Please answer the following Case analysis questions
1-What has New Balance’s management done to implement and execute the strategy? What policies, practices, support systems, and management approaches underlie New Balance’s strategy execution efforts?
2-To what extent has the New Balance Executional Excellence initiative impacted the firm’s performance?
3-What are the chief elements and characteristics of New Balance’s culture? What mechanisms does New Balance use to nurture and reinforce this culture? In what way, if at all, does the company’s private ownership impact the company’s culture?
New Balance Athletic Shoe Inc
On a pleasant August evening in 2005, Jim and Anne Davis enjoyed what was meant to be a relaxing dinner at home. As they finished their meal , however, they could not help but turn their attention to a headl ine in that morning's Boston Globe, a copy of which sat on their kitchen ta ble: "Adid as to buy Reebok."For over 30 years, the Davises had been the sole owners of New Balance Athletic Shoe Inc., one of the top five producers of athletic footwea r in the world. Given their experi ence i n the industry, they had suspected for some time that an Ad idas-Reebok transaction might be in the works. Neverthe less, the formal announcement caused them to wonder about the implications of this deal for New Balance. By bringing together Adidas and Reebok-the second- and third-largest produc ers of athletic footwear, respectively-this transac tion would create ajuggernaut that would rival Nike, the largest competitor in the industry. Although the Davises did not have to answer to Wall Street con cerning their competitive plans,they knew that many in the industry-including their own employees would soon be asking for their response. Lately, the Davises had focused significant atten tion on an initiat ive cal led New Balance Executional Excellence (N B2E), the goal of which was to in crease the quality and efficiency of the company's operational processes through the application oflean manufacturing. Started less than one year earlier,
NB2E already had provided evidence of early im provement, and the Davises did not want to lose the growing enthusiasm for this initiative among New Balance 's 2,600 associates. Further,they realized the importance of staying true to the private company's uniq ue operating philosophy, strategy, culture, and history.Nonetheless, they could not help but wonder whether New Balance's priorities needed to be ad justed in light of the shi fting competiti ve landscape.
THE U.S. ATHLETIC SHOE INDUSTRY'
The United States was the world's largest mari<et for athletic shoes and apparel, accounting for roughly 50 percent of the $32 billion spent globally each year. Between 2004 and 2009, the number of pairs of ath letic footwear sold in the United States was expected to grow ata 6.3 percent annual growth rate (8.4 percent growth among women who accounted for 58 percent of all pairs purchased), reaching 530 million pairs in 2009. Industry trade group Sporting Goods Intelligence projected that the $9 bi llion branded-shoe market in the United States would grow by 8 percent in 2005. Growth was slowing in part because of a maturation in consumer interest in sports and fitness activities.
ln recent years, manufacturers moved to com bine fashion and comfort to appeal to a broader range of consumers, namely those who wore athletic shoes for casual purposes. Concurrently, a combi nation of technological developments and style im provements in athletic footwear helped drive growth. While leather continued to be the most popular ma terial for athletic footwear uppers, some firms, such as Adidas-Salomon (Adidas), had developed shoes with so-called "smart textiles" and microchips that adjusted fit based on the wearer's activity, height, weight, and running terrain. Nike maintained a comfortable lead ahead of its competitors with 43 percent of the total global market for athletic shoes and apparel (see Exhibit I for sales and financial data for leading firms in the industry). Within the U.S. footwear market, Nike accounted for 36 percent of the market, while Adidas, Reebok and New Balance held on to a variable 8-12 percent each (Exhibit 2). Appendix A provides a brief description of each of the top competitors in the industry. The acquisition of Reebok by Adidas would cre ate a firm that rivaled Nike in terms of size and would boost Adidas 's share to roughly 20 percent of the U.S. footwear market. Though the Adidas-Reebok transaction was notable for its size, it reflected a broader recent trend of consolidation in the ath letic footwear industry. In July 2003, Nike acquired Converse, a Massachusetts based manufacturer of court and casual shoes, for $305 million. In June 2005, Stride Rite-the maker of casual footwear brands Keds and Sperry Top Sider-announced its intention to acquire Saucony, a $I 70 million manu facturer of specialty running shoes and apparel based in Peabody, Massachusetts. With respect to worldwide marketing, Nike out spent its rivals, spending $213 mi Ilion in measured media in 2004, compared to Adidas' $89 mill ion and Reebok 's $42 million.2 For the first JO months of 2005, for example, New Balance total advertising expenditure was $17.3 million.3 For all companies , a large portion of worldwide media expenditure was geared toward the marketing of footwear brands in the United States (Exhibit 2).
In addition to spending more on marketing than New Balance, most of its competitors produced their shoes outside of the United States, largely because the manufacturing of athletic footwear was highly l.abor intensive and required relatively low levels of worker skill. As a result,China had become the larg est manufacturer of athletic footwear for the U.S. market, commanding 85 percent of the category.4 The U.S. trade deficit in shoes was expected to con tinue to deepen, as more manufacturers shifted pro duction offshore. The deficit had increased about 7 percent per year since 1999, reaching 379 million pairs in 2004. Overall,Americans purchased 2.2 bil lion pairs of shoes and boots in 2004, enough to give each man, woman and child there 7.7 new footwear options that year.5
Distribution Channels
In 2005, the American sneaker market was divided i.nto several discrete retai I channels catering to pe riodically overlapping demographics that defined themselves by distinctive tastes, buying patterns, and price elasticity. Foremost among these were the "big box" chains such as Wal-Mart, Target, and Sears which together sold an estimated $12 billion in ath- 1.etic apparel and equipment per year.6 The second Largest group by sales volume included national sellers such as Foot Locker, The Sports Authority, Finish Line, and The Athlete's Foot. Next were smaller urban chains that maintained strong ties to tastemakers and arbiters of fashion. These chains typically either sold brands at heavy discounts to younger consumers or catered to high-end custom ers with very specific needs (e.g., high-performance running). The leading sneaker manufacturers, such as Nike and Adidas, also maintained showcase stores that featured new products in lavish displays accom panied by TV screens and music.These branded out lets were less retail stores than museums to the sneak ers of tomorrow and the "classics" made legendary by the likes of Pele, Chuck Taylor, and Michael Jordan.
With 4,000 stores around the world, Foot Locker was widely recognized as the world's leading retailer of athletic shoes and apparel. Foot Locker contribut ed slightly less than I0 percent to Nike's annual sales, but Nike products represented as much as 50 percent of sales for Foot Locker. The Sports Authority had 400 U.S. stores, but maintained a broader product base, selling workout equipment, basketball gear, sneakers and sports apparel. Finally, with 598 stores in the United States, Finish Line, originally started in the early 1980s as a discounter whose primary business was in "closeout" sales, prided itself in of fering prices that were typically $5 less than other retailers. Although beholden to the vagaries of fashion and manufacturers' ability to design hit products that would drive traffic into their stores, larger re tailers held a great deal of sway over the fortunes of the sneaker companies. For example, even though Converse sneakers were sold through many retail and on-line outlets nationwide, Foot Locker accounted for roughly 20 percent of all Converse sales. Any decision by Foot Locker about Converse's product placement thus could have a material impact on the brand's sales. In another case, a 2003 dispute over promotional practices for Nike shoes caused a costly one-year rift between the manufacturer and Foot Locker.
THE MAKING OF NEW BALANCE
New Balance was founded in Boston in 1906 as New Balance Arch 7 by William J. Riley, a 33-year-old British emigre who committed himself to helping people with problem feet by making arch supports and prescription footwear to improve shoe fit. In I 934, Riley went into partnership with his leading salesman, Arthur Hall. In 1954, Arthur Hall sold the business to his daughter and son-in-law, Eleanor and Paul Kidd. Arch supports and prescription fool:\vear remained the cornerstone of the business until 1961, when they manufactured the Trackster, the world 's first performance running shoe made with a ripple sole and available in multiple widths.
Du.ring the 1960s, New Balance's reputation for manufactu.ring innovative performance footwear available in multiple widths grew through word of mouth and grassroots promotions. When Jim Davis bought the specialized shoe man ufacturer from the Kidds on the day of the Boston Marathon in I 972, he committed himself to uphold the company's founding va lues of fit, performance , and manufac turing . He recalled: I wanted to buy a company, I wa young and single. I didn't have anything. so I had nothing to lose. [ looked at it a year before I bought ii.Al the time, I was in electronics. 1 pa. ed. because l knew noth ing about footwear and not much about spotting goods.other than what I knew from doing spotts in college. I got a pair of the hoes.statted running in them,and peoplewould come up lo me and comment that I must be a good runner. Unable to put a deal together in elect1-onics.with the company still avail able. I went back,and t he guy was desperate losell it. We paid $100,000 for the company; we put $10,000 down, and the rest of the $90,000 was generated from lowering im•ento1y.
At the time N ew Balance was primarily a mail order business with only a handful of U.S. retail ers. Jim Davis started traveling around the country to expand reta il distribution , and sales grew from $ I 00,000 to around $300,000 over a two-year pe riod. Anne, who wou l d marry Jim in 1984, joined New Balance in 1978 and focused on bui lding a dis tinct culture for New Balance associates and those who would do business with the company around the globe. Indeed, N ew Ba l ance's first international sales office and first European manufacturing facility both opened in 1978 in Europe. Since then the brand had expanded from Europe and Asia to the Middle East, Latin America, and Africa.
In the early 1980s New Balance set up new manufacturing facilities in New England and signed on international distributors. In 1982, the company reached the $60 million mark and debuted the well received 990 running shoe, the first athletic shoe priced at $ 100.1 Jn the 1990s, the company unveiled its New Balance Suspension System to telegraph its emphasis on cutting-edge R&D and its dedication to meeting the needs of performance-oriented runners. The company 's commitment to multiple sneaker widths remained a sell ing point that was reflected in the brand 's iconic marketing logo of three differently sized feet.9 Being Different Herb Spivak, executive vice president of opera tions and a 12-year veteran of the company, provid ed a picture of New Balance's un ique features. He observed: Ow·values have been very, very con istent and re inforced continuously by J im and Anne Davis. We do not endorse athletes, as an example. We aim to make every one of ow·shoes a pc1fo1mance product as opposed lojusl a fashion product. We sell eve1y shoe that we make in multiple width . because we believe that fit is a critical pe1fo 1mance charac1e1is tic. We maintain a great percentage of our product in inventory for replenishment. so that dealers can con tinually get fill-ins when they sell and when they need ce1tain sizes and widths. In con1ra 1. competitors pretty much tell retailers. "OK. tell us six months in advance what you 're going lo want lo buy and we'll deliver it. But it's fixed. and we don't plan on having future invenlo1y.'·These basic factors, combined with the maintainin g of our domestic factories all come together to describe what makes us unique.
Because the company had remained private,Jim Davis felt that he and his colleagues could act more nimbly and be more socially responsible than their more well-heeled competitors. "I f we were a pu b lic company, I am sure the shareholders would say, cclose your factories and make the product abroad because you will make more dough for me and my quarterly dividend,"' Davis told the Boston Globe in 2004.'0 Davis also felt that the company had prod ucts capable of providi ng sol id margin s needed to generate the cash flow required to finance growth. As such, the company's balance sheet remained very strong with a seven-to-one ratio of assets to Liabilities.
Beyond financial flexibility, other aspects of the company's operations and strategy suggested that it was somehow different from competitors. President and Chief Operating Officer Jim Tompkins noted: One thing that sets us aprui and that is we a1-e manu factun:rs. But "e at'C mediocre marketers by design. Our marketing spend as a percent of net revenue is much lower than our competitors.The message that we talk about in the marketplace i different from our competitors' message. And that's what makes the company unique-ii is that we are manufacturing and operations-based. not marketing-based.
Jim Davis emphasized this distinction: In the early lo mid- l 980s. Nikeand Reebok wem both becoming major players. and eve1ybody said, "You ought to really do this because Nike and Reebok are doing it." Well , we tried a cou ple limes with product and programsand whatever, and we failed. drastically. So then l woke up one moming and I said, "We're not any good at that. We're really good at this ." So we concentrated on doing this instead of that, and thus differentiated ow-selves. Culture Similar to its unique business model, New Balance's corporate culture developed over time. Teamwork was a critical component. "When you 're young and starting up," Jim Davis recalled, "you don't really think in terms of a culture. You just sort of do things a certain way. One day we realized that we're very team-oriented, and that we empower people. When we got to a certain size and maturity, we realized that that's basically what we were all about."Further, New Balance developed a long-standing commitment to social responsibility that, according to Anne Davis, "made people feel good about deal ing with the com pany." For example, after the 2004 Asian Tsunami, New Balance declared that it would match whatever its associates donated. Then retailers wanted to par ticipate, so New Balance decided to match their con tributions for a total contribution of $1 million. The company also promised to donate another $1 million if 100 pen;ent participation was reached among as sociates. In the end, every person in the organization contributed something.
The company's culture was also very entrepreneurial, starting with the owners' willingness to take risks and encourage others to do the same. Anne em phasized that this culture of change and challenge extended to the factory, noting thatmatmfacturing em ployees, mostly organized in cross-functional teams, represented one of the greatest forces for change in the company.This spirit was also reflected across New Balance's senior managers. Chief Financial Officer John Withee observed, "Continuous improvement is a mantra here. Do the best you can, work cross functionally, and work towards a common goal." As an example of a major risk taken relatively early on by the company, Jim Davis pointed to the introduction of the 990 series running shoe in the 1980s, the first $I 00 shoe at a time when athletic shoes were retai ling for about $50. "People said we were nuts;' Jim mused, "but we couldn 't make them fast enough. People learned from that and be came more confident in pushing the envelope."As of 2005, the 990 series still represented the top-selling product for New Balance, accounting for roughly 3.5 percent of the company's sales.
Endorsed by No One
In an industry dominated by endorsement deals and large print and TV campaigns featuring celebrity ath letes, New Balance put its energies and investment into research, design, and domestic manufacturing, and let the resulting products speak for themselves. New Balance felt it could eschew celebrity endorse ments and position itself as a brand for performance oriented runners less swayed by fashion trends and popular personalities. New Balance extended its product-focused strategy to its branding efforts in 1992 with its "Endorsed by No One" campaign despite holding only 3 percent of the U.S. market for athletic shoes at the time."
New Balance introduced edgier iterations of the campaign that culminated with an anti-endorsement ad message that actually chided professional athletes for losing sight of the game and focusing dispropor tionately on endorsement deals. With slightly older core customers (between 25 and 49), New Balance concluded it could afford to take this irreverent tone in commercials. The "For Love or Money" campaign was unveiled in February 2005.12 The slogan felt "natural to us because it was something that only New Balance can stand in front of;' said Paul Heffernan, executive vice president of global marketing. "Jt's all about everyday athletes playing for the love of the game."13 By contrast, Reebok introduced a new ad campaign of its own that same month featuring bas ketball icon Yao Ming, Olympic gold medalist Kelly Holmes, actress Lucy Liu, and tennis player Andy Roddick, with the tagline "I Am What I Am.'*
The New Balance campaign featured a you ng basketball player admonishing "some of the pros out there," for their swagger and potentially un sportsmanlike conduct on and off the court that had become accepted behavior in some quarters. Most notably, a game-ending brawl during a Detroit Pistons game in Auburn Hills, Michigan, on November 19, 2004, that erupted after Indiana Pacers' forward Ron Artest leapt into the stands to retaliate against a spectator who had lobbed a cup of beer at players from the stands. The New Balance campaign took a direct approach with an unassailable jibe: "Is fight ing in sports everjustified?" In addition to 30-second TV spots, the campaign included print, billboard, and onl ine ads that posed a series of questions about athletes'-and by exten sion, their fans'--core values: "Can a losing coach still be a good coach?" and "Which teaches a player more, winning or losing?"Yet another New Balance ad from the same series was even more direct and confrontational: "Just in case you forgot, this is what a pass looks like. . . . This is what a Aoor burn looks like." New Balance was reportedly planning to spend $21 million on its 2006 advertising campaign, which was close to its entire promotional budget for the year.16
PRODUCT DESIGN
According to Paul Heffernan, New Balance's focus on width sizing and fit had historically dictated the design of many of the company's products. He explained: A 15-year-old who wants a pair of Nike Air Jordans might curl his toes or put on six pairs of socks to make that shoe fit. tn that case, purchases are made based on how a shoe looks rathe1·whether it really fits well. The market that is interested in width sizing and fit is a little bit older and more mat u.re; those custom ers demand a product that is a bit more conservative in its presentation and style.They tend to like a prod uct and buy it again and again and again. It 's Like a white button-down shirt. I own a white button-down, it wears out, I buy another white button-down.
New Balance had approximately 60 people in product design and development who were involved with efforts on two fronts. One was incremental de velopment of existing models. The second involved the incorporation of new technologies such as Absorb EX-a premium, visible-cushioning techno logy and Zip, a patented responsive-cushioning technol ogy scheduled to debut in 2006. Both technologies were oriented toward a younger customer base.
Despite New Balance's desire for long-lived products, Heffernan knew that the company had to remain capable of delivering prod ucts to the shorter cycle, fashion-oriented segments of the market. He noted:The 991 series-our franchise shoe of 25 years stays in line three years. With t hree ye;us to update that shoe, we can afford lo lake our time and be more thoughtful. But the more fashion-oriented products often need to chw·n every 60 to 90 days. which cre ates a completely different model for prod uct design. The fashion segment cares !es about widths and more about time to market, so we need to work under tighter timelines for these product .
Jim Davis felt that in the past five or six years, New Balance had "dropped the ball in a few places, and design is one of them." He added:
Right now. we are emphasizing design more tha n we have in the past and are raising the level and tature of design within the organization. Design is going to become more impo1tant as time goes on. a much larger foclor than it has been. We tend to be a little bit more conservative with design than our competition and stay within a ce1tain real.m for a relatively long pe1iod oftime. Then we find that we might have hit a wall. o we have to come back and reinvent ourselves a little bit and move forward. The manufact uring folks do that every day. The rest of the company is so11 of playing catch-up there, and we have to re invent ou1-i;e lves a little bit more often than we have in the past.
SALES AND DISTRIBUTION
New Balance had focused more on smaller retailers, running specialty shops, and family footwear shops. John Withee explained, "We are heavi ly focused on supporting the smaller type of service-oriented cus tomer." New Balance sold its products through ap· proximately 3,500 retailers representing over 12,000 sites, commonly referred to as "doors." Its largest retai I customer was Foot Locker, a major chain that, on its own, accounted for over 3,000 doors in the United States. New Balance divided its retai lers into two groups-key accounts and specialty dealers (see Exhibit 3). Key accounts were further divided into six strategic accounts and 49 other key accounts. Specialty retai lers were subdivided into three major channels: elite ru nning stores (i.e., specia lty stores for serious runners); independently owned and op erated New Balance stores; and other independent dealers, which were primarily family shoe stores.
Fran Allen, executive vice president for sales and service, noted that strong relationships with both small and large retailers were critica l for New Balance. "The importanc.e of independent, specia lty retai lers to the image of our brand far exceeds their 25 percent share of our sales volume. Obviously, large accounts are extremely important in terms of their sales volume. Consequently, we give both groups a lot of attention and work hard to give each what they need to be successful."
In contrast to competitors, New Balance relied on a sales force that was composed of independent agents. Allen noted, "In the sporting goods industr there is an unwritten rule-or maybe it isjust natural selection-that as you get to a certain point in sales volume, you grow out of an independent sales force. You bring the sales organization in house. At New Balance, we do not have any in-house accounts. We prefer using independent, dedicated sales agencies with an entrepreneurial mindset." Indeed, all the company's sales agents were independent of-but exclusive tNew Balance. These sales agencies were compensated through a sales-based commission. Under this system, new salespeople might earn $40,000 to $50,000 per year (from which they would cover their own expenses) whi le the most experienced salespeople could make several hundred thousand per year. Large retail ac counts were managed by a total of 10 head sales agents, 6 of whom were strategic account managers (SAMs). Specialty accounts were managed by ap proximately 100 agents, who worked for independ ent sales agencies, but were managed by five regional managers employed by New Balance (see Exhibit 4). New Balance was investing in a sales force automa tion system to increase the agents' productivity.
Despite the fact that these agents were not direct employees of New Balance, Allen-who had been with New Balance 15 years as sales manager-not ed that the company was not concerned about these relationships that were u nique to the industry. "We have a loyal group of salespeople, and their longev ity of service provides us with a distinct edge over our competitors," he explained, attributing this loy alty to the strength of New Balance 's leadership and culture. He added: In 1991, my first year at New Balance, the company sold $84 million in footwear in the United States; last year, we did a little over $1 billion. One of the reasons Jim Davis liked this sales organ'ization was that he had head sales agents who had been with him for 15 or 20 years before [ got here and had gone through some difficult times and stuck with the company.
For smaller, privately owned retailers, New Balance had historically paid an independent sales representative to take product orders and either key them into the New Balance order system or fax them to New Balance's corporate sales office at company headquarters in Allston, Massachusetts. To speed the ordering process, the company had recently invested in what Chief Financial Officer John Withee termed a "state-of-the-art" ilistribution center and was us ing technology to leverage this resource, support its retailers, and strengthen its retail relationships. In terms of information technology, a new sales force automation system enabled sales representatives to place direct orders remotely, access New Balance's inventory information, and check on delivery sta tus business-to-business (B2B). A B2B application promised to enable retailers-particularly smaller retailers-to do the same without intervention by the sales representative. Withee added, "This appli cation helps manage the flow of product through the supply chain and is about as vital as you can get in determining our performance."
Going forward, Withee explained, the B2B ap plication would help reta.ilers directly manage basic ordering, thereby freeing up the sales representative to engage with the retailer and make recommenda tions about new items to carry or options for reduc ing inventory levels. Concerning retailers, Jim Davis explained: If you've been selling New Balance shoes for the last I 0 years, to sell 1,000 pairs you had 400 pairs in inventory. Assuming you are selling all domestic product, which some of our accounts do, we would say: "We think we can increase your sales next year and lower your invento1y at ihe same time. We will ship to you the day after you order the product, so yom inventoties can be decreased dramatically. Rather than canying 400 pairs, you can cru..-y 200 pairs, and sell maybe 1,200 pairs instead of 1 ,000.And your mru·kdowns ru·e negligible, because your inven tory's so low:' And we think ihat's a very compelHng argument. We ru·e taking all the risk when we do that.
By shipping quickly and accurately, New Bal ance offered retailers the ability to build loyal cus tomers of their own. Indeed, according to Jim Davis, New Balance had far the greater consumer loyalty than any of its competitors. "That translates well for the retailer, especially if that retailer's able to satisfy the customer with that 13EEEE, because that cus tomer always wants that 13EEEE. He or she will generally go back to that same retailer to get that product.. And retailers lmow that!'
SUPPLY CHAIN AND MANUFACTURING
Jn contrast to Nike and Reebok, who outsourced nearly all of their production to As.ian manufac turers, New Balance used outsourcers for only 75 percent of its U.S. volume. For the remaining 25 per cent,final product assembly took place in one of New Balance's five factories in the Northeastern United States. One-third of these domestically assembled shoes were referred to as "cut through assembly" product. For these shoes, New Balance would import finished soles and the raw materials for the upper from Asian suppliers. The uppers would then be ful ly manufactured and attached to soles in the United States. The remaining two-thirds of New Balance's domestic product was referred to as "sourced up per." For sourced-upper shoes, New Balance would import finished uppers and soles from Asia and would complete the assembly by attaching the appro priately sized uppers and soles at its U.S. factories. The more time-intensive cut-through-assembly prod uct was manufactured at New Balance's factories in Lawrence, Massachusetts; Skowhegan , Maine; and Norridgewock , Maine. Sourced-upper shoes were as sembled at these three sites,as well as another factory in Norway, Maine.17 Exhibit 5 provides an overview of the manufacturing network and supply chain.
Foreign Suppliers
New Balance sourced the soles for most of its shoes from two suppliers in China (suppliers A and B in Exhibit 5). Depending on the shoe, these two firms also supplied either finished uppers or kits contain ing a significant portion of the materials required to stitch uppers in the United States.18 Finally, these firms provided a limited amount of fully assembled shoes. These firms shipped to New Balance's three materials warehouses , two in Skowhegan, Maine, and one in Lawrence, Massachusetts.
Historically, it would take approximately one week for New Balance to place a purchase order for components (e.g., soles, uppers, or kits) and have it accepted by the appropriate supplier in China. It would then take roughly six weeks for the supplier to manufacture the required components and an ad ditional five weeks to ship them by boat across the Pacific and transfer them to cross-country transport for delivery to the designated warehouse. Until the early 2000s, New Balance tended to place orders for a particular sole on a monthly basis in batches as large as 20,000 pairs. For a single type of sole, each order would include roughly 20 different SKUs, re flecting different shoes' lengths and widths such as 90, J OY,E, and 12EEE.
John Wilson, vice president for manufacturing, noted that the company had taken several steps in recent years to reduce the lead times from Asian suppliers. First, New Balance had shifted to placing smaller orders of between 2,000 and 10,000 pairs on a weekly basis. Jn addition, New Balance made ar rangements with these suppl iers to enable them to "pre-buy" their own raw materials on behalf of the company, thereby reducing the lead time required to produce an order. Based on the above initiatives and other efforts to reduce lead time, the average time from placing a component order with a suppl ier to having those items available at the New Balance materials warehouses fell from 12 weeks to approxi mately 9 weeks by 2005.
New Balance also contracted with two other Chinese manufacturers who were responsible for 75 percent of New Balance's foreign final product assembly. These firms shipped finished shoes to several of New Balance's smaller international divi sions, but most were bound for the United States and were sent via ship directly to New Balance's product distribution centers in Lawrence, Massachusetts, or Ontario, Cal ifornia. The order-to-delivery lead time 25 percent of the total, while materials accounted for the remaining 50 percent. Estimates of the total cost for a cut-through-assembly pair of shoes assembled in the United States was approximately $13 greater than a similar product fully man ufactured in Asia. For "sourced upper" pairs, this difference was thought to be about $0.50, due to import duties placed on fin ished goods entering the United States.
In 200 I, the average lead time for a cut-through assembly batch (typically consisting of 12 pairs of shoes) through a New Balance plant-measured from arrival of the raw materials to loading on the truck as finished product-was roughly 8.5 days. By 2005, the company had reduced this time to 2.5 days through significant attention to process improvement and work-in-process reduction within the plants. Wilson and his colleagues believed that further reductions in manufacturing lead time were attainable. Following production, domestically assembled pairs were transported via truck either directly to the retai ler (in the case of large strategic accounts) or to inventory in the Lawrence or Ontario distribu tion center. Each of those sites received and filled orders from smaller retailers. Combined, these two distribution centers held roughly 6.4 million pairs of finished shoes. The Ne"v Balance Workforce A Key to Operations l111prove1nent
The Davises believed that improving the produc tion process at New Balance req uired widespread initiative and involvement from the company's front line workers. Before joining the New Balance team, these manufacturing employees went through a lengthy selection process. New Balance screened potential employees for their professional or per sonal experience in team-based environments. For example, the company often looked for employ ees who had played team sports in high school or college. New hires were paired up with an experienced employee, known as a "buddy;' and were placed in a training team for six to eight weeks u ntil they were comfortable enough to go on a regular production team. "As soon as new employees come in, we train them in the fow1dations of associate involvement, continuous improvement, and leadership," Anne Davis explained, "but we don't want to put them immediately into an existing team and have them intimidated by the skills that the more experienced members already have." Another important feature of the company's U.S. workforce was that it was not unionized. Some employees performed two or three jobs on teams-a feature that would not be possible under a strict job classification system. "If one area of the factory is slow and the other one is loaded up," Anne Davis explained, "people willingly go to the next area to make their numbers for the day,and we would not be able to do that if they were unionized." "It's a flexibility issue. The factories are always changing," Jim Davis explained. "The folks on the factory floor are always pushing us to change things so they can do it better. We would n't be able to do that if we were unionized." He added: Annie and l are constantly amazed at how flexible these folks are, and how engaged they are in what they're doing. They go home, and they come to work the next day thinking, "How can 1 do things better? How can [ be more productive?" And what we're trying to do is get the whole company to think that Beyond the organization of the workforce, compensation also played a key role in the abil ity of New Balance's management to leverage em ployee knowledge and initiative. A few years ago, New Balance briefly moved from individ ual-based hourly wages to team-based piece rates, but then quickly moved back to the hourly system. Jim Davis explained:
Teammates put too much pressure on each other under the team-based compensation system. If one person was out of work because she had a sick child at home, there would be too much pressure on the rest of the team to perfo1m, and she came in feel ing guilty the next day. So we have also a culture of mutual respect here, and we sat down with ow· supervisors and we talked about how we might bet ter accommodate these people, and one of the things that we came up with was hourly pay. We did a pilot run for a month or so, and we found that the produc tion when we were compensating them on an how·Jy basis was equal lo if not better than under the team bai;ed piecework system.
Anne Davis added that the maintenance of hourly compensatio n helped gain support for con tinued training of the workforce. "Under the team based rate, many supervisors saw training as another project, as taking their people away from the job;' she said. '•With hourly pay they were more willing to send poople to training, and by doing training early on, people know right away whether or not they fit in the company."
LEAN MANUFACTURING NEW BALANCE EXECUTIONAL EXCELLENCE (NB2E)
In 2004, New Balance began New Balance Execu tional Excellence (NB2E) to apply the principles of the Toyota Production System (TPS) to shoe produc tion. One of the key goals of NB2E was to further reduce the lead time from a retailer's order to its delivery. Tompkins clearly stated his objective for NB2E:
Our goa l is I 00 percent delivery of requested prod uct within 24 hours. It may be impossible, but we are going to\\ ork toward something very, very close to that-to a position "here, for that two or three percent that \\ e can't deliver within 24 hours-we can ce11ainly replenish within. say, four days al the most. And that would be only for the worst-case scenario where we got completely surprised by an order.
According to Tompki ns, an essential component of NB2E would be to move the company's manu facturing plants from batch production to single-pair flow. He added:
Over a period of time I would like to know that when a part of an u pper gets cut to what pair of shoes that part is heading. . ..And we might be making several different models in a given factory on a given day, but we would still know that that pru·t right there and the one in the ot her factory over there are going to end up in a shoe that is put on tliat trailer heading to that cu tomer.Thal is where I would like lo get to.
Before NB2E, to improve product availabi lity, New Balance was required to resort to what Spivak called "brut e force" by greatly increasing finished goods inventory. For the compa ny's flagship shoe, the 991 , inventory was doubled to ensure availability for all colors, sizes, and widths. Though there was a significant increase in sales of the 991,the inventory cost was very high.
If N B2E were to be successful-approaching Tompkin s' goal of I 00 percent availabi lity within 24 hourswhile reducing inventory levels-manufacturing cycle times would need to be dramatically reduced. These changes required complete realignment of factory operations. Spivak observed:
0lll' factory had a classk a1rn ngement with a cutting, an embroidery. a stitching, and an assem bly depait ment. Each department did their particular tasks for all styles, and t he factory worked on a batch basis. To 1ealign that under NB2E would require a big change. Instead of moving a day's worth of production, we needed to move toward a more continuous flow. Doing this would require us lo reduce work in proc ess significantly and get the line associates and su pe1visors to embrace that change. The real challenge would be lo keep making shoes every day while this transformation \Va ongoing.
THE MARATHON
G limpsing the brilliant evening sun outside their kitchen window, the Davises could not imagine a more fitting time for reflection. Though New Balance traditionally had competed on the basis of its manu facturing, service to retai lers, and its ability to build loyalty among a core set of customers for its high margin, long-lived shoe models, 2005 had not been a stellar year mostly beca use of operational issues. "We did a very poor job of executing i n the first half of the year," J im Davis noted. "We had a lot of qual ity problem s, late del iveries, late samples, which in hibited the effectiveness of our salespeople." To Jim Davis, the answer to the company's problems was "basically doing everything we've always done be fore, only doing it better."Yet as New Balance grew well beyond $ I billion in revenue, the question of scalability came up.
In: Operations Management
MERGERS AND ACQUISITION
DEUTSCHE BANK AND BANKERS TRUST
Deutsche Bank was in the process of strategic transformation from a German bank to Global organisation but lacks sufficient present in the USA. Ed acquired Bankers Trust to address this and was particularly interested in the investment Bank Alex Brown acquired by Bankers Trust 2 years earlier.The success of the position has been largely attributed to the pre-integration period or courting phase. Here during the due diligence period the period of time between announcing and closing the m&a deal, Can any pendant cultural assessment exercise was commissioned by Deutsche Bank senior management. The cross organisational perceptions of employees revealed that:
1.Deutsche Bank employees did not feel the acquisition of Bankers Trust will enhance their business.
2.The integration of Alex brown and Bankers Trust had not been managed effectively causing internal conflict and a loss of identity among Alex Brown employees.
3. Bankers Trust felt that Deutsche Bank typified the traits of bureaucracy hierarchy and slow decision making that are associated with German companies.
This finding led senior management to:
During the integration phase: the marriage a number of HR initiatives were introduced to facilitates organizational integration:
BRITISH PETROLEUM AND AMOCO
The merger between two large British and US Petroleum Companies has been hailed as a success by its managers because it was achieved faster and created greater synergy than forecast.As with Deutsche Bank, The management of the pre-merger phase was seen as crucial to the success. This involved the creation of an integration team who use the due diligence period to assess the potential synergies that could be produced by combining head offices and merging operating divisions.
Managing the post-merger “marriage phase” revolved around five areas:
VOLVO AND FORD
This merger between a large Swedish organisation and Huge Anglo-Saxon Corporation had to confront many cultural differences between the two. employees perceived Volvo as operating Within decentralized and participated management philosophy where teamwork and devolved decision-making were the accepted norm and where personal credibility was derived from expertise not position in the organisation hierarchy. these characteristics were reflected in the management of Industrial relation where Union Representatives and management work closely together to improve business performance. In contrast, Ford what perceived as highly structured in hierarchical, with status differential between blue and white collar workers and with a more confrontational industrial relation climate. For Volvo employees, the transitions was also more marked as they moved from a position where a Volvo represented 51% of the previous AB Volvo group to where it represented only 8% of Ford’s total business.
Structural reorganisation was a key outcome of the mergers. 2 major divisions were created. The first brought the premium products under one roof (Jaguar, Land Rover, Aston Martin and Volvo)- The Premium Automotive Group. The second Ford cars covers the more traditional mass market product offerings.
The due diligence period focus on exploring the potential for financial synergies cultural issues were not explored at this time but immediately after the merger was finalize an integration team comprising 18 matched pairs of Ford and Volvo executives was formed. They were task to work together on an equal basis to establish further synergise in specified areas such as marketing, purchasing and research. The integration team was seen as an important vehicle for overcoming cultural differences.
Case study questions
If you had been responsible for the HRP dimension of each of the three mergers situations which do you think was handled effectively? and why?
Please provide very detail and comprehensive answer.
In: Operations Management
MERGERS AND ACQUISITION
DEUTSCHE BANK AND BANKERS TRUST
Deutsche Bank was in the process of strategic transformation from a German bank to Global organisation but lacks sufficient present in the USA. Ed acquired Bankers Trust to address this and was particularly interested in the investment Bank Alex Brown acquired by Bankers Trust 2 years earlier.The success of the position has been largely attributed to the pre-integration period or courting phase. Here during the due diligence period the period of time between announcing and closing the m&a deal, Can any pendant cultural assessment exercise was commissioned by Deutsche Bank senior management. The cross organisational perceptions of employees revealed that:
1.Deutsche Bank employees did not feel the acquisition of Bankers Trust will enhance their business.
2.The integration of Alex brown and Bankers Trust had not been managed effectively causing internal conflict and a loss of identity among Alex Brown employees.
3. Bankers Trust felt that Deutsche Bank typified the traits of bureaucracy hierarchy and slow decision making that are associated with German companies.
This finding led senior management to:
During the integration phase: the marriage a number of HR initiatives were introduced to facilitates organizational integration:
BRITISH PETROLEUM AND AMOCO
The merger between two large British and US Petroleum Companies has been hailed as a success by its managers because it was achieved faster and created greater synergy than forecast.As with Deutsche Bank, The management of the pre-merger phase was seen as crucial to the success. This involved the creation of an integration team who use the due diligence period to assess the potential synergies that could be produced by combining head offices and merging operating divisions.
Managing the post-merger “marriage phase” revolved around five areas:
VOLVO AND FORD
This merger between a large Swedish organisation and Huge Anglo-Saxon Corporation had to confront many cultural differences between the two. employees perceived Volvo as operating Within decentralized and participated management philosophy where teamwork and devolved decision-making were the accepted norm and where personal credibility was derived from expertise not position in the organisation hierarchy. these characteristics were reflected in the management of Industrial relation where Union Representatives and management work closely together to improve business performance. In contrast, Ford what perceived as highly structured in hierarchical, with status differential between blue and white collar workers and with a more confrontational industrial relation climate. For Volvo employees, the transitions was also more marked as they moved from a position where a Volvo represented 51% of the previous AB Volvo group to where it represented only 8% of Ford’s total business.
Structural reorganisation was a key outcome of the mergers. 2 major divisions were created. The first brought the premium products under one roof (Jaguar, Land Rover, Aston Martin and Volvo)- The Premium Automotive Group. The second Ford cars covers the more traditional mass market product offerings.
the due diligence period focus on exploring the potential for financial synergies cultural issues were not explored at this time but immediately after the merger was finalize an integration team comprising 18 matched pairs of Ford and Volvo executives was formed. They were task to work together on an equal basis to establish further synergise in specified areas such as marketing, purchasing and research. The integration team was seen as an important vehicle for overcoming cultural differences.
Case study questions
Compare and contrast the three outline cases from a HRP perspective, what are the main similarities and differences between them?
Please provide very detail and comprehensive answer.
In: Operations Management
Please answer the following Case analysis questions
1-What do you see that is impressive about New Balance? What aspects of New Balance do you find less impressive? What accounts for New Balance’s success since the early 1980’s? IS it great strategy, sound strategy, implementation and execution, great leadership, or just plain good luck?
2-What are the key elements of new Balance’s strategy? Which of the five generic strategies is the company employing?
3- Are New Balance’s functional strategies well aligned with its business level strategy? Why or why not?
On a pleasant August evening in 2005, Jim and Anne Davis enjoyed what was meant to be a relaxing dinner at home. As they finished their meal , however, they could not help but turn their attention to a headl ine in that morning's Boston Globe, a copy of which sat on their kitchen ta ble: "Adid as to buy Reebok."For over 30 years, the Davises had been the sole owners of New Balance Athletic Shoe Inc., one of the top five producers of athletic footwea r in the world. Given their experi ence i n the industry, they had suspected for some time that an Ad idas-Reebok transaction might be in the works. Neverthe less, the formal announcement caused them to wonder about the implications of this deal for New Balance. By bringing together Adidas and Reebok-the second- and third-largest produc ers of athletic footwear, respectively-this transac tion would create ajuggernaut that would rival Nike, the largest competitor in the industry. Although the Davises did not have to answer to Wall Street con cerning their competitive plans,they knew that many in the industry-including their own employees would soon be asking for their response. Lately, the Davises had focused significant atten tion on an initiat ive cal led New Balance Executional Excellence (N B2E), the goal of which was to in crease the quality and efficiency of the company's operational processes through the application oflean manufacturing. Started less than one year earlier,
NB2E already had provided evidence of early im provement, and the Davises did not want to lose the growing enthusiasm for this initiative among New Balance 's 2,600 associates. Further,they realized the importance of staying true to the private company's uniq ue operating philosophy, strategy, culture, and history.Nonetheless, they could not help but wonder whether New Balance's priorities needed to be ad justed in light of the shi fting competiti ve landscape.
THE U.S. ATHLETIC SHOE INDUSTRY'
The United States was the world's largest mari
ln recent years, manufacturers moved to com bine fashion and comfort to appeal to a broader range of consumers, namely those who wore athletic shoes for casual purposes. Concurrently, a combi nation of technological developments and style im provements in athletic footwear helped drive growth. While leather continued to be the most popular ma terial for athletic footwear uppers, some firms, such as Adidas-Salomon (Adidas), had developed shoes with so-called "smart textiles" and microchips that adjusted fit based on the wearer's activity, height, weight, and running terrain. Nike maintained a comfortable lead ahead of its competitors with 43 percent of the total global market for athletic shoes and apparel (see Exhibit I for sales and financial data for leading firms in the industry). Within the U.S. footwear market, Nike accounted for 36 percent of the market, while Adidas, Reebok and New Balance held on to a variable 8-12 percent each (Exhibit 2). Appendix A provides a brief description of each of the top competitors in the industry. The acquisition of Reebok by Adidas would cre ate a firm that rivaled Nike in terms of size and would boost Adidas 's share to roughly 20 percent of the U.S. footwear market. Though the Adidas-Reebok transaction was notable for its size, it reflected a broader recent trend of consolidation in the ath letic footwear industry. In July 2003, Nike acquired Converse, a Massachusetts based manufacturer of court and casual shoes, for $305 million. In June 2005, Stride Rite-the maker of casual footwear brands Keds and Sperry Top Sider-announced its intention to acquire Saucony, a $I 70 million manu facturer of specialty running shoes and apparel based in Peabody, Massachusetts. With respect to worldwide marketing, Nike out spent its rivals, spending $213 mi Ilion in measured media in 2004, compared to Adidas' $89 mill ion and Reebok 's $42 million.2 For the first JO months of 2005, for example, New Balance total advertising expenditure was $17.3 million.3 For all companies , a large portion of worldwide media expenditure was geared toward the marketing of footwear brands in the United States (Exhibit 2).
In addition to spending more on marketing than New Balance, most of its competitors produced their shoes outside of the United States, largely because the manufacturing of athletic footwear was highly l.abor intensive and required relatively low levels of worker skill. As a result,China had become the larg est manufacturer of athletic footwear for the U.S. market, commanding 85 percent of the category.4 The U.S. trade deficit in shoes was expected to con tinue to deepen, as more manufacturers shifted pro duction offshore. The deficit had increased about 7 percent per year since 1999, reaching 379 million pairs in 2004. Overall,Americans purchased 2.2 bil lion pairs of shoes and boots in 2004, enough to give each man, woman and child there 7.7 new footwear options that year.5
Distribution Channels
In 2005, the American sneaker market was divided i.nto several discrete retai I channels catering to pe riodically overlapping demographics that defined themselves by distinctive tastes, buying patterns, and price elasticity. Foremost among these were the "big box" chains such as Wal-Mart, Target, and Sears which together sold an estimated $12 billion in ath- 1.etic apparel and equipment per year.6 The second Largest group by sales volume included national sellers such as Foot Locker, The Sports Authority, Finish Line, and The Athlete's Foot. Next were smaller urban chains that maintained strong ties to tastemakers and arbiters of fashion. These chains typically either sold brands at heavy discounts to younger consumers or catered to high-end custom ers with very specific needs (e.g., high-performance running). The leading sneaker manufacturers, such as Nike and Adidas, also maintained showcase stores that featured new products in lavish displays accom panied by TV screens and music.These branded out lets were less retail stores than museums to the sneak ers of tomorrow and the "classics" made legendary by the likes of Pele, Chuck Taylor, and Michael Jordan.
With 4,000 stores around the world, Foot Locker was widely recognized as the world's leading retailer of athletic shoes and apparel. Foot Locker contribut ed slightly less than I0 percent to Nike's annual sales, but Nike products represented as much as 50 percent of sales for Foot Locker. The Sports Authority had 400 U.S. stores, but maintained a broader product base, selling workout equipment, basketball gear, sneakers and sports apparel. Finally, with 598 stores in the United States, Finish Line, originally started in the early 1980s as a discounter whose primary business was in "closeout" sales, prided itself in of fering prices that were typically $5 less than other retailers. Although beholden to the vagaries of fashion and manufacturers' ability to design hit products that would drive traffic into their stores, larger re tailers held a great deal of sway over the fortunes of the sneaker companies. For example, even though Converse sneakers were sold through many retail and on-line outlets nationwide, Foot Locker accounted for roughly 20 percent of all Converse sales. Any decision by Foot Locker about Converse's product placement thus could have a material impact on the brand's sales. In another case, a 2003 dispute over promotional practices for Nike shoes caused a costly one-year rift between the manufacturer and Foot Locker.
THE MAKING OF NEW BALANCE
New Balance was founded in Boston in 1906 as New Balance Arch 7 by William J. Riley, a 33-year-old British emigre who committed himself to helping people with problem feet by making arch supports and prescription footwear to improve shoe fit. In I 934, Riley went into partnership with his leading salesman, Arthur Hall. In 1954, Arthur Hall sold the business to his daughter and son-in-law, Eleanor and Paul Kidd. Arch supports and prescription fool:\vear remained the cornerstone of the business until 1961, when they manufactured the Trackster, the world 's first performance running shoe made with a ripple sole and available in multiple widths.
Du.ring the 1960s, New Balance's reputation for manufactu.ring innovative performance footwear available in multiple widths grew through word of mouth and grassroots promotions. When Jim Davis bought the specialized shoe man ufacturer from the Kidds on the day of the Boston Marathon in I 972, he committed himself to uphold the company's founding va lues of fit, performance , and manufac turing . He recalled: I wanted to buy a company, I wa young and single. I didn't have anything. so I had nothing to lose. [ looked at it a year before I bought ii.Al the time, I was in electronics. 1 pa. ed. because l knew noth ing about footwear and not much about spotting goods.other than what I knew from doing spotts in college. I got a pair of the hoes.statted running in them,and peoplewould come up lo me and comment that I must be a good runner. Unable to put a deal together in elect1-onics.with the company still avail able. I went back,and t he guy was desperate losell it. We paid $100,000 for the company; we put $10,000 down, and the rest of the $90,000 was generated from lowering im•ento1y.
At the time N ew Balance was primarily a mail order business with only a handful of U.S. retail ers. Jim Davis started traveling around the country to expand reta il distribution , and sales grew from $ I 00,000 to around $300,000 over a two-year pe riod. Anne, who wou l d marry Jim in 1984, joined New Balance in 1978 and focused on bui lding a dis tinct culture for New Balance associates and those who would do business with the company around the globe. Indeed, N ew Ba l ance's first international sales office and first European manufacturing facility both opened in 1978 in Europe. Since then the brand had expanded from Europe and Asia to the Middle East, Latin America, and Africa.
In the early 1980s New Balance set up new manufacturing facilities in New England and signed on international distributors. In 1982, the company reached the $60 million mark and debuted the well received 990 running shoe, the first athletic shoe priced at $ 100.1 Jn the 1990s, the company unveiled its New Balance Suspension System to telegraph its emphasis on cutting-edge R&D and its dedication to meeting the needs of performance-oriented runners. The company 's commitment to multiple sneaker widths remained a sell ing point that was reflected in the brand 's iconic marketing logo of three differently sized feet.9 Being Different Herb Spivak, executive vice president of opera tions and a 12-year veteran of the company, provid ed a picture of New Balance's un ique features. He observed: Ow·values have been very, very con istent and re inforced continuously by J im and Anne Davis. We do not endorse athletes, as an example. We aim to make every one of ow·shoes a pc1fo1mance product as opposed lojusl a fashion product. We sell eve1y shoe that we make in multiple width . because we believe that fit is a critical pe1fo 1mance charac1e1is tic. We maintain a great percentage of our product in inventory for replenishment. so that dealers can con tinually get fill-ins when they sell and when they need ce1tain sizes and widths. In con1ra 1. competitors pretty much tell retailers. "OK. tell us six months in advance what you 're going lo want lo buy and we'll deliver it. But it's fixed. and we don't plan on having future invenlo1y.'·These basic factors, combined with the maintainin g of our domestic factories all come together to describe what makes us unique.
Because the company had remained private,Jim Davis felt that he and his colleagues could act more nimbly and be more socially responsible than their more well-heeled competitors. "I f we were a pu b lic company, I am sure the shareholders would say, cclose your factories and make the product abroad because you will make more dough for me and my quarterly dividend,"' Davis told the Boston Globe in 2004.'0 Davis also felt that the company had prod ucts capable of providi ng sol id margin s needed to generate the cash flow required to finance growth. As such, the company's balance sheet remained very strong with a seven-to-one ratio of assets to Liabilities.
Beyond financial flexibility, other aspects of the company's operations and strategy suggested that it was somehow different from competitors. President and Chief Operating Officer Jim Tompkins noted: One thing that sets us aprui and that is we a1-e manu factun:rs. But "e at'C mediocre marketers by design. Our marketing spend as a percent of net revenue is much lower than our competitors.The message that we talk about in the marketplace i different from our competitors' message. And that's what makes the company unique-ii is that we are manufacturing and operations-based. not marketing-based.
Jim Davis emphasized this distinction: In the early lo mid- l 980s. Nikeand Reebok wem both becoming major players. and eve1ybody said, "You ought to really do this because Nike and Reebok are doing it." Well , we tried a cou ple limes with product and programsand whatever, and we failed. drastically. So then l woke up one moming and I said, "We're not any good at that. We're really good at this ." So we concentrated on doing this instead of that, and thus differentiated ow-selves. Culture Similar to its unique business model, New Balance's corporate culture developed over time. Teamwork was a critical component. "When you 're young and starting up," Jim Davis recalled, "you don't really think in terms of a culture. You just sort of do things a certain way. One day we realized that we're very team-oriented, and that we empower people. When we got to a certain size and maturity, we realized that that's basically what we were all about."Further, New Balance developed a long-standing commitment to social responsibility that, according to Anne Davis, "made people feel good about deal ing with the com pany." For example, after the 2004 Asian Tsunami, New Balance declared that it would match whatever its associates donated. Then retailers wanted to par ticipate, so New Balance decided to match their con tributions for a total contribution of $1 million. The company also promised to donate another $1 million if 100 pen;ent participation was reached among as sociates. In the end, every person in the organization contributed something.
The company's culture was also very entrepreneurial, starting with the owners' willingness to take risks and encourage others to do the same. Anne em phasized that this culture of change and challenge extended to the factory, noting thatmatmfacturing em ployees, mostly organized in cross-functional teams, represented one of the greatest forces for change in the company.This spirit was also reflected across New Balance's senior managers. Chief Financial Officer John Withee observed, "Continuous improvement is a mantra here. Do the best you can, work cross functionally, and work towards a common goal." As an example of a major risk taken relatively early on by the company, Jim Davis pointed to the introduction of the 990 series running shoe in the 1980s, the first $I 00 shoe at a time when athletic shoes were retai ling for about $50. "People said we were nuts;' Jim mused, "but we couldn 't make them fast enough. People learned from that and be came more confident in pushing the envelope."As of 2005, the 990 series still represented the top-selling product for New Balance, accounting for roughly 3.5 percent of the company's sales.
Endorsed by No One
In an industry dominated by endorsement deals and large print and TV campaigns featuring celebrity ath letes, New Balance put its energies and investment into research, design, and domestic manufacturing, and let the resulting products speak for themselves. New Balance felt it could eschew celebrity endorse ments and position itself as a brand for performance oriented runners less swayed by fashion trends and popular personalities. New Balance extended its product-focused strategy to its branding efforts in 1992 with its "Endorsed by No One" campaign despite holding only 3 percent of the U.S. market for athletic shoes at the time."
New Balance introduced edgier iterations of the campaign that culminated with an anti-endorsement ad message that actually chided professional athletes for losing sight of the game and focusing dispropor tionately on endorsement deals. With slightly older core customers (between 25 and 49), New Balance concluded it could afford to take this irreverent tone in commercials. The "For Love or Money" campaign was unveiled in February 2005.12 The slogan felt "natural to us because it was something that only New Balance can stand in front of;' said Paul Heffernan, executive vice president of global marketing. "Jt's all about everyday athletes playing for the love of the game."13 By contrast, Reebok introduced a new ad campaign of its own that same month featuring bas ketball icon Yao Ming, Olympic gold medalist Kelly Holmes, actress Lucy Liu, and tennis player Andy Roddick, with the tagline "I Am What I Am.'*
The New Balance campaign featured a you ng basketball player admonishing "some of the pros out there," for their swagger and potentially un sportsmanlike conduct on and off the court that had become accepted behavior in some quarters. Most notably, a game-ending brawl during a Detroit Pistons game in Auburn Hills, Michigan, on November 19, 2004, that erupted after Indiana Pacers' forward Ron Artest leapt into the stands to retaliate against a spectator who had lobbed a cup of beer at players from the stands. The New Balance campaign took a direct approach with an unassailable jibe: "Is fight ing in sports everjustified?" In addition to 30-second TV spots, the campaign included print, billboard, and onl ine ads that posed a series of questions about athletes'-and by exten sion, their fans'--core values: "Can a losing coach still be a good coach?" and "Which teaches a player more, winning or losing?"Yet another New Balance ad from the same series was even more direct and confrontational: "Just in case you forgot, this is what a pass looks like. . . . This is what a Aoor burn looks like." New Balance was reportedly planning to spend $21 million on its 2006 advertising campaign, which was close to its entire promotional budget for the year.16
PRODUCT DESIGN
According to Paul Heffernan, New Balance's focus on width sizing and fit had historically dictated the design of many of the company's products. He explained: A 15-year-old who wants a pair of Nike Air Jordans might curl his toes or put on six pairs of socks to make that shoe fit. tn that case, purchases are made based on how a shoe looks rathe1·whether it really fits well. The market that is interested in width sizing and fit is a little bit older and more mat u.re; those custom ers demand a product that is a bit more conservative in its presentation and style.They tend to like a prod uct and buy it again and again and again. It 's Like a white button-down shirt. I own a white button-down, it wears out, I buy another white button-down.
New Balance had approximately 60 people in product design and development who were involved with efforts on two fronts. One was incremental de velopment of existing models. The second involved the incorporation of new technologies such as Absorb EX-a premium, visible-cushioning techno logy and Zip, a patented responsive-cushioning technol ogy scheduled to debut in 2006. Both technologies were oriented toward a younger customer base.
Despite New Balance's desire for long-lived products, Heffernan knew that the company had to remain capable of delivering prod ucts to the shorter cycle, fashion-oriented segments of the market. He noted:The 991 series-our franchise shoe of 25 years stays in line three years. With t hree ye;us to update that shoe, we can afford lo lake our time and be more thoughtful. But the more fashion-oriented products often need to chw·n every 60 to 90 days. which cre ates a completely different model for prod uct design. The fashion segment cares !es about widths and more about time to market, so we need to work under tighter timelines for these product .
Jim Davis felt that in the past five or six years, New Balance had "dropped the ball in a few places, and design is one of them." He added:
Right now. we are emphasizing design more tha n we have in the past and are raising the level and tature of design within the organization. Design is going to become more impo1tant as time goes on. a much larger foclor than it has been. We tend to be a little bit more conservative with design than our competition and stay within a ce1tain real.m for a relatively long pe1iod oftime. Then we find that we might have hit a wall. o we have to come back and reinvent ourselves a little bit and move forward. The manufact uring folks do that every day. The rest of the company is so11 of playing catch-up there, and we have to re invent ou1-i;e lves a little bit more often than we have in the past.
SALES AND DISTRIBUTION
New Balance had focused more on smaller retailers, running specialty shops, and family footwear shops. John Withee explained, "We are heavi ly focused on supporting the smaller type of service-oriented cus tomer." New Balance sold its products through ap· proximately 3,500 retailers representing over 12,000 sites, commonly referred to as "doors." Its largest retai I customer was Foot Locker, a major chain that, on its own, accounted for over 3,000 doors in the United States. New Balance divided its retai lers into two groups-key accounts and specialty dealers (see Exhibit 3). Key accounts were further divided into six strategic accounts and 49 other key accounts. Specialty retai lers were subdivided into three major channels: elite ru nning stores (i.e., specia lty stores for serious runners); independently owned and op erated New Balance stores; and other independent dealers, which were primarily family shoe stores.
Fran Allen, executive vice president for sales and service, noted that strong relationships with both small and large retailers were critica l for New Balance. "The importanc.e of independent, specia lty retai lers to the image of our brand far exceeds their 25 percent share of our sales volume. Obviously, large accounts are extremely important in terms of their sales volume. Consequently, we give both groups a lot of attention and work hard to give each what they need to be successful."
In contrast to competitors, New Balance relied on a sales force that was composed of independent agents. Allen noted, "In the sporting goods industr there is an unwritten rule-or maybe it isjust natural selection-that as you get to a certain point in sales volume, you grow out of an independent sales force. You bring the sales organization in house. At New Balance, we do not have any in-house accounts. We prefer using independent, dedicated sales agencies with an entrepreneurial mindset." Indeed, all the company's sales agents were independent of-but exclusive tNew Balance. These sales agencies were compensated through a sales-based commission. Under this system, new salespeople might earn $40,000 to $50,000 per year (from which they would cover their own expenses) whi le the most experienced salespeople could make several hundred thousand per year. Large retail ac counts were managed by a total of 10 head sales agents, 6 of whom were strategic account managers (SAMs). Specialty accounts were managed by ap proximately 100 agents, who worked for independ ent sales agencies, but were managed by five regional managers employed by New Balance (see Exhibit 4). New Balance was investing in a sales force automa tion system to increase the agents' productivity.
Despite the fact that these agents were not direct employees of New Balance, Allen-who had been with New Balance 15 years as sales manager-not ed that the company was not concerned about these relationships that were u nique to the industry. "We have a loyal group of salespeople, and their longev ity of service provides us with a distinct edge over our competitors," he explained, attributing this loy alty to the strength of New Balance 's leadership and culture. He added: In 1991, my first year at New Balance, the company sold $84 million in footwear in the United States; last year, we did a little over $1 billion. One of the reasons Jim Davis liked this sales organ'ization was that he had head sales agents who had been with him for 15 or 20 years before [ got here and had gone through some difficult times and stuck with the company.
For smaller, privately owned retailers, New Balance had historically paid an independent sales representative to take product orders and either key them into the New Balance order system or fax them to New Balance's corporate sales office at company headquarters in Allston, Massachusetts. To speed the ordering process, the company had recently invested in what Chief Financial Officer John Withee termed a "state-of-the-art" ilistribution center and was us ing technology to leverage this resource, support its retailers, and strengthen its retail relationships. In terms of information technology, a new sales force automation system enabled sales representatives to place direct orders remotely, access New Balance's inventory information, and check on delivery sta tus business-to-business (B2B). A B2B application promised to enable retailers-particularly smaller retailers-to do the same without intervention by the sales representative. Withee added, "This appli cation helps manage the flow of product through the supply chain and is about as vital as you can get in determining our performance."
Going forward, Withee explained, the B2B ap plication would help reta.ilers directly manage basic ordering, thereby freeing up the sales representative to engage with the retailer and make recommenda tions about new items to carry or options for reduc ing inventory levels. Concerning retailers, Jim Davis explained: If you've been selling New Balance shoes for the last I 0 years, to sell 1,000 pairs you had 400 pairs in inventory. Assuming you are selling all domestic product, which some of our accounts do, we would say: "We think we can increase your sales next year and lower your invento1y at ihe same time. We will ship to you the day after you order the product, so yom inventoties can be decreased dramatically. Rather than canying 400 pairs, you can cru..-y 200 pairs, and sell maybe 1,200 pairs instead of 1 ,000.And your mru·kdowns ru·e negligible, because your inven tory's so low:' And we think ihat's a very compelHng argument. We ru·e taking all the risk when we do that.
By shipping quickly and accurately, New Bal ance offered retailers the ability to build loyal cus tomers of their own. Indeed, according to Jim Davis, New Balance had far the greater consumer loyalty than any of its competitors. "That translates well for the retailer, especially if that retailer's able to satisfy the customer with that 13EEEE, because that cus tomer always wants that 13EEEE. He or she will generally go back to that same retailer to get that product.. And retailers lmow that!'
SUPPLY CHAIN AND MANUFACTURING
Jn contrast to Nike and Reebok, who outsourced nearly all of their production to As.ian manufac turers, New Balance used outsourcers for only 75 percent of its U.S. volume. For the remaining 25 per cent,final product assembly took place in one of New Balance's five factories in the Northeastern United States. One-third of these domestically assembled shoes were referred to as "cut through assembly" product. For these shoes, New Balance would import finished soles and the raw materials for the upper from Asian suppliers. The uppers would then be ful ly manufactured and attached to soles in the United States. The remaining two-thirds of New Balance's domestic product was referred to as "sourced up per." For sourced-upper shoes, New Balance would import finished uppers and soles from Asia and would complete the assembly by attaching the appro priately sized uppers and soles at its U.S. factories. The more time-intensive cut-through-assembly prod uct was manufactured at New Balance's factories in Lawrence, Massachusetts; Skowhegan , Maine; and Norridgewock , Maine. Sourced-upper shoes were as sembled at these three sites,as well as another factory in Norway, Maine.17 Exhibit 5 provides an overview of the manufacturing network and supply chain.
Foreign Suppliers
New Balance sourced the soles for most of its shoes from two suppliers in China (suppliers A and B in Exhibit 5). Depending on the shoe, these two firms also supplied either finished uppers or kits contain ing a significant portion of the materials required to stitch uppers in the United States.18 Finally, these firms provided a limited amount of fully assembled shoes. These firms shipped to New Balance's three materials warehouses , two in Skowhegan, Maine, and one in Lawrence, Massachusetts.
Historically, it would take approximately one week for New Balance to place a purchase order for components (e.g., soles, uppers, or kits) and have it accepted by the appropriate supplier in China. It would then take roughly six weeks for the supplier to manufacture the required components and an ad ditional five weeks to ship them by boat across the Pacific and transfer them to cross-country transport for delivery to the designated warehouse. Until the early 2000s, New Balance tended to place orders for a particular sole on a monthly basis in batches as large as 20,000 pairs. For a single type of sole, each order would include roughly 20 different SKUs, re flecting different shoes' lengths and widths such as 90, J OY,E, and 12EEE.
John Wilson, vice president for manufacturing, noted that the company had taken several steps in recent years to reduce the lead times from Asian suppliers. First, New Balance had shifted to placing smaller orders of between 2,000 and 10,000 pairs on a weekly basis. Jn addition, New Balance made ar rangements with these suppl iers to enable them to "pre-buy" their own raw materials on behalf of the company, thereby reducing the lead time required to produce an order. Based on the above initiatives and other efforts to reduce lead time, the average time from placing a component order with a suppl ier to having those items available at the New Balance materials warehouses fell from 12 weeks to approxi mately 9 weeks by 2005.
New Balance also contracted with two other Chinese manufacturers who were responsible for 75 percent of New Balance's foreign final product assembly. These firms shipped finished shoes to several of New Balance's smaller international divi sions, but most were bound for the United States and were sent via ship directly to New Balance's product distribution centers in Lawrence, Massachusetts, or Ontario, Cal ifornia. The order-to-delivery lead time 25 percent of the total, while materials accounted for the remaining 50 percent. Estimates of the total cost for a cut-through-assembly pair of shoes assembled in the United States was approximately $13 greater than a similar product fully man ufactured in Asia. For "sourced upper" pairs, this difference was thought to be about $0.50, due to import duties placed on fin ished goods entering the United States.
In 200 I, the average lead time for a cut-through assembly batch (typically consisting of 12 pairs of shoes) through a New Balance plant-measured from arrival of the raw materials to loading on the truck as finished product-was roughly 8.5 days. By 2005, the company had reduced this time to 2.5 days through significant attention to process improvement and work-in-process reduction within the plants. Wilson and his colleagues believed that further reductions in manufacturing lead time were attainable. Following production, domestically assembled pairs were transported via truck either directly to the retai ler (in the case of large strategic accounts) or to inventory in the Lawrence or Ontario distribu tion center. Each of those sites received and filled orders from smaller retailers. Combined, these two distribution centers held roughly 6.4 million pairs of finished shoes. The Ne"v Balance Workforce A Key to Operations l111prove1nent
The Davises believed that improving the produc tion process at New Balance req uired widespread initiative and involvement from the company's front line workers. Before joining the New Balance team, these manufacturing employees went through a lengthy selection process. New Balance screened potential employees for their professional or per sonal experience in team-based environments. For example, the company often looked for employ ees who had played team sports in high school or college. New hires were paired up with an experienced employee, known as a "buddy;' and were placed in a training team for six to eight weeks u ntil they were comfortable enough to go on a regular production team. "As soon as new employees come in, we train them in the fow1dations of associate involvement, continuous improvement, and leadership," Anne Davis explained, "but we don't want to put them immediately into an existing team and have them intimidated by the skills that the more experienced members already have." Another important feature of the company's U.S. workforce was that it was not unionized. Some employees performed two or three jobs on teams-a feature that would not be possible under a strict job classification system. "If one area of the factory is slow and the other one is loaded up," Anne Davis explained, "people willingly go to the next area to make their numbers for the day,and we would not be able to do that if they were unionized." "It's a flexibility issue. The factories are always changing," Jim Davis explained. "The folks on the factory floor are always pushing us to change things so they can do it better. We would n't be able to do that if we were unionized." He added: Annie and l are constantly amazed at how flexible these folks are, and how engaged they are in what they're doing. They go home, and they come to work the next day thinking, "How can 1 do things better? How can [ be more productive?" And what we're trying to do is get the whole company to think that Beyond the organization of the workforce, compensation also played a key role in the abil ity of New Balance's management to leverage em ployee knowledge and initiative. A few years ago, New Balance briefly moved from individ ual-based hourly wages to team-based piece rates, but then quickly moved back to the hourly system. Jim Davis explained:
Teammates put too much pressure on each other under the team-based compensation system. If one person was out of work because she had a sick child at home, there would be too much pressure on the rest of the team to perfo1m, and she came in feel ing guilty the next day. So we have also a culture of mutual respect here, and we sat down with ow· supervisors and we talked about how we might bet ter accommodate these people, and one of the things that we came up with was hourly pay. We did a pilot run for a month or so, and we found that the produc tion when we were compensating them on an how·Jy basis was equal lo if not better than under the team bai;ed piecework system.
Anne Davis added that the maintenance of hourly compensatio n helped gain support for con tinued training of the workforce. "Under the team based rate, many supervisors saw training as another project, as taking their people away from the job;' she said. '•With hourly pay they were more willing to send poople to training, and by doing training early on, people know right away whether or not they fit in the company."
LEAN MANUFACTURING NEW BALANCE EXECUTIONAL EXCELLENCE (NB2E)
In 2004, New Balance began New Balance Execu tional Excellence (NB2E) to apply the principles of the Toyota Production System (TPS) to shoe produc tion. One of the key goals of NB2E was to further reduce the lead time from a retailer's order to its delivery. Tompkins clearly stated his objective for NB2E:
Our goa l is I 00 percent delivery of requested prod uct within 24 hours. It may be impossible, but we are going to\\ ork toward something very, very close to that-to a position "here, for that two or three percent that \\ e can't deliver within 24 hours-we can ce11ainly replenish within. say, four days al the most. And that would be only for the worst-case scenario where we got completely surprised by an order.
According to Tompki ns, an essential component of NB2E would be to move the company's manu facturing plants from batch production to single-pair flow. He added:
Over a period of time I would like to know that when a part of an u pper gets cut to what pair of shoes that part is heading. . ..And we might be making several different models in a given factory on a given day, but we would still know that that pru·t right there and the one in the ot her factory over there are going to end up in a shoe that is put on tliat trailer heading to that cu tomer.Thal is where I would like lo get to.
Before NB2E, to improve product availabi lity, New Balance was required to resort to what Spivak called "brut e force" by greatly increasing finished goods inventory. For the compa ny's flagship shoe, the 991 , inventory was doubled to ensure availability for all colors, sizes, and widths. Though there was a significant increase in sales of the 991,the inventory cost was very high.
If N B2E were to be successful-approaching Tompkin s' goal of I 00 percent availabi lity within 24 hourswhile reducing inventory levels-manufacturing cycle times would need to be dramatically reduced. These changes required complete realignment of factory operations. Spivak observed:
0lll' factory had a classk a1rn ngement with a cutting, an embroidery. a stitching, and an assem bly depait ment. Each department did their particular tasks for all styles, and t he factory worked on a batch basis. To 1ealign that under NB2E would require a big change. Instead of moving a day's worth of production, we needed to move toward a more continuous flow. Doing this would require us lo reduce work in proc ess significantly and get the line associates and su pe1visors to embrace that change. The real challenge would be lo keep making shoes every day while this transformation \Va ongoing.
THE MARATHON
G limpsing the brilliant evening sun outside their kitchen window, the Davises could not imagine a more fitting time for reflection. Though New Balance traditionally had competed on the basis of its manu facturing, service to retai lers, and its ability to build loyalty among a core set of customers for its high margin, long-lived shoe models, 2005 had not been a stellar year mostly beca use of operational issues. "We did a very poor job of executing i n the first half of the year," J im Davis noted. "We had a lot of qual ity problem s, late del iveries, late samples, which in hibited the effectiveness of our salespeople." To Jim Davis, the answer to the company's problems was "basically doing everything we've always done be fore, only doing it better."Yet as New Balance grew well beyond $ I billion in revenue, the question of scalability came up.
In: Operations Management
Bob Downe is auditing Red Gum Home Furniture (RGHF), a manufacturer and retailer of boutique home furniture. RGHF was founded 25 years ago by a husband and wife team and has grown rapidly in the last five years as solid, environmentally friendly, wooden furniture has grown in popularity. However, although RGHF’s owners have attempted to expand the administration department to keep pace with the growth in sales, some systems are not operating as effectively as they should. This is partly due to difficulty in attracting and retaining accounts staff with appropriate experience and skills.
RGHF’s owners have recently realised that they need to increase pay and improve conditions for accounts staff to avoid regular periods without sufficient qualified staff, particularly for sales invoice processing. The staff shortages have resulted in sluggish performance in processing invoices, sending out customer statements, and collecting cash from account customers. In addition, there have been numerous mistakes in processing sales invoices, some of which have been discovered after customer complaints.
Bob is selecting a sample of sales invoices for substantive testing. All documents relating to sales invoices for the last five years are stored in boxes in the shed behind the office. The shed is very small and the boxes are stacked on top of each other because the shelves are full. Due to the damp conditions some labels have peeled from the boxes, so it is not clear which boxes relate to the current year.
a. Describe the population(s) that would be relevant to Bob’s sample selection.
b. Which sample selection methods would be appropriate for choosing sales invoices for substantive testing at RGHF? Explain the factors that would influence your choice.
In: Accounting
In: Accounting
a survey of 2284 adults in a certain large country aged 18 and
older conducted by reputable polling organization founded that 424
have donated blood in the past two years. Complete Parts (a)
through (C).
a) obtain a point estimate for the population proportion of adults
in the country age 18 and older who have donated blood in the past
two years.
b) verify that the requirements for constructing a confidence
interval.
the sample [ a) can be assumed to be b)is stated to not be. c)
cannot be assumed to be. d) is stated to be. ] a simple random
sample, the value of [ a)np b) p(1-p) c) np(1-p) d) p.] is [ ].
which is [ a) greater than. b) less then] 10. & the [ a)
population size b) sample population c) sample size d) population
proportion] [ a)can be assumed to be. b) is stated to not be c)
cannot be assumed to be d) is stated to] less than or equal to 5%
of the [a) sample proportion b) population proportion c) population
size d) sample size.]
c. construct and interpret a 90% confidence interval for the
population proportion of adults in the country who have donated
blood in the past two years. Select the correct Choice below and
fill in any answer box within your choice.( type integer or decimal
rounded to three decimal places as needed. Use ascending
order)
A) we are [ ]% confident the proportion of adults in the country
aged 18 and older who have donated blood in the past two years is
between [ ] and [ ].
B) there is a [ ]% chance the proportion of adults in the country
aged 18 and older who have donated blood in the past 2 years is
between [ ] and [ ].
In: Statistics and Probability
Stiff Clay: Cc=0.15; Cs = 0.02; Pc = 120 kPa; e0=0.9
Soft Normally Consolidated Clay: Cc=0.38; Cs = 0.06; e0=1.0
a) The isolated foundations are subjected to a stress of 140 kPa. Calculate the consolidation settlement. Consider the very stiff clay as one layer and divide soft clay layer into two equal sub-layers. Calculate settlement under one typical foundation.
b) What would be the maximum additional stress applied on a central foundation from two neighboring foundations (situated at the left and right sides of the central foundation). Is it necessary to consider the additional stresses from neighboring foundations in the settlement calculations?
c) A concern is the differential settlement between isolated adjacent footings. It was decided to change the design to have the structure founded on a raft foundation subjected to a stress of 45 kPa. Compute the consolidation settlement and comment on the results.
In: Civil Engineering
Larissa has been talking with the company’s directors about the future of East Coast Yachts. To this point, the company has used outside suppliers for various key components of the company’s yachts, including engines. Larissa has decided that East Coast Yachts should consider the purchase of an engine manufacturer to allow East Coast Yachts to better integrate its supply chain and get more control over engine features. After investigating several possible companies, Larissa feels that the purchase of Ragan Engines, Inc., is a possibility. Ragan Engines, Inc., was founded nine years ago by a brother and sister—Carrington and Genevieve Ragan—and has remained a privately owned company. The company manufactures marine engines for a variety of applications. Ragan has experienced rapid growth because of a proprietary technology that increases the fuel efficiency of its engines with very little sacrifice in performance. The company is equally owned by Carrington and Genevieve. The original agreement between the siblings gave each 150,000 shares of stock. Last year, Ragan had an EPS of $5.35 and paid a dividend to Carrington and Genevieve of $320,000 each. The company also had a return on equity of 21 percent. Larissa tells Dan that a required return for Ragan of 18 percent is appropriate.
Assuming the company continues its current growth rate, what is the value per share of the company’s stock? You must show all your works for the full credits.
Step 1: Find total earnings
Step 2: Find payout ratio
Step 3: Find retention ratio
Step 4: Find growth ratio
Step 5: Find total equity value
Step 6: Find value per share
In: Finance
Java
Project Requirements:
1.Write a Java program that plays a word game with a user. The program asks the user questions and then creates a paragraph using the user’s answers.
2.The program must perform the following:
a.Uses a Scanner object to ask the user: (The program asks for no other information)
i.Full Name (First and Last name only) - stores this Full Name in one String object variable.
ii.Age – must be read in as an int.
iii.Profession or expected profession
iv.Name of favorite pet
v.Cost of their first vehicle – must be read in as a double.
b.All input data must be stored in their own variable prior to printing out.
c.Display a paragraph of the programmer’s choosing that contains the following
i.The user’s full name, first name, and last name in separate places in the paragraph, such as James Gosling founded Sun Microsystems. James was a child prodigy. The Gosling family is very proud of James.
ii.The user’s age.
iii.The user’s profession in all uppercase regardless of the case the profession was entered.
iv.The user’s favorite pet’s name in all lower case regardless of the case the name was entered.
v.The total cost of the user’s first vehicle in a rounded two decimal places including the dollar signs. The total cost must include the inputted cost plus a 7.5% sales tax. The sales tax rate is stored as a constant in the program.
vi.A statement in parenthesis stating the total number of characters in the paragraph such as (The above story contained 345 characters)
d.Include javadoc class comment following Project Comment Template on the content page.
3.The project requires one files to be turned in - WordGame.java (the source code of your Word Game programming.
In: Computer Science