Magazine article Management Review

Soviets Do the Shuffle - American Style

Magazine article Management Review

Soviets Do the Shuffle - American Style

Article excerpt

SOVIETS DO THE SHUFFLE - AMERICAN STYLE

As part of our daily American ritual, we wake up, get dressed, put on our shoes and walk out the door. We don't think about it - we just do it. Selecting the right style of shoe for the day is not a matter of concern; in fact, most people don't even give it a second thought. But what is commonplace in the United States - the availability of comfortable, well-made shoes - is often a luxury in other places of the world.

With this in mind, enter Wolverine World Wide Inc., which, in the summer of '88, opened a Hush Puppies shoe store in Sofia, Bulgaria - of all places. That's pretty far afield for this Rockford, Mich.-based company. But the store, unique to Bulgaria, experienced a great measure of success. Not only were the comfortable pigskin products selling off-the-shelf, but they were priced considerably lower than similar products sold in the United States. This store was the offshoot of a licensing agreement with a Bulgarian combine to make the Hush Puppies' products in the good old American style. Since its opening and phenomenal success, Wolverine has moved into approximately 30 other stores throughout Bulgaria via Pirin, the licensee.

Why Bulgaria? "We felt that it was the best way to gain access to the USSR," Wolverine Chairman and CEO Thomas D. Gleason explains. "We wanted to get a showcase, an example for the rest of the Eastern bloc." Although negotiations for licensing with both governments began around the same time, the Bulgarians were quicker to take action. But persistence paid off, because the deal with the Soviet Union has been set.

In June '89, Wolverine signed a licensing agreement with Kirov, a Soviet shoe and tanning combine for the production of Hush Puppies footwear and tanning of pigskin leather. Production is scheduled to begin on a test basis this quarter. This year, the licensee expects to open one Hush Puppies shoe store in Moscow and a second in an outlying city.

BRITISH ADVISORS

Wolverine discovered that signing a licensing agreement in the Soviet Union is hardly an easy task. In fact, it took more than two years of negotiations before pen met paper. Wolverine relied heavily on its own international group in the United Kingdom to get the ball rolling. The U.K. group, through private contacts, finessed its way through its negotiations with the appropriate Soviet department. The idea of producing U.S.-quality footwear sparked such interest that Wolverine set up a two-day technical seminar for the Soviet footwear industry, sponsored by the Soviet bureau in June '87. Opportunity knocked and the Soviets answered - attendees at the seminar inspired department officials to start negotiations with Wolverine. Two years later, the licensing agreement became reality.

The specifics of the licensing agreement include production of the footwear, the technology for skinning and tanning pigskin leather, the use of the Hush Puppies brand name and the option to go into a joint venture. Gleason chose to pass on this option because "we thought the ruble was greatly overvalued and although [the government is] in the process of devaluing it, we thought it was better to go with the licensing agreement." (See story on page 14.) Through the agreement, Wolverine will enjoy a royalty based on sales - part in hard currency and part in barter trade of raw pigskins. …

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