IBUS 205 – Tutorial 3 – Icebreaker

1. Applying the competitive positioning model by Brown (1997) cited in the book by Fletcher and Brown (2008), discuss the structural position, competitive position, resources position, market position of Icebreaker and the implications of these positions for Icebreaker’s competitive strategy in the global market.
Structural position – market share structure (niche), firms share

Competitive position – competitive advantage (merino wool innovation)

Resource position – resource leverage (wool suppliers – primary good)

Market position – price/benefits mix (high benefit, high price – Icebreaker)

2. What are the implications of these positions for Icebreaker’s competitive strategy?
Rise & Trouts strategic square: Flanking – Icebreaker focused on an uncontested area in the sportswear market – merino sportswear

Brown’s competitive strategy: Niche strategy – can be seen from their intention to stay relatively small & leader in the sense that merino sportswear had not yet been in the market

3. According to Peter Drucker (Drucker & Maciariello, 2008), “Because its purpose is to create a customer, the business has two – and only two – functions: marketing and innovation. Marketing and innovation create value, all the rest are costs.” How is this management principle applied in the success of Icebreaker?
Marketing

– The development history of Icebreaker has been built around strong brand story of icebreaker & marketing of merino to environmentally and quality concerned consumers

– Focused in length on the logo. Wording of its product
Icebreakers became Icebreaker (passive to active) natural became nature (the former too associated with hippies), wool became merino (the former being too ‘itchy and heavy’)

Innovation

– Icebreaker was innovative in the field of merino wool because they were the first manufacturer to make sportswear garments out of merino wool, they pioneered and created the market. From then on they perfected their product & made it sleeker

4. How has their internationalisation activity influenced the innovation strategy of Icebreaker?
Entering foreign markets: broadened the focus of outwear stores giving them a lifestyle aspect

Access to global design talents enables Icebreaker products to keep up with international design and fashion trends: Relocating R&D to Portland Oregon, the silicon valley of outdoor gear (clustering) allows Icebreaker to poach talent

5. How would you describe the dynamic relationship between design and marketing in Icebreaker’s internationalisation process (design led vs. marketing led)?
Half of capital at the start of Icebreaker put towards marketing (100 thousand from 250 thousand). Icebreaker’s core brand value of connecting with nature is pervasive in all icebreaker products. Focuses on what consumer wants – lightweight, smell resistant, quality wool that is shaped into a stylish product.

Jeremy Moon has led by design with merino wool. No other firm had attempted a clothing line made from merino. There was no market for it. He led by design and marketed it successfully. Customers had not yet known that it was a product they were after.

6. How do we understand the mixed (both wholesale and retail) strategy by Icebreaker in overseas markets compared with a predominant wholesaler approach in NZ?
– Selective in retailers, similar to Femme Fatale

– Exclusivity so as to not flood the market and maintain demand

– Retail staff see Icebreaker as cool in outdoor stores overseas, must maintain that

7. How can we apply the concepts of ‘liability of smallness’ (Gassmann & Keupp, 2007) and ‘liability of foreignness’ (Lu & Beamish, 2001) to explain Icebreaker’s different distribution strategies between NZ and the overseas countries?
Liability of foreignness: the additional costs that foreign firms must incur that local firms do not

Liability of smallness: the additional costs a small firm must incur over a large firm

Liability of smallness & foreignness =
– overcome by innovation, superior resource, speciality
– worked hard with retailers listening to their complaints, suggestions & tapping into customer insight in regular focus groups