Xinbailun

CLASS 5 Strategic Capacity Planning

3rd March

Learning Objectives for this session

Learn the elements behind devising a successful capacity strategy: Types of capacity cushions,

flexibility considerations, allocation of capacity among multiple facilities, and facility location

considerations.

Case: New Balance Athletic Shoes (9-680-110)

Reading: Capacity Strategy

New Balance Athletic Shoes describes the plight of an athletic shoe manufacturing firm that faced

high market growth that exceeded 100% per year. James Davis, president of New Balance, must decide

how to meet the need for additional capacity. Several factors contribute towards a climate of

uncertainty. Several options are considered from second shift to acquiring a plant in Ireland.

Case Questions for New Balance Athletic Shoes

(Note that this case requires a written submission from all syndicate groups)

1. What is the positioning strategy New Balance adopted in the marketplace vis-a-vis its competition?

2. What are the problems Jim Davis is facing? Support your findings with information from the case.

3. What is your evaluation of the options Davis has? Identify criteria and rank the options on the

basis of their financial and strategic implications. Show detailed calculations to support your claims.

4. Choose an Option and discuss briefly the risks associated with the option and the timing of its

implementation. What is your plan for managing the risks?

5. Beyond the suggested options, are there other issues that Davis needs to focus on? If so, state the

issues and discuss their criticality for the future of NB.

NEW BALANCE ATHLETIC SHOES:

* What competitive priorities are necessary to successfully compete in this market?

* How reasonable is the New Balance sales forecast. Justify your position.

* What is the profit after tax for each of the different capacity expansion options. You may wish to prepare a spreadsheet detailing the various relevant costs in comparison...