Before we dive deep into the SWOT analysis, let’s get the business overview of New Balance. New Balance Athletics, Inc., commonly known as New Balance, is an American multinational corporation headquartered in Boston, Massachusetts. The company was founded in 1906 as the New Balance Arch Support Company and is one of the world’s major sports footwear and apparel manufacturers.
Business Model: New Balance operates on a vertical integration model, overseeing numerous aspects of production, marketing, and sales of its products. Unlike many of its competitors, New Balance asserts to maintain a significant manufacturing presence in the United States and the United Kingdom for the European market, despite the higher costs associated with manufacturing in these regions.
Products: The company produces a range of shoes and apparel for runners and other athletes, focusing on performance and quality. It is known for prioritizing function over fashion, though it has also become more prominent in the lifestyle and streetwear segments in recent years.
Market Position: New Balance is known for its commitment to domestic manufacturing (at least a portion of its product line) and its focus on producing running shoes that prioritize fit and performance. They cater to a wide range of customers by offering shoes in multiple widths and continue to gain traction in the global athletic wear market.
Distribution: Their distribution channels include company-owned and third-party retail outlets, online stores, and a global distribution network of distributors and retailers. New Balance is also often found in multi-brand sports apparel stores.
Brand and Marketing: New Balance uses a targeted marketing strategy, often focusing on individual athletes and fitness enthusiasts rather than celebrity endorsements. They sponsor various events, teams, and athletes across the world, which helps maintain their image as a serious athletic brand.
Financial Performance: In an interview with Yahoo Finance, managing director Joe Preston said that New Balance’s 2022 revenue was $5.3 billion (€5 billion), equivalent to a 21% growth over the previous year.
Here is the SWOT analysis for New Balance
A SWOT analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats of a business, project, or individual. It involves identifying the internal and external factors that can affect a venture’s success or failure and analyzing them to develop a strategic plan. In this article, we do a SWOT Analysis of New Balance.
SWOT Analysis: Meaning, Importance, and Examples
Strengths
- Strong Manufacturing Presence: Unlike many competitors who primarily manufacture overseas, New Balance maintains significant production facilities in the United States and the United Kingdom, appealing to consumers who advocate for local manufacturing and can pay a premium for products made in these countries.
- Quality and Durability: New Balance is renowned for the quality and durability of its shoes, which is a significant strength as consumers seek value for their money.
- Customization and Fit: Offering a range of sizes and widths, New Balance caters to a broad spectrum of customers, providing better-fitting shoes that appeal to specific needs.
- Brand Reputation: With a history dating back to 1906, New Balance has established a strong brand reputation for comfort, fit, and performance, especially among serious athletes.
- Innovation: The company strongly focuses on research and development, leading to innovative products incorporating the latest materials and design technologies.
- Marketing Strategy: New Balance strategically markets its products by focusing on fitness communities and grassroots campaigns rather than high-cost celebrity endorsements, which resonates with many consumers.
- Diverse Product Range: While primarily known for running shoes, New Balance has expanded its product line to include apparel, accessories, and shoes for various sports and outdoor activities.
- Global Reach: Despite being a U.S.-based company, New Balance has a substantial global presence, with its products being sold in numerous countries worldwide.
- Community and Social Engagement: New Balance is active in various social causes and community engagements, enhancing its brand image and fostering customer loyalty.
- Loyal Customer Base: The brand has a loyal customer base that values the specific qualities associated with New Balance’s products, such as performance and fit.
Weaknesses
- Limited Marketing: Unlike giants like Nike and Adidas, New Balance has a relatively modest marketing budget. This could limit brand visibility in an industry where aggressive marketing is key to capturing market share.
- High Manufacturing Costs: Maintaining manufacturing operations in the United States and the UK results in higher production costs than competitors in countries with cheaper labor.
- Fashion Over Function: Although focusing on function over fashion is a strength for athletes, it can be a weakness in the broader consumer market, where style and brand image can play a more significant role in purchasing decisions.
- Lesser Celebrity Endorsements: New Balance doesn’t engage heavily in celebrity endorsements, which can limit its appeal among younger demographics who are often influenced by celebrity culture.
- Narrower Product Line: While New Balance has diversified its product range, it is still primarily known for running shoes, with less presence in other sports and leisurewear segments than some of its competitors.
- Limited Global Presence: Despite being an international brand, New Balance’s presence in some key emerging markets is not as robust as some of its competitors, potentially limiting growth opportunities.
- Dependence on the US Market: A significant portion of New Balance’s revenue comes from the US, which could be risky if the domestic market faces economic downturns or shifts in consumer preferences.
- Scale: As a more minor player compared to industry leaders, New Balance might lack the scale to negotiate as effectively with suppliers and distributors, potentially affecting margins and market reach.
- E-commerce and Digital Presence: While New Balance has an online presence, its digital and e-commerce strategies may not be as developed as some competitors, which is increasingly important in the consumer market.
Opportunities
- Global Expansion: There is a significant opportunity for New Balance to expand its reach into emerging markets, where increasing incomes and interest in health and wellness could drive demand for athletic wear.
- E-commerce Growth: By bolstering its online sales platform, New Balance could take advantage of the growing trend of online shopping, especially in the context of a post-pandemic world where consumers are more inclined to buy online.
- Product Diversification: New Balance could diversify its product portfolio to include more sports and lifestyle segments, broadening its customer base.
- Technology and Innovation: Investing in new technologies, such as advanced materials for better-performance shoes or wearables integrated with fitness technology, could provide New Balance with a competitive edge.
- Sustainable Products: There is a growing market for eco-friendly products. New Balance could seize this opportunity by developing sustainable, eco-friendly footwear and apparel.
- Market Segment Expansion: Targeting new market segments, such as youth sports, casual wear, or specific women’s athletic wear, could provide new revenue streams.
- Collaboration and Partnerships: Collaborating with designers, celebrities, or other brands could help New Balance reach new customers and markets.
- Marketing Campaigns: Developing innovative marketing campaigns that resonate with a broader audience can help improve brand visibility and appeal, especially among younger demographics.
- Health and Fitness Trend: The increasing focus on health and fitness globally is a positive signal for New Balance to position its products in line with health-conscious consumer trends.
- Supply Chain Optimization: Streamlining its supply chain and reducing manufacturing costs without compromising quality could help improve margins.
- Retail Experience Innovation: Creating unique in-store experiences can drive traffic to New Balance’s retail locations and strengthen brand loyalty.
- Community Engagement: Increasing community engagement through sponsorships, events, and local initiatives can enhance brand reputation and customer loyalty.
Threats
- Intense Competition: The athletic footwear and apparel market is highly competitive, with giants like Nike, Adidas, and Under Armour having substantial market shares and brand loyalty.
- Counterfeit Goods: The prevalence of counterfeit goods can damage New Balance’s brand reputation and result in lost sales.
- Global Economic Fluctuations: Economic downturns can reduce consumer spending on non-essential goods, including premium athletic wear.
- Trade Policies and Tariffs: Changes in trade policies and the imposition of tariffs can affect New Balance’s supply chain and profitability, mainly since it manufactures in the US and the UK.
- Shifts in Consumer Preferences: A shift from the performance athletic style to other fashion trends can affect sales.
- Retail Disruption: The ongoing shift to online shopping can threaten physical retail stores, impacting New Balance’s sales channels.
- Rapid Technological Change: Slower adaptation to new technologies compared to competitors can result in a loss of market share.
- Market Saturation: There may be limited growth opportunities due to market saturation in mature markets.
- Supply Chain Disruptions: Global events such as pandemics, natural disasters, or political instability can disrupt supply chains, affecting production and distribution.
- Regulatory Changes: Stricter environmental or labor regulations can increase the cost of production, especially for companies manufacturing in developed countries with already high standards like New Balance.
- Currency Fluctuations: Since New Balance operates internationally, fluctuations in currency exchange rates can negatively affect profit margins.
- Health and Wellness Trends: While an opportunity, if the public’s interest in health and fitness diminishes, it could reduce demand for athletic footwear and apparel.
