Macpac Strategic Management: Global Expansion Case Study

Introduction: Macpac's Strategic Journey

Analyzing the case study of Macpac identifies multiple strategic issues the company faced in its journey from startup to "iconic New Zealand Company" (Benson-Rea & Shepherd, 2008). Of these strategic scenarios, three in particular stand out as representative of the challenges facing organizations in the "worldwide movement toward economic, financial, trade, and communications integration" (Business Dictionary, n.d.). Globalization provides context for Macpac's three strategic challenges and subsequent policy choices: expansion of sales beyond New Zealand to encompass the scope and breadth of global markets; direct selling to retail partners; and, of greatest importance to their financial survival, the outsourcing of manufacturing to Asia. These three strategic challenges form the foundation of how Macpac moved through its life cycle — from introduction, growth, maturity, and decline to ultimate renewal. An analysis of each challenge offers a clearer view of the organization's development.

Global Sales Expansion Beyond New Zealand

Macpac's growth over three-plus decades was concurrent with the rise in export opportunities for companies around the globe. Based in New Zealand, the company initially sold predominantly in its home market; however, the late 1970s and early 1980s saw the expansion of exports of the firm's outdoor gear to Australia, accounting for "five percent of total sales of one million" (Benson-Rea & Shepherd, 2008). This initial move toward an export-driven sales approach further developed the basic principles of strategic management: customer focus, competitive advantage, and resource-based analysis (Lynch, n.d.).

Bruce McIntyre, "the entrepreneurial founder of Macpac" (Benson-Rea & Shepherd, 2008), understood that the future of the business was rooted in the development of global markets. From a strategy perspective, an organization will typically follow one of two models — or both — in developing its blueprint: the prescriptive process and the emergent process. "A prescriptive strategy is one whose objective is defined in advance and whose main elements have been developed before the strategy commences. An emergent strategy is one whose final objective is unclear and whose elements are developed during the course of its life, as the strategy proceeds" (Lynch, n.d.).

In the case of sales expansion beyond New Zealand, there was a combination of both processes. McIntyre clearly had designs on expanding the business to Australia, and in this regard the prescriptive process was evident. He also looked to the United States for market growth, and subsequently to economically strong European countries: Great Britain, Switzerland, the Netherlands, and Germany. These efforts, while achieving the desired outcome of increased global sales, relied more on adapting elements as the strategy unfolded. The U.S. market, for example, proved extremely difficult for Macpac to penetrate, while Europe seemed to fit well into their sales and marketing approach. Together, the prescriptive and emergent processes were responsible for the success of the export strategy. By 2005, exports accounted for 65% of total Macpac sales (Benson-Rea & Shepherd, 2008) — a figure representative not only of a burgeoning global trade environment, but also of a strategic shift toward direct selling of product to retailers.

Shift to Direct Retail Selling

The 1990s were a time of transition for Macpac, particularly in the shift away from using agents and distributors. Of fundamental importance to the company was the expansion of sales opportunities; however, reliance on outside distribution channels was detrimental to profitability. In 1992 the company "started selling directly to Australian retailers… followed closely by similar arrangements in Europe and the U.K." (Benson-Rea & Shepherd, 2008). In this regard, the firm made the tactical decision to handle outbound logistics — a component of Porter's Value Chain — in order to increase margins (NetMBA, n.d.).

McIntyre recognized that company resources would be better utilized through a direct selling approach. A resource audit of the firm's physical, human, and financial resources clarified that direct sales would drive profit margins higher, as employees could foster connections abroad and develop networks of retailers to sell product.

Conclusion

The power of suppliers in no small way contributed to cost increases for the firm. "Labor, parts, raw materials, and services" (Ehmke et al., n.d.) were at the core of the company's financial difficulties in the early part of the decade; the movement of production offshore was a direct recognition of the bargaining power of their suppliers. The power of buyers operates on two levels. In the first case, buyers are the end consumers of the product — and while "Macpac had a very high quality product which many people said they did not need and were not prepared" to pay a premium price for, the brand's differentiation helped sustain demand. In the second case, buyers include the retail partners to whom Macpac sold directly, giving those retailers their own negotiating leverage. Taken together, supplier power, buyer power, and intense rivalry among competitors shaped each of Macpac's three strategic decisions and ultimately propelled the company's transformation from a domestic New Zealand manufacturer into a globally oriented outdoor gear brand.