Posted: November 28th, 2013
ECCO A/S Quest for Global Value Chain
ECCO is a company established by Karl Toolsbuy in Bredebro, Denmark in 1963. It was set up to produce high quality shoes of various types unparalleled internationally in terms of high degree of crafts-man ship and quality. The company is guided by the vision to be “the most wanted brand within innovation and comfort footwear” a position it envisages attaining through consistent research, employee training and capitalizing on its key areas of production and product technology (Nielsen et al., pg 48). This report looks into in the company’s global value chain management and analyzes how it matches up with the industry drivers.
ECCO has maintained a tight grip over the entire value chain from hide processing to the actual shoe processing. The company through its various tanneries (located in Netherlands, Thailand and Indonesia) purchase the raw hides and transform them into different leather raw materials. In addition, the Netherlands tannery has a fully-fledged research center guaranteeing up to date research and expertise on tanning. Its main purpose is to research on environmentally friendly tanning processes and invent next generation ECCO shoes (Nielsen et al., pg 2 ). The specialists attached in the research center offer training to the other employees ensuring dissemination of new technology and efficient production skills. This model also ensures ease patenting new breakthrough ides. In addition, the company gains extra income by selling the surplus leather to automotive and furniture industries.
The company’s production process is divided into the following core functions: full-scale, benchmarking, ramp-up, prototype and laboratory production. It is evident from the scope of works of this functions system does not allow for specialization hence not benefiting from improved efficiency associated with labor division. The main branch in Denmark appears to be carrying out all the tasks from design, prototype development, branding and marketing, and the almost entirely all the research and development. Moreover, there is no clear distinction of duties between the different branches (Nielsen et al., 6). The full-scale production process depends on both human and machine power. The whole process takes roughly 30 minutes a clear indication that the process is time consuming hence expensive. From production, the distribution and marketing is done centrally leading to logistical challenges when supplying goods under short notice especially when the shoe demand is on short notice. It is important to note that all the production process is in-house. ECCO has opened up 26 sales subsidiaries globally and four international production units with the capacity to produce similar goods. This step is aimed at lowering production costs, because of cheap labor in production areas, and spreading risk. However, this has led to limited specialization leading to inefficient production methods
This organization model does not auger well with the competitors’ production models, who are generally the industry drivers. In the light of the market share landscape, the competitors have enough financial resources and specialized labor in the marketing department to conquer the market. This can be attributed to the fact that for most of the ECCO competitors they have outsourced their production areas. As illustrated by Geox, which has outsourced its production line to China, Vietnam and Indonesia but it has set up quality control and logistics monitoring center in Italy (Nielsen et al., pg 10).. In addition, they have gained relative success due to concentrating in research thus developing of waterproof and breathable membrane. In order to spread risk Geox is intending to set a clothing line to cushion themselves from consumers’ price fluctuations. The model of setting up production houses in different countries seem to not yield any fruits as outlined by the similarity in production problems between Clark and ECCO. Production should be outsourced to independent contractors and quality monitored to ensure standardized products.
Prof. Nielsen B. B., Prof. Torben P., Prof. Pyndt J. “ECCO A/S- Global Value Chain Management.” Ivey Management Services 03 October 2008: PLo3. Print.
“Clarks ends shoemaking in Somerset.” BBC.com, Inc., n.p. Web. March 2005
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