Brand Management of New Balance - Essay Example

?Question A Choose a familiar brand (except Reebok and Starbucks) and perform a brand value chain analysis. Draw a well labeled diagram to illustrateyour discussion. Provide a discussion on the success of this brand and suggest any recommendations. (10 marks) I chose New Balance (NB) as my brand. See Figure 1 for the brand value chain analysis. The three value changes are marketing program investment, customer mindset, marketing performance, and shareholder value (Keller 2006, 155). The multipliers are program quality, marketplace conditions, and investor sentiment (Keller 2006, 155). For the marketing program investment, NB is positioned as the best fit for athletes and people who want shoes that represent their fitness goals. NB concentrates on manufacturing shoes with diverse widths because it believes that a large fit enhances footwear performance. The brand is also known for the benefits of comfort, performance, and quality of fits and soles (Ryan 2008). The commodification is manufacturing for quality. NB is involved in international business; it sells products all over the world. Furthermore, employee relations are regarded as satisfactory, because the executive management is dedicated to responding to internal stakeholder needs (Baker 1999). For customer mindset, awareness is high, but not as high as for market leaders, such as Nike and Reebok-Adidas, when sales are considered. See Table 1 for Comparative Data on Major Athletic Footwear and Apparel Companies, 2004. NB also has good associate relations. NB imports finished soles and raw materials from Asian suppliers. The uppers would then be made and connected to soles in the U.S. almost seventy percent of NB’s domestic product is called “sourced upper.” For sourced-upper shoes, NB will import finished uppers and soles from Asia and will conclude the assembly at the American factories. Three warehouses in Skowhegan and Lawrence hold approximately $9 million (or 4 and half weeks) worth of raw materials inventory (Bowen, Huckman, and Knoop 2002, C-383). It can take 10 to 12 weeks for the shoes to arrive at Lawrence and Ontario (order to deliver lead time) (Bowen et al. 2002, C-383). The lead time has also been lessened, due to the efforts of NB to develop ordering and synchronization processes between the company and the suppliers. The management also strategically located the manufacturing plants near distributors and stores (Bruce, Daly, and Towers 2004; Jin 2004). Table 1: Comparative Data on Major Athletic Footwear and Apparel Companies, 2004 Company Worldwide Sales Footwear Sales Total Assets Net Income Employees Nike 13,739.7 7,299.7 8,793.6 1,211.6 26,000 Adidas-Salomon 8,057.0 3,384.0 6,015.8 402.3 17,023 Reebok 3,785.3 2,430.3 2,440.6 192.4 9,100 Puma 1,903.3 1,065.8 1,263.1 320.0 3,910 New Balance 1,500.0 NA NA NA 2,600 Fila 955.2 NA NA -85.0 2,300 Vans 330.2 NA NA -30.0 1,890 Source: Bowen, Huckman, and Knoop (2006, C374) The attitudes of the company represent good work ethics and social responsibility. NB actively supports societal marketing. Some of its products use natural materials. NB also energetically donates to charity and other organizations. It has a New Balance Foundation that tackles child obesity, as well as other cultural and environmental concerns (New Balance 2011). Studies also showed that New Balance has loyal customers, because they appreciate the performance of its products and the grassroots marketing approach of the company (Datamonitor 2008). The main marketing promotions of NB are word-of-mouth and PR through de-emphasizing the importance of celebrity endorsements (Datamonitor 2008). Price premiums of NB are pricing for value. New Balance has different prices for its products, but mostly it charges premium pricing for its athletic apparel and footwear. Customers are not that price elastic. NB enjoys a market share of 8 to 12% market share (Bowen et al. 2002, C-384). Expansion success is high, since NB has strong brand equity. Cost savings is also good, because of the strategic supply chain management of NB (Bruce et al. 2004; Jin 2004). Cost savings and profitability are competitive, according to sources, but not openly disclosed unlike that of Nike and other brands (Yahoo! Finance 2011). Shareholder value is not publicly disclosed, but sources assert that the company is highly profitable (Datamonitor 2008). As for program quality, it is assessed that NB is sending a distinctive, relevant, consistent, and cohesive brand. Loyal customers find NB as a relevant product and brand for their fitness needs. The weaknesses of New Balance are sluggish sales in the domestic market, it has not design-oriented, and it does not have economies of scale like Nike (Datamonitor 2008, 5). The opportunities for New Balance are the global demand for footwear, increasing purchasing power of Gen X and Gen Y or Millenials, and apparel and strategic expansion (Cass and Choy 2008; Ciminillo 2005; Datamonitor 2008, 5). The competition, such as Puma, Vans, and Nike are more effective in creating designs for Gen X, especially. Marketplace conditions are lucrative, especially expansion abroad. NB should improve products for Asian consumers, where economic development is highest. Two difficult situations that will lead to New Balance not doing so well in Asian markets are having too long soles for Asian countries that have shorter feet and enough stock for the sizes that are in demand. NB can respond to these challenges by conducting a market research on the foot sizes and widths of these Asian markets. Asians are also more fashion conscious than other markets. NB should also determine the fashion trends that Asian respond to, so that it can design products for their particular tastes. NB should also focus on Gen X and Gen Y. Sirias, Karp, and Brotherton (2007) assert that that Gen X is more practical and detached, while Cass and Choy (2008) observe that Millenials are more inclusive and fashion-oriented, though they also purchase high-quality products. Gen Y also seek for “edgier” marketing campaigns and find objectionable hard sells that the older customers can endure (Ciminillo 2005). NB should have specific product development and marketing strategies for these emerging generations, but differentiating marketing strategies can be more costly. Nonetheless, responding to these markets through market segmentation and positioning can be valuable in the long run. Investor sentiment is estimated as positive, because of the encouraging advantages of NB. The sustainable competitive advantages of New Balance are its brand equity and functional shoes that are modified to the sport and foot sizes of consumers. New Balance is an expert in designing shoes that are fit to perform. The company uses science to design these shoes. The logo of New Balance also powerfully stands for performance, comfort, and quality. Expansion abroad can improve sentiments further, particularly when market research is used to drive supply chain management, marketing, operations, HR, and product development strategies. Figure 1: New Balance’s brand value chain analysis VALUE STAGES Word Count: 985 References Baker, D. 1999. Strategic human resource management: performance, alignment, management. Librarian Career Development 7 (5), 51-63. Basu, D.R. and V. Miroshnik, 1999. Strategic human resource management of Japanese multinationals – a case study of Japanese multinational companies in the UK. Journal of Management Development 18 (9),714-732. Bowen, H.K., Huckman, R.S., and C. Knoop. 2006. New Balance Athletic Shoe Inc. Case 27. Harvard Business School Case 607-008. Bruce, M., Daly, L., and N. Towers 2004. Lean or agile: A solution for supply chain management in the textiles and clothing industry? International Journal of Operations & Production Management 24 (2), 151-170. Cass, A. and E. Choy. 2008. Studying Chinese generation Y consumers' involvement in fashion clothing and perceived brand status. Journal of Product & Brand Management 17 (5), 341-352. Ciminillo, J. 2005, April 25. Elusive Gen Y demands edgier marketing. Automotive News 79 (6144), 28B. Datamonitor. 2008. New Balance Athletic Shoe. New Balance Athletic Shoe SWOT Analysis. Datamonitor, 1-8. Jin, B. 2004. Achieving an optimal global versus domestic sourcing balance under demand uncertainty. International Journal of Operations & Production Management 24 (12), 1292-1305. Keller, K.L. 2006. Branding and brand equity. In Handbook of marketing, eds. B.A. Weitz, and R. Wensley, 151-178. California: Sage. New Balance. 2011. Responsible leadership. http://www.newbalance.com/responsible-leadership/ (accessed February 12, 2011). Ryan, T.J. 2008. New Balance opens sports research lab. SGB 4 (10): 10. Sirias, D., Karp, H.B., and T. Brotherton, 2007. Comparing the levels of individualism/collectivism between baby boomers and generation X: Implications for teamwork. Management Research News 30 (10), 749-761. Yahoo! Finance. 2011. Nike. http://finance.yahoo.com/q/ks?s=NKE (accessed February 12, 2011). Question B Pick a company you are familiar with and characterize its brand portfolio and brand hierarchy. Draw diagrams and charts to illustrate your case. How would you improve the company’s branding strategies? (10 marks) The brand portfolio of Toyota provides its different brands (Piotraschke 2007, 16). The main branded house consists of automobile brands. See Figure 1. Toyota Motor Corporation designs, makes, and sells sedans, minivans, compact cars, sport-utility vehicles, trucks, and related parts and accessories, principally in North America, Europe, and Asia (Yahoo! Finance 2011). The company sells traditional engine vehicles, such as subcompact and compact cars primarily consisting of Corolla sedan, Yaris, iQ, Scion xB, and Scion xD brands; mini-vehicles, passenger vehicles, commercial vehicles, and auto parts; mid-size models, particularly Camry, REIZ, Avensis, and Mark X brands; and luxury vehicles under the Lexus and Crown brands, and Century limousines, and hybrid vehicles, which run on a mixture of gasoline engine and motor principally under the Prius brand (Yahoo! Finance 2011). Toyota also sells sports and specialty vehicles, which comprise of Lexus SC and Scion tC brands; sport-utility vehicles, including Sequoia, 4Runner, RAV4, Highlander, FJ Cruiser, and Land Cruiser brands; pickup trucks that encompass Tacoma and Tundra brands; minivans and cab wagons that principally contain Alphard, Vellfire, Corolla Verso, Wish, Hiace, Regius Ace, Estima, Noah, Voxy, Sienta, Isis, Passo Sette, and Sienna brands; and trucks and buses (Yahoo! Finance 2011). Furthermore, the company has sub-brands; it offers retail and wholesale financing, insurance services, vehicle and equipment leasing, and other financial services, such as credit cards primarily to its dealers and their customers (Yahoo! Finance 2011). In addition, Toyota has other unrelated brands. It designs and manufactures prefabricated housing; information technology related businesses, including an e-commerce marketplace called GAZOO.com; and sales promotions for KDDI communication related products (Yahoo! Finance 2011). It can be seen from Fig.1 that Toyota has a wide brand portfolio. Its main brands are the automobile brands and they are the most known of its brands, especially because of the prominence of its Toyota Production System (TPS) (Amasaka 2009; Vokurka, Lummus, and Krumwiede 2007). Toyota’s total quality management system is not just focused on the technical side of the production system; it is also a management and leadership viewpoint (Bodek 2008, 40; Liker and Morgan 2006, 9). The management is trained to see and practice quality in a holistic manner, which includes the hard and soft side of management (Udugawa 1995, 111). The hard side of management engages technical capabilities, where innovation, efficiency, and customer satisfaction goals are profoundly intertwined, while the soft side of management focuses on motivating employees to work for unified quality management goals (Gonzalez-Molina 2003; Kakuro 2004; Lander and Liker 2007). Toyota is known for scientific methods of measuring organizational and human performance (McPhaul 2005; Pardi 2007; Towill 2006). However, there are complaints on the dehumanizing costs of efficiency efforts and goals (Sohal and Samson 1994). The brand hierarchy of Toyota can be seen in Figure 2. It can be seen that the primary hierarchies are trucks, SUV/Vans, cars, financial services, and Lexus. Lexus is considered as a separate hierarchy because of its premium pricing. Recent problems and lawsuits against Toyota, however, tarnished its image. Apparently, Toyota lost something in its pursuit of total quality management (TQM). Top executives made a program called CCC21 ("Construction of Cost Competitiveness for the 21st Century") that started in 1998 (Ohnsman et al. 2010). Through CCC21, car details were modified to drastically cut costs (Ohnsman et al. 2010). For example, Toyota designers examined grip handles mounted above the door inside most cars (Ohnsman et al. 2010). By expressing concerns for cost-cutting with suppliers, Toyota reduced the number of parts to five from 34, which brought down procurement costs by 40% (Ohnsman et al. 2010). The change also lessened installation by 75% to only three seconds (Ohnsman et al. 2010). "The pressure is on to cut costs at every stage," Takashi Araki, a project manager at parts maker and Toyota affiliate Aisin Seiki, says to BusinessWeek (Ohnsman et al. 2010). Soon, Watanabe, a trained economist, became Toyota’s president. Watanabe informed the press at Sept. 12, 2005 that CCC21 had produced more than $10 billion in savings over six years. "Under CCC21 activities, which I led, Toyota realized cost reductions of more than 200 billion yen ($2.2 billion) a year on a consolidated basis” (Ohnsman et al. 2010). Efforts mounted as a more "aggressive version of CCC21," called Value Innovation, which “promised more savings by making the entire development process cheaper and faster, further trimming parts, production costs, and time to market” was developed (Ohnsman et al. 2010). Toyota had also decreased lead time or the time to “about 12 months, compared with an industry average of between 24 and 36 months” (Ohnsman et al. 2010). The problems slowly emerged, with lapses in quality measures and as hierarchical communication impeded the identification and resolutions (Ohnsman et al. 2010). Toyota made millions of recalls that tarnished its quality-drive image. Figure 2: Brand hierarchy Source: Piotraschke (2007, 16) The brand marketing strategy is to focus on continuous brand improvement after the setbacks in 2010. Toyota should improve PR and maximize the use of online social media. Social media refers to new media that includes Internet, cell phones, and other mobile communications. It represents the new consumer movement, where consumers are active makers and sharers of information. Toyota should tap social media to generate social capital. Social capital refers to social relations that are needed to attain organizational objectives (Sohal and Samson 1994). Toyota can develop social capital through the active use of online social media to inform customers about press releases, updates, and product information. For instance, it should use consumer blogs to respond to activism in the industry. Toyota should actively assert its position as a better corporate citizen also, by advancing green technologies and improving quality. It should position itself as a true green company with strong corporate governance measures, where social media is well-leveraged to promote different stakeholder needs and interests. Figure 1: Brand portfolio Word Count: 969 References Amasaka, K. 2009.The foundation for advancing the Toyota production system utilizing new JIT. Journal of Advanced Manufacturing Systems 8 (1), 5-26. Bodek, N. 2008.Toyota managers know the road to Lean is by way of motivation. T & P: Tooling & Production 74 (1), 40-41. Gonzalez-Molina, G. 2003, August 14. Toyota applies quality management to people. Gallup Management Journal Online, 1-3. Kakuro, A. 2004. Development of 'science TQM', a new principle of quality management: Effectiveness of strategic stratified task team at Toyota. International Journal of Production Research 42 (17), 3691-3706. Liker, J.K. and J.M. Morgan. 2006. The Toyota way in services: The case of lean product development. Academy of Management Perspectives 20 (2), 5-20. Lander, E. and J.K. Liker. 2007.The Toyota Production System and art: making highly customized and creative products the Toyota way. International Journal of Production Research 45 (16), 3681-3698. McPhaul, J. 2005, February 3. Toyota uses innovative employee evaluation system. Caribbean Business 33 (4), 32. Ohnsman, A., Green, J., Inoue, K., Welch, D., et al. Y. Hagiwara. 2010 Mar. 22. The humbling of Toyota. BusinessWeek 4171, 32-36. Pardi, T. 2007. Redefining the Toyota Production System: the European side of the story. New Technology, Work & Employment 22 (1), 2-20. Piotraschke, F. 2007. Brand portfolio management, basic principles and recent trends. Germany: Grin. Sohal, A.S. and D. Samson. 1994.Toyota Motor Corporation Australia: A case study. Total Quality Management 5 (6), 431-440. Towill, D.R. 2006. Handshakes around the world [Toyota production system].Manufacturing Engineer 85 (1), 20-25. Udagawa, M. 1995.The development of production management at the Toyota Motor Corporation. Business History 37 (2),107-119. Vokurka, R.J., Lummus, R.R., and D. Krumwiede. 2007. Improving manufacturing flexibility: The enduring value of JIT and TQM.SAM Advanced Management Journal 72 (1),14-21. Yahoo! Finance. 2011. Toyota. http://finance.yahoo.com/q/pr?s=TM+Profile (accessed February 12, 2011). Read More