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1) Describe the competitive environment of ECCO and determine how well ECCO is positioned (vis-à-vis competitors) to take advantage of changes in the industry. Use Porter’s five-forces model, the PEST model, and a SWOT analysis to explain your answer. (400 words) ECCO produces mainly casual footwear with an intense focus on high-quality production. In order to deliver the highest quality product, ECCO maintained a fully vertically integrated value chain situated in various countries leveraging local expertise. Because of this unique situation, competitors found it very difficult to sustain a comparable level of quality. As noted in the case, ECCO finds itself in a highly competitive industry. The primary competitors identified in the case are: Timberland, Clarks, and Geox. For a brief analysis of the strengths of each of these competitors, please refer to Figure 3. As ECCO has recently entered the golf shoe market, they also face stiff competition from firms such as Nike, Rebok, and Adidas. ECCO stands in a unique position among the competitors in that it is the only non-branded manufacturer. The primary competitors of ECCO identified in the case outsource the majority of their manufacturing then uniquely brand the end product. These firms depend on brand recognition and marketing to drive consumer decision, not intrinsic quality. By contrast, ECCO is very focused on quality, and maintains control of 80% of manufacturing in-house. Because ECCO is uniquely positioned with full control of manufacturing and distribution, they have a level of agility and efficiency that is unattainable by competitors. Because of this, they can respond more quickly and efficiently to consumer demand. This ability, however, stands in contrast to their practice of resource driven and quality focused manufacturing. A SWOT analysis can be found in Figure 1, and Porter’s Five Forces analysis can be found in Figure 2. As a result of ECCO’s agility, changes in the industry can be met by ECCO more efficiently than their competitors. ECCO may simply choose to stop producing a current item, instead of having to cancel outsourcing contracts. Close competitor Clarks at one time had many plants in the United Kingdom but has closed all but one to cut labor costs. Because of their value chain and supply chain ownership, ECCO is better prepared than their competitors to adapt to changes in the industry. 2) How well does the configuration of ECCO’s global value chain match the drivers in the industry? (400 words) ECCO's value chain is spread out through several countries, set up to leverage the various social, demographic, economical, and geographic advantages of each. For a brief analysis of each of the countries and their strengths and weaknesses, see Figure 4. The disadvantage of such a distributed approach is cost and complexity. ECCO must employ managers to oversee each of their specific tasks with local language, cultural, and political expertise as required. Furthermore, with each additional country in which ECCO decides to locate a factory, they face an increase in the risk that unfavorable political or economic forces might undermine any benefit they may have gained. Of course, the overall firm level risk will be lower because of the resource pooling effect. The industry for casual shoes, ECCO's main market, is driven by demand for comfortable and high quality footwear. ECCO's value chain has taken advantage of this driving factor by controlling the quality and production of their shoes to meet this demand for high quality. If operations were outsourced, they lose the control of ensuring such high quality and leverage of their high technology. 3) ECCO has a fully integrated vertical value chain. What are the advantages, disadvantages, tradeoffs, and risks of this strategy? What economic and strategic factors should be analyzed to answer this question? (400 words) As noted above, Ecco’s in-house production accounts for 80% of their total...
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