TU-91.

2038 Strategies for Growth and Renewal Case Kipling

Nikita Semkin 79048K

In 1991 Kipling, a Belgian casual bag company experienced turmoil. Their main banker announced that they would stop providing credit for them despite their continuous growth. The company had to go through vigorous changes and reconstruction with the aim of getting company profitable and steering it to path of high growth. Both the crisis Kipling faced and their methods to overcome it are very similar to those described in arti cle How to Structure Companies for High Growth by Antino Davila and George Foster. Similarities can also be found in Larry E. Greiners article Evolution and revolution as organizations grow. Both of these articles are used to analyze Kiplings situation. Even though Kiplings sales were growing fast it still lacked working capital. And investors didnt find Kiplings growth as enough guarantee. Kiplings founders Paul and Xavier involved Tony Gram in the company. He brought with himself experience that the company and its managers lacked. Events that followed were consistent with ideas presented in Greiners article. Using description provided in article, the company was coming to end of creation phase and coming to grip with crisis of leadership. Having Gram involved in the company is also congruent with the solution described in Grinders article. Tony Gram was the strong manager with necessary knowledge and skill to introduce new business techniques. Changes and the times after Gram are also consistent with articles direction phase. Tony started immediately making improvements in company. He started streamlining companies operations that were previously chaotic. He created a new price structure and limited product range. He also dropped small retail orders that proved to be more costly then beneficial to the company. Next in line was renewal of Kiplings international strategy which, lacking consistency and efficacy, was started from scratch. The previous partners were of average quality and very different. A more structured approach to internationalization was defined, directing focus to core markets. These restructures lead to Kiplings rapid expansion on international scale. Foresters and Davilas article suggests that growth is important to companies not just for increased revenues, but for increased business opportunities. Growth of the company enables more growth so to speak. This applied for Kipling also. Companys growth granted them the US market with practically no effort involved. Later they also managed to expand to South American markets same way. Growth and therefore increased brand value also helped Kipling by giving them more leverage in negotiations with suppliers and retailers. Changes in the company also create problems. Both articles describe how changes and increasing professionalism in growing companies can be difficult for managers to handle. In Kipling this was seen by raising tensions between Xavier and other managers which in the end lead to Xavier leaving the company. With continuous growth also came new challenges for Kipling. They were expected to continuously present the market with something new and innovative which meant they had to continuously create new collections, something Kipling was not prepared for, on either organizational or design level. More challenges came. Paul and Tony realized that most of the workers didn t have global understanding of the company. They tended to the problem by having a seminar for employees to increase the awareness within the company. The seminar also brought out the need for people management, something also suggested by Davila and Foster. With the growth of the company Kipling realized that the entrepreneurial culture had to be directed. Without clear directives and structures the company would not be successful in the long term. They also realized they had to delegate responsibility from Paul and Tony. This matches Davilas and Fosters thoughts. Growing company needs to move from entrepreneurial to managerial mindset to be able to work efficiently. Davila and Foster suggest that at some point in growing company, the entrepreneur and oft the founding member need to pass the reins of the company to a manager. This was again true in Kipling. Paul and Tony sold the company to UBS Capital and a new CEO, Ian Siddal, took over. Unfortunately changes that follow were too much for Paul and he decided to leave the company,