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enter into a category that they are not currently exposed to. Strategy In this case New Balance wants to capitalize on what they see competitors like Nike cashing in on. They see an under-utilized market in the 12-18-year-old male segment and are confident that this can bring value to shareholders through a carefully executed plan. New Balance is willing to spend money on endorsements because they can measure the success of competitor endorsements. Strategically focusing on a market segment that is not being over saturated has the capability to secure a following in customer base. Additionally, New Balance has a potential plan to break into the market of hiking shoes which they have researched and found to be one of the fastest growing trends in the shoe market.New Balance has two very aggressive and costly projects to expand their portfolio in this case. Capitalizing on an under focused market (12-18-year-old males) and a growing market (hiking footwear). Should both these projects be successful, New Balance has the potential to increase itsmarket share, which compared to competitors is substantially smaller. Endorsement Pros and Cons Endorsements have the potential to increase the margins of a product substantially. New Balance’s plan is to bank on Kirani James to expand their market share makes sense since Kirani is only 18 years of age. He would be an inspiration and could be a catalyst to capture the hearts and minds of young runners who want to perform at his level. However, endorsements do not always pay off and the risk of the athlete's career derailing needs to be taken into account. Nike and Gatorade lost a ton of money when the Tiger Woods scandal broke out. Estimates on total losses for both companies’ combined are near $12 Billion. (UC Davis, 2009). In examining that 7
Sneaker 2013Group 10particular situation, two companies that have huge percentages of market shares in their respective markets, counted on an athlete to continue performing well and not have any major career setbacks. In this case, they gambled and that gamble failed. For Nike, they still have a majority market share in the sneaker industry. However, New Balance may not be able to sustain that kind of impact if something goes wrong with Kirani James’ career. This is a crucial risk that needs to be kept in mind as the endorsement cost alone issubstantial. And there is no completely accurate way to determine how the sales of the shoe would be affected. Endorsements also have the potential to ensure that certain products skyrocket in value. The Air Jordan sneakers prove that an athlete has the potential to bring in a ton of revenue to their endorsers. In this case, the chosen athlete is young, and has a bright career ahead of him. James potential at the Olympics can ensure that Sneaker 2013 is sought after and that the project is successful. The projected selling price of this shoe is also a high-risk area. $190 is a steep cost compared to a market share that usually pays around $100 for the higher name brands such as Nike and Reebok.