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Nike versus New Balance: Trade Policy in a World of Global Value Chains

By: Simon Brodeur, Ari Van Assche

In 2013, Michael Froman, the newly appointed United States Trade Representative, was responsible for leading the U.S. negotiating team in the formulation of the terms of the Trans-Pacific Partnership…

• Length: 16 page(s)
• Publication Date: Sep 19, 2014
• Discipline: Economics
• Product #: HEC087-PDF-ENG

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In 2013, Michael Froman, the newly appointed United States Trade Representative, was responsible for leading the U.S. negotiating team in the formulation of the terms of the Trans-Pacific Partnership (TPP). During the negotiations, Froman had to adopt a position on the sensitive issue of tariffs on imported footwear. On the one hand, Vietnam, a TPP member country, was America's second largest foreign footwear supplier and was pushing for the elimination of tariffs. On the other hand, U.S. labour unions argued that Vietnam's strength in the footwear industry was based on unfair subsidies and labour practices. Even among U.S. footwear companies, there was disagreement. New Balance, the only U.S. athletic footwear company that produced parts of its shoes in the U.S., was openly opposed to the elimination of tariffs, as their removal could lead to factory closures in the U.S. Nike Inc., however, manufactured all its shoes overseas and was an overt proponent of the abolition of tariffs. Froman had to carefully weigh the arguments of all the stakeholders to determine whether or not to accept the lowering of tariffs on footwear imported from Vietnam and, if he accepted, whether or not to impose conditions on Vietnam.

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The case provides a vehicle for analyzing strategic, contextual, and ethical challenges underlying modern trade negotiations.

Sep 19, 2014

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Nike versus New Balance: Trade Policy in a World of Global Value Chains

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Nike versus new balance: trade policy in a world of global value chains description.

In 2013, Michael Froman, the newly appointed United States Trade Representative, was responsible for leading the U.S. negotiating team in the formulation of the terms of the Trans-Pacific Partnership (TPP). During the negotiations, Froman had to adopt a position on the sensitive issue of tariffs on imported footwear. On the one hand, Vietnam, a TPP member country, was America's second largest foreign footwear supplier and was pushing for the elimination of tariffs. On the other hand, U.S. labour unions argued that Vietnam's strength in the footwear industry was based on unfair subsidies and labour practices. Even among U.S. footwear companies, there was disagreement. New Balance, the only U.S. athletic footwear company that produced parts of its shoes in the U.S., was openly opposed to the elimination of tariffs, as their removal could lead to factory closures in the U.S. Nike Inc., however, manufactured all its shoes overseas and was an overt proponent of the abolition of tariffs. Froman had to carefully weigh the arguments of all the stakeholders to determine whether or not to accept the lowering of tariffs on footwear imported from Vietnam and, if he accepted, whether or not to impose conditions on Vietnam.

Case Description Nike versus New Balance: Trade Policy in a World of Global Value Chains

Strategic managment tools used in case study analysis of nike versus new balance: trade policy in a world of global value chains, step 1. problem identification in nike versus new balance: trade policy in a world of global value chains case study, step 2. external environment analysis - pestel / pest / step analysis of nike versus new balance: trade policy in a world of global value chains case study, step 3. industry specific / porter five forces analysis of nike versus new balance: trade policy in a world of global value chains case study, step 4. evaluating alternatives / swot analysis of nike versus new balance: trade policy in a world of global value chains case study, step 5. porter value chain analysis / vrio / vrin analysis nike versus new balance: trade policy in a world of global value chains case study, step 6. recommendations nike versus new balance: trade policy in a world of global value chains case study, step 7. basis of recommendations for nike versus new balance: trade policy in a world of global value chains case study, quality & on time delivery.

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Case Analysis of Nike versus New Balance: Trade Policy in a World of Global Value Chains

Nike versus New Balance: Trade Policy in a World of Global Value Chains is a Harvard Business (HBR) Case Study on Global Business , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Nike versus New Balance: Trade Policy in a World of Global Value Chains is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Nike versus New Balance: Trade Policy in a World of Global Value Chains case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Nike versus New Balance: Trade Policy in a World of Global Value Chains will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

Nike versus New Balance: Trade Policy in a World of Global Value Chains case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Global Business, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Nike versus New Balance: Trade Policy in a World of Global Value Chains, is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The Nike versus New Balance: Trade Policy in a World of Global Value Chains case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Global Business Solutions

In the Texas Business School, Nike versus New Balance: Trade Policy in a World of Global Value Chains case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Nike versus New Balance: Trade Policy in a World of Global Value Chains

Step 1 – Problem Identification of Nike versus New Balance: Trade Policy in a World of Global Value Chains - Harvard Business School Case Study

The first step to solve HBR Nike versus New Balance: Trade Policy in a World of Global Value Chains case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Footwear Tariffs is facing right now. Even though the problem statement is essentially – “Global Business” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Footwear Tariffs, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Nike versus New Balance: Trade Policy in a World of Global Value Chains. The external environment analysis of Nike versus New Balance: Trade Policy in a World of Global Value Chains will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Nike versus New Balance: Trade Policy in a World of Global Value Chains case study. PESTEL analysis of " Nike versus New Balance: Trade Policy in a World of Global Value Chains" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Nike versus New Balance: Trade Policy in a World of Global Value Chains macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for Nike versus New Balance: Trade Policy in a World of Global Value Chains

To do comprehensive PESTEL analysis of case study – Nike versus New Balance: Trade Policy in a World of Global Value Chains , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact Nike versus New Balance: Trade Policy in a World of Global Value Chains

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ Nike versus New Balance: Trade Policy in a World of Global Value Chains ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Footwear Tariffs is operating, firms are required to store customer data within the premises of the country. Footwear Tariffs needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Nike versus New Balance: Trade Policy in a World of Global Value Chains has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Footwear Tariffs in case study Nike versus New Balance: Trade Policy in a World of Global Value Chains" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Footwear Tariffs in case study “ Nike versus New Balance: Trade Policy in a World of Global Value Chains ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Footwear Tariffs in case study “ Nike versus New Balance: Trade Policy in a World of Global Value Chains ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ Nike versus New Balance: Trade Policy in a World of Global Value Chains ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Footwear Tariffs can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Nike versus New Balance: Trade Policy in a World of Global Value Chains case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Footwear Tariffs needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact Nike versus New Balance: Trade Policy in a World of Global Value Chains

Social factors that impact nike versus new balance: trade policy in a world of global value chains, technological factors that impact nike versus new balance: trade policy in a world of global value chains, environmental factors that impact nike versus new balance: trade policy in a world of global value chains, legal factors that impact nike versus new balance: trade policy in a world of global value chains, step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: nike versus new balance: trade policy in a world of global value chains case study solution.

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Volume 12 Issue 4 December 2014

Nike versus New Balance: Trade Policy in a World of Global Value Chains

Case prepared by Simon BRODEUR1 and Professor Ari VAN ASSCHE2

United States Trade Representative (USTR) Michael Froman closed the door of his new office, walked to his window, and admired the glimmering Washington D.C. skyline. During his illustrious career as a government official, Froman had never wielded such power as he did now: he had just been nominated by President Obama to be the 11th USTR, serving as the president’s principal advisor, negotiator, and spokesperson on matters pertaining to international trade and investment. One of his main responsibilities would be to complete negotiations on the Trans- Pacific Partnership (TPP), an Asian-Pacific trading bloc built upon the pre-existing Trans-Pacific Strategic Economic Partnership Agreement between Brunei, Chile, New Zealand, and Singapore. As of 2013, numerous nations had participated in the TPP negotiations, namely the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam (Exhibit 1).

The TPP was the most promising trade liberalization initiative since the Doha round of world trade talks, which stalled in 2008, and would cover approximately 40% of the world’s GDP.3 The multilateral talks could potentially deliver huge benefits for the U.S. economy, as the TPP would provide American companies with unprecedented market access to key players in the Asia- Pacific, the largest and fastest growing region in the world.4 Furthermore, it would allow consumers and importers to enjoy wider and cheaper access to the goods and services of TPP countries.

Froman knew that the TPP negotiations would have to be conducted with caution, however; reducing U.S. barriers to trade and investment would put additional pressure on the country’s already frail manufacturing sector. Between 1999 and 2012, while the total number of U.S. jobs had increased by 2.3%, U.S. production occupations had fallen by 31.9% (Exhibit 2). Import competition from and offshoring to Asian manufacturing nations such as China and Indonesia − and TPP negotiating partner Vietnam − were widely blamed for the decline of U.S. manufacturing.

1 Simon Brodeur is an M.Sc. student at HEC Montréal. 2 Ari Van Assche is an Associate Professor in the Department of International Business at HEC Montréal. 3 “Free Trade Agreements: Opening Up the Pacific,” The Economist, November 12, 2011 (accessed October 17, 2013). 4 International Bank for Reconstruction and Development / World Bank, East Asia and Pacific Economic Update – April 2013 – A Fine Balance, 2013 (accessed October 17, 2013). © HEC Montréal 2014 All rights reserved for all countries. Any translation or alteration in any form whatsoever is prohibited. The International Journal of Case Studies in Management is published on-line (http://www.hec.ca/en/case_centre/ijcsm/), ISSN 1911-2599. This case is intended to be used as the framework for an educational discussion and does not imply any judgement on the administrative situation presented. Deposited under number 9 00 2014 001 with the HEC Montréal Case Centre, 3000, chemin de la Côte-Sainte-Catherine, Montréal (Québec) Canada H3T 2A7. Nike versus New Balance: Trade Policy in a World of Global Value Chains

When negotiating the TPP, it was therefore imperative for Froman to find the right balance between promoting American business interests abroad and protecting American interests at home.

In recent months, industry activists and politicians had focused on the downside risks of the TPP negotiations for the American footwear industry. U.S. footwear manufacturing had contracted by almost a third in the last decade due to increased import competition from China and Vietnam, and tariff reductions on Vietnamese imports would likely accelerate this decline.

Froman was aware that the footwear industry would be a major sticking point in the TPP negotiations. After consulting with various U.S. footwear lobby groups earlier that day, he knew that even among American companies, there was disagreement on the position the U.S. should adopt. The divide was especially wide between two major footwear companies: Nike Inc. and New Balance. On the one hand, New Balance was strongly opposed to the removal of tariffs on shoes from Vietnam, as they believed this would endanger footwear manufacturing activities in the U.S. On the other hand, Nike Inc. was adamant that the tariffs on footwear imports from Vietnam were detrimental to the U.S. economy. According to Nike, tariffs have led to higher footwear prices, which harm U.S. consumers and reduce the competitiveness of U.S. firms. If tariffs were eliminated, U.S. footwear manufacturers would be able to save on production costs and reinvest those savings in modern, high-value-added jobs in America.1

When he was sworn in as USTR, Froman had promised to use every tool at his disposal to level the playing field so that Americans could compete and win in the global economy.2 Yet discussions with representatives from New Balance and Nike had shown him that identifying the best negotiating strategy would be complex and require in-depth analysis of the impact of tariff elimination on the various footwear industry stakeholders. His stance on the TPP footwear dilemma required urgent deliberation, as the president had summoned all of his advisors to a conference call later that evening and expected them to advise him on the position the United States should adopt during the TPP negotiations.

The U.S. footwear industry

Froman had to first consider the U.S. footwear market and industry to determine the impact of the TPP on the domestic economy. The challenges facing the footwear manufacturing industry were similar to those of the U.S. manufacturing sector as a whole. Rising wages and heavy competition from low-cost countries were putting a strain on U.S. shoe factories. In 2012, only 13,290 people were employed in the footwear manufacturing industry, down from 19,440 in 2003. This decrease was due largely to a 41% decline in the number of production workers (Exhibit 3). In comparison, office and administrative support occupations in the footwear industry had dropped by just 25%, and management occupations had almost returned to 2003 levels.

1 Eric Martin, “New Balance Wants Its Tariffs. Nike Doesn’t,” BloombergBusinessWeek, May 3, 2012 (accessed October 17, 2013). 2 Office of the United States Trade Representative, “Statement by United States Trade Representative Michael Froman,” 2013: http://www.ustr.gov/about-us/press-office/press-releases/2013/june/amb-froman-statement (accessed October 17, 2013).

© HEC Montréal 2 Nike versus New Balance: Trade Policy in a World of Global Value Chains

The decrease in U.S. footwear manufacturing activities contrasts sharply with the steady growth of the U.S. footwear market. It is the world’s largest, valued at $71.7 billion in 2012, accounting for 27.9% of the global footwear market, and projected to continue developing in the short to medium term (Exhibit 4).

The main reason for America’s manufacturing decline is growing import competition from low- wage countries. Currently, almost 99% of the footwear sold in the United States is imported from low-cost manufacturing locations, especially in East and Southeast Asia.1 China alone accounted for 71.9% of U.S. footwear imports in 2012, while TPP negotiating partner Vietnam, a rapidly developing footwear behemoth, accounted for 10.1% of those imports (Exhibit 5). The pace of Vietnam’s growth in the footwear market is staggering: exports to the U.S. jumped an astounding 23.8% annually between 1997 and 2012, and that trend is expected to continue over the short term as wages in China continue to rise.

Vietnamese footwear industry

Ever since Vietnam signed the U.S.-Vietnam Bilateral Trade Agreement in 2001 establishing “normal trade relations,”2 it has been an increasingly important source of footwear products. In just fifteen years, Vietnam grew into America’s second largest supplier of footwear imports (Exhibit 5). In 2012, about 13% of its exports to the U.S. were footwear products, making this a strategic industry for Vietnam.3

Vietnam has a clear footwear production cost advantage over the U.S. A New Balance spokesperson estimated that producing a pair of shoes in the U.S. costs 25-35% more than in Vietnam,4 while a Nike representative estimated that it costs around US$20-25 to produce a pair of Nike running shoes in a Vietnamese factory.5

Low wages are a key driver of this production cost advantage. Earnings in Vietnam are more than 20 times lower than in the U.S. A study by the Congressional Research Service concluded that wages in Vietnam’s footwear and apparel manufacturing sector averaged US$0.51 an hour in 2012.6 This is significantly lower than in China.7

In addition to low wages, low labour and environmental standards help Vietnamese companies keep their production costs down. Vietnam has ratified eighteen conventions with the

1 Timothy Aeppel, “New Balance Sweats Push to End U.S. Shoe Tariffs,” The Wall Street Journal, February 27, 2013, (accessed October 17, 2013). 2 Embassy of the United States, Hanoi, Vietnam, “The U.S.-Vietnam Bilateral Trade Agreement (BTA) – Resources for Understanding,” n.d. (accessed October 17, 2013). 3 United States Census Bureau, “U.S. Imports from Vietnam by 5-digit End-Use Code, 2003 – 2012,” 2012 (accessed October 17, 2013). 4 See Aeppel, op. cit. 5 Jim Landers, “Vietnam Trade Deal Sparks a Running Battle on Shoe Tariffs,” The Dallas Morning News, December 27, 2012 (accessed October 17, 2013). 6 Michaela D. Platzer, U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations, Congressional Research Service, October 5, 2012 (accessed October 17, 2013). 7 See Aeppel, op. cit.

© HEC Montréal 3 Nike versus New Balance: Trade Policy in a World of Global Value Chains

International Labour Organization (ILO).1 However, labour unions in Vietnam are not independent from the ruling communist party, and workers are not free to create or join unions. Furthermore, official strikes are rendered almost impossible due to government requirements. While collective bargaining exists, it is a relatively new concept and has yet to take root in the country. Finally, child labour, forced labour, and long hours are still a problem in Vietnam as the government struggles to enforce laws prohibiting such working conditions.2

Government support of the country’s strategic footwear sector also strengthens Vietnamese firms. Vietnam is officially still a communist country, and its footwear sector is dominated by large state-owned enterprises that enjoy large government subsidies and extensive support. For example, Vinatex, the state-owned textile and apparel consortium, is the tenth largest garment producer in the world and currently accounts for 40% of the country’s apparel production, 60% of its textile production, and close to 20% of its total apparel and textile exports.3 According to the National Council of Textile Organizations, Vinatex benefits from eleven different government subsidy programs that include low-cost loans and free land.4

A final advantage of Vietnam’s footwear industry is its heavy reliance on cheap imported yarn from China. Like Vietnamese footwear, Chinese yarn is predominantly produced by large state- owned enterprises that receive dozens of direct and indirect subsidies from the government. The allegedly unfair practices of Chinese yarn producers has led many countries, including those in the European Union, to impose antidumping tariffs on yarn originating from China.5

U.S. trade protectionism

Compared to other industries, the U.S. footwear sector is highly protected by import tariffs. While U.S. import tariffs on consumer goods average about 1.5%, the average tariff on imported footwear is approximately 10%.6 Moreover, they can run as high as 48% of the “free on board” (FOB) value of imported shoes, that is, the commercial value of the shoes before transportation costs are added to the price (Exhibit 6). These tariff rates substantially affect production costs; for instance, of their US$20-25 overall production costs, current tariffs on athletic shoes add US$3 to US$5 to the cost of midrange running shoes from Vietnam, increasing production costs by as much as 25%.7

While the United States has signed numerous free trade agreements (FTA) over the years, it has generally been reluctant to completely eliminate tariffs on footwear and has systematically

1 International Labour Organization, “International Labour Standards,” n.d. (accessed October 17, 2013). 2 Embassy of the United States, Hanoi, Vietnam, “International Labor Standards – Critical To Successful Economic Development – Workers’ Rights and Labor Standards,” n.d. (accessed October 17, 2013). 3 See Platzer, op. cit. 4 National Council of Textile Organizations, “Fact Sheet – Trans-Pacific Partnership Negotiations,” 2012 (accessed October 17, 2013). 5 Jonathan Steams, “China Faces Five-Year EU Tariffs on Automotive Yarn,” Bloomberg, November 29, 2010 (accessed October 17, 2013). 6 Erik Siemers, “Blumenauer: Footwear Tariffs Hurt Nike, Drive Up Costs,” Portland Business Journal, April 20, 2012 (accessed October 17, 2013). 7 See Aeppel, op. cit.

© HEC Montréal 4 Nike versus New Balance: Trade Policy in a World of Global Value Chains imposed a “yarn forward rule” to these FTAs. This rule of origin requires that the yarn used in shoe manufacturing be produced within the FTA countries to qualify for the reduced duties agreed upon in the trade agreements.1 This serves to protect the U.S. textile industry, a battered yet significant component of the manufacturing sector. Textiles are a US$53 billion industry that employed almost 240,000 workers in 2011. However, its prominence has declined steadily in recent years, with almost 300,000 fewer people working in the textile industry than in 2001.2

New Balance versus Nike Inc.

While Vietnam was pressuring the U.S. to reduce tariffs on imported footwear, interest groups inside the country were also pressuring Froman and the U.S. negotiators. Froman’s meetings with various lobby groups revealed that the widest divide was between American footwear companies New Balance and Nike Inc. On the one hand, New Balance argued that reductions in import tariffs would be detrimental to U.S. footwear workers and smaller footwear manufacturing companies. On the other hand, Nike Inc. contended that reducing tariffs on footwear would strengthen U.S. companies, create high-value footwear jobs in the United States, and lower consumer prices. Froman was particularly intrigued by this disagreement: which of the two companies was really defending American economic interests?

New Balance Athletic Shoe, Inc.

New Balance, an American firm headquartered in Boston , Massachusetts , has been a player in the footwear industry for many years.3 It was founded in 1906 under the name New Balance Arch Support Company by William J. Riley, a British immigrant who had the idea of designing arch supports shaped like a chicken’s three-clawed foot to maximize comfort, mostly for policemen and waiters. He later added ancillary products, and, in 1938, designed his first athletic shoe made of lightweight kangaroo leather with crepe soles for the Brown Bag Harriers Running Club in Belmont, MA. The company continued to grow and was bought in 1972 by Jim Davis, an entrepreneur and marathoner who still owns the firm. By 2012, his business acumen had led New Balance to becoming the fourth largest athletic footwear and apparel company in the world with annual sales of $2.4 billion in over 120 countries. In addition to its eponymous footwear and clothing brand, the New Balance family also includes the brands Avaron, Cobb Hill, Dunham, PF-Flyers, Brine, and Warrior.

Throughout its history, New Balance has focused on footwear innovation, resulting in a number of industry firsts: the first athletic shoe available in multiple widths; the first running shoe made exclusively for women; and the first shoe to incorporate flared heels for stability. More recently, the company has focused on custom shoes and its “Made in America” businesses. For US$115, a consumer can order a custom pair of shoes that is made in the United States, choosing any combination of twenty-six leather colours and five fabric colours for nine different shoe parts. And the company is taking customization much further than just the shoe’s appearance: it is

1 See Platzer, op. cit. 2 Ibid. 3 Information concerning the company’s history and statistics was obtained from New Balance’s Web sites and Responsible Leadership Report: http://www.newbalance.com/Overview/about_overview,default,pg.html (accessed October 17, 2013).

© HEC Montréal 5 Nike versus New Balance: Trade Policy in a World of Global Value Chains introducing a track-specific running shoe that uses 3-D printing to create a plate on the sole of the shoe that is supposed to enhance performance with every step. These custom shoes can be delivered in as little as four days and are a growing part of the firm’s sales.

Over the years, this focus on innovation has consolidated New Balance’s reputation: in 1976, the New Balance 320 was voted the best running shoe by Runner’s World, and the 990 “Made in the USA” series, produced in the company’s five U.S. factories, has been increasingly popular among U.S. consumers ever since it was launched in 1982. In 2008, New Balance inaugurated a state-of-the-art research lab next to its Lawrence, MA, factory that is exclusively dedicated to research into athletic footwear.

Unlike most of its competitors, New Balance does not outsource all of its footwear production to foreign contractors. Rather, it uses a hybrid system of insourcing and outsourcing. In New England , for example, New Balance owns five manufacturing plants that primarily produce for local markets: 90% of their output is for American consumers, accounting for about a quarter of the company’s total U.S. sales.1 While New Balance is currently the sole U.S. athletic footwear manufacturer to produce a portion of its shoes in the United States, it also relies heavily on foreign contractors in China, Indonesia, and Vietnam.2

New Balance has a number of U.S. suppliers for parts it does not manufacture itself, such as embroidery thread or the leather used in certain shoes (see Exhibit 7 for the various shoe parts). These suppliers, for which New Balance is a major client, employ an estimated 7,000 people in the U.S.3 Moreover, its factories in small U.S. cities are vital to local economies: for instance, in Skowhegan, Maine, a town of 8,500, it is the largest employer in the region and its presence supports a wide range of small businesses, such as restaurants. The fate of whole towns and communities is tied to the manufacturing presence of New Balance in their region.4

During the consultation meetings with Froman, New Balance reps expressed fierce opposition to tariff reductions on Vietnamese imports. According to their spokesperson, Matt LeBretton, it is already 25% to 35% more expensive to produce in the United States than in Vietnam. A tariff reduction is not necessary to make manufacturing activities viable in Vietnam and would only chip away at the tariff buffer that allows New Balance to produce in America.5 This, in turn, would force New Balance to close its U.S. factories and move all of its production facilities overseas. Thousands of jobs would be lost, in addition to hurting the company’s U.S. contractors and the small communities in which the company has manufacturing operations.

1 See Aeppel, op. cit. 2 See Martin, op. cit. 3 New Balance Athletic Shoe, Inc., “Made in the USA,” n.d. (accessed October 17, 2013). 4 See Martin, op. cit. 5 See Aeppel, op. cit.

© HEC Montréal 6 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Nike Inc. is a public company headquartered in Beaverton, Oregon, and the largest athletic footwear and athletic apparel company in the world in terms of sales,1 with over $24 billion in revenues for a total gross profit of over US$10 billion in 2012.2 Its high profit margins (43.4% in 2012) have been reflected in the price of its shares, whose value increased an average of 17% annually between 2003 and 2013.3 Nike Inc. offers a wide variety of products in seven key categories: running, basketball , soccer, men’s training, women’s training, action sports, and Nike Sportswear .4 In addition to the Nike brand, it also owns a few other highly popular apparel and sporting equipment brands such as Hurley, Converse , and Bauer Nike Hockey. Nike Inc. directly employs 37,715 people worldwide, but indirectly employs a much larger workforce in factories owned by contractors who may manufacture products for numerous companies including Nike Inc.5

Nike Inc. was founded in 1964 as Blue Ribbon Sports by two partners, Phil Knight and Bill Bowerman. They started as distributors of Japanese-made Tiger (now Asics) running shoes, but as the relationship between the firm and its Japanese supplier began to sour in the early 1970s, Knight and Bowerman decided it was time to start manufacturing their own shoes. The new line of Nike shoes debuted in 1972 for the U.S. Track & Field Trials, where Bowerman’s innovative design – a very light outsole with waffle-type nubs for traction – was a great success. Then, in 1979, Nike Inc. innovated once more by introducing its Nike Air technology in running shoes, paving the way for its IPO a year later. The firm quickly grew to become the industry leader; however, unlike New Balance, Nike Inc. didn’t position itself in the booming fitness sector and thus lost ground to its competitors.

These difficulties were overcome by major marketing campaigns in the mid-eighties − first in 1985, when Michael Jordan, a young NBA rookie at the time, endorsed the company, and then in 1987, when the iconic Air Max commercial featuring the Beatles song Revolution was aired. By the end of the eighties, Nike Inc. had regained its title of largest footwear company in the world. Marketing then became a large part of Nike Inc.’s business strategy: in 1995, the firm sponsored the Brazil National Soccer Team and supplied its uniforms. One year later, a young golfer named Tiger Woods was signed for a reported annual compensation of $5 million. The company continued to expand, innovate, and skilfully market its products throughout the next decade. In 2012, it became the official sponsor of the National Football League (NFL).6

None of Nike Inc.’s 37,715 employees, roughly half of whom work in the United States,7 are factory workers. Rather, they are mostly involved in providing headquarter services, designing and engineering new equipment, promoting products, and selling them in Nike stores. As with

1 Barbara Brenner, Bodo B. Schlegelmilch, and Björn Ambos, “Inside the NIKE matrix,” in The New Role of Regional Management, Björn Ambos and Bodo B. Schlegelmilch (Ed.), Hampshire, Palgrave Macmillan, 2010. 2 Yahoo! Finance, “Nike, Inc. (NKE),” 2013 (accessed October 17, 2013). 3 Google Finance, “Nike Inc (NYSE:NKE),” 2013 (accessed October 17, 2013). 4 NYSE Euronext, “Nike Inc.,” 2013 (accessed October 17, 2013). 5 Nike Inc., Corporate Responsibility Report, 2012 (accessed October 17, 2013). 6 Nike Inc., “History & Heritage,” n.d. (accessed October 17, 2013). 7 Nike Inc., Corporate Responsibility Report, 2009 (accessed October 17, 2013).

© HEC Montréal 7 Nike versus New Balance: Trade Policy in a World of Global Value Chains most U.S. footwear companies (with the notable exception of New Balance), shoe manufacturing has been almost completely outsourced to foreign contractors in Mexico, Brazil, Argentina, Italy, Bosnia, India, China, South Korea, Japan, Indonesia, Taiwan, and Vietnam.1 In August 2013, it was estimated that Nike’s external contractors employed more than a million people in 774 factories in 42 countries. Vietnam supplies the most workers to Nike, with over 310,000 people producing footwear, apparel, and sporting equipment, followed by China and Indonesia, where contractors employ about 260,000 and 175,000 people respectively. Three quarters of Nike’s global workforce is located in these three countries (see Exhibit 8).

Contrary to New Balance, Nike Inc. was a strong supporter of reducing import tariffs, predicting that U.S. footwear manufacturers would be able to save on production costs and reinvest their savings in modern, high-value-added jobs in the United States. As Erin Dobson, a Nike Inc. spokesperson said, “The question comes down to, is one kind of job more important than another? What are the jobs for the 21st century? They’re not necessarily jobs that existed 30 years ago.”2

Nike Inc. also argued that being able to offshore footwear production without being penalized by tariffs would help to offset rising foreign labour and material costs, which would in turn make footwear more affordable to U.S. consumers. As argued by Oregon’s Representative Earl Blumenauer, whose constituency is home to Nike employees as well as the U.S. headquarters of Adidas , keeping the tariffs taxes millions of Americans on their footwear purchases to keep a few thousand manufacturing jobs.3 This argument is especially compelling when one considers that 99% of the footwear purchased in the U.S. is produced in other countries.

Eliminating Footwear Tariffs – A Blessing or a Curse?

Through his numerous meetings with lobbyists, industry spokespeople, and activists, Froman was able to map the major arguments for and against the elimination of footwear import tariffs under the TPP. While his determination to level the playing field so that Americans could compete in the global economy never faltered, it became obvious to him that no decision would have a purely positive impact on every stakeholder. Numerous realities and potential impacts had to be considered since adopting the wrong position could have ripple effects throughout the U.S. economy.

As the daylight faded, Froman was still pondering the various statistics and viewpoints. Should he side with New Balance and insist that footwear tariff reductions be kept off the negotiating table? Or would the elimination of tariffs as advocated by Nike Inc. be more beneficial to U.S. interests? Should the United States impose conditions on Vietnam for reducing footwear tariffs? His phone rang, and the numbers were still dancing in his head as he heard the beep indicating that he had joined the conference call.

1 Nike Inc., “Global Manufacturing,” 2013 (accessed October 17, 2013). 2 See Martin, op. cit. 3 Ibid.

© HEC Montréal 8 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Exhibit 1 The 12 Negotiating Parties to the Transpacific Partnership

Source: Office of the United States Trade Representative, “The United States in the Trans-Pacific Partnership,” 2011 (accessed October 17, 2013)

© HEC Montréal 9 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Exhibit 2 Production Occupations and Total Employment in the U.S., 1999-2012

Source: Bureau of Labor Statistics, “Occupational Employment Statistics,” 2013 (accessed October 17, 2013)

© HEC Montréal 10 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Exhibit 3 U.S. Occupations in the Footwear Industry, 2003-2012

Office and Production Management Total administrative occupations occupations support occupations Average Average Average Average # # # # Year hourly hourly hourly hourly workers workers workers workers wage wage wage wage 2003 19,440 12.26 14,040 10.48 1,900 12.25 620 43.72 2004 19,170 13.14 12,120 10.35 2,410 12.79 810 42.77 2005 18,410 13.24 12,170 10.81 2,350 13.00 620 43.38 2006 17,340 13.77 12,300 11.31 1,930 13.51 600 44.66 2007 15,760 13.87 12,150 11.75 1,170 13.42 470 44.14 2008 16,290 14.40 12,650 12.21 1,100 14.47 490 46.56 2009 15,420 14.43 12,030 12.32 980 15.06 440 48.14 2010 13,790 15.89 9,770 12.56 1,170 15.73 470 54.62 2011 13,650 16.25 9,600 12.76 1,260 15.81 470 56.50 2012 13,290 17.61 8,340 12.70 1,420 15.87 590 56.23

© HEC Montréal 11 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Exhibit 4 U.S. Footwear Market Value and Growth, 2008

Source: Marketline, U.S. Footwear in the United States, March 2013

© HEC Montréal 12 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Exhibit 5 Growth of U.S. Footwear Imports, by Country of Origin, 1997-2012

Share of U.S. footwear imports U.S. Footwear imports (US$ Millions) Compound Annual (%) Growth (%) Country 1997 2012 1997-2012 1997 2012 China 7,737 17,876 5.74 53.03 71.90 Vietnam 102 2,512 23.83 0.70 10.11 Italy 1,244 1,230 -0.07 8.53 4.95 Indonesia 1,139 982 -0.99 7.81 3.95 Mexico 393 497 1.57 2.69 2.00 Rest of the world 3,560 1,233 3.62 27.24 7.09

Source: United Nations Comtrade Database: http://comtrade.un.org/

© HEC Montréal 13 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Exhibit 6 Import Duty on a Pair of Athletic Shoes That Do Not Cover the Ankles with Outer Soles of Rubber, Plastics, Leather or Composition Leather, and Have a F.O.B. Value of More Than $6.50

Tariff Rate Harmonized Most Textile KORUS System Favoured NAFTA Upper FTA Code Nation F.O.B. value 20% + 90 6404.11.89 0% 0% $12 Leather 6403.99.90 10% 0% 0% upper

Source: United States International Trade Commission, “Harmonized Tariff Schedule of the United States,” 2013 (accessed October 17, 2013)

© HEC Montréal 14 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Exhibit 7 A New Balance Shoe Made in the United States

Source: Timothy Aeppel, “New Balance Sweats Push to End U.S. Shoe Tariffs,” Wall Street Journal, February 27, 2013 (accessed October 17, 2013)

© HEC Montréal 15 Nike versus New Balance: Trade Policy in a World of Global Value Chains

Exhibit 8 Nike Inc.’s Manufacturing Network (data as of August 2013)

Global production Footwear production Number Number Workers Country Workers of Workers of (Nike factories factories brand) Vietnam 312,828 70 231,420 29 193,169

China 263,108 213 129,920 38 119,654

Indonesia 174,259 42 131,958 20 117,452

United States 13,670 65 77 2 0

Total (including 1,005,547 774 528,509 163 459,307 other countries

Source: Nike Inc., “Global Manufacturing,” 2013 (accessed October 17, 2013)  These statistics do not indicate the number of workers that are employed by Nike Inc., but rather the number of workers that are involved in the production of Nike Inc. products.

© HEC Montréal 16

Nike vs New Balance- A Detailed Comparison

• Written by 440 Industries
• Case Study , New Balance , Nike
• March 24, 2022

  When you’re looking for the ideal running shoe, the question of which brand is the perfect option for you always pops up. A Nike vs New Balance comparison is important to determine which brand’s technologies, feel and fit are right for you. Both brands have a long history of what people love and don’t want. In the elite world, Nike has been dominating for decades. However, New Balance seems to be here to stay. This article explores both brands’ history and factors that differentiate each brand. Without further ado, let’s dive in.

Humble Beginnings

Nike began with Bill Bowerman and Phil Knight. At first, Bill Bowerman is a track and field coat at the University of Oregon. He reunited with Phil Knight after a brief stint at Standford University. Bowerman wanted athletic footwear and running shoes that were optimized for performance. Due to this, he began to work with varying models after he learned some tips from a local cobbler. In 1964, Knight and Bowerman decided to create Blue Ribbon Sports, an Oregon-based footwear company that operated for many years from the back of a car at varying track meets.

They started as a distributor for different imported shoes like Onitsuka Tiger. Knight was always amazed at the quality of their trainers and found them unique in a market dominated by German sneakers. While the world was trying to decide their favorite between Adidas and Puma, Knight turned to Onitsuka Tiger for premium running trainers. After a couple of years of being Onitsuka’s sole distributor in America, there was a rise in competition. This led the duo to think of new ways they could stand out from the crowd. Blue Ribbon Sports became Nike in 1971, and they decided to launch their trainer. Bowerman had always created trainers for the athletes he coached. After researching Onitsuka Tiger shoes and thinking of different ways he could change things for Nike, he started working on a prototype that would become the first-ever Nike sneaker.

The First Nike Shoes

The Nike vs New Balance comparison won’t be complete without mentioning Nike’s first shoe. Bowerman designed the first Nike Shoe and named it Moon Shine. However, this shoe was made in Bowerman’s waffle iron. The sole waffle design was inspired while Bowerman was eating breakfast one day. He began to wonder if the grooves in his waffle would provide extra traction while playing sport. After some test runs with his waffle iron, the Waffle Trainer came to be. It was a massive success from the beginning because of the grip it offers and its performance-driven design. The prototype model was technically the first Nike shoe. This prototype sold for almost $450,000 at Sotheby’s.

Nike Expansion

By 1976, Nike was ready to expand. Therefore, the brand hired John Brown and Partners, a Seattle-based ad company, to help with exposure. A year later, the ad agency created the first ad for Nike titled ‘There is No Finish Line.’ Although there were no close-up Nike shoes in the ad, it was a success and propelled the brand further into the limelight. By 1980, Nike owned a 50% market share in the US athletic shoe market. Later that year, Nike went public as a company. 

After the popularity of its sneakers, Nike decided to expand into the clothing world. It released a line of athletic and sportswear in 1979, and one of the first pieces was the Windrunner. This jacket was lightweight and quickly became a favorite for many people. In 1982, the company partnered with another advertising agency to push its reach into new territories. During one of the campaigns, the slogan ‘just do it’ was created, and it became the brand’s slogan to date.

One of the brand’s most significant assets was the many celebrity endorsements. The company signed many athletes like Lebron James, Tiger Woods, and Kobe Bryant quite early in their carrier. However, the brand’s most lucrative endorsement was with Michael Jordan. The bran swooped in with an endorsement from Jordan at the start of his first seasons. Although Jordan was harboring hope for a deal with Adidas, he signed for a payment of $500,000 

each year for five years, shoes customized to his request and two Mercedes car. It was an excellent hit for Nike as Jordan rose to stardom. Air Jordans hit the market and made over $100 million in revenue. To date, Air Jordans continue to make money for the brand. 

Nike vs New Balance – New Balance History

The history of New Balance is one of business savvy and tenacity. It begins with a man in Boston who drew inspiration from farm animals and started a company that fast became a cultural fixation. New Balance began as New Balance Arch Support in 1906 and was founded by William J Riley. Riley is an Irish immigrant who resided in Boston. After watching chickens move around his backyard, he drew inspiration for his first product. He was fascinated by how the chickens achieved a perfect balance on their three-pronged feet. Therefore, Riley created flexible arch support with three support points. 

In 1927, he hired a salesman called Arthur Hall. Borth of them became partners in the company by 1934. At this point, New Balance provided arch support to workers who had to stand for long periods. The company didn’t dabble in sneakers at the time. Over time, Hall sold the company to his daughter Eleanor and her husband in 1956.

New Balance arch supports were becoming famous amongst athletes in 1960, and some began to approach the brand to request custom sneakers. The sneakers were released in 1961 and were the first running shoe to feature a rippled sole for traction. This move inspired Eleanor and her husband to design the first New Balance sneakers called the Trackster. The company provided this sneaker in different sizes to fit all athletes, and it was soon a top choice by many schools and colleges for track and cross-country. 

Despite the success of the Trackster, the company was yet to hit the mainstream sneaker market. The company was a pretty small operation run by six people, so sales were slow. However, Jim Davis purchased the brand in 1972 and steered it into one of the biggest brands in the world. 

New Balance Expansion

For a complete Nike vs New Balance comparison, a review of New balance expansion is necessary. Jim acquired the company at the ideal time. The company began to release more runners each year, and the sneakers were available in different widths. The company also started using model numbers instead of names for their sneakers. This number defined the shoe type, the activity it was ideal for, and if it was ideal for speed, arch support, or stability. In 1976, the company launched its first sneaker to feature the N logo. People voted this sneaker the number one running shoe in the market, leading to a global breakthrough for the brand. 

By the 80s, the brand has several product ranges, including walking shoes and clothing like the Gore-Tex running jacket. The brand also released its most famous sneakers, the 574, during this period. Although this was initially a technical shoe, it became famous off the running track. To date, New Balance continues to cement itself in sportswear and many popular cultures by releasing many successful sneakers. 

Nike vs New Balance – The Main Differences

Nike and New Balance have many similar products that feel and fit differently. Most times, the difference is in their marketing practice. Both brands are excellent choices for training and race, but to make a more specific Nike vs New Balance comparison, we’ll be delving into some of the particular shoe details of both brands to see how they differ.

The Upper on New Balance shoes combines mesh and suede or mesh and synthetic material. This combination usually provides enough stability for the foot to stay in place, allowing for flexibility. The perforation and the mesh ensure better air circulation for the feet while preventing hotspots. Overall, New Balance shoes keep your feet as cool as necessary.

On the other hand, Nike uses an engineered Mesh featuring Nike Flyknit material or their ultra-light ripstop fabric. This 

material is lighter in some parts of the feet to ensure ample air circulation while remaining flexible. Sometimes, they feature the brand’s Flywire and  Dynamic Fit Technology . This technology wraps around the arch and mid-foot to give wearers snug feet. When you tighten the laces, it makes the feet like the light they’re being hugged.

New Balance uses a midsole foam technology that can make the wearer feel like they’re walking on clouds. They use Fresh Foam X, which provides a level of cushioning and responsiveness that makes the legs feel fresher. Many of their models like the 880s, the 1080s, and more feature this technology. Some of their shoes also feature the FuelCell Foam that provides speed for anyone looking for a great energy return.

Nike’s Air technology has been the bedrock of their cushioning for decades. The brand listens to their runners’ wants and improves their technology, creating the Nike React technology. This technology uses foam that is soft and provides a great energy return. It features zoom bags available at the forefoot or heel to ensure a more comfortable ride. However, if the New Balance Shoe makes you feel like you’re running on clouds, Nike makes you run on air in this Nike vs New Balance comparison. 

The ideal cushioning comes down to the wearer’s personal preference. Some runners prefer a firm, responsive cushioning, while others want a cushioning that makes them feel like they’re walking on clouds. Both brands have received positive feedback from their buyers. They aim to provide ample cushioning to reduce the risk of injury while walking or running. Both sneaker companies provide shoes that run the entire length of the shoe. They also have shoes where the cushioning offers more support, either heel or forefoot. 

Overall Fit and Comfort

The brand is also famous for ensuring support, comfort, and stability in their shoes so you can wear them all day. The many options ensure their product range covers all runners. Nike is famous for providing comfortable shoes that increase speed and is relatively easy on the feet. However, the shoes can become narrow from the midfoot to the toe. On the other hand, you can buy New Balance shoes in a wide or extra wide size, providing enough space to waffle your toes. Many doctors also recommend New Balance shoes for several foot conditions. Many athletes offer feedback to the companies after wearing their shoes, and the companies use this feedback to improve the comfort and performance of their shoes. 

Final Thoughts

When it comes to the Nike vs New Balance comparison, it’s hard to determine which brand is a better option. Both brands are well established and quite reputable. They also use several technologies to improve their shoes and cater to their customers’ unique needs. The right brand for you isn’t necessarily the ideal choice for the next runner. This Nike vs New Balance comparison aims to help you compare and decide which brand works best for you.

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Nike versus New Balance Trade Policy in a World of Global Value Chains Case Analysis and Case Solution

Posted by Peter Williams on Aug-09-2018

Introduction of Nike versus New Balance Trade Policy in a World of Global Value Chains Case Solution

The Nike versus New Balance Trade Policy in a World of Global Value Chains case study is a Harvard Business Review case study, which presents a simulated practical experience to the reader allowing them to learn about real life problems in the business world. The Nike versus New Balance Trade Policy in a World of Global Value Chains case consisted of a central issue to the organization, which had to be identified, analysed and creative solutions had to be drawn to tackle the issue. This paper presents the solved Nike versus New Balance Trade Policy in a World of Global Value Chains case analysis and case solution. The method through which the analysis is done is mentioned, followed by the relevant tools used in finding the solution.

The case solution first identifies the central issue to the Nike versus New Balance Trade Policy in a World of Global Value Chains case study, and the relevant stakeholders affected by this issue. This is known as the problem identification stage. After this, the relevant tools and models are used, which help in the case study analysis and case study solution. The tools used in identifying the solution consist of the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis. The solution consists of recommended strategies to overcome this central issue. It is a good idea to also propose alternative case study solutions, because if the main solution is not found feasible, then the alternative solutions could be implemented. Lastly, a good case study solution also includes an implementation plan for the recommendation strategies. This shows how through a step-by-step procedure as to how the central issue can be resolved.

Problem Identification of Nike versus New Balance Trade Policy in a World of Global Value Chains Case Solution

Harvard Business Review cases involve a central problem that is being faced by the organization and these problems affect a number of stakeholders. In the problem identification stage, the problem faced by Nike versus New Balance Trade Policy in a World of Global Value Chains is identified through reading of the case. This could be mentioned at the start of the reading, the middle or the end. At times in a case analysis, the problem may be clearly evident in the reading of the HBR case. At other times, finding the issue is the job of the person analysing the case. It is also important to understand what stakeholders are affected by the problem and how. The goals of the stakeholders and are the organization are also identified to ensure that the case study analysis are consistent with these.

Analysis of the Nike versus New Balance Trade Policy in a World of Global Value Chains HBR Case Study

The objective of the case should be focused on. This is doing the Nike versus New Balance Trade Policy in a World of Global Value Chains Case Solution. This analysis can be proceeded in a step-by-step procedure to ensure that effective solutions are found.

• In the first step, a growth path of the company can be formulated that lays down its vision, mission and strategic aims. These can usually be developed using the company history is provided in the case. Company history is helpful in a Business Case study as it helps one understand what the scope of the solutions will be for the case study.
• The next step is of understanding the company; its people, their priorities and the overall culture. This can be done by using company history. It can also be done by looking at anecdotal instances of managers or employees that are usually included in an HBR case study description to give the reader a real feel of the situation.
• Lastly, a timeline of the issues and events in the case needs to be made. Arranging events in a timeline allows one to predict the next few events that are likely to take place. It also helps one in developing the case study solutions. The timeline also helps in understanding the continuous challenges that are being faced by the organisation.

SWOT analysis of Nike versus New Balance Trade Policy in a World of Global Value Chains

An important tool that helps in addressing the central issue of the case and coming up with Nike versus New Balance Trade Policy in a World of Global Value Chains HBR case solution is the SWOT analysis.

• The SWOT analysis is a strategic management tool that lists down in the form of a matrix, an organisation's internal strengths and weaknesses, and external opportunities and threats. It helps in the strategic analysis of Nike versus New Balance Trade Policy in a World of Global Value Chains.
• Once this listing has been done, a clearer picture can be developed in regards to how strategies will be formed to address the main problem. For example, strengths will be used as an advantage in solving the issue.

Therefore, the SWOT analysis is a helpful tool in coming up with the Nike versus New Balance Trade Policy in a World of Global Value Chains Case Study answers. One does not need to remain restricted to using the traditional SWOT analysis, but the advanced TOWS matrix or weighted average SWOT analysis can also be used.

Porter Five Forces Analysis for Nike versus New Balance Trade Policy in a World of Global Value Chains

Another helpful tool in finding the case solutions is of Porter's Five Forces analysis. This is also a strategic tool that is used to analyse the competitive environment of the industry in which Nike versus New Balance Trade Policy in a World of Global Value Chains operates in. Analysis of the industry is important as businesses do not work in isolation in real life, but are affected by the business environment of the industry that they operate in. Harvard Business case studies represent real-life situations, and therefore, an analysis of the industry's competitive environment needs to be carried out to come up with more holistic case study solutions. In Porter's Five Forces analysis, the industry is analysed along 5 dimensions.

• These are the threats that the industry faces due to new entrants.
• It includes the threat of substitute products.
• It includes the bargaining power of buyers in the industry.
• It includes the bargaining power of suppliers in an industry.
• Lastly, the overall rivalry or competition within the industry is analysed.

This tool helps one understand the relative powers of the major players in the industry and its overall competitive dynamics. Actionable and practical solutions can then be developed by keeping these factors into perspective.

PESTEL Analysis of Nike versus New Balance Trade Policy in a World of Global Value Chains

Another helpful tool that should be used in finding the case study solutions is the PESTEL analysis. This also looks at the external business environment of the organisation helps in finding case study Analysis to real-life business issues as in HBR cases.

• The PESTEL analysis particularly looks at the macro environmental factors that affect the industry. These are the political, environmental, social, technological, environmental and legal (regulatory) factors affecting the industry.
• Factors within each of these 6 should be listed down, and analysis should be made as to how these affect the organisation under question.
• These factors are also responsible for the future growth and challenges within the industry. Hence, they should be taken into consideration when coming up with the Nike versus New Balance Trade Policy in a World of Global Value Chains case solution.

VRIO Analysis of Nike versus New Balance Trade Policy in a World of Global Value Chains

This is an analysis carried out to know about the internal strengths and capabilities of Nike versus New Balance Trade Policy in a World of Global Value Chains. Under the VRIO analysis, the following steps are carried out:

• The internal resources of Nike versus New Balance Trade Policy in a World of Global Value Chains are listed down.
• Each of these resources are assessed in terms of the value it brings to the organization.
• Each resource is assessed in terms of how rare it is. A rare resource is one that is not commonly used by competitors.
• Each resource is assessed whether it could be imitated by competition easily or not.
• Lastly, each resource is assessed in terms of whether the organization can use it to an advantage or not.

The analysis done on the 4 dimensions; Value, Rareness, Imitability, and Organization. If a resource is high on all of these 4, then it brings long-term competitive advantage. If a resource is high on Value, Rareness, and Imitability, then it brings an unused competitive advantage. If a resource is high on Value and Rareness, then it only brings temporary competitive advantage. If a resource is only valuable, then it’s a competitive parity. If it’s none, then it can be regarded as a competitive disadvantage.

Value Chain Analysis of Nike versus New Balance Trade Policy in a World of Global Value Chains

The Value chain analysis of Nike versus New Balance Trade Policy in a World of Global Value Chains helps in identifying the activities of an organization, and how these add value in terms of cost reduction and differentiation. This tool is used in the case study analysis as follows:

• The firm’s primary and support activities are listed down.
• Identifying the importance of these activities in the cost of the product and the differentiation they produce.
• Lastly, differentiation or cost reduction strategies are to be used for each of these activities to increase the overall value provided by these activities.

Recognizing value creating activities and enhancing the value that they create allow Nike versus New Balance Trade Policy in a World of Global Value Chains to increase its competitive advantage.

BCG Matrix of Nike versus New Balance Trade Policy in a World of Global Value Chains

The BCG Matrix is an important tool in deciding whether an organization should invest or divest in its strategic business units. The matrix involves placing the strategic business units of a business in one of four categories; question marks, stars, dogs and cash cows. The placement in these categories depends on the relative market share of the organization and the market growth of these strategic business units. The steps to be followed in this analysis is as follows:

• Identify the relative market share of each strategic business unit.
• Identify the market growth of each strategic business unit.
• Place these strategic business units in one of four categories. Question Marks are those strategic business units with high market share and low market growth rate. Stars are those strategic business units with high market share and high market growth rate. Cash Cows are those strategic business units with high market share and low market growth rate. Dogs are those strategic business units with low market share and low growth rate.
• Relevant strategies should be implemented for each strategic business unit depending on its position in the matrix.

The strategies identified from the Nike versus New Balance Trade Policy in a World of Global Value Chains BCG matrix and included in the case pdf. These are either to further develop the product, penetrate the market, develop the market, diversification, investing or divesting.

Ansoff Matrix of Nike versus New Balance Trade Policy in a World of Global Value Chains

Ansoff Matrix is an important strategic tool to come up with future strategies for Nike versus New Balance Trade Policy in a World of Global Value Chains in the case solution. It helps decide whether an organization should pursue future expansion in new markets and products or should it focus on existing markets and products.

• The organization can penetrate into existing markets with its existing products. This is known as market penetration strategy.
• The organization can develop new products for the existing market. This is known as product development strategy.
• The organization can enter new markets with its existing products. This is known as market development strategy.
• The organization can enter into new markets with new products. This is known as a diversification strategy.

The choice of strategy depends on the analysis of the previous tools used and the level of risk the organization is willing to take.

Marketing Mix of Nike versus New Balance Trade Policy in a World of Global Value Chains

Nike versus New Balance Trade Policy in a World of Global Value Chains needs to bring out certain responses from the market that it targets. To do so, it will need to use the marketing mix, which serves as a tool in helping bring out responses from the market. The 4 elements of the marketing mix are Product, Price, Place and Promotions. The following steps are required to carry out a marketing mix analysis and include this in the case study analysis.

• Analyse the company’s products and devise strategies to improve the product offering of the company.
• Analyse the company’s price points and devise strategies that could be based on competition, value or cost.
• Analyse the company’s promotion mix. This includes the advertisement, public relations, personal selling, sales promotion, and direct marketing. Strategies will be devised which makes use of a few or all of these elements.
• Analyse the company’s distribution and reach. Strategies can be devised to improve the availability of the company’s products.

Nike versus New Balance Trade Policy in a World of Global Value Chains Blue Ocean Strategy

The strategies devised and included in the Nike versus New Balance Trade Policy in a World of Global Value Chains case memo should have a blue ocean strategy. A blue ocean strategy is a strategy that involves firms seeking uncontested market spaces, which makes the competition of the company irrelevant. It involves coming up with new and unique products or ideas through innovation. This gives the organization a competitive advantage over other firms, unlike a red ocean strategy.

Competitors analysis of Nike versus New Balance Trade Policy in a World of Global Value Chains

The PESTEL analysis discussed previously looked at the macro environmental factors affecting business, but not the microenvironmental factors. One of the microenvironmental factors are competitors, which are addressed by a competitor analysis. The Competitors analysis of Nike versus New Balance Trade Policy in a World of Global Value Chains looks at the direct and indirect competitors within the industry that it operates in.

• This involves a detailed analysis of their actions and how these would affect the future strategies of Nike versus New Balance Trade Policy in a World of Global Value Chains.
• It involves looking at the current market share of the company and its competitors.
• It should compare the marketing mix elements of competitors, their supply chain, human resources, financial strength etc.
• It also should look at the potential opportunities and threats that these competitors pose on the company.

Organisation of the Analysis into Nike versus New Balance Trade Policy in a World of Global Value Chains Case Study Solution

Once various tools have been used to analyse the case, the findings of this analysis need to be incorporated into practical and actionable solutions. These solutions will also be the Nike versus New Balance Trade Policy in a World of Global Value Chains case answers. These are usually in the form of strategies that the organisation can adopt. The following step-by-step procedure can be used to organise the Harvard Business case solution and recommendations:

• The first step of the solution is to come up with a corporate level strategy for the organisation. This part consists of solutions that address issues faced by the organisation on a strategic level. This could include suggestions, changes or recommendations to the company's vision, mission and its strategic objectives. It can include recommendations on how the organisation can work towards achieving these strategic objectives. Furthermore, it needs to be explained how the stated recommendations will help in solving the main issue mentioned in the case and where the company will stand in the future as a result of these.
• The second step of the solution is to come up with a business level strategy. The HBR case studies may present issues faced by a part of the organisation. For example, the issues may be stated for marketing and the role of a marketing manager needs to be assumed. So, recommendations and suggestions need to address the strategy of the marketing department in this case. Therefore, the strategic objectives of this business unit (Marketing) will be laid down in the solutions and recommendations will be made as to how to achieve these objectives. Similar would be the case for any other business unit or department such as human resources, finance, IT etc. The important thing to note here is that the business level strategy needs to be aligned with the overall corporate strategy of the organisation. For example, if one suggests the organisation to focus on differentiation for competitive advantage as a corporate level strategy, then it can't be recommended for the Nike versus New Balance Trade Policy in a World of Global Value Chains Case Study Solution that the business unit should focus on costs.
• The third step is not compulsory but depends from case to case. In some HBR case studies, one may be required to analyse an issue at a department. This issue may be analysed for a manager or employee as well. In these cases, recommendations need to be made for these people. The solution may state that objectives that these people need to achieve and how these objectives would be achieved.

The case study analysis and solution, and Nike versus New Balance Trade Policy in a World of Global Value Chains case answers should be written down in the Nike versus New Balance Trade Policy in a World of Global Value Chains case memo, clearly identifying which part shows what. The Nike versus New Balance Trade Policy in a World of Global Value Chains case should be in a professional format, presenting points clearly that are well understood by the reader.

Alternate solution to the Nike versus New Balance Trade Policy in a World of Global Value Chains HBR case study

It is important to have more than one solution to the case study. This is the alternate solution that would be implemented if the original proposed solution is found infeasible or impossible due to a change in circumstances. The alternate solution for Nike versus New Balance Trade Policy in a World of Global Value Chains is presented in the same way as the original solution, where it consists of a corporate level strategy, business level strategy and other recommendations.

Implementation of Nike versus New Balance Trade Policy in a World of Global Value Chains Case Solution

The case study does not end at just providing recommendations to the issues at hand. One is also required to provide how these recommendations would be implemented. This is shown through a proper implementation framework. A detailed implementation framework helps in distinguishing between an average and an above average case study answer. A good implementation framework shows the proposed plan and how the organisations' resources would be used to achieve the objectives. It also lays down the changes needed to be made as well as the assumptions in the process.

• A proper implementation framework shows that one has clearly understood the case study and the main issue within it.
• It shows that one has been clarified with the HBR fundamentals on the topic.
• It shows that the details provided in the case have been properly analysed.
• It shows that one has developed an ability to prioritise recommendations and how these could be successfully implemented.
• The implementation framework also helps by removing out any recommendations that are not practical or actionable as these could not be implemented. Therefore, the implementation framework ensures that the solution to the Nike versus New Balance Trade Policy in a World of Global Value Chains Harvard case is complete and properly answered.

Recommendations and Action Plan for Nike versus New Balance Trade Policy in a World of Global Value Chains case analysis

For Nike versus New Balance Trade Policy in a World of Global Value Chains, based on the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis, the recommendations and action plan are as follows:

• Nike versus New Balance Trade Policy in a World of Global Value Chains should focus on making use of its strengths identified from the VRIO analysis to make the most of the opportunities identified from the PESTEL.
• Nike versus New Balance Trade Policy in a World of Global Value Chains should enhance the value creating activities within its value chain.
• Nike versus New Balance Trade Policy in a World of Global Value Chains should invest in its stars and cash cows, while getting rid of the dogs identified from the BCG Matrix analysis.
• To achieve its overall corporate and business level objectives, it should make use of the marketing mix tools to obtain desired results from its target market.

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• Michael Froman (male), United States Trade Representative

Nike versus New Balance: Trade Policy in a World of Global Value Chains

About This Product

• Additional Details
• Supplemental Products
• Supporting Materials

New Balance Vs Nike: Which Is Better For You?

When it comes to performance footwear, Nike and New Balance have long been two of the most popular brands on the market. Whether you’re a professional athlete or a recreational runner, both brands have something to offer. But when it comes to choosing between Nike and New Balance, which should you go for? In this article, we’ll compare the two brands in terms of quality, comfort, and style, so you can make an informed decision.

Google Feature Snippet Answer: When it comes to athletic shoes, New Balance offers high-quality materials and a comfortable fit, while Nike offers a wide range of styles, durable construction, innovative technologies, and a wide range of sizes. Both brands offer customizable options, but New Balance is more focused on performance.

New Balance Vs Nike: In-Depth Comparison Chart

New balance versus nike.

New Balance and Nike are two of the leading shoe manufacturers in the world. Both companies have a long history of producing high-quality footwear and have a strong presence in the sporting industry. Both companies offer a wide range of different styles and designs, as well as a variety of sizes and colors to fit any foot type. This article will compare and contrast the two companies to help you decide which shoe is right for you.

Style and Design

New Balance and Nike both offer a wide range of different styles and designs. New Balance focuses on creating shoes with a classic look and feel, while Nike offers more modern and innovative designs. Nike also has a wide range of performance-based shoes, such as running and basketball shoes. New Balance also has a range of performance-based shoes, but they also have a selection of more casual shoes.

New Balance has a wide range of shoes for men, women, and children. They offer a wide range of colors, sizes, and styles. Nike also has a wide range of shoes for men, women, and children. They offer a wide range of colors, sizes, and styles, but they also have a line of shoes specifically designed for athletes.

When it comes to style and design, Nike and New Balance both offer a wide range of options. However, Nike tends to focus more on innovation and performance-based designs, while New Balance provides more options for casual and everyday wear.

Price and Quality

Nike and New Balance both offer high-quality footwear at affordable prices. Nike tends to be slightly more expensive than New Balance, but both companies offer a wide range of prices for different styles and sizes. When it comes to quality, both companies use high-quality materials and craftsmanship to ensure their shoes are durable and comfortable.

Nike offers a wide range of shoes for different budgets. They also offer sales and discounts throughout the year. New Balance also offers a wide range of prices and discounts, but they tend to be slightly more expensive than Nike. When it comes to quality, both companies provide shoes that are comfortable and durable.

When it comes to price and quality, both Nike and New Balance provide high-quality footwear at affordable prices. Nike tends to be slightly more expensive than New Balance, but they also offer a wide range of styles and discounts throughout the year.

Features and Technology

Nike and New Balance both use a variety of features and technologies to ensure their shoes are comfortable and durable. Nike has a wide range of shoes that feature cushioning and support technology, as well as air and foam cushioning. They also offer a wide range of shoes that feature Flyknit technology, which provides a lightweight and breathable fit.

New Balance also uses a wide range of features and technologies to ensure their shoes are comfortable and durable. They offer a variety of cushioning and support technologies, as well as their own Fresh Foam technology, which provides a lightweight and comfortable fit.

When it comes to features and technology, Nike and New Balance both offer a wide range of features and technologies to ensure their shoes are comfortable and durable. Nike has a wide range of shoes that feature cushioning and support technology, as well as air and foam cushioning. New Balance also offers a wide range of features and technologies, including their own Fresh Foam technology.

Durability and Support

Nike and New Balance both offer shoes that are durable and supportive. Nike has a wide range of shoes that feature cushioning and support technology, as well as air and foam cushioning. They also offer a wide range of shoes that feature Flyknit technology, which provides a lightweight and breathable fit.

New Balance also offers a wide range of shoes that are durable and supportive. They offer a variety of cushioning and support technologies, as well as their own Fresh Foam technology, which provides a lightweight and comfortable fit. In addition, New Balance also offers a wide range of shoes that feature their Ortholite technology, which provides superior shock absorption and support.

When it comes to durability and support, Nike and New Balance both offer shoes that are durable and supportive. Nike has a wide range of shoes that feature cushioning and support technology, as well as air and foam cushioning. New Balance also offers a wide range of shoes that are durable and supportive, as well as their own Fresh Foam technology and Ortholite technology.

Customer Service and Warranty

Nike and New Balance both offer a wide range of customer service and warranty options. Nike offers a wide range of customer service options, including online chat, email, and phone. They also offer a 30-day return policy and a one-year warranty on select products. New Balance also offers a wide range of customer service options, including online chat, email, and phone. They also offer a 30-day return policy and a one-year warranty on select products.

When it comes to customer service and warranty, both Nike and New Balance offer a wide range of options. Nike offers a wide range of customer service options, including online chat, email, and phone. They also offer a 30-day return policy and a one-year warranty on select products. New Balance also offers a wide range of customer service options, including online chat, email, and phone. They also offer a 30-day return policy and a one-year warranty on select products.

New Balance and Nike are two of the leading shoe manufacturers in the world. Both companies offer a wide range of different styles and designs, as well as a variety of sizes and colors to fit any foot type. When it comes to style and design, Nike and New Balance both offer a wide range of options. When it comes to price and quality, both Nike and New Balance provide high-quality footwear at affordable prices. When it comes to features and technology, Nike and New Balance both offer a wide range of features and technologies to ensure their shoes are comfortable and durable. When it comes to durability and support, Nike and New Balance both offer shoes that are durable and supportive. Finally, when it comes to customer service and warranty, both Nike and New Balance offer a wide range of options.

New Balance Vs Nike Pros & Cons

Pros of new balance.

• Wide selection of shoes available
• High cushioning and support
• Comfortable and durable
• Affordable prices

Cons of New Balance

• Limited selection of styles
• Not as stylish as Nike
• Lack of customization options

Pros of Nike

• Wide selection of styles
• High-tech materials used
• Highly customizable
• Stylish and fashionable

Cons of Nike

• More expensive than New Balance
• Less cushioning and support
• Not as durable as New Balance

Which is Better – New Balance Vs Nike?

When it comes to choosing between New Balance and Nike, it is not a simple decision. Both of these brands have their own merits and a range of products that can be tailored to individual needs. Ultimately, it comes down to personal preference in terms of style, comfort, and price.

When it comes to style, Nike has long been the leader in terms of modern design and fashion. Their signature swoosh logo is iconic and the range of styles and colors available makes them a top choice for those looking for something fashionable. New Balance, on the other hand, offers a more classic look and feel, featuring timeless designs and colors.

In terms of comfort, both brands offer reliable options. Nike is known for their high-quality cushioning, making them a great choice for those who prioritize comfort. New Balance also has a range of cushioning options, but is known more for the durability of their shoes. Depending on the type of activity, one may be better than the other.

Finally, when it comes to price, Nike and New Balance offer a variety of options. Nike tends to be more expensive, while New Balance offers more budget-friendly options. So depending on the budget, one may be better than the other.

In conclusion, when it comes to New Balance Vs Nike, there is no clear winner. It ultimately comes down to personal preference in terms of style, comfort, and price. Here are three reasons to choose either:

• Nike is great for those looking for modern, fashion-forward style.
• New Balance is great for those looking for timeless, classic style.
• Nike is great for those looking for high-quality cushioning, while New Balance is great for those looking for more durable shoes.

Frequently Asked Questions

New Balance and Nike are two of the most popular athletic footwear brands. Both have unique features that make them attractive to shoppers. This article answers some of the most commonly asked questions about New Balance and Nike.

What is the Difference Between New Balance and Nike?

New Balance and Nike are two of the leading athletic shoe brands on the market. New Balance shoes are designed to provide comfort and stability, while Nike shoes provide a combination of style and performance. New Balance shoes are designed with a focus on cushioning, arch support, and flexible materials for superior comfort. Nike shoes are designed with a focus on lightweight materials, cushioning, and performance-enhancing technologies for optimal performance.

Both brands provide a wide range of styles, so shoppers can choose the right shoe for their activity. New Balance shoes are available in a variety of widths, while Nike offers a wide selection of sizes and colors. Both brands offer shoes for running, walking, and other activities.

Which Brand is More Affordable, New Balance or Nike?

The cost of New Balance and Nike shoes depends on the style and features of the shoe. Generally, New Balance shoes are slightly more affordable than Nike shoes. However, both brands offer discounts and promotions regularly, so shoppers can find great deals on both brands.

New Balance shoes are often the most affordable option for those looking for a comfortable, supportive shoe. They are designed with a focus on cushioning, arch support, and flexible materials for superior comfort. Nike shoes tend to be more expensive, as they are designed with a focus on lightweight materials, cushioning, and performance-enhancing technologies for optimal performance.

Which Brand Has More Variety, New Balance or Nike?

New Balance and Nike both offer a wide range of styles, colors, and sizes. New Balance is known for its diverse selection of shoes, with sizes available in both men’s and women’s styles. Nike also offers a wide selection of shoes, but they tend to focus more on performance-oriented styles.

New Balance shoes come in a variety of widths, which can be helpful for those with wider feet. Nike shoes are available in a variety of sizes, but they tend to focus more on performance-oriented styles. Both brands offer shoes for running, walking, and other activities.

Which Brand is More Durable, New Balance or Nike?

New Balance and Nike both offer shoes that are designed to be durable and long-lasting. New Balance shoes are designed with a focus on cushioning, arch support, and flexible materials for superior comfort and durability. Nike shoes are designed with a focus on lightweight materials, cushioning, and performance-enhancing technologies for optimal performance and longevity.

New Balance shoes tend to be more durable and last longer than Nike shoes. They are constructed with thicker materials and are designed to withstand the rigors of everyday use. Nike shoes are designed with a focus on lightweight materials, which makes them less durable than New Balance shoes. However, they are designed to provide maximum performance and are a great choice for athletes.

Which Brand Has Better Customer Service, New Balance or Nike?

Both New Balance and Nike offer excellent customer service. New Balance provides a satisfaction guarantee on all of their shoes, and they have a knowledgeable customer service team that is available to answer any questions or concerns. Nike also offers a satisfaction guarantee on their shoes, and their customer service team is always available to help with any issues.

New Balance offers a wide variety of services, including free returns and exchanges, online customer service, and shoe customization. Nike also offers a variety of services, including free returns and exchanges, online customer service, and a mobile app for easy access to their products. Both brands offer excellent customer service, so shoppers can be sure they are getting the best service possible.

Why New Balance is Winning Right Now

When it comes to sports shoes, New Balance and Nike both offer high-quality products that are designed to meet the needs of athletes. Both brands have their own loyal customer base, and each has their own unique offerings. Ultimately, it is up to the consumer to decide which brand suits their needs best. Whether you are a professional athlete, a casual jogger, or a fashionista, both New Balance and Nike offer styles that will meet your needs.

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The marketplace for case solutions.

New Balance Athletic Shoe, Inc. – Case Solution

New Balance is one of the world's five largest manufacturers of athletic shoes. It is considering if it should respond to Adidas' planned acquisition of Reebok. The acquisition would result in the consolidation of the second and third-largest companies in the footwear industry. This case study discusses the unique sides of New Balance's strategy which highlights fit and performance. Now, New Balance is facing the challenge of whether to change strategy in light of the recent development in its competitors' consolidation move.

​H. Kent Bowen; Robert S. Huckman; Carin-Isabel Knoop Harvard Business Review ( 606094-PDF-ENG ) April 20, 2006

Case questions answered:

Case study questions answered in the first solution:

• 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.
• 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.
• What is your assessment of the implications (financial and strategic) of the decision to keep 25% of manufacturing in the US? Assume that the US market for athletic footwear was 400 million in 2005.
• What should New Balance do about Adidas’ planned acquisition of Reebok and the NB2E initiative? What aspects of operations strategy may need to change and why?
• What would be needed to implement your recommendations? How would you handle the related risks?

Case study questions answered in the second solution:

• Evaluate New Balance’s current operations strategy. What are the key decisions implicit in this strategy?
• Assuming that the total U.S. market for athletic footwear was 400 million pairs in 2005, how costly was New Balance’s decision to maintain 25% of its manufacturing in the United States? What is your assessment of that decision?
• How should Davises react to Adidas’ planned acquisition of Reebok? What aspects of New Balance’s operations strategy should they change?
• Moving forward, how important is the NB2E initiative for New Balance?

Case study questions answered in the third solution:

• How should New Balance respond to the Adidas/Reebok transaction?
• How has New Balance’s operations strategy supported its competitive objectives?
• What is your assessment of the company’s objectives for the NB Executional Excellence initiative?

Not the questions you were looking for? Submit your own questions & get answers .

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

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