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)
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