordinated way so that they interrelate with each other and at the same time collectively allow the competitive strategy to be implemented properly. [5]

Strategy formulation is the development of long range plans for the effective management of environmental opportunities and threats in light of corporate strengths and weaknesses. It includes defining the corporate mission, specifying achievable objectives, developing strategies and setting policy guidelines. It begins with situational analysis. The simplest way is to analyse this is through SWOT analysis. This is the method to analyse the potency and weak points in order to make the most of the hazard and to triumph over the hazard. SWOT is regarded as Strength, Weakness, Opportunities and Threats. How the external opportunities and threats facing a particular corporation can be harmonized with that company’s inner potency and weak point to consequence in four sets of probable premeditated alternatives.

1.1.1 Mission

An organization’s mission is the principle or the enthusiasm for the firm’s existence. A well visualized mission proclamation characterizes the essential, only one of its kind purposes that distinguish a company away from each other from extra organizations which are of the same kind and identifies the scope of the company’s procedure in terms of the products offered and markets hand round. A mission statement may be described narrowly or largely in scope. A broadly described mission announcement keeps the firm from restricting itself to one discipline or manufacturing, but it neglects to evidently identify what it makes or which product/market it strategies to emphasize. A slender mission very clearly expresses the organizations prime business, but it may restrict the scale of the firm’s performances in relations of product or service offered, the expertise used and the market served. [6]

1.1.2 Objectives

Objectives are the outcomes of an intended action. The objectives correspond to the actions that are to be done and should be computed if possible. The accomplishment of corporate objective should result in the fulfilment of a corporate mission. In a very different scenario an objective, a goal is an unwrapped ended statement of what is to be achieved with no calculation of what is to be achieved and no time decisive factor for the finishing point. The regions which the company may target and strive for establishing its goals and objectives are prosperity, enlargement, shareholder’s wealth, proper utilization of resources etc.

2. Strategies

The standard norms and strategies of an organisation form a wide-ranging master plan which states how the company will achieve its stated goals and targets. It takes full use of the competitive advantage and diminishes the competitive disadvantage.

2.1 Types of strategy:

There are three standard types of strategies which are generally considered by many of the business firms:

2.1.1 Corporate strategy:

It tells about a company’s overall direction in terms of its general attitude towards development and supervision of its various fabrication and product lines. Corporate strategy mainly corresponds to three key issues in front of the firm as a whole.

2.1.2 Directional strategy:

The firm’s overall orientation towards development, steadiness and reduction of expenditure. The two basic growth strategies are meditation and diversified nature. The growth of a business can be made possible through combination, getting hold of the on-going, occupation, joint business enterprise and premeditated association. Turnaround, divestment and insolvency are the various types of reduction of expenditure approach.

2.1.3 Portfolio analysis:

The industries or markets in which the organisation contends through its products and business units are called as portfolio analysis. In this type of analysis, top management views its product lines and business units as a chain of portfolio savings and all the time keeps a check on the operations going on for a profitable return. Two of the most popular strategies are the Boston Consulting Group (BCG) Growth Share Matrix and General Electric`s (GE) business screen

2.1.4 Parenting strategy:

The approach in which administration coordinates behaviour and transfers possessions and develops competencies among product lines and business units.

2.1.5 Business strategy:

It is generally present at the commercial unit or alongside product and it lays prominence to the enhance the structure of competition in terms of products and services offered by the corporation in the specific industry or marketing sector served by that production unit. It may well be shaped within two on the whole categories of competitive or corporate strategies. Competitive strategy is the strategy battle in opposition to all the contenders for improvement. Michael Porter came forward with three competitive strategies which are known as Generic strategies. They are cost leadership, differentiation and focus. Cooperative strategy is to work with one or more competitors to gain advantage against other competitors. [7]

2.2 Stages of corporate development

The Corporations which are termed to be successful have a propensity to follow a prototype of structural enlargement called stages of progress as they nurture and make bigger. Starting with the simple structure of the industrial firm, they generally become superior and handle the operations as per functional lines with promotion fabrication and funding sections. With continuing success the company includes new product lines in different industries and organizes itself into organized divisions.

Figure : Different Stages of job handling (Anon, 2009)

Applying the principle of customer-focused organisation leads to the following actions:

Understanding the whole range of consumer desires and expectations for price, products, dependability, delivery, etc.

Safeguarding a balanced methodology among consumers and additional stakeholders

Collaborating these needs and potentials all over the organisation

Measuring consumer pleasure and acting on outcomes and

Managing consumer relationships. [8]

Beneficial applications of this principle include:

Policy and strategy formulation, making sure that the individuals of the organisation are aware of the customer needs and the needs of other stakeholders;

Goal and target setting, ensuring that appropriate goals and targets are in a straight line linked to purchaser needs and opportunities;

Operational management, humanizing and striving to give the best performance of the organisation to meet customer needs;

Human resources management, ensuring that the people have the acquaintance and skills required to keep happy the organisation’s customer

Applying the principle of process approach leads to the following actions:

Defining the process to accomplish the preferred consequence,

Identifying and keeping a check on the inputs and outputs of the process,

Making out the interfaces of the process with the functions of the organisation,

Estimating possible risk factors, and its consequences and impacts of developments on consumers, suppliers and other stakeholders of the course,

Establishing clear responsibility, authority, and accountability for managing the process,

Identifying the internal and external customers, suppliers and other stakeholders of the process,

When designing processes, consideration is given to process steps, activities, flows, control measures, training needs, equipment, methods, information, materials and other resources to achieve the desired result.[9]

Beneficial applications of this principle include:

For policy and strategy formulation, utilizing defined processes throughout the organisation will lead to more predictable results, better use of resources, shorter, cycle times and lower costs;

For goal and target setting, understanding the capability of processes facilitates the creation of challenging goals and targets;

For operational management, adopting the process approach for all operations results in lower costs, prevention of errors, control of variation, shorter cycle times and more predictable outputs;

For human resource management establishing cost and well-organized processes for human resource management, such as taking into service, instruction and guidance, enables the arrangement of these courses of actions with the needs of the organisation and bring into being a more accomplished.[10]

3. Manufacturing Perspective

When we discuss issues pertaining to manufacturing option New Balance Corporation has made up a greater change in whole new world of shoe manufacturing .They brought up changes, which would bring better options varying technologies .They used some best tailoring equipment’s which would make better profits and also provide end source production within an hour as of the china market production of shoe. Below is the brief overview of the corporation which has gained maximum profit in producing shoes at a better level.

New balance innovatively adapting the latest technology in shoemaking process and stay competitive in United States while continuously providing training for their employees. The 22 hours of training is given to the employees on teamwork and process line basis. Assisting one another and sharing missions is to make sure the job to get done. The floor worker contributes the various for the process development. [10]

In order to maintain better methodology in intensifying globalization prospects in known level of competitive pressure in developing countries produced goods. There been a accelerated growth at an level of investment liberalization and increasing make up a fragmented approach in stages of production in value possible chain .Some of the process through which these manufacturing process can be yielded are reintegrated through a broad level of production system and global value chains (GVC) and global production networks (GPN) .Threes also a level of maintaining a group of transnational corporations (TNCs),which play a major role in organizing and maintaining a better level of infrastructure ,marketing and logistic and trade investment characteristics. There’s also a far reaching approach which can be more competitive and very much of cross national and provide a better technological way of analysing ,learning and better offerings in field of better welfare gains and brings out a major challenge. [11]

By considering manufacturing companies to take up issues regarding the GVCs and other GPNs, there’s always a diminishing pressure for protectionism of the one own trade and production growth. New Balance as said above tried to bring about greater amount of changes in sphere regarding to multicultural and other foreign market based sector identification prospects. They gave a huge turnaround in producing large number of shoes pairs for Beijing Olympic events, which was one the best Olympic events ever organized. They were also the issues regarding brining about technical and non-technical work base ethic work methodology and bring greater level of aspiration go head. There’s always a level of self-attaining and possible approach of having to reconfigure previous technological trajectory. [6]

To have a further growth aspect in shoe based sector, there needs to be perfect level of sequential steps, which has to be taken care of for providing better service and product to the customer .These process need to be taken in greater sphere of knowledge and other related activities to bring about better service and conception issues at various level or can be said as the phased of production life cycle. There needs be a proper functioning mechanism which may help in making out better possibilities and due complexities in a life cycle based issues for better management and links in a clear way.[9]

There’s always a mechanism through which a better span enterprise can be made up of better local economy and provide a greater regional economy based approached. There’s always a diverse work based methodology and dynamism which brings a change in value chain serving an important factor for better possibilities in bringing about innovation at an enterprise level of value chain.[11]

There has been always two level of divergent process which can be notified as buyer driven and producer driven value chain. The two distinct aspect make up a larger important and base level dynamic in providing better inter reactions and generations at each of different case. There has been more of a point which can bring up better opportunities and capabilities for better differing in arrangements. There are always issues which would bring about buyer driven chains and difficult close coordination spectrum needs and get a better market yield of prospects. [12]

In other buyer base driven value chain there’s always a clear level of larger options and core competencies and has cool setting up driving factors in that value chain. It helps in providing an increasing access to organize and coordinate and get better control of all production and designing process. There needs to be a better marketing activity to gain better accumulation of consumer market for developed and developing countries. The chain is typically more intensive of industries and has a highly irrelevant development methodology. [5]

There’s always seems to be a particular level of branded level product ,which are more of greater importance to capture a clear much added values in terms of red in product development and get better marketing options and maintain a clear brand protection property right. There’s always a better market position based approach which can result in a global brands in a specific market and region. When taken up with a clear producer values and key production and chain control of technologies and make up better importance positioning in a final product in a market.

There’s always a clear level of coordinate issues regarding a value chain probability and take up responsible approach for suppliers and their customers .These chain of typical medium and high tech based prosperity conditions need to be taken up at an higher level. There’s also a clear level of developing country produced part of labour intensive and buyer driven chain prospects in exception to the East Asian newly industrializing economy, which can force a clear case of buyer to producer chain in terms of shoe production. [6]

When setting up a better methodology there’s also a need to take up better quality management issues and other requirement specification which are diverse universal. Here, it would be best in considering some part of process flow need to be taken care of. The following are the basic process technique for quality analysis, they are:

Quality planning process for creating and designing and planning of product and services, which can meet or exceed a customer level expectations.

There’s always a pathway for quality control improvement and process making up to a level of elimination variation.

To take up a clear process of how better shoes are produced with a qualitative approach there’s always seem to be a deficient way of taking 20 % output variations. There’s needed to be a clear performance measurement aspect to know a better level of constant process inherent and variation fairly constant over a range of time. There’s always a level of performance inherent to a clear process .In other words ,there’s always an original way of taking up greater quality control and accepted average and range of variation for better performance measurement .These zone are however need to be taken up for better standard performance.[5]

4. Quality Management System

When we come up with better Total quality management and ways of details at different approach can nowhere be seen .There’s been a different definition for Total Quality Management scenarios which has to be emphasized in a continuous way. There’s always a level of quality improvement process architecture which need to have an institutional operations and represent a clear shift in differing administrative circles and form a clear collegial management. Total Quality Management principles need to have successfully implemented various issues and provide a clear knowledge skills and abilities. It also notes out better concept on quality based control and get better process methodology and clear foundation in process of Total Quality Management.

There always a level of better quality managed which have been emerge overnight and it has very inter related units for quality management ,which are collectively involved. There is also a level of Total Quality Management process which takes up greater level of operating breweries and quality with good word management having a clear service set up. [13]

TQM is a management process based on fundamental principles that focus an organization’s energy on always meeting customers’ expectations. But because it is a process-not simply a program, it requires long-term commitment to bring into play in every aspect of the development.

For a company like New Balance Corporation needs to have all the basic level work consideration and its unanimity .It has several years of quality based approach for better professional activity and numerous companies acronym .It has more number of circular base passage based configuration .There’s always a better initiative starting off with electronic and automobile manufacturing in the late 70’s and early 80’s and have greater level of banking and other service oriented based architecture companies. To have greater level of expenditure process in companies, there needs to be clear use of TQM and return of investment and originally expect a question based approach with a better Return of Investment hovering around. [10]

There’s always a change in achieving a clear breakthroughs for better performance contribution breakthroughs .It also creates a better challenging standard performance quality control zone and representing things to be done in a better way. There has been a poor response at the chronic level and achieve better functionality approach .There’s always a historical based needs to be taken up for better cross solving functional problems.[12]

4.1 Quality affects business performance

There’s always a relationship consideration for major improvement for innovative and exploration for specified strategies and tactics to apply improvement in industry based application. In other way there has been a greater industry undergoing rapid technological change in uncertain environments and can be discussed about. The best quality based objective can be linked to different strategically approach and tactics with a quality field in particular for having job duties of a quality professional. [6]

Figure 2 Quality Management

There also need to be an organization renewal efforts and prevent better organizational classified work on drawing an elaborating the best set up analysis work on small wins ,it was brought about by researchers like weick and frances. [14]

There needs to be some significant benefits which can provide a better improvement form in detailed manner.

The following are the process which can generate clear process at a generic level like,

Getting Continuous improvement typically by moving out a clear large amount of employees and other improvement based in contrast to the large scale innovation and efforts to involve selected experts. The contribution of such broad mobilization of employees is potentially large.

There’s always a corollary of broad based efforts, which have to be taken up in small win system and parallel way resulting in an aggregate and change of efforts for a magnificent results.

A series of small wins often precedes and follows large changes, first paving the way for these changes by providing momentum and basic learning, and second by eliminating the impediments to optimizing the new processes or products. In this sense, small wins make large-scale change possible. [10]

5. Financial Perspective

When taking up new balance Corporation was taking up major issues pertaining to various technical prospects and its work basics. There are always issues pertaining to process based work financial management.

New Balance Corporation in order to make up with the delivery scale for Beijing Olympic took up various issues pertaining level of normal time order specification and reduce the chance of going to bankruptcy and potentially take up a backseat in cost management. They have taken an order of automatic sewing machine which can help them in generating double the revenue prospects and other confidentiality aspects .The amount of product specification of potential cost generation on financial distress and include possibility customers take up the product thus varies and specify a clear financial distress and reason for firms to have less debt and chosen potential cost variance. The potential cost has it variance in all aspect and can be a deciding factor when taking up a clear approach in ways when real quality product hasn’t been ascertained. The major importance of these product based approach is not considered and better modelling frame has to be taken up for effects to be taken unknown. [15]

5.1 Financial analysis

Financial analysis is a phase of the whole business finance purpose that includes examining historical statistics about the present and prospect financial strength of a company. The finance function in business institutes includes estimating economic trends, establishing financial policy, and creating future plans for business activities. The two major sources of facts for financial analysis are a company’s income statement and balance sheet. A company’s whole financial health can be measured by observing three major factors: its leverage, profitability and liquidity.

Elements of Financial Health

LEVERAGE- Leverage refers to the share of a company’s investment that has been funded by investors as compared to creditors. In other terms, leverage is the amount to which a company has depended upon borrowing to finance its operations

PROFITABILITY-Profitability refers to management’s operation in using the capitals of a business. Many events of profitability include calculating the financial profit that the company makes on the money that has been spent

LIQUIDITY-Liquidity refers to a company’s capability to pay its present bills and expenses. In other term, liquidity relates to the obtainability of cash and other assets to cover short-term debt, accounts payable and other liabilities. [20]

5.2 Poor quality product

There is a cause-and-effect link concerning quality and finance. Normally organization’s quality performance will affect its bottom line. A simplified economic equation is useful to investigate this relationship:

Profit = income – expense

For it to influence profit, quality must affect either expense or income. The figure below shows that good quality product will increase the income plus the bad quality will affect the company finance badly [21]

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Quality’s Effect on Income and Expenses [21]

Reduced quality product will effect company financially in many ways, some of the effect that cause the company are :

5.2.1 Internal failure costs

SCRAP- the shoes have to scrap due to poor quality

REWORK- cost for the rework, including the overtime that have to paid to workers

DOWNTIME – time that been consume to arrange manpower for the rework department

PRICE REDUCTIONS- the price may have to reduce to sell of the shoes that already in the market

5.2.2 External failure costs

COMPLAINTS- Customer always right, so the complaints will give bad impression on the shoes

RETURNS- The product return will cost money as they have to send back the entire shoe to company for scarp or repair

WARRANTY CLAIMS – warranty claim is one more cost that company have to look in to if the reject level or return is high [nota km]

6. Financial implication to run shoe business

As discussed above, one key requirement of the failing firm defence is that the relevant assets be

Shopped to see if they would continue operating in the market in the hands of a less anticompetitive acquirer. If the financially distressed firm conducts a shop and receives a bid from another firm, however, it may not be the case that this acquirer will employ the assets in the market of concern. Assets are often fungible and have alternative uses to which they can be put. Perhaps a competing bidder even has in mind that it will liquidate them entirely. Given such uncertainty, should the competition authority be troubled by the possibility that the alternative purchaser might not continue employing the assets in its market of concern? [12]

By taking another analysis of bidder taken up new balance financially distressed issue need to be more precise in getting greater market power. There’s also major change in aspect recreated in terms of the asset building and other market purchase in close based scenarios .New balance acquiring can be due to these, which can be a safe option for companies considering taking up of purchase as permitted. There’s also major scenario in taking up shop return goods and losses incurred in getting back the product. Hence Company has to make up a mark, which is more relevant to past aspect and general work based scenario setup.

6.1 Current Profit/loss

By 2003 new balance corporation share was 11% share in market and achieve third ranked among the athletic shoe manufacture, by 2004 new balance sales were estimated $ 1.3 billion compare to 1991 that the sales reach $ 100 million, and the profit the company sales years 2008 is 1.64 billion. New balance chairman and chief operating officer, Mr James David, stated that the company emphasizing the design and quality of the shoes rather than stylistic to gain this achievement and sales. [22]

6.2 Return of investment

Return on Investment (ROI) analysis is generally used methods for valuing the financial outcomes of business investments or decisions. ROI analysis relates the scale and timing of investment gains exactly with the scale and timing of investment costs. A high ROI means that investment gains compare beneficially to investment costs. ROI has become a central financial metric for asset purchase decisions approval and funding decisions for projects and programs of all kinds such as marketing programs, recruiting and training programs. [23]

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Figure [23]

Return on investment is normally known as the “return” from an action divided by the cost of that action. A simple calculation of ROI as used in business case analysis and other forms of cash flow analysis. For example, what is the ROI for a new marketing program that is expected to cost $20,000 over the next five years and deliver an additional $55,000 in increased profits during the same time?

Simple ROI= = = 55%

6.3 The break-even

Breakeven point (in sales dollars) equals total fixed costs divided by 1 minus total variable costs divided by corresponding sales volume. As New Balance Corporation already has the major market power, which can make up a great extent of choosing price and better quality maintenance options needs to be better. In period of quality firms make up great number of technical prospect issues, which bring out lower quality is to be observed. Firms can cut quality and given that quality provision is costly, this will lower the marginal cost of production. Until consumers realize the good sold is of lower quality, firms will earn higher profits. Once the lower quality is observed, firms will face reduced demand. If the claimants do not bear the full cost of this reduced demand or face a very high discount rate, they may have incentives to shift profits into nearby periods. These features fit well the shoe industry. [9]

In revising a plan observe the cost data from breakdown of annually expenses (operating ratios on the income report). If any of your cost items are too high or too low change them. The data changes can be writes above or below your original entries on the expenses worksheet. When finish making the adjustments the data will have a revised projected statement of sales and expenses.

With the revised figures a revised break-even analysis can be work out. Whether the new break-even. In the Shoe industry, firm’s provision of quality is to some extent unobserved at the time a product been is sold. Consumers can observe lagged measures of quality, but quality at the actual time the product been used and some time may be quite different than past quality. Firms may also face a very high demand for current profits and may be willing to trade future profits for current profits. Debt, financial distress and bankruptcy play a role just as in the Maksimovic and Titman model, as financial distress and expected bankruptcy can increase the incentives of firms to lower quality. The intuition for financial distress to play a role is simple and follows directly from their model. If the firm defaults on its debt, debt holders rather than equity holders bear the loss of the future market share. [11]

Conclusion

From the above consideration it becomes clear that, New Balance Corporation need to go through various cost analysis and work based framework. By analysing this issue, it brings out better cost and strategy analysis for Shoe industry sustenance in a market bogged with competition. In this, mainly we discuss various analysis need to be made when marketing strategy for a particular product needs to be taken up.