UNIVERSITY OF SOUTH AFRICA (UNISA)

SCHOOL OF BUSINESS LEADERSHIP (SBL)

MASTER OF BUSINESS LEADERSHIP (MBL)

STRATEGIC MANAGMENT (MBL 915P)

ASSIGNMENT 2
On
CASE STUDY – NEW BALANCE SOUTH AFRICA : OUTRUNNING THE
OPPOSITION
By
Eskinder Getachew Belete 72522402

Getachew Amare Admassu 72522364

Haimanot Tesfaye 72521783

Kasanesh Ayalew 72522143

Robel Debebe 72533994

Teklu Kidane 72521287

Yodit Hailu 72518324

Zahir-ud-din Babar 72521147

August, 2010

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Table of Contents
1-Introduction........................................................................................1
2-New Balance SA Strategy using Porters Generic Strategies...................3
2.1. Strategic scope and strategic strength.....................................3
2.2. Cost leadership strategy........................................................4
2.3. Differentiation strategy..........................................................4
2.4.Segmentation strategy............................................................5
3-Industry dominant economic features..................................................5
3.1.Industry dominant economic features.......................................5
3.1.1 Market size.....................................................................5
3.1.2 Scope of rivalry...............................................................6
3.1.3 Number of rivals and relative size....................................6
3.1.4 Whether products are highly differentiated or similar.......7
3.1.5 To what extent are economies of scale in purchasing, dist’n,
advertisement, etc important...................................................7
3.1.6 To what extent do learning curves exist...........................7
3.1.7 Are there segments within the industry............................7
3.2.The competitive forces in the industry......................................8
3.2.1 A threat of new entries....................................................8
3.2.2 Bargaining power of suppliers..........................................8
3.2.3 Bargaining power of buyers.............................................9
3.2.4 Intensity of rivalry...........................................................9
3.2.5 Threat of substitutes.........................................................9
3.2.6 Collective strength of five forces of profitability...............9
3.3.The industry’s key success factors..........................................10
4- Competitive advantage of New Balance.........................................11
5- Strategic leadership style of Gary Van Roayen...............................12
6- Key challenges for New Balance SA in the future...........................13
7-Future strategies for New Balance ................................................14

List of references...........................................................................15

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1. Introduction

This report provides a rundown on the basic application of generic and competitive strategies in
New Balance South Africa. The chosen organization is a multinational company and is
manufacturer of goods that is primarily driven by the companies’ respective expertise on modern
innovations. The organization being chosen has proved its mark in the business, thus exploring
on their current generic strategies is interesting.

New Balance is in the footwear and apparel industry. To begin with, an overview of the New
Balance SA and nature of generic strategies would be of help to better understand the whole
context and useful in the formulation of critical analysis for the current generic strategies being
employed by New Balance SA.

NEW BALANCE SOUTH AFRICA

“New Balance South Africa has really come of age over the past 10 years. It has been the most
exciting ride ever, putting together a team that is recognized and respected throughout the
industry. As we go forward, we will continue to expand our range of footwear and apparel to
meet the demands of the South African market and ensure that we offer the best possible
customer service to enhance this product offering.” (- GARY VAN ROOYEN, GENERAL MANAGER, NEW BALANCE
SA www.newbalnce.co.za )

GENERIC STRATEGIES:

Generic strategies were formulated by Michael Porter that has considered a category scheme
consisting of three types of strategies being employed by businesses. These are the level of
differentiation, relative product cost, and scope of target market. Further, these three generic
strategies are defined along two dimensions namely strategic scope and strategic strength. By
strategic scope connotes the demand-side which focuses on the marketplace factors and the
strategic strength on the other hand, connotes the supply-side in which it focuses internal
environment of the company that would serve as the company’s competitive advantage.
However in the year 1980 in his classic book Competitive Strategy: Techniques for Analyzing

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Industries and Competitor (Porter 1980), he altered the category scheme into cost leadership,
differentiation and market segment or also known as the focus segment.

Cost leadership strategy place emphasis on efficiency through the production of high volumes
and standardized products in order to take advantage the scale of economies and the curve effects
being experienced. Researches about the impact of profit on the market share indicated that
firms with high market share were often profitable and so does with low market share, but for the
firms with moderate market shares are the ones that is likely to be least profitable. Porter (1980)
explains, high market shares were successful because they pursued a cost leadership strategy and
firms with low market share were successful because they used market segmentation to focus on
a small but profitable market niche. The association of distribution strategy, on one hand, is in
the acquisition distribution channels that are extensive, whereas, the promotional strategy, on the
other hand, engages in the virtue from the low cost features of the products. Several benefits can
be reaped off from the successful implementation of the cost leadership strategies. Among the
several benefits that it can bring is the processing of engineering skills, the design of the products
that provides easiness in the manufacturing process, sustainable accessibility to capital that is
inexpensive, supervision of labor can closely be supervised, tightened control of the cost and the
incentives based on quantitative targets.

The second named generic strategy comes in the form of differentiation that pertains the creation
of the product that is innovative. The innovativeness of the products that will be created would
mean that there is a tendency of reduction in the price elasticity of demand and customers are
likely to be brand loyal due to the fact that customers’ in any sense is willing to spend more
provided that they get a good deal of the products and that customer’s are getting back their
money’s worth.

The last generic strategy to be previewed is the segmentation strategy wherein target markets are
being filtered to come up with a selected and specialized markets. Therefore, tailoring the
marketing mix to these specialized markets enables company to cater the needs of the selected
target market which in turn can gain competitive advantage such that the demands of the target
market are being meet. (Porter, M. (1980))

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2. NEW BALANCE SA Strategy using Porters Generic Strategies:

Because feet don't come in one or two widths, and because shoes that fit better perform better,
New Balance shoes come in a wide range of widths and sizes. In addition, the New Balance
Suspension System - a collection of technologies developed to meet the diverse needs of athletes
- is integrated throughout the product line to ensure you find the right shoe for your foot type and
performance requirements.

New Balance has made significant strides in apparel, taking a more progressive approach with
innovative fabrics and features, an attractive color palette, and timeless designs. Like our
footwear, the apparel line features the New Balance hallmark of fit, performance, and comfort.
An increasing segment of the New Balance business, NB apparel includes a large collection of
garments - from technical running gear to athletic workout wear. Engineered to be versatile and
durable, our apparel collection incorporates advanced moisture management liners, breathable
micro fibers, and water-resistant coatings to provide consumers the ultimate in comfort and
weather protection.

Over the past decade, New Balance has grown substantially. Worldwide sales have increased
from $210 million in 1991 to $1.3 billion in 2003. They quote “We attribute this success to our
ongoing commitment to integrity, teamwork, and total customer satisfaction; performance and fit
over fashion; investment in domestic manufacturing; and technological innovation. We have
remained true to who we are by remaining focused on manufacturing as opposed to marketing,
and by being concerned first and foremost with producing high-quality performance products”.
(www.newbalnce.co.za)

2.1. Strategic scope and strategic strength

The strategic scope of New Balance SA is to cater to every athlete and the aspiring athletes in
South Africa that will be characterized by innovative features from the shoes, to apparels and
gears. The market of New Balance is very much diverse in nature yet the market is particularly
promising such as the market is not only limited to athlete but the people from all walks of life
who does exercise or just have fun in sports. The strategic strength of New Balance is in the

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innovation they have been creating for the people especially for the athletes who wants
something new to show off and sports enthusiast who have a fetish for wearing unbelievably
innovated shoes. Like for example, the company believes that “one size did not fit for all”,
hence the product New Balance Multiwidth (from 2A to 6E) or “Athleisure” have got very
special features.

New Balance SA set about targeting people involved in sports other than running. Like going for
Triathlon, surf skiing, Paddling and cycling all yielded a market for selling different sports shoes.
None of the competitors had this strategy which has been the special feature of the New Balance
SA.

2.2. Cost leadership strategy

New Balance strategy for keep the brand affordable and decision to settle for margin of 38% to
40% on its products made it to have the advantage of being cost leader to the biggest competitors
like Nike and ASICS where they had 50% margin. Prices of entry level shoes have been set to a
low level as compared to the competitors made the company to capture the market share in good
proportion.

2.3. Differentiation Strategy

New Balance relies more on the differentiation strategy and presumably it is the strategy where
they excel. Versatility as the strength of New Balance goes beyond its basic function of impact
protection such that New Balance can shape and tuned to cater the demands of athletes in a
detailed manner. Needless, to say New Balance’s footwear are being customized to meet the
standards of the athletes and the people in general. Aside from the innovative features of their
footwear, New Balance’s apparel has had a share in the invention of innovative designs and high
performance fabrics they have been using to produce their apparel products. Given these
considerations before taking into account the dynamics of invention, New Balance has been
considered the master of innovation in shoe industry.

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2.4. Segmentation Strategy

New Balance has penetrated the market and was able to focus on the different facets of
footwear. In every stores and boutique, every New Balance products are being sort out in the
shelves according to its function. For example, the labeling of the shoes as being for basketball,
tennis, cross-training or running, that enables customers to know exactly what they are looking
for. In the segmentation strategy, they have been very specific to their target market, whether for
boys, girls, children, men and women.

3. Industry dominant economic features,

3.1. Industry’s dominant economic features
3.1.1. Market Size:
• The footwear industry, long regarded as the Cinderella of the South African industry, is stepping
out in newfound success, likened by the South African Footwear Export Council to a
"renaissance" in the industry.
• Nora Hill of the South African Footwear and Leather Export Council (SAFLEC) commented that
this indicates the huge potential of the industry, not only for expansion, but also for joint ventures
and franchises. The increase in export volumes will also lead to an increase in employment and
much needed foreign exchange.
• In February this year, seven South African footwear manufacturers, including a black
empowerment small enterprise, showcased their products at the Footwear UK exhibition in
Birmingham. The Council is already gearing up for larger stand and greater participation on the
next Birmingham show in August. (Department of Trade and Industry, SA, official website)
• The South-African apparel retail industry generated total revenues of $6.1 billion in 2008,
representing a compound annual growth rate (CAGR) of 8.3% for the period spanning 2004-
2008.
• The South African children wear market generated total revenues of $1,281.1 million in 2008,
representing a compound growth rate (CAGR) of 7% for the period spanning 2004-2008.
• The South African footwear market generated total revenues of $1,559.9 million in 2008,
representing a compound annual growth rate (CAGR) of 6.9% for the period spanning 2004-2008
• The South African menswear market generated total revenues of $1,718.3 million in 2008,
representing a compound annual growth rate (CAGR) of 7.8% for the period spanning 2004-2008

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 • The South-African women-wear market generated total revenues of $3.1 billion in 2008,
representing a compound annual growth rate (CAGR) of 9.2% for the period spanning 2004-
2008. (Fast Market research report 17/04/2010)

3.1.2. Scope of Rivalry:

• The industry is currently experiencing hyper competition and the Leading players in the South
African Footwear Industry sector include, Nike, ASICS, Addidas, Reebok and some new brands
introduced by the SA top retailers as their house brands.
• In order to boost sales the major Footwear industry players like Nike executing to be innovative
and bringing out new products continuously to keep them in the emerging market, but still there
is huge scope for New Balance like working for all types of major sports footwear instead of
sticking to the runners or soccer footwear only .
• With the industry experiencing severe competition, and the product requiring intensive labor,
firms are facing extreme pressure to increase their profit margins through their sourcing practices,
hence making it challenging for the rival competitors to keep their market share.
• Price completion in the industry is relatively low, the means by which the firms compete with
respect to the price is, to introducing products at different prices levels in order to reach al areas
of the market. There are only few companies who compete in the every sector of the market with
regard to the intended purpose (as well as price).

3.1.3. Number of Rivals and their relative size:

• Competition and rivalry is high in the Sports footwear industry, in return there is a constant focus
on the introduction of new models and technology.
• Nike is the leading competitor in the industry. They are the world’s largest sports apparel and
footwear maker employing 26,000 people around the world and have manufacturing operations in
six continents.
• The key competitors in the SA industry are Nike, Addidas, ASICS, Reebok which have got
Market shares of 27%, 10%, 39%, 3% where as NB share is 15% (Two Oceans shoes count, Sports trader,
June 2006, Page14)

3.1.4. Whether Products are highly differentiated or very similar:

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 • The perceived status or image is a key factor in the differentiation of the sports footwear since the
main function and structure of the basic product are very similar in the industry.
• Advertisements are the main driving force to the product differentiation; they create a sense of
value for the product whether it’s genuine or perceived.

3.1.5. To what extent are economies of scale in purchasing, distribution,

advertising, etc. important:
• The cost of developing high volume production facilities, in order to benefit from economies of
scale” creates a barrier to entry for new entrants (IBIS world, “Industry conditions”).

3.1.6. To what extent do learning curves exist

• There is a significant learning curve in the Sports footwear and apparel manufacturing industry.
For instance, it will be difficult for an un-established company to enter the industry because a
massive amount of capital is necessary in order to be successful and competitive with the
incumbent firms.
• Investment in the work force is substantial in the industry. By doing so they are able to keep their
cost advantage with their high skilled workers.

3.1.7. Are there segments within the industry

o The industry is divided amongst segments like sports apparel and footwear and among
this; there are further segmentation of applications and technical requirements for the
specific sports activities, which makes segment of the products for different sports.

3.2. The competitive forces in the industry

The evaluation of the industry is based on Michael Porter’s Five Forces Model, which suggests that
from the perspective of existing members of the industry, the market is unattractive.

Porter’s Five Forces Model: This model devised by Michael Porter “proposes that business-level
strategies are the result of five competitive forces in the company’s environment” (Porter, 1980).
These forces include; potential new entrants, bargaining power of buyers, bargaining power of

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 suppliers, threat of substitute products and rivalry among competitors. In order for the model to
achieve its designated purpose of evaluating the attractiveness or unattractiveness of entering into
such business, one must first define the industry he or she wishes to analyse. Without a clear
definition, an attempt to evaluate the forces is futile, as inaccurate hypotheses will be concluded. In
this scenario, the industry is defined as the sports footwear and apparel market. The aforementioned
attractiveness or unattractiveness depends on whether the forces are being evaluated from the
perspective of a new entrant or from an existing player. This report examines the industry from an
existing players perspective.

3.2.1. A Threat of new entrants:

The threat of new entrants is based on the extent to which new competitors can enter the market. In
reference to the South Africa’s Sports footwear industry, it is a competitive market to penetrate. In
the presence of ASICS, Nike, Addidas, Reebok and New Balance SA, makes it difficult market for
new entrants, but as the top retailers of SA like Edgars, Dion, Sportsman’s Warehouse and Cape
Union Mart have recently started for their own House brands like Globe, Loxion Culture, Run-X,
Brooks and Mizuno. Hence New Balance SA have upcoming challenges of new Entrants in the
footwear Market and has to keep up the innovation and strategic planning to keep the customers.

3.2.2. Bargaining power of suppliers:

“…if a firm is purchasing supplies from suppliers who [do not] control a large share of [their]
market, the suppliers will [not] be able to control prices” (McColl-Kennedy, Kiel, Lusch, Lusch,
1994), resulting in little bargaining power. Suppliers of other goods, with fewer suppliers, for
example fabrics, may have a higher bargaining power over the apparel Industry. Overall, this is an
attractive feature of the industry from the player’s perspective.

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3.2.3. Bargaining power of buyers:

Within the Footwear and sports apparel industry there are two types of buyer, the individual and the
organizations. However, the Footwear and apparel industry must realize that it is very important to
differentiate their product. as, in situations where products “…are incapable of being differentiated,
the bargaining power of buyers is strengthened.” (Bradmore, 1996). Additionally, the high
availability of substitutes also adds to buyers bargaining power. The higher the buyers power, the
more unattractive the market for the industry competitors.

3.2.4. Intensity of Rivalry

Although South Africa has Multinational Footwear players in the Market but still there is room in
this market for everyone. This feeling appears to be mutual throughout the larger competitors.

3.2.5. Threat of substitutes:

A substitute is something that the consumer will be satisfied with purchasing or using, instead of the
product in discussion, in this case, Footwear and apparel. It is obvious that sports Footwear and
apparel has a no substitute in the form of product that is the sports footwear and sports apparel but
of course there are alternate suppliers available in the market where as the switching costs involved
for the consumer are low and therefore, the threat of substitutes is said to be high. This is another
unattractive force for the Footwear Industry. (McColl-Kennedy, J.R., Kiel, G.F., Lusch, R.F. and Lusch, V.N., (1994))

3.2.6. Collective strength of five forces of profitability:

The five forces on profitability, identified by Porter’s model and described above, are not favorable
towards earning healthy profit margins. According to Thompson and Strickland (2008), “The
stronger the forces of competition, the harder it becomes for industry members to earn attractive
profits” (pg. 73). However, Porter’s five forces are not static and are subject to change. This means,

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 in the future, the athletic apparel and footwear retailing industry may be more or less attractive than
it is currently. Currently the Footwear and sports apparel manufacturing industry is an attractive
industry because there are opportunities for profitability. Competitive forces are very strong as a
result of the dependency for automobiles. According to Porter’s Five Forces focal firms must strive
for continuous improvement, innovation, and cost leadership for the reason that buyers have a
significant power in the industry. (Bradmore, D., (1996),

3.3. The industry’s key success factors

An industry’s key success factors, defined by Thompson and Strickland (2008), are “the product
attributes competencies, competitive capabilities, and market achievements with the greatest impact on
future competitive success in the marketplace” (pg. 87). Six key success factors (KSFs) have been
identified for the athletic apparel and footwear industry.
These KSFs include globalization, personalization, differentiation, merchandising, technology, and
finally, multiple sales channels. Globalization will be the first KSF to be described.

Globalization. Global expansion is growing in importance for firms looking to remain competitive in the
marketplace. Implementing a global strategy implies several advantages. One of these advantages
involves the avoided risk associated with operating only at the domestic level. By implementing a
multinational corporate strategy a company can spread its risk across a greater geographical area,
resulting in decreased economic and political risk. South African footwear companies have the additional
advantage of less saturated markets abroad especially in other parts of Africa. Many overseas markets
hold tremendous opportunity for growth. By expanding a company’s operations overseas, greater market
share of the worldwide industry can be obtained without directly attacking another competitor. These two
advantages provide substantial motivation for global growth. However, globalization is not the only KSF
associated with this industry.

Personalization. Personalization is another industry KSF gaining momentum internationally. With this
growing trend, consumers are pursing products that mirror their individuality (Nancy Wurtzel, 2008).
Industry retailers successful in adapting to this personalization trend will gain a strategic competitive
advantage in the marketplace.

Differentiation. Differentiation is the third KSF associated with the athletic apparel and footwear
industry. In a saturated market, competitors are continually in search of ways to distinguish themselves.

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For companies employing the low cost generic strategy, this differentiation is focused on low prices.
However, the upper tiered companies, as described previously, must distinguish their businesses in other
ways. By investing the resources into building demand for their brand, a company/retailer has
distinguished itself from its competitors. As the brand is exclusive to one particular company, any
consumer wishing to purchase that branded product will be required to use one of the company’s
distribution channels.
Merchandising. Merchandising products effectively is essential to attracting and retaining loyal
customers. For this reason, merchandising is considered the fourth KSF in this industry. Melanie
McIntosh (2007) emphasized the significance of good merchandising in one of her recent articles.
McIntosh believed that a retailer’s merchandising ability correlates directly with its current and future
profitability. In her article, she referred to merchandising as “an integral component of the business
image” (para. 6). For a company to remain competitive in this industry, effective merchandising must be a
priority.

Technology. The fifth KSF, technology, plays an important role in gaining a sustainable competitive
advantage in this industry. Technological development is becoming the dominant method of driving down
costs and increasing company profit margins. In its industry analysis, NetAdvantage (2009) stated,
“technological innovations have facilitated global expansion and closer coordination between retailers
and manufacturers, while also cutting costs” (pg. 15).

Multiple Sales Channels. A company having multiple sales channels is the final KSF within the athletic
apparel and footwear industry. As consumers hold the balance of power in this industry’s buyer-seller
relationship, companies must be willing to operate through multiple sales channels. The negative
implications of not doing so are too great to ignore. Most companies have already embraced this KSF by
operating through multiple distribution channels, including physical stores, e-commerce, and catalogs. To
earn attractive profit margins, companies within this industry must recognize the KSFs described above as
essential. These KSFs include globalization, personalization, differentiation, merchandising, technology,
and multiple sales channels.

Becoming proficient in each of these KSFs will help to ensure the company’s owners are able to earn an
attractive return on their investment. ((2009). NetAdvantage. Retrieved February 15, 2009,)

4. Competitive advantage of New Balance

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The competitive advantages of the company are:-
1. The wide range of width (from 2A to 6E) across the product lines giving a wider opportunity to
address the market. This has not been done by the other competitors so far.

2. Has attained cost effectiveness by producing its products abroad. This way the company can
tackle the cost variation due to exchange rate variation of the Rand.

3. Highly competitive price by reducing the margin to 38 – 40% where as the competitors are
having the mark up of 50%.

4. The organization has a dynamic management team which as managed to pull the company from
10th ranking to the top three ranking.

5. They are able to work at the grass root level on sales issues and innovative ideas from bottom to
top. In addition the company is able to from good relationship with customers. These have not
been done by the other competitors.

6. The company is able to motivate staff by helping the staff to have a balanced approach to work
and life. Moreover, it involves the staff in different sport activities so that the staff will have the
feel of the products which in turn helps in innovation.

7. The company distributes its products even to smaller shops so as increasing the company’s
presence. The other competitors distribute their products only to the key retailers.

8. The company concentrates on marketing more on the products superior fit and performance
where as the competitors advertise through top athletes.

Some of the competitive advantages mentioned above can be sustained by few more efforts. Since the
company concentrates on the function and fit of the shoes it has to work more on getting more innovative
ideas that strengthen the product function. The major competitive advantage with regards to function, the
different size fit can be taken over by competitors easily. On the contrary if it cannot work on adding
more features it cannot be sustainable.
With regards to its cost efficiency it can continue to produce the products in the US and avoid the price
fluctuation and sustain. It can also start producing the products in countries where the labor and
production costs are cheap, such as China, and maintain a buffer for competition even if the other
competitors reduce their mark-ups.
Having a motivated staff and helping the staff to have a balanced work/life approach can always be
sustained if it is done consistently.

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5. Strategic leadership style of Gary Van Rooyen

According to Thomson, Strickland and Gamble leadership in executing strategy leaders should
consider the following
1. Top executives have to be out front personally leading the implementation/execution and
driving the pace of progress

2. Top level executives can usually best create a fully engaged organization by delegating
authority to middle and lower level mangers

3. Creating a sense of empowerment among employees. It is unwise for company personnel

to feel powerless to change anything significant and just wait to follow orders from top
executives.

“Participative leadership is a style of leadership that involves all members of a team in

identifying essential goals and developing procedures or strategies for reach those goals. From
this perspective, participative leadership can be seen as a leadership style that relies heavily on
the leader functioning as a facilitator rather than simply issuing orders or making assignments.
This type of involved leadership style can be utilized in business settings, volunteer
organizations and even in the function of the home.”
( http://www.wisegeek.com/what-is-participative-leadership.htm)

According to these definitions and the three leadership qualities in strategy execution mentioned
above, the manager can be seen as participative having the qualities substantiated below from the
case-
1. He provides the vision of offering a world class service and empowered the employees to
take total ownership of their actions.

2. He built the team spirit in the company

3. He motivates people to bring out the best in every employee. Employee empowerment
and motivation is attached to maximization of individual outcomes that contributed to
company competitiveness.

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 4. Another important leadership quality depicted in the case regarding the manager is that he
knew his own weaknesses and he has never been a leader in its strict sense but
compensated his weaknesses by employing people with strengths.

6. Key Challenges for New Balance SA in future

There are a lot of challenges that companies face on the course of the product life cycle, related to
technological, economical, legal and cultural issues. As New Balance South Africa manufactures its
products entirely overseas, it will have a key challenge of acquiring stock from abroad and problems
regarding delivery lead times which will be aggravated by the continuous challenges of a fluctuating
exchange rate due to instability in the world economy.

Despite the company’s phenomenal growth over the past five years, how to keep on being different, and
to keep on changing, remained a daily challenge. As the company did not go the branded retail route,
should it take at expanding to other African countries, or should it rather concentrate on other segments of
the market which the company has not yet explored.

7. Future strategies for New Balance

New Balance has to make some important moves for catering the future challenges
1) Adding up stockholders
2) Increasing productivity with current stores
3) Expanding internationally
4) Differentiating its stores from its competitors
5) Merchandising renovations
6) Marketing initiatives

Adding up Stockholders. Historically, New Balance has relied heavily on the Retailers other than their
own retail setup which has been made in practice in recent times. General Manager Van Rooyen, planned

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to make their own retail setup and set up their own retail out lets which are now 8 in number across SA
and have 142 retailers (Source: www.newbalnce.co.za). This number of stockholders should increase.
This stockholders growth would lead to increased future profitability and stronger competitiveness. This
strategic option would provide Stockholders with greater understanding of the products and hence
broadening the customers awareness as well.

Increasing productivity with current stores. By renovating or closing unproductive stores, an anticipated
increase in ROI for shareholders will result. Given the current economic downturn, this strategy is
warranted and will be beneficial after world economies recover. Additionally, the resources liberated
through the execution of this strategic element can be allocated to global expansion.

Expanding internationally. International expansion especially within the neighboring African Countries
is the third strategic element for New Balance. Although the current state of the world economy has
slowed the pace of global expansion, this global growth is anticipated to quicken after the world economy
regains its footing (NetAdvantage, 2009).

Differentiating from competitors. In an effort to differentiate from competitors, New Balance is

expanding its products range to provide “more compelling assortments of name-brand athletic footwear
by increasing the quantities of unique, exclusive and limited-distribution marquee goods. This strategic
element is also an industry key success factor, as described above. Executing this strategy will help New
Balance’s brand become more distinctive from competitors in the future.

Merchandising renovations. The company’s future plans should include “modifying the interior layouts
of the stores, adding new fixtures to enhance the display of our products, and better define and cater to the
fashion desires of the core customer”. As these merchandising renovations will further increase
productivity within existing stores, implementing this strategic element will enable New Balance to
promote its competitive advantage.

Marketing initiatives. The Company supports its businesses through a number of highly-visible sports
marketing programs and partnerships with well-known third parties in the global sports arena will
increase consumer awareness of its brands. In the future, NB should complement its sports marketing
programs with incongruent marketing initiatives. By using a greater variety of marketing media, NB
should realize a greater ROI from its advertising budget.

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List of References:

(2009). NetAdvantage. Retrieved February 15, 2009, from Standard & Poor's Web site:
http://www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/index.do Accessed
August 03, 2010.

Bradmore, D., (1996), “Competitive Advantage: Concepts and Cases”, Prentice Hall: Sydney

Fast Market research report 17/04/2010 http://www.fastmr.com/prod/7848_clothing_south_africa

_industry_guide.aspx [online]
Accessed August 03, 2010

Gary Van Rooyen, General Manager, New Balance Sa www.newbalnce.co.za [online] Accessed August
03, 2010.

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http://www.dti.gov.za/thedti/footwearindustry.htm (Department of Trade and Industry, SA, official
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