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SHOE MAKERS GO GLOBAL TO REDUCE COSTS
Published May 30, 1995
International manufacturing of athletic shoes -- and Reebok in particular -- is profiled in this week's U.S. NEWS, with the report detailing how shoe companies move from one Asian site to another in search of low-cost labor. Ten years ago nearly all of Reebok's manufacturing took place in South Korea and Taiwan, but as the countries become more productive, wages increased. Reebok then "began shifting out of South Korea and Taiwan, moving its operations to cheaper markets." Today, most of the work is being done in China, Indonesia and Thailand, with only 9% being made in South Korea, and none in Taiwan. Footwear companies are moving manufacturing plants, because "fluctuations in labor costs can have a signing impact on a sneaker maker's bottom line." A $70 pair of Reebok's cost $20 to make in East Asia, but after operating expenses the "sneaker company's profit is just over $6. New Balance is seen as "sneaking up on its rivals." New Balance "clings to four of the five remaining factories in the [U.S.] that actually cut and stitch athletic shoes" and being one of "the nation's last domestic sneaker makers has turned into a marketing boon." Worldwide sales jumped 25% last year to $310M and the company will use money from what it saves in its no endorsement and reduced ad strategy ($6M a year, compared to Nike's $200M) to expand output (U.S. NEWS, 6/5 issue).