Table of Contents: Case Study IC Companys

1. Introduction

2. Theoretical Background

3. Understanding Power in IC Companys

3.1. Conflict, Power and the Multi-Brand Strategy

3.2. Decentralized Power?

3.3. The Hegemony of Niels Martinsen

4. Recommendations

4.1. Strategic Positioning

4.2. Organic Cultures

4.3. Communities of Practice

5. Appendix

6. Bibliography

1. Introduction

In this case study I will analyse the Danish fashion company IC Companys - a merger

between InWear Group and Carli Gry International. Following their merger, IC Companys

experienced intra-organizational difficulties which included a “poor working climate”,

“inadequate management capacity”, and “tensions between country and brand managers” to

name a few (Foss, Pedersen et al 2012:165). To resolve these issues IC Companys took a

number of initiatives such as “the re-establishment of industrial competences, strategic

clarification, and a shift in the managerial paradigm” (Foss, Pedersen et al 2012:182). Most

importantly, CEO Theillbjörn developed a multi-brand strategy. While these initiatives

seemed to drive growth, they predominantly based themselves on creating new agency and as

a result changing the power relations within the company. For example, the multi-brand

strategy entailed giving the brand managers new intra-organizational power at the expense of

the country managers; 400 employees were made redundant; and the main shareholder Niels

Martinssen was able to install a new management team which included then-CFO Theillbjörn.

As part of this academic analysis of IC Companys I will concentrate on the multiple levels

and implications of power within the organization. In recent decades the issue of power has

been of much interest to those studying management practices (Pfeffer 1981, Steetz 1999).

“Central to such a project is an understanding of the relations among power, discursive

practices, and conflict suppression as they relate to the production of individual identity and

corporate knowledge” (Steetz in Alvesson & Willmott, 1999: 22). Thus such an analysis will

allow me to give recommendations which can minimise internal struggles and allow IC

Companys to overcome its strategic impasse.

2. Theoretical Background

Contemporary interpretations of power in and outside management studies emphasize its

symbolic, cultural and discursive dimension (Clegg 1989, Alvesson 1987, Laclau & Mouffe

1985). In light of this, key signifiers such “autonomous”, “decentralized”, “supportive”,

“own universe and subculture”, “engender feelings of independence”, “blurred” (Foss,

Pedersen et al 2012:166) cannot be reduced to describing IC Companys’s de facto

management practices. In fact, they create a symbolic order which (1) presents intra-

organizational power vis-à-vis employment relations as networked, capillary, enabling, and

perhaps even democratic (2) attempts to win employees to relations a self-regulative exercise

of power or what Peter Drucker would refer to as “greater self-discipline” (Drucker 1988:47).

Too often these discursive and symbolic interpretations of power downplay, or even omit the

economic root of unequal power relations at the workplace. While a vulgar Marxist approach

would suggest that the economic base determines the superstructure, it is nonetheless

necessary to understand the political-economic dimension of power in organizations. Hereby,

I build on Gramsci’s insight that that “the old dichotomy between base and superstructure,

state and civil society be dissolved into a broad ‘ensemble of relations’ [my italics]” (Boggs

1976:120,121). In the case of IC Companys this helps us to pose the right questions: Is it

necessarily the highest revenue-generating brand which wields the most intra-organizational

power? What does the appointment of former-CFO Theillbjörn mean for the strategic

orientation of IC Companys? What economic power is vested in the brands?

Gramsci’s ensemble of relations is then mediated by discourses, symbols, and most

importantly, (the (in-)accessibility of) information. By taking ‘information’ into account we

are able to distinguish between informal and formal power (Greve & Mitsuhashi 2007;

Mechanic 1962). This is of particular importance in IC Companys which I would label an

“information-based organization” (Drucker 1988, Castells 1997). It also allows us to use

information which emanates from outside the organization as a resource to enhance the

company’s performance.

In adopting this theoretical framework it is no longer a question whether IC Companys’s

brands are “too autonomous”. Instead we start to understand autonomy’s contested nature,

and the way that those in powerful, dominant or hegemonic positions within the company can

use it to their own benefit. In other words, the autonomy of the individual brands is not the IC

Company’s problem but its foremost core competency. The company’s symbolic order rests

on this and related notions (i.e. subcultures, freedom) while its brands are non-imitable and

scarce (rf. Prahalad & Hamel 1990).

3. Understanding Power in IC Companys

3.1.Conflict, Power and the Multi-Brand Strategy

Following the restructuring, IC Companys reduced the organisational responsibility and

power of their country directors. Economically this should not come as a surprise given IC

Companys was not necessarily growing internationally as outlined in Foss, Pedersen et al

(2012) but in fact concentrating its market power in places where markets quickly become

saturated. They continued to operate in the same geographic areas while emerging markets

such as Brazil, China, South Africa and India were not being covered. This is confirmed by

the fact that sales were concentrated in population-poor countries (70.62 per cent) in small

countries. While growth rates in smaller countries were above 10 per cent most larger

countries – the exception being Russia - had less than 10 per cent growth (see appendix).

Foss, Pedersen et al describe how this move by management led to a conflict between

country directors and brand managers (2012). The conflict between these two groups of

actors is a mediated expression of a number of structural problems within IC Companys.

Elevating the position of brand managers within the organization is not the same as

developing the brands. While these brand managers are key agents within the company who

embed knowledge they cannot substitute themselves for a successful brand strategy which

was not in place. This is underlined by the fact that as part of the restructuring IC Companys

shut sixty retail stores and focused its attention on outlets. In other words, the power of retail

in harnessing brand identification downstream in the value chain was consistently

underestimated. The strategy to “use outlets […] to become more brand-oriented” (Foss,

Pedersen et al. 2012:184) only works if boutiques and retail stores in city centres and high

streets reinforce the brand as part of people’s everyday lives and shopping experience. This is

highlighted by Guercini and Runfola who link retail-activity to product innovation processes

(rf. Guercini & Runfola, 2008:10)

Another industry-related issue which might create tensions between country and brand

managers is the fact that luxury or price-level are associated with certain countries and even

sometimes cities. Brand names may likewise communicate the country and associated quality

(Usunier 1993). In other words, Sweden and the Scandinavian countries are known for H&M

and associated with a lower segment, while brands from Milano, Italy are, for example,

associated with haute couture. On the other side, Hoskins argues that there increasingly

blurred distinction between high fashion and street fashion insofar that River Island joined

TopShop in the London Fashion Week, H&M has organised fashion shows in the Musée

Rodin in Paris. Versace, Armani, Stella McCartney have done collections for H&M (Hoskins

2014). IC Companys falls into neither of these categories. All of IC Companys brands are

situated somewhere in the middle segment which suffers from the problem of

‘undifferentiation’ in which “no players hold dominant positions”. (rf. Foss, Pedersen et al

2012: 178).

The problems outlined in this section highlight that internal organizational tensions are

frequently rooted in structural and environmental limitations that the company faces. Further,

it raises the question whether IC Companys actually employed a ‘multi-brand strategy’, or

whether it was more of ‘Brand manager’-strategy? Given that I have identified IC

Companys’s brands as their foremost core competence this offers a possible explanation for

the strategic impasse.

3.2. Decentralizing Power?

Gramsci points out that power in advanced capitalist societies operates through consent rather

than coercion (Gramsci 1971). This has fundamental implications for information-based

organizations and their employment relations. Rather than using coercive management

practices which seek to maximize employees’ efficiency, IC Companys’s decentralized

organizational set-up can facilitate consent from its employees. This is of particular

importance in the creative industries where knowledge workers such as fashion designers

demand a stimulating environment, creativity and even decision-making power (Amabile

2005). Rather than seeing this level of autonomy as a threat to the company’s strategy it can

harness it as one of its core competencies which give the firm competitive advantage, and

allows it to exploit synergies which the industry creates.

As Alfred Chandler pointed out with his organizational M-Form “structure follows strategy”

(1962). In other words, companies which deal with complex, multiple-product, and multiple-

market firms sought to devolve their intra-organisational decision-making power not for the

sake of their employees but in order to boost their bottom-line. While employees might not

have to confront power in their day-to-day activities, we start to understand how IC

Companys’s symbolic and discursive order is rooted in the economic reality of the industry it

competes in, and the products it makes. Thus we have to distinguish between essence and

appearance when analysing IC Companys’s decentralized nature vis-à-vis its organizational

form.

The subcultures which exist inside IC Companys are a by-product of this type of

decentralization. Writing about youth subcultures Stuart Hall argues that subcultures have

their own discourses, symbols, rituals which resist bourgeois hegemony by consciously

adopting threatening behaviours, or fashion styles (Hall & Jefferson 1993). Thus the brands’

subcultures might form a counter-weight. While Foss and Pedersen regard the subcultures as

potential areas of conflict, they instead should be viewed as “agonistic partners” (Mouffe

2000) insofar that they continue to define themselves through différence to the symbolic

order. In the final instance, the symbolic order is their source of power. Thus the subcultures

are a source of intra-organizational power which should be viewed as a core competence.

These are not replicable and thus a source of competitive advantage. Knowledge workers will

be attracted to working in such environments (Amabile 2005). This is of particular

importance given the middle-market segment in the fashion industry which is characterized

by undifferentiation.

It could be argued, for example, that decentralized structures create informal powers, groups

and actors which might end up losing sight of IC Companys’s overall strategy. The question

though is whether these sub-units really need to be aware of IC Companys’s overall strategy.

I would argue not as elaborated in the next part.

3.3. The hegemony of the Niels Martinsen

Niels Martinssen is the major shareholder of IC Companys and the founder of the InWear

Group. It could be argued that his dominant position facilitates the kind of intra-

organizational flatness. When the organization found itself in crisis he was able to call a

general meeting and install a new management team (Foss, Pedersen et al 2012). By

appointing former CFO Theillbjörn as the new CEO, Martinssen changed the formal intra-

organizational power dynamics. Why did he not appoint one of the chief designers, or

perhaps, even one of the leading lights in Peak Performance? I would argue it shows the

dominant or hegemonic which finance commands inside the organization.

The share of profits (Foss, Pedersen et al 2012: Figure 7.2) discloses that the acquired

companies and new creations make up 81 per cent of the profits while the old brands only

make up 19 per cent. If Martinssen had chosen one over the other it would have exacerbated

the tensions between the different brands, and sent a clear signal that IC Companys was either

favouring the new brands endowed with incumbent power or strengthening the hand of the

traditional old brands. Given that “brands are intangible assets which can build shareholder

value” (Nandan 2004:264) Martinssen acted out of pure self-interest when he appointed

Theillbjörn as the new CEO. His former position allowed Theillbjörn to strip down IC

Companys by making 400 employees redundant, and closing sixty retail stores. This will

have sent the right dog whistles to shareholders who arguably behave like ‘locusts’ and are

more interested in short-term financial results than building brand identification amongst IC

Companys’s client base.

However there is a caveat with Theillbjörn’s appointment. Foss, Pedersen et al compare him

to a football manager of eleven teams. However the football manager is by no stretch of

imagination the most powerful person in the club in modern financialised football. In fact, he

is subject to the results of the team and his players. He usually receives the blame when

things go wrong. Thus it is no surprise that CEOs are shuffled around when companies do not

meet shareholders’ expectations. A recent study even suggests that long CEO tenure can hurt

performance. The authors suggest that the length of a business cycle - 4.8 years of service - is

optimal for a CEO (Luo, Kanuri & Andrews 2013).

Whether one buys into the argument or not, the Martinssen-Theillbjörn relationship

highlights the that ownership and control are continual source of conflict in financialised

firms (Fama & Jensen 1983; Froud, Johal et al 2006). It also confirms the extent to which

power relations inside IC Companys need to be seen as an ensemble of relations.

4. Recommendations

4.1. Strategic Positioning

Michael Porter’s notion of strategic positioning "makes sense when a company can best

produce particular products or services using distinctive sets of activities" (Porter 1996). This

would mean that IC Companys would use its shared platform to create simple consistency

without obliterating the subcultures and instead reinforece the different activities. According

to Porter "competitive advantage grows out of the entire system of activities." (Porter 1996)

While IC Companys has taken steps to cut slack in the value chain downstream it has not

tackled the question of how its individual units establish themselves in the middle-market

segment without cannibalising each other.

4.2. Organic cultures

Adopting a cultural perspective of management innovation (Birkinshaw, Hamel et al 2008)

allows us to see how the subcultures and strong autonomy between the different units can

shape management behaviour and innovate practices across the organisation. It also means

that one can generalise from the experiences of employees and individual units. This does not

mean that different subcultures have to assimilate to one another but could integrate the best

elements of a subculture in their own subculture. It is based on the view that IC Companys

acknowledges that “agents are important but constrained by power relations and traditions”

(Birkenshaw, Hamel et al. 2008: 827). In other words, IC Companys need to create the

absorptive capacities which encourage cross-fertilisation without forcing assimilation.

4.3. Communities of Practice

Consumption is highly intertwined with branding. The power relationship between

consumers and brand-owners is in a continuous flux and continuously being renegotiated. It

really exemplifies the fact that power is an ensemble of relations. “Branding is becoming one

of the core strategic and commercial competences driving firms and a key area within which

consumers become actively involved in commodity processes.” (Power & Hauge 2008:124)

Today consumers create fashion blogs, email lists, or youtube channels. Arguably this

constitutes a new source of consumer power. This data could be used for open innovation. If

IC Companys has the absorptive capacities which facilitate exploiting the data generated by

those who frequently set trends, they could be enhance their performance. This means

creating a community of practice (Wenger & Snyder 2000)

While these bloggers, and digital content creators might not be inside the organization they

can pick up the trends as they do not only follow one particular company, or segment as a

whole but act as popularisers, adapters etc. This information could flow into what the IC

Companys are doing and create new value downstream (Chakraborrty 2014). These

communities of practice will require mean that IC companies can extract value downstream

in the value chain. Their informal nature makes them difficult to sustain. At the same time

their interests might not necessarily be aligned to those of IC Companys.

5. Appendix

Revenue (DKK million) Growth

Location of revenues Market Segment

Brand Ebit

Peak Performance 802 24% 61% in Scandinavia High-price segment acquisition (2001) Highest

InWear 540 14% 39% in Scandinavia upper-part of mid-price Original Highest

Jackpot 445 -11% 20% in Scandinavia mid-price Original Very Low

Tiger of Sweden 388 18% 91% in Scandinavia lower-part of high price segment acquisition (2003) High

By Marlene Birger 126 40% 51% in Scandinavia High-price segment acquisition (2003) Above Average

Soaked 104 30% 60% in Scandinavia high street brand own creation (2002) below Average

Designers Remix 48 66% 54% in Scandinavia high-price segment own creation (2002) Low

Cottonfield 278 18% 32% in Scandinavia mid-price segment Original Low

Matinique 245 23% 36% in Scandinavia mid-price segment Original Very Low

Part two 189 13% 51% in Scandinavia mid-price segment Original Low

Saint Tropez 157 -6% 71% in Scandinavia mid-price segment acquisition (2002) High

Total 2520

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