Case Analysis: ECCO by Rohan Kulkarni,21040

1. Describe the competitive environment of ECCO and determine how well it is positioned to
take advantage of changes on the industry
i) Nike and Reebok, competed directly with some of ECCO’s products. On the other hand,
ECCO’s expansion into such new segments as golf shoes gave rise to new competitors. In
addition, the industry felt increasing pressure from retailers that had established
products under private labels. As a consequence of the fuzzy boundaries between
different footwear product categories and geographical regions, pinpointing ECCO’s
competitors was a challenge.
ii) Fierce competition had sparked investments in both cost optimization and new
technologies. First, the quest for competitive pricing had driven the search for new ways
of producing and assembling in order to lower costs and reduce time to market.
Operations were streamlined and formerly manual processes were automated. Second,
incumbents invested in new technology, improved customer service, and market
knowledge.
iii) , The success of Geox was based on perforated rubber soles in which a special
waterproof and breathable membrane was inserted, allowing the vapor from
perspiration to leave but still preventing water from entering the shoe — a technology
protected by over 30 patents.
iv) Clarks, like other shoe manufacturers, had vigorously sought lower labor costs in
response to fierce competition.
v) ECCO is positioned at an advantage as their different production units all over the world
specialize in different competencies , and yet are acting integrated to the global value
chain. Any problems in any one of the units can be quickly covered and solved

2) Analyse ECCO’s Global Value chain. How well does this configuration match the driver’s in the
industry.
i. Leather constituted the main material in shoe uppers, which were produced at ECCO’s
production sites (see Exhibits 3 and 4). The company owned several tanneries in the
Netherlands, Thailand and Indonesia, which supplied leather to ECCO’s factories all over
the world. The majority of the rawhides originated from Germany, France, Denmark and
Finland. Apart from supplying leather to its shoe factories around the world, it also sold
leather to the auto and furniture industries.
ii. In addition, the plan was to set up a tannery in conjunction with the factories in China.
ECCO’s strategy was quite unique, as most of its competitors had phased out in-house
production. Companies like Clarks and Timberland had followed Nike’s marketing-
oriented business model by outsourcing the production to a large extent. These
companies were described as branded marketers, i.e., manufacturers without factories,
who only design and market their goods. While Timberland produced approximately 10
per cent of its shoes in-house, Clarks had completely outsourced its production. ECCO,
by contrast, produced 80 per cent of its shoes in-house. The remaining 20 per cent were
outsourced as these shoes (for instance, ladies’ shoes.
iii. ECCO’s production process could be divided into five strategic roles or phases: full-scale,
benchmarking, ramp-up, prototype and laboratory production. The objectives of full-
scale production were to uphold demand, quality and operational reliability, and still
produce high volumes. Benchmarking production, on the other hand, strove to retain
 knowledge and competencies in terms of opportunities for improvements and
production cost structure.
iv. Earlier operations in Denmark had encompassed all design, prototype, ramp-up, quality
control, branding, marketing and most research and development (R&D) aspects, while
ECCO foreign plants performed volume production. For instance, ECCO had split up R&D
activities, relocating many activities to the production sites, which evidently were more
in touch with ECCO’s R&D efforts from a practical perspective. The R&D activities
conducted at the production sites revolved around support for the production process
and optimization of materials. ECCO’s distribution system was also vital to its business.
ECCO had two main distribution centres; one in the United States and one in Tønder,
Denmark.

3) ECCO has a fully integrated vertical value chain. What are the pros and cons of this strategy. What
economic and strategic factors should be analysed to answer this question?

i. ECCO maintained focus on the entire value chain, or from “cow to shoe” as the company
liked to put it. ECCO bought raw hides and transformed them, into various kinds of
leather usable in shoe manufacturing.
ii. Since its foundation, ECCO emphasized production technology as a key asset to the
company. The founder was, above all, known and recognized for his profound knowledge
of inventing and fine-tuning cutting- edge production techniques.
iii. Competitors had tried for a long time to apply the same techniques or to license ECCO’s
production techniques, however, ECCO performed many small tasks differently
throughout the process, which improved quality and made it hard to imitate.
iv. Since then, the main forces driving ECCO’s internationalization have been i)
establishment of a market presence, and ii) reduction of labor costs and increasing
flexibility. ECCO was one of the offshoring pioneers in Danish manufacturing. Over a
period of 25 years, ECCO established 26 sales subsidiaries covering the entire world and
four international production units. The objective of these establishments, apart from
achieving labor cost savings, was to spread risk. Initially, the various production sites
were capable of producing the same types of shoes, indicating an insignificant degree of
specialization in the production units. However, in recent years, ECCO had strived to
narrow each unit and capitalize on its core competencies.

4) Is ECCO following the inside out or outside in strategic perspective? What are the implications of
this choice and how can ECCO increase sales/marketing efforts?

i. The firm was following outside in strategy. Though the founder insisted and also took steps
towards improving internal capabilities, in terms of administration and capabilities, later in
the case some significant positions were taken over by the external personnel purely
because they bought in their experience and expertise in different industries for example
retail and even related industry at other firm , which now van be leveraged to the
development of the new ECCO.
ii. As the competitive and organizational as well as the external factors forced ECCO to change its
conventional operating methods, it later used the competencies of the local resources at
the place where their production units were set-up. Labour cost, the eye to detail of the
Thai were the examples.
 iii. Leveraging the talents in domains of marketing like that being done by Nike and Reebok would
increase the sales. Keeping focus on the consumeristic-innovation and acquiring the patent
rights will give them the advantage in the market. A shift from tradition manufacturing
processes, continuous implementation of new technological processes will shoot up
production and sales.

5) How is family ownership affecting ECCO? Comment on the corporate ownership structure and its
implications for strategy making and implementation. What alternatives exist.

i. Trends in the market in terms of fashion and elegance were important, but usability was
ECCO’s highest design priority
ii. . The company’s vision is to be the “most wanted brand within innovation and comfort
footwear — a position that only can be attained by constantly and courageously researching
new paths, investing in employees, in our core competencies of product development and
production technology.
iii. . The company invested aggressively in vocational training, career development,
developmental conversations and expatriation. ECCO’s establishment of the Education and
Conference Centre in 1994, the research centre Futura in 1996, and the ECCO Business
Academy in 2001 served as signs of commitment to these issues. According to Karl Toosbuy,
these investments were vital to allowing ECCO to recruit internally for management
positions and, thereby, accomplish his strategy announced in 1991. This strategy stated that
80 per cent of the company’s leaders should come from inside ECCO.
iv. Despite the founder’s intention of internal recruitment for management positions, on two
recent occasions this ambition could not be met.