NEW BALANCE CASE STUDY
If you have a company and do business internationally, in today’s global world you have to compete with your rivals and be strong in the market. Reducing your cost is one of the effective ways to be competitive and strong. That’s why majority of companies seek low cost producer, labor etc. As we know China is the best example with its low cost labor, outsource etc. So China is very attractive for the companies doing international business. Most of them outsource more of their manufacturing to China to maintain a cost advantage. It looks very logical and easy to benefit from cost advantage by this way but it not as easy as we thought. As we can see our case, New Balance which is one of important shoe companies chose this way and faced really annoying problem for its brand: Counterfeit goods.

1) New Balance faced with these issues:

• How to protect its intellectual properties when setting up manufacturing overseas.

• How to stop the Chinese manufacturing unit from producing the “fashion” shoe which is sold at very low price and diluting the brand.

2) Important factors that are important in understanding this decision situation:

• Since China is selling the low-price “fashion” shoes that are indistinguishable from the originals, brand value of New Balance can be damaged.

• Selling low-price shoes can lead New Balance to gain reputation of selling low-quality shoes.

3) The alternatives are:

• Getting into the overseas legal system to enforce the agreement.

• Paying the least amount of $50,000 and making a decision of setting up a price for the Fashion shoes that they cannot be sold for price lower than the standard price set.

• By closely monitoring the supply chain to partially eliminate the problem of protecting the intellectual property rights.

• New Balance can publish press release on the newspapers that explains the situation about Chinese manufacturer.

• New Balance can reach the target audience by making viral ads on the internet.

• New Balance can organize a press conference and provide awareness of their customers.

4) What decision(s) do you recommend?

• New Balance negotiate with Chinese manufacturing unit which says that they must sell the “fashion” shoes for a particular price and cannot stop selling and producing by explaining that how it is going to dilute the brand and is marked as low-quality shoes when they sell for a less price.

• Since it already has agreements with companies in Japan, South Korea and Taiwan, it should set up a manufacturing unit in one of these countries whichever has the lowest production costs while making an agreement that it is not going let the information out and also cannot sell the product for less than particular price.

• Also New Balance can withdraw from China and other third countries and produce in a local way. However it increases the cost and it doesn’t make sense for the company.

• New Balance may investigate similar cases of other companies related with counterfeit goods.

5) Some ways to implement our recommendation:

• New Balance and Chinese manufacturer can come together and both of the sides explain their wants so that they try to find a common point which is benefit for both of them.

• New Balance can begin the negotiations with other companies in Japan, South Korea or Taiwan to set up a new manufacturing company.