ECCO is a Danish shoemaking and retailing company that was founded by Karl Toosbuy in Bredebro, Denmark in 1963. The company’s vision is to be the ‘most wanted brand within innovation and comfort footwear’ – which they intend to attain by constantly and courageously researching new paths, investing in employees, in core competencies of product development and production technology. While trends in the market with regards to fashion and elegance are deemed important, usability has been ECCO’s highest design priority. By 2004, ECCO had its main markets in the US, Germany and Japan and worked constantly on creation of new markets with emphasis on regions like Asia, Central and Eastern Europe. The financial ownership was kept within the company and ECCO refrained from issuing Initial Public Offerings despite financial constraints in the beginning of the 21st century as the company believed that that would inhibit their risk taking abilities. ECCO’s production strategy has been unique in that 80% of the production was in-house. The company regarded their ‘direct injected’ technology as a key asset and believed it gave them an edge over the competitors. A decade of more than satisfactory growth later, ECCO ventured towards internationalizing its operations by establishing its upper production unit in Brazil in 1974. Since then, the chief drivers of internationalization have been i) creation of new markets ii) leveraging the relatively cheap cost of labour. By May 2004, ECCO was finalizing its plans to set up production in China. The Report has covered Situational Analysis for ECCO’s present day operations and market presence. It has covered Competitor Analysis taking into account its main rivals in the international market. The report also contains valuable recommendations for future growth strategies.
TABLE OF CONTENTS
Products and Markets:4
The Global Value Chain4
Advantages of the Global Value Chain6
Drawbacks of the Global Value Chain6
The internationalization program was taken up to optimize various activities associated with the value chain. Having already established operations in Portugal, Slovakia, Indonesia, Thailand ECCO was gearing up to set up shop in China as part of the internationalization of the value chain. By doing so it intended to utilize the cheap labour costs, use China as a launching pad to export finished goods to the market the world over. ECCO had one tannery located in Netherlands, and two others next to factories in Indonesia and Thailand. While the complete ownership of tanneries meant ECCO could exercise sufficient quality control over the leather used, it also means added overheads and incurring maintenance costs. Products and Markets:
The ECCO group produces footwear for men, ladies and children in the casual, outdoor and semi-sport shoes categories for two different seasons – spring/ summer and autumn/winter. The distribution of sales in 2004 across the categories was as follows. Bulk of the share fell to ladies at 47%, followed by men at 30% and 11% and 12% for children and sport respectively. The year also saw the ECCO group introducing the range of golf shoes which was met with outstanding success as market research showed the brand being preferred by more than 90% of the golfers. The chief markets for ECCO were the US, Germany and Japan, accounting for more than 90% of the exports. The US remained the most important market with the shoes selling for a high price. The US market accounted for 26% of the total sales in 2004. The Global Value Chain
ECCO retained a close control of the entire value chain right from procuring the leather to packaging of the shoes. ECCO had one tannery located in Netherlands, and two others next to factories in Indonesia and Thailand. The Netherlands facility handled prototyping,...