New Balance Company’s Situation Analysis

Product and Problem Statement

New Balance is a US privately owned multi-national company that designs and produces athletic footwear, apparel, and accessories for fitness and multiple athletic activities such as team sports, running, training, tennis, light walking, as well as casual and lifestyle wear. Formed in 1906, the company has more than 100 years of experience in its industry. It is viewed as one of the largest privately owned apparel and athletic footwear business in the United States and across the world (New Balance, 2012).

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The company makes its products in the US, China, and the UK. It is indeed the only major shoes company to have production in the United States (Kozar & Hiller, 2013). It produces 25% of its products in the United States while the rest of the commodities are produced in China and the United Kingdom (Yang, 2015). The company has more than 4100 employees. It attained revenues of $3.3 billion as of 2014. The company is headquartered in Boston, Massachusetts.

The apparel and athletic footwear industry is highly competitive. It is dominated by other major corporations such as Nike, Adidas, and Puma among others. Therefore, it is important for organizations such as New Balance to be innovative in designing and marketing their products. Innovativeness is the key driver in the industry. Companies must strive to ensure that their products meet clients’ expectations while at the same time adhering to safety requirements (Kozar & Hiller, 2013). In recognition of the above requirements, the company is keen on innovating and introducing new products that meet the current demands and safety requirements of many sports people while at the same time ensuring that it remains competitive and successful in its operations.

For instance, the introduction of the Men’s 611 running shoes is an important addition to the company’s product portfolio that targets male athletes in both armature and professional sporting activities. However, the product has had mixed results and reception in the market. Therefore, it is important to implement a good marketing plan, which will drive the new product to achieve the success that the company envisions.

Justification of the Marketing Plan

The marketing plan provides important guidelines that allow a company’s marketing efforts to translate into sales that can bring success to the organization (Kozar & Hiller, 2013). A good marketing plan considers many factors such as competition, pricing, positioning, and branding, analysis of the target market, market research (trends), marketing strategies, and monitoring and evaluation of marketing efforts (Franklin, 2011).

The current marketing plan focuses on identifying the strategies and approaches that can be used by New Balance to move the Men’s 611 running shoes in its markets across the world. The marketing plan will help the company to identify external environmental factors, competition trends, and customer preferences that will guarantee success of New Balance’s product.

Situation Analysis

External Environment Analysis

The external environmental factors in a business environment are important in determining the competition of an organization and products. In the apparel and athletic footwear industry, external environment factors play an important role in determining the competitiveness of New Balance Men’s 611 running shoes. The following PEST analysis provides an external environmental analysis for the company:

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Pest Analysis for Accor Group of Hotels
Political Factors Economic Factors
  • Governments’ policies on foreign investors and businesses in overseas markets
  • Punitive tax measures in international markets for apparel and athletic shoes and accessories
  • Consumers’ perception and willingness to spend new athletic shows
  • Income levels of the target groups
  • Pricing of the shoes in relation to others in the market
Social Factors Technological Factors
  • Buying and access trends
  • Changing societal values
  • Changing lifestyles and consumer demographics
  • Brand and company image
  • Rapid changing technological environment in design of running shoes
  • Consumer buying mechanisms
  • eCommerce infrastructure

Competitor Analysis

Competitor analysis provides an important tool for comparing an organization or a business with its competitors in the market (Kozar & Hiller, 2013). For instance, New Balance operates in an industry that is dominated by multi-national corporations such as Adidas, Nike, and Puma among others (Cui, 2014). The analysis will use Adidas and Nike as the major competitors of New Balance to provide important insights into the competition, thus proving recommendations that New Balance can use to market its shoes.

Firstly, Nike and Adidas are the world’s largest athletic shoe companies. In this case, they have significant financial strength that can allow them to produce and market their products with ease and competitively. For instance, Nike had an annual income of $25 billion as of 2013 while Adidas attained $15 billion in the same period. Compared to New Balance’s $3.3 billion, it is evident that the company is not financially competitive as compared to its major competitors (Yang, 2015).

Secondly, Nike and Adidas have a higher brand identity and recognition and hence their bigger success. For instance, the companies are major sponsors of many sport’s people and teams across the world (Kozar & Hiller, 2013). Although New Balance sponsors various teams and sports persons, its efforts are concentrated on low tier team and personalities since major apparel makers in the industry such as Nike and Adidas among others already have taken the major teams.

Thirdly, New Balance makes a substantial number of its products in costly manufacturing areas such as the UK and the USA as compared to Nike and Adidas whose products are made in China where there is cheaper labor and lower manufacturing costs (Yang, 2015). In essence, the lower manufacturing costs in offshore locations such as China allow Adidas and Nike to have cheaper products as compared to New Balance whose high manufacturing costs have forced its products to be among the most expensive.

Lastly, the financial muscles and brand identity of Nike and Adidas have allowed the companies to run major marketing campaigns that New Balance cannot manage. Such marketing campaigns have allowed the two companies to dominate in nearly all areas of sporting activities to the disadvantage of smaller organizations such as New Balance.

Customer Environment Analysis

Customer Analysis

Men’s 611 running shoes target both professional and armature athletes. However, their pricing means that they are majorly accessible to those who can afford the more-than-$60-a-pair price tag on them. In essence, due to the pricing, the shoes target professional athletes, thus attracting steep competition from other companies in the sector (Kozar & Hiller, 2013). Therefore, it is a highly competitive target for the company and thus the need for major marketing strategies and approach that will allow the shoes to be a success in the market.

Internal Environment Analysis

As a private organization, New Balance’s internal operations are highly protected since the company does not have the obligations that are imposed on publicly owned companies (Yang, 2015). However, the company’s considerable financial successes are important indicators of the appropriateness of its management team. Its lean number of employees is appropriate for its size, thus showing that the company operates to maximize profits while reducing the expenses (Kozar & Hiller, 2013).

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However, the fact that the company still has manufacturing operations in the United States and the UK shows poor decision-making in the quest of maximizing profits. Such operations are to blame for the high cost of its products that have limited the company’s ability to reach mass markets and brand identity.

Company Analysis

A company analysis is very important in determining the financial and competitive position of a business. For instance, a company analysis of New Balance reveals that the business’s profitability has been on a rising trend from 2010 when it had revenues of $1.8 billion to $ 3.3 billion in 2014. Appendix 1 shows the company’s financial records.

Conclusion

From the analysis above, it is evident that the company operates in a highly competitive market that is dominated by other major players such as Adidas and Nike. As such, the entry of New Balance Men’s 611 running shoes into a highly competitive region requires the company to put in place measures, which will address its competitive weaknesses that have been identified in the analysis. For instance, it is highly recommendable for the company to reduce production costs that have affected the company’s ability to price its new products competitively. Once this recommendation is implemented, the company will be assured of beating its competitors as discussed above.

Reference List

Cui, L. (2014). Analysis on sports shoes design under the guidance of the green design concept. Applied Mechanics and Materials, 3(440), 379-382. Web.

Franklin, D. (2011). League parity: bringing back unlicensed competition in the sports fan apparel market. Chi.-Kent, 86(2), 987-990. Web.

Kozar, J., & Hiller, C. (2013). Socially and environmentally responsible apparel consumption: knowledge, attitudes, and behaviors. Social responsibility journal, 9(2), 315-324. Web.

New Balance. (2012). New Balance responsible leadership report. Boston, MT: New Balance. Web.

Yang, T. (2015). Localization of New Balance brand marketing strategy for Chinese markets. New York, NY: MacMillan. Web.

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StudyCorgi. (2020, November 3). New Balance Company's Situation Analysis. Retrieved from https://studycorgi.com/new-balance-companys-situation-analysis/

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