Kipling: Monkey Business - Kipling tries to conquer the world
This case was developed in collaboration with Leleux B. from IMD. This case is available at ECCH and consists of two parts (A & B). Reference case A: IMD-3-2153 on ECCH. Reference case B: IMD-3-2154 on ECCH.
May 1991. Flying back from Venice, Paul Van de Velde thought back about the strange meeting he and Enrico Boldoni had earlier that day with a potential Italian investor. Enrico, an elegant forty something Italian, was the franchising manager for a major department store chain in Italy. He strongly believed in the Kipling brand, and after opening the first Italian Kipling shop in a mall near Rome, he decided to switch into a higher gear - opening the next 25 stores!
Enrico had found an investor willing to stake a great deal of money in the development of Kipling's franchise concept in Italy. After a short presentation of the Kipling concept, the man confirmed his interest in investing in Kipling with a minor Italian twist; instead of becoming a Kipling franchisee, he wanted to take over the whole company and become the franchisor! He offered to pay 3.75 million euros for the company. Paul took a deep breath. Was this really what he was after when he entered the Italian market? Would he have to deal with this kind of issue when internationalizing Kipling? Did they really want to depend on this type of character for the future growth of the company? Was franchising the way to go?
The second part of the case goes back to September 1991. Paul Van de Velde and Xavier Kegels were expecting a visit from their main banker, Mr Meuleman. Paul and Xavier had founded Kipling, a casual bag company, five years earlier, together with a third partner, Vincent Haverbeke, who provided the seed money for the venture. Shortly after lunch, the banker finally arrived. Because he had the habit of visiting Kipling about twice a year to briefly go through the financials, his visit did not seem in any way extraordinary. Unfortunately, this time around the meeting turned out very different. Mr Meuleman had stopped by to announce that his bank would stop providing short-term lines of credit to Kipling. The Gulf War had made the banks jittery, in particular with respect to fast-growing companies requiring extensive bank loans. Kipling belonged to that not-so-exclusive-anymore club. Although the company was steadily heading towards 11 million euros in revenues, the bank had
decided not to renew its 1.1 million euros revolving credit line. Kipling had three months to look for new sources of funds. Was this the end of the story or the welcome 'kick in the pants' that would force the young firm to professionalize and address the issue of sustainability? Was this the kiss of death or the kiss of life? It was still a bit early to tell, but the wake up call was nasty.
Maybe it was time to step back from the mystique and get their feet back on the ground. Kipling as a successful, fast-growing company had needs very different from Kipling, the startup. Maybe it was finally time to wake up to that fact and give the firm the tools it needed to be really successful. Would they be able to make that transition?
Learning Objectives of this Case:
- Building a Brand
- Globalising a start-up company
- Professionalising a creative start-up
- Modes of internationalisation
- Financing growth
- Managing growth
- Private equity