Ecco Global value chain management
CASE STUDY: ECCO GLOBAL VALUE CHAIN MANAGEMENT
Question 1. What opportunities and threats exist for ECCO?
-Labour laws are more flexible in non-European countries. E.g. in China, there were labour costs are lower.
-Ease of entering new markets due to possibility of improvement of employment rate in country. E.g. in ECCO expected to employ 3000 people in China.
– Restrictions such as taxes etc.
-Eventually corruption (such as China : they don’t know yet how it will work there)
-Lower labor cost in non-European countries like China, Thailand,
-New growing markets, as the rise of the purchasing power in China -Production cheaper
-Production cheaper abroad: lower wages, cheap machines (as in China)
-Improvement in interest rates and economic growth in China, Thailand and Portugal
-Sales and profit will be smoothened by reducing the risk of underperforming regions.
-Establishment of a market presence globally increase the global brand power of ECCO
-New CEO since 2004 (more market oriented)
-Inflation rate in China, Portugal and Slovakia kept fluctuating making forecasting and strategic planning difficult.
-Operating margin falling since 2000
-Company debts rising
-Due to rapid economic growth, monetary side suffered Domestic currency losing its value)
-Use of the Scandinavian reputation (slogan ‘Scandinavian minimalism’ already used) -People increasingly aware of products’ quality
-People increasingly aware of products’ quality
-Extension in China bad seen
-Change in customers’ needs could not easily be predicted, leading to inventory problems.
– Due to the technological developments ECCO staff was reduced/suffered shortages (Portugal & Slovakia)
-New finds thanks to the invests
-Production was kept in house
-Benefited from partnership with specialized companies like Maingroup.
-Intensive capital invested in Portugal has led to an improvement in the laser technology
-Direct injection technology which was hard to imitate by competitor i
-Competitors find a better innovation due to constant development of technology (need of being always up to date) Environmental
-The R&D centres explored less polluting tanning methods
Due to possibility of high environmental pollution caused by production, storage, and transportation. They need to find more eco-friendly solutions for production.
Question 2. Where do you see the strengths and weaknesses of ECCO?
-Perfect quality of their leather (they maintain control of leather processing), and constant work on its development. (Five largest leather producer worldwide) -Knowledge about materials
-Knowledge about materials
-Own employees training
-40 years of craftsmanship (expertise)
-Big investments in product development and technology (unique way of production difficult to imitate) -Company’s vision : importance of ‘product development and production technology’
-Products were perceived not fashionable enough.
-In-house production (They manage everything, from ‘cow to shoes’);
They produce 80% of its production, the remaining 20% are outsourced
-ECCO located their production facilities in countries with cheap labour costs
-Real study on the company’s inside-out, in order to adapt ECCO’s culture
-Unique production process, divided in five strategic phase
-A delay in lead time and more stock was held in different distribution centres : this caused an increase in working capital
-Differentiation between producing countries (Ex : Portugal specialized in laser technology, Thailand for Golf shoes)
-Establishment of sales subsidiaries and production units, to save labour costs and spread risk (in some countries)
-Distribution system well managed (Two distribution centres, then distribution by ship, and by plane, which isn’t really developed yet)
-Complicated interlinked logistic organization
-Differentiation strategy : stay a ‘quality brand’
-Clear vision to be the most wanted brand, because of its innovation and comfort -Constant research of new paths
-ECCO isn’t really aware of the fashion aspect. (Brand name is a secondary consideration)
The company needs to become more market-oriented Service
-Investments in customer service
-Sellers become more competent (Even more shoes sold per employee : 1,104 in 1999, 1,247 in 2004)
According to the analysis provided above we were able to identify the main aspects of the Ecco in terms of their operation. Ecco is having an original and well managed value chain (“Cow to shoe”). They have nailed their quality of production through implementation of enhanced technology into this process. Nevertheless, the lack of marketing activities can be noticed. They are not building relation with their customers and in long term this can cause the loss in the market share as their competitors are being active in this. Moreover, their product is a subject to change in the consumers perceptions due to the fact that there are large amounts of the substitutes and competitors. Investing a solid amount from their budget in marketing will have a positive effect not only on the consumers, but on the firms ROI. Furthermore, this will help to gain market share.