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Answers to the assignment should be in conjunction with the textbook we are studying (Exploring strategy 11th edition).

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From zero to plus size: The growth story of the CUBjeans start-up
This case was written by Paulami Mitra and Barbara Slavich. It is intended to be used as a basis for class discussion rather
than to illustrate either effective or ineffective management. The case was made possible by the cooperation of CUBjeans and
CCI, Paris. We would like to thank Mr. Franck Vercauteren and Mr. Antoine Roy for their availability as well as the students
of Masters in Fashion Management program and the Bachelor students of the Fundamentals of Strategy course in IESEG
School of Management for helping us improve the case.
© 2015, IESEG School of Management
No part of this publication may be copied, transmitted, reproduced or distributed in any form or medium whatsoever without
the permission of the copyright owner.
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Abstract
This case is about a start-up called CUBjeans that focusses on a niche market of plus size
men’s denim jeans. The story of this start-up sheds light on the denim jeans industry and on
how the founders recognized an entrepreneurial opportunity in a niche market segment. After
four years of its inception, now the entrepreneurs are seeking to carry out a strategy of
international expansion to develop their business. The present challenges and future directions
of this firm have also been discussed. In that respect, the case explores the topic of
international growth of start-up companies. It also takes a close look at the history of the
denim fabric and narrates how denim jeans have paved their way from being a workers outfit
to fashion casuals. This case is intended to serve pedagogic purposes in courses on strategy
and international business. Senior bachelor students or master students are the target
audiences.
Keywords: strategy, entrepreneurship, international business, denim, fashion casuals, start-up
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A sunny day….
It is the first week of March and the sun is shining brightly in Paris. Franck, founder of
CUBjeans- a company operating in the plus size men’s denim jeans segment, just returned
from Tunisia after conducting some quality checks at the manufacturer’s site. As he stepped
off the aircraft, he started thinking about that day, three months before, when he and his
business partner Antoine, took the “big decision”. He remembered how they were sitting at a
Parisian Café, having a long discussion on whether or not to expand their business
internationally. They had certainly taken some important decisions related to their business
over the last four years, but deciding about international expansion seemed particularly
problematic. They had brainstormed the opportunities and risks of international growth and
the discussion had culminated into a strong debate. Franck thought that further developing
their business and penetrating the French market was more important and less risky as they
had in depth knowledge of their home market. Antoine argued that international recognition
of their brand should be their long-term strategy even if it seemed more risky at the outset. It
was impossible to conclude if the risk of international expansion was worth the struggle.
Chances of failure were high. After long hours of discussion and debate, finally they took a
deep breath and concluded, “Let’s do this! Let’s concentrate on international expansion!”.
Three months after the “big decision” was taken, things were much beyond their imagination.
Franck and his business partner Antoine are going to have a hectic schedule for the next two
months of March and April, which is the period of denim fabric’s exhibitions in Paris. They
have been working very hard for the last few years, sacrificing holidays and vacations to
focus on their business. Franck is contemplating that this year things do not seem to get better.
They will have no time to take a vacation throughout summer as they are gearing up for the
sale of their denim jeans brand for the upcoming season. Moreover, unlike other years, this
year they have been planning and budgeting to launch their fashionable denim jeans brand for
plus size men in a foreign country.
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The history of denim and jeans
Moving back to the history of “denim” and “jeans”- ever wondered what is the origin of these
words? Often, denim jeans are associated with the United States, especially the Western part
of the country that witnessed the great gold rush in California in the 19th century. However,
the words “denim” and “jeans” have their roots in two European cities. It is believed that the
name “denim” comes from a French town called “Nîmes” where a rough fabric called “serge”
was woven in huge quantities around the 17th century. During that time, the serge fabric
industry facilitated the economic development of Nîmes and thus was commonly called
“serge de Nîmes” (meaning: serge from Nîmes). Eventually the word “denim” was derived
from “de Nîmes” (pronounce as “de nim”) as denim has a similar weave to the serge fabric.
The only difference between these two fabrics is that serge is woven from wool whereas
denim is woven from cotton.
The word “jeans” has a similar story and is often associated with the Italian city of Genoa (or
Genova). The French call the city Gênes, which is pronounced as “jeans” in English. Some
paintings from the 1650s by an anonymous artist suggest that jeans were used by Genoese
sailors, workers, peasants and even beggars. Due to the sturdy nature of the fabric, the
material was worn several times until it got torn. Some historians suggest that the first pair of
jeans was made in Italy and thus there is a controversy if the origin of denim jeans is French
or Italian.
Denim Jeans: From workers outfit to fashion casuals
Denim jean, which was probably discovered 400 years ago, has travelled a long way. Around
the 1850s, a Bavarian named Levi Strauss took the material to USA to sell the rough fabric to
make tents and wagon covers in San Francisco, California (Gordon, 1991). Strauss discovered
that there was a real need among laborers for hardwearing fabric and resistant pockets in their
daily work activities. In the 1880s he and his business partner fabricated the material to sell
sturdy, practical and affordable riveted denim trousers for laborers and farmers. The two
business men chose to patent their innovation of riveted denim jeans with a substantial sum of
money. In 1889, denim travelled to the central American city of Kansas where another
company called ‘Lee’ was founded. Lee sold denim dungarees and jackets for workers at that
time. From the 1900s onwards, denim jeans were no longer just considered work wear and
became an anti-fashion rebel statement to impose group identity or special status attribute for
both sexes in many parts of USA. At the same time, Lee manufactured and advertised its
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famous Union-All outfit for workers (Lee official website, see Appendix I). Lee, however,
came to prominence in the 1920s after a series of innovation with denim jeans, the zipper fly
being one of the most notable and creative innovations of that time. By the 1930s, this rough
and rugged material made its way from the western states and the central part of the United
States to the east, into the stores of New York and the pages of Vogue magazine. Denim jeans
began to attract attention as a fashion statement after having traversed all the way from
California in the west, to central USA in Kansas and to the east in New York.
During World War II, denim outfits again became a wartime fashion frequently worn by
military forces at the war camps as well as by factory workers producing war supply goods.
Wrangler at that point introduced the dungaree, also called Jeanie, which was not as popular
as the denim trousers (Gordon, 1991). Again denim jeans reached a work-outfit status.
However, the fabric could be put anywhere between the fashion and anti-fashion continuum
during that period. In recent years the outfit is more often perceived as a practical and
everyday wear or as a fashion causal. Its versatility ensures that it has remained a popular
textile among designers, stylists and fashionistas alike. Denim now has a global presence and
more than half of the global population wears this textile (Miller and Woodward, 2007).
There is no doubt that denim has a prominent place in the fashion/textile/apparel/clothing
world.
The Global Recession and the birth of CUBjeans
In 2010, the 100 year old denim fashion brand Lee Cooper went bankrupt due to the global
recession. The company started laying off workers and closing down some stores worldwide.
At that time two good friends and colleagues: Antoine, Head of Marketing and Franck, Head
of International Collections, worked for Lee Cooper in France. With a solid experience in the
denim jeans industry, both dreamed of having their very own business in this industry. Time
was ripe and the duo joined forces and immediately left their jobs to realize their
entrepreneurial dreams. They began by conducting extensive market analysis. Their 20 years’
experience in the denim industry helped them capitalize on personal and professional business
networks in this arena. They studied niche markets and special demands of customers in terms
of design, color, fits and lengths of denim jeans and outfits. They decided to focus on jeans
for plus size men. After deciding their positioning, they started visiting and creating a network
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of relationships with jeans suppliers and manufacturers close to France. They realized that
manufacturing in France was difficult due to a loss of technical competences and inability to
produce in large quantities. They calculated other costs and expenses, and finally in 2011,
founders Franck Vercauteren and Antoine Roy launched CUBjeans for plus size men looking
for fashionable denim jeans (see appendix II and appendix III). They placed their very first
production order on April 2011 and started selling their products from January 2012. The
brand caters to the “plus” size market segment for men – in other words for men outside the
average size range. These denim trousers are normally priced between 100€ to 130€ (see
appendix III). Hence, since 2011 life has been very busy as well as challenging for Franck and
Antoine who are now respectively the CEO and Managing Director of their start-up firm. As
of 2015, they want to focus only on this core business segment for the next few years.
CUBjeans
Brand Inspiration
Since his teenage days, Franck always found it difficult to find the right pair of jeans that
would make him feel fashionable and comfortable. His massive height of 192cm, a narrow
waist size of 30US and a leg-length of 38 (96,5cm) excluded him from wearing many top
brand jeans. He found the existing plus size jeans on the markets were out of fashion and
made him look rather gangly. To compensate, he travelled to Amsterdam once a year to find
the best fit of jeans. Amsterdam had a few retailers that sold plus size outfits for men but with
more fashion conscious styles. He also noticed that it was a market segment where French
retailers were not found easily. Franck’s initial frustration in regards to the search of the right
pair of jeans served as an inspiration towards launching CUBjeans.
Furthermore, the story of the Canadian loggers offered the style and inspiration (see appendix
IV) for the start-up. The beguiling charm exuded by the ancient Canadian loggers and
lumberjacks through their manly, robust, muscular and well-built physiques had made an
impression on Franck and Antoine in their younger years. This is also one of the reasons why
they chose the symbol of a cub as their logo (see appendix V). Association of the brand with
the cubs of the polar bears and the loggers of Canada triggered them to consider expanding
their business to Canada in future.
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Market Segment
Before the products were launched, Antoine conducted a thorough research to study the
average heights and weights of European men. The statistics collected very much surprised
him. He realized that 47% of French men could not find a pair of jeans with a perfect size or
leg-length as they were either taller or shorter than the average. These sizes were also not
available in regular shops. He further noticed that the average height of European men have
been increasing for the last 100 years by 11cm. On an average Europeans are growing taller,
but southern Europeans (Greeks, Italians, Portuguese and Spaniards) are gaining a height
increase faster than northern Europeans (Austrians, Belgians, Danish, Finish, Irish, and the
Swedish). In addition, the taller men in Europe generally come from the Scandinavian
countries including Sweden, Denmark, Norway and Finland and the tallest of them all come
from Netherlands. At the same time, Franck found that more than 50% of men in Europe and
the United Kingdom are overweight. Their research immediately helped them to spot a niche
market segment that could be explored to their advantage.
The Final Product
Once they knew their market segment, Franck and Antoine started focusing on the
opportunities and threats present in the market. They analyzed that this sector lacked in
producing fashionable denim jeans for plus size men. Launching such a product in the French
market could allow them to reap a higher margin and the consumers will not have to travel to
Amsterdam to buy a fashionable outfit. Franck and Antoine often discuss that just like plus
size women, plus size men must also feel proud of their curves and feel comfortable and
attractive. Thus, they wanted to create a pair of jeans for a segment of men who wanted to
look manly and fashionable rather than too skinny or too stout.
At present the brand specializes in catering to three main categories of customers, namely tall
men, overweight men, and short men. The other brands claiming a share in this market
segment produce 2/3rd for overweight men and 1/3rd for tall men. On the contrary, CUBjeans
produces around 2/3rd for tall men and 1/3rd for overweight men. As a fourth category, 10% of
the jeans are manufactured for men who have an average weight and height. This production
trend is quite unique and different from what other plus size brands do according to Antoine
and Franck. The sizes of the denim trousers manufactured by CUBjeans thus range from a
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waist size of US 26 to 50 with a leg-length of L 32 to 38 (see Appendix VI). The competitors
of CUBjeans in France normally sell their jeans starting at a waist size of around US 28 and
end at US 40 and the leg-lengths start at L 32 and end at L 36. This leaves a niche market
segment where CUBjeans is currently trying to penetrate and consolidate.
Manufacture-to-Sales Time Line
As the duo assessed the opportunities and threats of the denim jeans industry they interpreted
that the biggest risk was managing and monitoring the manufacture-to-sales cycle (see table 1
below).
Table 1 : Manufacture-to-Sales Time Line
Phase
1
March, April Fabric exhibitions are held in Paris to market new trends in
denim fabric. Often orders are placed with the fabric suppliers
by the jeans companies.
Phase
2
May Franck takes charge of monitoring quality and following the
progress of the orders placed with denim suppliers based in
Turkey, Spain and Italy to monitor.
Phase
3
June New collections and designs are created for the summer and
winter seasons.
Phase
4
July, August,
September
Retailers with physical shops place their order with CUBjeans
for the upcoming season.
Phase
5
October,
November
CUBjeans compiles the orders placed by the retailers. Budgets
are estimated for the next seasons.
Phase
6
December,
January, February
CUBjeans places the order with the suppliers in Tunisia to
manufacture the final product- that is the denim jeans.
Any mistake in the above mentioned cycle that consists of six main phases could either kill
their margin or harm their brand reputation. However, the manufacture-to-sales time line itself
is an interesting process. The real business cycle starts in March. This first phase starts with
the fabric exhibitions that are normally scheduled in the months of March and April.
CUBjeans participates in these exhibitions to learn about newer trends in denim fabric, the
prospective suppliers of denim and the new entrants of the market. The suppliers of the denim
fabric do not sell less than 3000 meters of fabric. This turns out to be a problem as CUBjeans
require only 750 meters as they sell around 500 pairs a year. Eventually, this means that
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CUBjeans either has to find partners who are willing to buy the left over 2250 meters (3000
meters – 750 meters) of the same fabric or CUBjeans has to carry over the same fabric for the
next season. This is a big challenge as neither finding partners is easy nor is it easy to bet on
the success of the same farbric for the next seaon. Thus visiting various exhibitions and
forming a network of business collaborations and strategic alliances with competitor brands is
extremely important for CUBjeans. Through-out the month of May, Franck takes charge of
monitoring and following the progress of orders placed with the denim fabric suppliers based
in Turkey, Spain or Italy.
After the fabric is ordered, the next phase starts in June when new collections and designs are
created. The company works with a Parisian style office to launch their new products twice a
year (a summer collection and a winter collection). Frank and Antoine makes sure that the
artists must design and customize the higher end products that are in line with CUBjeans’
values and mission. The months of July, August and September are the pre-sales period when
orders are placed to CUBjeans by retailers who have physical shops in various parts of
France. At present, the company works with 40 retailers directly or through an agent. The
months of October and November are also quite hectic as all the compilation of the orders
from those 40 retailers is filed and budgets are estimated. Finally, by the end of the month of
November, CUBjeans places its final orders with the suppliers in Tunisia to manufacture the
denim jeans. Franck and Antoine insist on make-to-sell for the seasonal products as they don’t
think it is a good idea to over-stock. However, they still follow a never-out-of-stock program
to fulfil the demands of customers at any time of the year.
The last and the final phase of the business cycle extend between the months of December to
February in manufacturing the jeans. Franck is the one responsible in looking after this
activity and for this reason he often travels to Tunisia. He visits the suppliers as quality
checks are a very important part of the process. Verification of all the shapes, sizes, colors,
logos -both inside and outside, are done cautiously. Moreover, once they even had a problem
with the logo in the inner side of the jeans. These errors are not tolerable in such industries.
Franck often travels to Turkey, Spain and Italy, where the denim fabric suppliers are based
and from where the fabric is directly transported to Tunisia at the manufacturer’s site.
After the fabric is purchased and the material is transferred to Tunisia, the denim goes through
a process of stitching and washing. This process of stitching, washing and producinging all
the pairs of jeans takes about 3 weeks. It takes another week at least to transfer the goods to
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France. This is a long and complicated process as any mistake in the supply chain can incur
heavy costs that can narrow down the margin or even kill it.
While Franck is busy with issues related to quality, production and relationship management
with suppliers during these months, Antoine stays in France to deal with all the activities
related to marketing, sales and finance. Since their brand is not yet very well known, they
constantly think new ways of making their brand more and more appealing to prospective
customers through high quality, creative design and fidelity programs. Antoine oftentimes
pays particular attention to increase sales through their online shop as that brings them closer
to their customers directly without having to pay high commission to agents. At the moment
the ratio between online sales and sales through retailers is 1:3. The brand wishes to increase
their online sales ratio.
Ecological and Environmental Issues
The makers of CUBjeans are very thoughtful about social responsibility and ecological issues.
It is said that indigo denim fabric itself is not harmful but the stone-washing process needs to
be done carefully as it is very important to re-cycle the water after the denim has been
washed. This left over water is extremely harmful. The un-recycled water, if led into streams
directly kills aquatic plants and animals as it cuts the light into water.
During one of his visits to a potential manufacturer in a North African country, Franck found
out that the manufacturer does not recycle the water carefully and drains it directly into the
fields. He was very upset to see little children walking in that poisonous water and even
playing with it. Immediately he decided to reject that supplier. For the company, such
technical pacts are very important no matter how much margin the manufacturer takes from
them.
Challenges
Like many start-ups, the initial funding of CUBjeans came from family, friends and the
owners’ personal savings. At present, the entrepreneurs’ biggest challenge is running the
company without having made profits for the last three years. Even though their total revenue
has been increasing since 2011, they have not yet reached their break-even point, as
frequently happens in the case of start-up firms. Furthermore, even though the company is
focusing on a niche market where people are ready to pay more for a good pair of jeans, they
have not been able to reach out to a broad range of consumers. Their brand is still not well
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known in comparison to giant competitors like Levis Strauss, Wrangler, Lee, Lee Cooper,
Diesel and Pepe Jeans. This also makes it difficult to expand their business abroad.
Time constraints and budget constraints are also restricting Franck and Antoine from opening
their very own physical store. Having a physical store is a matter of a big budget and a good
location. Antoine’s eyes almost blinks in passion when he talks to Franck about the possibility
of opening a physical store and a workshop behind the store where all the back-stage
activities could take place. However, before the physical store and a workshop, reaching out
to people with their brand and recuperating a net profit is still the biggest challenge.
International Expansion: The opportunities and risks
Recently Franck and Antoine came across some data showing that the overall denim market is
estimated at 51 billion dollars and the market should increase in the next five years. Even with
the crisis, the worldwide denim sales increased by 2.3% in 2013. On the contrary, the overall
clothing market decreased by 6.3%. USA alone consumed 450 million pairs of jeans while
France consumes 63 million pairs of jeans every year. Furthermore, out of the 1.8 billion pair
of jeans consumed worldwide, Western Europe takes a 20% share, USA takes a 39% share,
Japan and Korea takes a 10% share and the rest of the world consumes about 31%.
Keeping the above details in mind, Franck and Antoine are now enthusiastic about expanding
sales to any one of the following countries, namely Canada, Belgium, Luxembourg or
Netherlands. According to them, Canada seems to have a good market. They found that
obesity had tripled in the last 30 years throughout Canada. Moreover, the eastern part of
Canada such as Montreal and Quebec has linguistic similarities with France that could prove
to be helpful in managing their business abroad. Moreover, Canada and France has friendly
trade agreements that allows French traders to export goods without having to pay very high
trade taxes. Yet Franck and Antoine are not sure if expanding their business to Canada is
immediately feasible as the cost of transportation of the goods will be very high and time
consuming. The Canadian market is also quite varied across the western and eastern parts
with differing customer preferences, significant cultural differences and high competition due
to the presence of many competing brands. Additionally, logistic issues might also be very
complicated due to the vastness of the country.
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In case of Belgium, Netherlands and Luxembourg, cost of transport of the products are very
low as the countries are nearby neighbors of France. In that respect, business expansion could
be easy to execute and manage due to lesser geographical distance from France. It was also
found that there is a reasonable market segment for plus size denim wear in these three
countries. However competition is already very high due to the presence of several existing
brands and well established retailers who try to squeeze margins as much as possible.
Moreover, in Netherlands and most parts of Belgium and Luxembourg, a language other than
French is commonly spoken. Thus, it could be perceived that language differences between
the French and the Dutch or Belgians is quite measurable. It was also found that the people of
Luxembourg often go to Belgium, Netherlands and France for shopping. The open borders of
the European Union have helped consumers in many ways but have increased competition
and rivalry for organizations. Another interesting fact that grabbed the founders’ attention was
that, due to genetic factors the Flemish (or Belgian Dutch language) speaking Belgians and
the Dutch are often tall, broad and well-built compared to the French. Some data also
suggested that between Belgium and Netherlands, the standard of living in Netherlands was
higher. As a result, the Dutch customers are generally ready to pay a premium price for a
good pair of jeans over the Belgian customers due to their higher incomes. However, while
working out the finances, Franck and Antoine calculated that, on one hand, the trading taxes
in Netherlands were very high compared to Belgium. On the other hand, trading taxes were
least in Canada due to friendly trading agreements between Canada and France. The
Principality of Luxembourg imposes the highest trade tax among all.
Another Meeting
As Franck stepped out of the airport, he looked up at the bright sky. He was happy that the
business trip in Tunisia had been successful. His mood brightened up and he called up
Antoine to join him at that same Parisian Café in 30 minutes. Another important appointment
was about to begin over a cup of coffee. The agenda was fixed. The puzzle to solve this time
was to find out which country to expand to – Canada, Belgium, Netherlands or Luxembourg?
However, no final decision could be taken unless both have minutely judged all the
advantages and disadvantages of expanding to a new country and the feasibility of the
international growth.
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Appendices
Appendix I: Lee Dungarees and Union-All Outfits in the 1900s
Appendix II: Founders Franck and Antoine
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Appendix III:
Appendix IV: Brand inspired by the Loggers of Canada
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Appendix V: logo B CUBjeans
Appendix VI: The range of sizes and fits of CUBjeans
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17
Reading List:
Adler, P. S. and Kwon, S. 2002. Social capital: Prospects for a new concept. Academy of
Management, 27(1): 17-40.
Bourdieu, P 1986.: The forms of capital. In: John G. Richardson (ed.): Handbook of Theory
and Research for the Sociology of Education. New York: Greenwood Press.
Bourdieu, P. 1980. Le Capital Social. Actes de la Recherche en Science Social, 31(31) : 2-3.
Catry, B. 2003. “The Great Pretenders: The Magic of Luxury Goods”. Business Strategy
Review, 14(3): 10-17.
Dore, R. 1983. Goodwill and the spirit of market capitalism. British Journal of Sociology, 34:
459-482.
Faulkner, D. and Bowman, C. 1995. “The Essence of Competitive Strategy”. Prentice Hall.
Fuller, T. and Tian, Y. 2006. Social and symbolic capital and responsible entrepreneurship:
An empirical investigation of SME narratives. Journal of Business Ethics, 67:287-304.
Gabbay, S. M., & Zuckerman, E. W. 1998. Social capital and opportunity in corporate R&D:
The contingent effect of contact density on mobility expectations. Social Science Research,
27: 189-217.
Gordon, B. 1991. American denim: Blue jeans and their multiple layers of meaning. In
Cunningham, P. and Lab, S. V. Eds, Dress and Popular Culture, Bowling Green: Bowling
Green Popular Press.
Hatton, T. J. 2013. How have Europeans grown so tall? Oxford Economic Papers, Oxford
University Press.
Kapferer, J. 2012. Why luxury should not delocalize: A critique of a growing tendency. The
European Business Review, 58-62.
Kraatz, M. S. 1998. Learning by association? Interorganizational networks and adaptation to
environmental change. Academy of Management Journal, 41: 621-643.
Miller, D. and Woodward, S. 2007. Manifesto for a study of denim. Social Anthropology,
15(3): 335-351.
Porter, M. 1985. “Competitive Advantage: Creating and Sustaining Superior Performance”.
The Free Press, A Division of Simon & Schuster Inc.
Porter, M. 1990. “The Competitive Advantage of Nations”. Free Press, New York
Tsai, W., & Ghoshal, S. 1998. Social capital and value creation: The role of intrafirm
networks. Academy of Management Journal, 41: 464-478.
Uzzi, B. 1997. Social structure and competition in interfirm networks: The paradox of
embeddedness. Administrative Science Quarterly, 42: 35-67.
315-138-1
Taught by Paul Kelly, from 1-Sep-2017 to 31-Dec-2017.
Purchased for use on the Strategic Management BBS 4 HDIP SCM, at Institute of Technology Carlow.
Educational material supplied by The Case Centre
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