Knirps® - The Original

Topics: Strategy; Marketing; Branding; Internationalization; Licensing

• Background: ’Knirps‘ the inventor of collapsible umbrellas, used to be a well known and valuable brand. This case is set in 2007, when two former competitors took over the company and tried to revive the brand. 'Knirps' is the only international umbrella brand, but has made a lot of mistakes in the past. What has to be undertaken for things to improve in the future?

• CASE SYNOPSIS Few inventions become world-famous brands.

Knirps®, the umbrella that is extremely small but expands to full size when required, is one of them.

• Knirps® as a brand, - and protected by many patents - has, for nearly 80 years, succeeded due to its quality, durability, practicality and “pocket-friendly“ size.

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• Recently, this company has changed hands, and the new owners expect from Michael Lackner, Managing Director proposals on the future strategic and marketing direction of the firm. He is contemplating the former and current situation of the famous collapsible umbrella and the Knirps® future direction.

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History Products

X1 Line • innovative design • ultralight • small & handy • windproof & flip-resistant • Knirps® Quality

Alu Line • ultralight • small & handy • windproof & flip-resistant • user-friendly • Knirps® Quality

Fiber Line • Combines light weight with extreme durability • stormproof • state-of-the-art materials • Knirps® Quality

Steel Line • long durability • harmonious blend of materials, design &

craftsmanship • unique comfort of use and wear • Knirps® Quality

• Like many major brands, the story of Knirps® began with a revolution. In 1928 the engineer Hans Haupt invented the first telescopic, pocket umbrella.

• Like all great brands it was copied. To prevent this the Knirps® brand was modernised in the mid 1950´s, and the unique Red Dot symbol was added, which became established world wide, and which remains unmistakable to this day.

• Of course, we also gave it a modern "facelift". With the Knirps®X1 we set the standard that satisfies the requirements of the modern consumer, where modernity, functionality and quality are important

Point Of SaleThe Knirps®Presentation furniture

Modern shopfitting as a flexible module system.• High stock levels achieved from limited floor

space • High profitability and an outstanding brand

presentation

Packing material for pocket umbrellas

Two different sizes • manual umbrellas • automatic umbrellas

Knirps® Roundabout

Modern X1 shopfitting system• High stock levels achieved from limited floor

space • High profitability and an outstanding brand

presentation

TIMELINES OF THE CHANGES IN OWNERSHIP

• In 1928 Hans Haupt devised the first collapsible umbrella, “Knirps®” (German for “small guy”)

• Manufacturers were not ready to invest in the new business because of the difficult economic situation around that time, marked by – a dramatic drop in export in the German umbrella

business– the depreciation of the British Pound and – the declining demand for umbrellas in general.

• Fritz Bremshey recognized the economic importance of Han’s innovation; he bought it, enhanced the “Knirps” and registered the name as a trademark.

• In 1932, Bremshey founded the Knirps®

consortium

• Obtaining the Knirp® frames as semi-finished products from Bremshey, and uphostering them with their own line of drapery (fabric); he made sure that the unique technique of the Knirps® frames quickly prevailed.

• Arranged for a standard designed advertising and promotion campaigns

• Priced the product in the upper segment of the market.

• Innovative design and the highest quality standard was highly successful resulting in strong brand loyalty and brand asset – A large-scale market research study in 1973

confirmed that 95% of the Germany population replied to the question “Can you name an umbrella brand?” with “Yes, Knirps! “

End of 1970s - 1990s

• End of the 1970s strong concentration movements in the global umbrella industry led to the bankruptcy of lots of manufacturers including Bremshey (in 1982)

• Kortenbruck & Rauh acquired all the rights of the brand Knirps® and all associated technical patents,

• The new company manufactured the frames in Portugal, Lesotho, and China, shifting the entire production to China in the nineties.

• Due to the inferior quality of the Knirps® umbrellas from the Chinese production and the increasingly better products of competitors, Knirps lost market share dramatically.

• Kortenbruck & Rauh suffered losses, and was declared bankruptcy in 1999.

In 2000, Thomas Herriger acquired all rights and patents from Kortenbruck & Rauh;

• Invested heavily in the development of new, trendy (up to the minute/facshionable) products

• Revised or reduced the number of frames and article.

• Updated brand mage, logo and the Point of Sales Presentations

• Established subsidiaries in France, Benelux, Switzerland and Hong Kong (Asia Pacific)

• Set up licensees in Italy, Spain, Portugal, Greece, Austria and Canada.

• In 2003, Herriger founded today’s Knirps® License Corporation (KLC) with the purpose of marketing and licensing of the Knirps® brand internationally

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• In 2004, the latest company was on the brink of bankruptcy;

• Herriger started looking for new shareholders in KLC; Ernest & Doppler Co. Ltd (Germany leader). and its Swiss partner, Strotz AG, participate with a minority stake in KLC

• Since November, 2005, the companies Doppler and Strotz are the two sole owners of the firm.

• The KLC subsidiaries in France, Benelux and Hon Kong were taken over by the parent companies and are now licensees of KLC.

• The subsidiary in Switzerland was closed; Swiss license of KLC is now Strotz AG.

• Doppler and Strotz are convinced that the brand can be rebuilt and positioned successfully in the international markets.

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Company Profile today

• The purpose of the firm is “the purchase and sale of trademarks and licenses, and the granting of licensees, especially of the brand Knirps®”.

• Main revenues of the Company consist of royalties and currently amount to around one million Euros, with half the market in Germany, and with Canada, Benelux and Japan contributing about 10% each of the total turnover.

• The license fee amounts to 8.5% of net sales; a minimum license fee agreed upon in advance, which increases by steps of 5% for the following years.

Strength

• HR is the key strength of the company

• Michael Lackner (38, CEO holds MBA, with a broad experience in marketing at home and abroad).– Managing and monitoring of the company– Customer relations / expansion of relations with

licensees– Acquisition of customers (licensees)– Monitoring of patents and registered designs.

• Elfi Falterbauer (42, Assistant to the CEO, has many years of experience as a production manager and has a College degree.)– Administrative Activities

• Knut Schroeder (54, Technicians, was employed by Knirps® GmbH, the only umbrella engineer in Europe, with a unique know-how in the construction of collapsible umbrellas.– Product Development– Quality Management– Research & Development

• Lackner and Falterbauer are working in the KLC office in Braunau; Schroeder lives in Germany and has a home office.

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Weakness

• Hindrance to larger new investment

• The company is still reducing existing debt at the time of the takeover

THE PRODUCT RANGE

• KLC provides its licensees with four products lines to choose from.Each product line may consist of several umbrellas, which are different in function or size.

Product line 1: X1, X2, etc

• Features• Innovative Design with Style • The product line X stands out due to novel

design. This can be done by an unusual protective cover, or a special grip demonstrating a modern style.

Patterns and benefits

• X basic: – Cloths are plain and simple. – Besides monochrome fabrics, also a simple

pattern may be used.– A stylish, modern quality umbrella of a premium

brand, which can be worn with any attire.

• X Limited Edition: – Trendy and outlandish; correspond to the current

fashion trends are introduced to the markets at least twice a year in a limited edition.

– Fabrics are made of high-quality micro fibres with up to 75% UV protection.

• An absolutely trendy and stylish umbrella of a quality premium brand, which should be worn with the latest fashion

• Customers: Mainly women between 20 and 50 years, more modern, medium to high income class, living in the city or the suburbs and loving design, style and brands.

Product line 2: AluLine

• Features• Light weight• The frames are made of aluminium, which is

relatively inexpensive and, above all, a light material.

Patterns and benefits• Basic colours such as black, blue, and red are

available throughout the year.• Fabrics for all seasons available• Fabrics are made of high-quality light

polyester with Teflon coating• Light weight, not too expensive quality

umbrella, which can worn with any attire.

• Customers:– 70% are women, 30% men– Aged between 30 and 70 years– More conservative attitude, living in city or the

suburbs.

Product line 3: FibreLine

Features • Innovation: • Frames are made of resilient, but very light fibre

material. • Handle design is very modern and noble.

Patterns and benefit• Only available in black. • This colour emphasizes its elegance and high value.

• Elegant quality of a premium brand, provided with innovative materials and newest design, which is perfect for a business outfit.

• Customers – 60% are women– 40% men, living in the city or the suburbs.

• People who love design, technology and brands, looking for an umbrella, which combines quality with technology, medium high income class.

Product line 4: SteelLine

Features • Tradition: represents the original Knirps umbrella. • Its steel frame makes the product heavier, but very

durable. Patterns and benefit• The colours of the high-quality fabrics are dark and

can either be monochrome or with a pattern.• In any case, it must be a classic one.

• Only available in black. • A traditional quality umbrella, showing its

German origin.• Customers

– More than 90% are men, who have a conservative attitude, and are between 40 and 70 years old.

– They live in the city or the countryside, look for an umbrella with good quality and know the brand Knirps,

– Medium to high income class.

THE SUPPLIERS

• Since the 90s, the Knirps umbrella have been produced in China at MIT, headed by Max Wang, until 2002, the exclusive supplier of Knirps umbrellas and Knirps frames.

• Max Wang acquired an immense knowledge of the brand Knirps and its products.

• All machinery, which was especially designed and built for Knirps, was also in his possession.

• Key advantage of single sourcing: reduction in the complexity of managing supplier relations

Risk of single supplier• Very strong dependence on MIT• High risk of supply problems in case of production

downtimes• Price dependency; MIT determines the price• Know how transfer; MIT acquire important knowledge

about Knirps•

Need for alternatives

Why it took a long time to look for alternatives: • A change in supplier is connected with high

switching costs. The production line is owned by MIT.

• It was feared that MIT, with its large Knirps® know-how, would produce unauthorized copies.

In search of a new supplier

• Increasingly, MIT produced no longer in the

required quality. • The company Citta; got orders for new Knirps®

umbrellas, without the knowledge of MIT.• From 2002 to 2006, there were two producers

for Knirps® umbrellas, MIT and Citta. • MIT got fewer orders; and since Max Wang knew

of expired Knirps® patents, he began to copy Knirps umbrellas and sold them in the US and Korea.

• These developments forced KLC to terminate the contract with MIT and began looking for a new partner.

• Futai, a longtime supplier of Doppler and Strotz, provides a unique quality and is the world’s largest manufacturer of umbrella parts.

• While the quality of Citta leaves room for improvement the one of Futai is flawless.

• In the meantime MIT is trying to compete with close imitations; using old patents, but does not dispose of the brand name Knirps®.

• The licensees in Europe are sometimes producing Knirps® umbrellas with special and exclusive fabrics for those who insist on European quality. The production series are very small and they are sold at a huge markup.

THE LICENSEES

• The licensees have lots of freedom. • They determine which items out of the

Knirps® range they want to sell in their territories, at what price, and through which distribution channel.

• They are also largely responsible for the quality control, because the delivery process runs as follows:

– 1st The licensee communicates its order quantity to KLC at its own risk.

– 2nd KLC in turn collects the different orders and combines them to “omnibus orders”, which are forwarded to the suppliers; and the licensee can still order small quantities.

– 3rd While the manufacturer produces the goods, the licensee offers retailers the various Knirps® products.

THE BRAND

• The role of KLC• KLC patented numerous products in various

countries. • The patents protect a variety of technical

functions, such as the strengthening of the cane of collapsible umbrellas or the carbon-steel parts in the frames.

• KLC guarantees its licensees that all the patents are registered in the countries in which the licensees are active.

• KLC patented its innovations in potentially interesting markets such as the United States, Norway, South Africa and Russia as well.

• Patents are valid for twenty years and cannot be renewed.

• Various pictures and logos are registered and thus protected in many countries; the protection lasts for ten years, but can be reviewed again and again.

Quality in the Umbrella business• The main feature related to the Knirps® brands is

“quanlity”; quality in the umbrella business has two dimensions:

• Product Design:– Knirps® is expected to use the latest technology and

the latest innovation in frames and handles. – The aesthetics of a product, however, relates to a

very subjective assessment of quality and is dominated by personal attitudes and preferences.

• Longevity / Durability:– Knirps® frames are very robust. Furthermore,– Only the best fabrics are used; they are

impenetrable.

• Knirps®, by the way, is the only existing global umbrella brand.

THE COMPETITION

Competitors• Cheap umbrellas: simple no-name umbrellas, with

monotonous, boring colors, sold in discount stores.

• National brand umbrellas: Each manufacturer can create its own collections, which is sold under a certain brand name mostly in the domestic market.

• Designer umbrellas: sold as a fashion accessory to the respective designer collections, e.g. umbrellas by Louis Vuitton, Giorgio Armani, S. Oliver, etc.

The vendors• Differ significantly in relation to the following

criteria:• Retail price• Quality in terms of longevity• Product design• Fashion

Retail Price Quality P-Design Fashion

Cheap umbrellas

National brand umbrellas

International brand umbrellas

Designer umbrellas

WAY FORWARD

• This case is set in 2007, when two former competitors took over the Knirps and tried to revive the brand. Knirps is the only international umbrella brand, but has made a lot of mistakes in the past.

• Identify their past mistakes and challenges• What has to be undertaken for things to improve

in the future?• What should be Knirps future direction in terms

of suppliers and range of products?

See notes on: • Marketing Management & Strategic Marketing (To

fashion out future strategic and marketing direction)• The supplier relationship (Single supplier or multiple

suppliers?)• The competition (Explore Porter’s generic competitive

strategies: cost or differentiation leadership or both?) • Segmentation (Repositioning in the light of

competition)• Branding (Brand loyalty and brand asset)

SUPPLIER RELATIONSHIPS

• All successful companies build strong relationships with their suppliers. Companies are not isolated entities that simply purchase goods and services from individuals who happen to be able to supply them at that particular time. Companies typically make larger purchases.

• In reality, successful companies recognize the need to build bridges between their organization and the vendors that they work with by establishing strong buyer/seller relationships.

• Supplier relationships are different from simple purchasing transactions in several ways. First, there can be a sense of commitment to the supplier. For example, if a vendor sells light bulbs, he can feel confident that the buyer will come to him the next time the company he represents requires a new shipment of light bulbs.

• Another element of these supplier relationships is advanced planning. Buyers don't just communicate with suppliers when a procurement need arises; they also contact them in order to discuss their future needs and to determine how best to satisfy those needs by working together.

• While both of those distinguishing features are easy to spot, a third element is also important. The company's attitude and view of its suppliers matters a lot for business success. Companies that forge supplier relationships think of these vendors as partners and not just simple commodity providers.

• This difference in orientation can have a profound effect on the way an organization communicates and works with its suppliers. This in turn affects efficiency and profitability.

• One ramification is a vendor’s knowledge of the buyer's business. When vendors are viewed as commodity providers, they generally don't take the time or are not given the opportunity to learn the details of the business or its vision for the future.

• However, vendors that are deemed to be partners are encouraged to become knowledgeable about the company, its processes, its products, and its goals.

• The result is greater buyer satisfaction with the services provided by the supplier. A study of IT directors found that vendors who were considered commodity providers delivered unsatisfactory service almost half of the time while suppliers who were thought of as partners delivered excellent service some of the time and good service most of the time.

• Another result of this attitude of partnership and difference in knowledge level has to do with handovers, which is a top priority among most IT directors. After all, if the handover is unsuccessful or is poorly handled, it minimizes the benefits the business hoped to achieve with the project.

• Businesses that viewed their suppliers as commodity partners, according to the poll, viewed the way their vendors handled this critical process as unsatisfactory nearly half of the time.

• On the other hand, vendors who were considered partners handled handovers excellently nearly some of the time and good most of the time. Clearly, the change in attitude does make a significant difference.

• Obviously, these two examples illustrate how important it is to have strong supplier relationships, but many businesses simply don't know how to foster an environment where purchasing personnel have an attitude of partnership with vendors. The change is not as difficult as they may think. It does not have to cost them the savings they achieve by shopping around either.

• First, businesses need to find a small number of suppliers to work with. Companies should carefully evaluate potential vendors and their backgrounds in order to select the suppliers from the group that will best fit the needs of the business.

• After they pick these vendors, companies need to negotiate contracts with the vendors and to sit down with them in order to engage in some forward planning. Both of these steps are critical in establishing the stability in the supplier relationship that is necessary for both parties to feel comfortable.

• Furthermore, the future planning makes it more likely that the vendor will have the resources and qualified staff available when the buying company requires them.

• Overall, vendors and buyers are both better served when they come together to form strong, mutually beneficial, and secure business relationships for non-commodity type goods and services. When these relationships exist, they can drive the growth and profitability of both organization and prevent purchasing and execution problems.

licensing

• Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise.

• Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include

Licensing

• Definition: • Method of foreign operation whereby a firm

in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, knowhow or some other skill by the licensor.

• Advantages: • · entry point with risk reduction,

· benefits to both parties,· capital not tied up,· opportunities to buy into partner or royalties on the stock.

• ii) "Lumpy investment" building capacity long before it may be currently utilised e.g. port facilities

• iii) Time - processing, transport and storage - so credit is needed e.g. Argentina beef.

• iv) Transaction costs - logistics, market information, regulatory enforcement.

• Disadvantages: • · limited form or participation,

· potential returns from marketing and manufacturing may be lost,· partner develops knowhow and so license is short,· partner becomes competitor,· requires a lot of planning beforehand.