Icebreaker Ltd. New Zealand Despite the Fact

Icebreaker Ltd. New Zealand

Despite the fact that New Zealand is a relatively small market, in recent years this country has been growing in several industries. One industry experiencing exponential growth is the clothing industry. This paper overviews the case study regarding Icebreaker Ltd. This is followed by the author's comments on the case study and Icebreaker's participation in this high growth industry.

Case Summary:

With just over four million people,, New Zealand is considered a reasonably small economic market; however a variety of their industries are growing by leaps and bounds, including the clothing industry. Icebreaker was formed through a convergence of "kiwi ingenuity and an unanticipated encounter that occurred in Pohuenui" (Andrade, 2010, p. 2). Brian Brakenridge, an owner of 3,000 merino sheep, wanted to change the public's negative perception of wool. To do this, he wanted to show the industry that wool could be applied to outdoor garments. Following a trip to the United States, and a meeting with the owner of an outdoor store, Brian began production in the mid-1990s of some very basic garments under the label - Ice Breaker. Jeremy Moon discovered the advantages of merino wool for outdoor garments in 1994, mortgaged his house, quit his job and bought half of Ice Breakers, changing the name to Icebreaker Nature Clothing. By 1995, the company was the first "in the world to develop a merino wool layering clothing line for the outdoors, including underwear, mid layer and outwear" (p. 4). Icebreaker quickly expanded their product line to five styles, with four unisex sizes, an array of designs and two colors.

Despite growing sales in New Zealand, Icebreaker had the opportunity to expand internationally. International growth could produce more revenues as well as mitigate risks of underperforming markets, as well as balance out seasonal and cyclical sales. However, the process was fraught with challenges, like distributor selection. Despite these challenges, "within five years, Icebreaker became the largest outdoor clothing brand in Australasia" (Andrade, 2010, p. 4).

Expansion into Europe began in 1999, and by 2005 more than half of Icebreaker's revenues came from international sales. Combining state-of-the-art technology and natural merino wool, by 2010 Icebreaker clothing was found in 30 countries and in 2,000 stores. Two hundred twenty-five employees distribute products around the world (Andrade, 2010, p. 5). The company's supply chain is filled with a variety of participants.

The beginning of the supply chain, for Icebreaker, is the sourcing of merino wool direct from New Zealand's sheep farmers. Since its first purchase of just 700 kilograms in 1997, the company grew to the largest merino contract in the world, with 2.5 thousand tonnes between 2006 to 2008. With such a significant step in the supply chain relying on animals, animal welfare has been a primary concern for Icebreaker (Andrade, 2010, p. 6).

Other supply chain steps involved shipment to China or New Zealand for cleaning, carding, combing, and superwashing. Yarn spinning followed, in Australia, Korea or China. From there, the fiber was sent to either the United States, for sock manufacturing or Shanghai for other garments. All of these garments were designed in America (Andrade, 2010, p. 6).

Icebreaker didn't rely on pricing as a competitive advantage. Instead, it built its business on the segmentation strategy. The uniqueness of their products and the high quality set it apart in an increasingly competitive outdoor apparel industry. Moving the manufacturing processes offshore was not due to a desire for cost reduction, but rather access to higher quality and quantiy production. The total process from wool to distribution of finished garments took 33 to 43 weeks. The complexity of the supply chain required a high degree of coordination to maximize its effectiveness (Andrade, 2010, p. 7).

Like many popular brands, imitators have plagued the company; however, Icebreaker's unique designs and high quality couldn't be easily reproduced. The company has also embraced the Internet to market the company's commitment to ethics and promote their "Baacode," the company's transparent supply chain. In addition, Icebreaker garments are available via several retailer websites (Andrade, 2010, p. 9).

Comments:

Icebreaker is an excellent example how innovation, commitment to product quality, ethics, and commitment to the customer can help create competitive advantage that trumps price point competition. The company has grown from a small New Zealand clothing manufacturer and in fifteen years has grown to an international outdoor clothing success story. Much of this success is contrary to the success garnered by other clothing manufacturers in an incresingly competitive and globalized world.

Although Icebreaker has turned to outsourcing for much of its supply chain, like many manufacturers around the world, this outsourcing wasn't done to increase profit margins. Instead, the company's outsourcing partners were suppliers who could provide a higher quality product, due to technological improvements, and who could meet the increasing production needs of the company. In addition, in an industry where concerns about unethical labor practices of suppliers, such as child labor, have become increasingly ethical challenges for clothing manufacturers. Icebreakers has offered consumers complete transparency in their supply chain, giving consumers piece of mind when it comes to these concerns. These unique attributes have not only given Icebreakers another competitive advantage, but has helped build customer loyalty.

The future for Icebreaker looks bright. The company is well-positioned to take advantage of a rebounding global economy, with consumers who will have increased access to discretionary spending. As consumers become evermore socially conscience, Icebreaker's corporate policies of transparency and concern for animal welfare will further assist the organization in garnering valuable market share. A continued commitment to quality, innovation and customer service will see Icebreaker continue their successful path for the next decade and a half.