Lorpen Case

LORPEN

“El Centro Virtual de Experiencias de Internacionalización” (The On-line Centre for International Business Cases) is the result of the collaboration of the Spanish Institute for Foreign Trade ICEX and AEEDE, the Spanish Association of Business Schools , which includes eleven leading Business Schools. The aim of this project is to promote the internationalisation of Spanish SMEs,drawing on the academic rigour of the business schools that have participated in this project.

This centre presents case studies of Spanish companies that are successful internationally. These case studies can be found on the ICEX webpage and appear in a multimedia format that includes discussion forums and articles that create awareness of the key issues involved in internationalisation.

Thesuccess stories chosen represent a broad sample of sectors and geographic areas and show the globalisation process that some of our companies have gone through. The company profile shown here is that of an SME multinational which has become a reference point in its sector, basing its international penetration strategies on factors as diverse as marketing, management, financial liquidity and businessalliances.

This pioneering project, in Europe and throughout the world, serves to promote and diffuse a comprehensive entrepreneurial culture among SMEs. It promotes the integration and association between universities and businesses, facilitates dialogue and the exchange of knowledge between experienced businesses and those that are beginning to take their first steps in international markets.It also emphasises the importance of human capital in medium and long term business competitiveness.

1

Starting Point

LORPEN

INTRODUCTION
Etxalar is a small town with 823 inhabitants [Spain’s Institute of Statistics, 2008] located in the Basque-speaking area of north-west Navarre, in the foothills of the Pyrenees, bordered to the east by the Baztan Valley, 74 km from Pamplona, 40km from San Sebastian and 20 km from the Irun-Hendaya Spanish-French border. The town’s economy, which in the past included forestry and mining exploitations, ironworks, sawmills and limestone quarries, was reduced in the twentieth century to three main activities: agriculture, stockbreeding and smuggling. In recent decades, these activities started to lose importance and lack of work has forcedmany of the inhabitants to migrate1 to industrial areas.

In this idyllic setting with stone houses dating back hundreds of years, green valleys and woods of oak, beech and chestnut trees (where the adventures of some of the characters in the novels of Pío Baroja2 are set), seven young friends, related to each other, decided to start their own company. After considering several possibilities,they decided to devote themselves to the manufacture of socks and founded the company Lorpen S. Coop. The word “Lorpen” means “achievement” in Basque. After acquiring the necessary basic machinery, in 1985 work commenced on the production of white cotton sports socks3 which they sold through major retail outlets. During the following ten years they found a niche in the Spanish market as suppliers ofthe major retail outlets, such as Alcampo, El Corte Inglés and Continente as well as manufacturing for some important brands, such as Adidas and Reebok. In 1994, 1,243,000 pairs of socks were manufactured and turnover exceeded 1 million euros. In spite of their success, for the company’s directors, its future prospects were not very clear. On the one hand, because Lorpen was a small company, thenegotiating power of its customers, all of them important companies, was enormous (see Table 1). On the other, lacking clear differentiating factors, its continuation as a supplier of these major customers depended

1 In the 1940s, the population census of Etxalar was 1,400 inhabitants and since then it fell continuously until the end of the century.

6

2 The most well-known native of...