ECCO A/S - Global Value Chain Management by Bo Nielsen, Torben Pedersen, Jacob Pyndt 21 pages.

Publication date: Apr 24, 2008. Prod. #: 908M14-PDF-ENG ECCO A/S (ECCO) had been very successful in the footwear industry by focusing on production technology and assuring quality by maintaining full control of the entire value chain from "cow to shoe." As ECCO grew and faced increased international competition, various value chain activities, primarily production and tanning, were offshored to low-cost countries. The fully integrated value chain tied up significant capital and management attention in tanneries and production facilities, which could ... Read More ECCO A/S (ECCO) had been very successful in the footwear industry by focusing on production technology and assuring quality by maintaining full control of the entire value chain from "cow to shoe." As ECCO grew and faced increased international competition, various value chain activities, primarily production and tanning, were offshored to low-cost countries. The fully integrated value chain tied up significant capital and management attention in tanneries and production facilities, which could have been used to strengthen the branding and marketing of ECCO's shoes. Moreover, an increasingly complex and dispersed global value chain configuration posed organizational and managerial challenges regarding coordination, communication and logistics. This case examines the financial, organizational and managerial challenges of maintaining a highly integrated global value chain and asks students to determine the appropriateness of this set-up in the context of an increasingly market-oriented industry. It is suitable for use in both undergraduate and graduate courses in international corporate strategy, international management, international marketing, supply-chain management, cross-border strategic management and international business studies in general.
Learning Objective 1) Global value chain analysis. This case can be used as a starting point for students to investigate how a multinational corporation (MNC) configures its global value chain activities in order to exploit location-specific advantages and gain global scale and scope advantages. ECCO has a fully integrated value chain and this allows for a discussion of the pros and cons of such an approach. (2) Outsourcing versus inhouse (offshore) production. The case is well positioned to allow for an elaborate discussion of pros and cons of outsourcing versus in-house (yet offshored) production (and other activities). For advanced students, this can be accompanied by a discussion of the theories that can be helpful in assessing when and how to outsource versus offshore. Resource-based view (RBV), transaction costs economics (TCE), agency theory, and real options theory may be utilized to answer these questions. (3) International corporate level strategy. This case can be used to discuss the sustainability of corporate international strategy with emphasis on core competencies and drivers of competitive advantage in a dynamic market. ECCO is following an inside-out strategy, whereas all the competitors seem to follow an outside-in strategy. The case can be used to discuss the relevance of changing strategic focus as well as the drivers and problems/cost associated with this. (4)

Industry analysis and competitive strategy. The case has enough information to allow for a Porter's 5 Forces that could be combined with some indication of macroenvironmental trends via a PEST analysis. Information about main competitors allows for a competitor analysis, which can be used together with Barney's VRIO analysis to assess the sustainability of ECCO's advantages over time in this dynamic environment. 2) INTRODUCTION
Strategy can be thought of as a long term plan of action or execution designed to achieve particular objectives, such as achieving competitive advantage for an organisation. It reflects the values, expectations and goals of those who are in power within the organisation. (RDI course material-

Strategic Management module; Unit 1-Nature and scope of strategic management; Lesson 1-Nature)

Strategic decisions direct the company towards the path of growth. A company formulated and undertook decisions in such a way that a strategic direction was made to ensure all possible opportunities for success and keeping control of challenges alongside. Every strategic decision that is made will have an implication for change all the way through the whole organisation.

TASK 1

ECCO, the Danish pioneer in the footwear industry, as the founder, Karl Toosbuy, declares has always aimed to be the worlds best shoes-shoes with internal values.

Though

3) the inception of the company has been in Denmark in 1963, today ECCO has been successful in creating
an international profile. With reference to the case study, ECCO is one among the renowned companies of the world, operating in the footwear industry, with an in-house production of 80%.

From the given case study it is learnt that there seemed to be a strategic drift, for ECCO, for a period of five years from 1999 to 2003 .They were not going the way they had to going. There was stagnation in the productivity and the opening margins were lower than expected. Strategic initiatives to overcome the negative trend, paved way for an emergent strategy to come in, in order to save the company from transforming into an initial public offering (IPO).

In 2004, the United States, Germany and Japan had been the main markets, where ECCO exported about 90% of their production. Ever since then, like most other large organisations, the company has been seeking market opportunities and working persistently to create...

4)

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Understand the nature of the business, the industry and key competitors. ECCO has a unique competitive environment and holds a distinct advantage from it's competitors. Most of ECCO's competitors are "branded marketers", who do not produce most of their offerings, they brand and market them. These competitors include Clarks, Geox, and Timberland, along with indirect competitors such as Nike and Adidas. ECCO is not a branded marketer, but uses a fully integrated vertical value chain where they produce many of their own materials. ECCO makes nearly all of their own products in different countries, but in their own facilities unlike competitors.

ECCO produces high-quality footwear that is mainly in the casual category. In the last decade, ECCO has entered the golf shoe market which has gained them one large competitor in Nike. ECCO used its superior technology in production to maintain a higher level of quality over its competitors. The many aspects of their production adds quality to their shoes that made creating a similar shoe very hard for competitors.

Changes in the industry can be met by ECCO more efficiently than their competitors because they produce their own supply. If a major change takes place, they can simply stop producing a current item, instead of having to cancel outsourcing contracts like their competitors. Close competitor Clarks at one time had many plants in the United Kingdom but has closed all but one to cut labor costs. With producing their own material, ECCO is prepared better than their competitors to adapt to changes in the industry. Understand the organisation culture and/or structure. ECCO's value chain is spread out through several countries. They have tanneries in the Netherlands, Indonesia, and Thailand. ECCO uses over one million cows each year for the leather used for their shoes . They were able to gain the expertise from an acquired tannery in the Netherlands and a leather research center in Denmark. Because of these... Skip to Navigation Skip to Content
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Understand the nature of the business, the industry and key competitors. ECCO has a unique competitive environment and holds a distinct advantage from it's competitors. Most of ECCO's competitors are "branded marketers", who do not produce most of their offerings, they brand and market them. These competitors include Clarks, Geox, and Timberland, along with indirect competitors such as Nike and Adidas. ECCO is not a branded marketer, but uses a fully integrated vertical value chain where they produce many of their own materials. ECCO makes nearly all of their own products in different countries, but in their own facilities unlike competitors.

ECCO produces high-quality footwear that is mainly in the casual category. In the last decade, ECCO has entered the golf shoe market which has gained them one large competitor in Nike. ECCO used its superior technology in production to maintain a higher level of quality over its competitors. The many aspects of their production adds quality to their shoes that made creating a similar shoe very hard for competitors.

Changes in the industry can be met by ECCO more efficiently than their competitors because they produce their own supply. If a major change takes place, they can simply stop producing a current item, instead of having to cancel outsourcing contracts like their competitors. Close competitor Clarks at one time had many plants in the United Kingdom but has closed all but one to cut labor costs. With producing their own material, ECCO is prepared better than their competitors to adapt to changes in the industry. Understand the organisation culture and/or structure. ECCO's value chain is spread out through several countries. They have tanneries in the Netherlands, Indonesia, and Thailand. ECCO uses over one million cows each year for the leather used for their shoes . They were able to gain the expertise from an acquired tannery in the Netherlands and a leather research center in Denmark. Because of these...

To a growing number of companies, a SAP BusinessObjects Planning and Consolidation (BPC) solution is the ideal way to streamline financial processes, reduce cycle times and boost efficiency. However, successful implementation is crucial when it comes to making the most of a BPC solution. Teaming up with the right implementation partner can help you maximise the return on your investment. One of Denmarks most successful global brands, ECCO is a major shoe manufacturer with sales in 90 markets across the globe. The company was upgrading its SAP Apparel and Footwear Solution (AFS) a business solution developed specially by SAP for the shoes and clothing industry. As part of the upgrade, ECCO wanted to implement a BPC solution in order to standardise planning and consolidation processes and integrate them fully with its SAP business suite. In the absence of BPC, the company relied heavily on manual processes carried out by key members of staff. And with no single point of access to planning and consolidation, transparency and traceability were reduced. Says Jrn K Olesen, Head of Business Controlling, ECCO: In brief, we needed clarity, transparency and accuracy, which only a unifying business planning and consolidation solution could give us. When SAP launched SAP BPC, Jrn K Olesen and his colleagues knew that they had found the ideal solution. By using the SAP BPC 7.0 version for the SAP NetWeaver technology platform, ECCO would ultimately be able to integrate its BPC solution fully with its SAP business suite, thus optimising efficiency. However, implementation proved to be a challenge. ECCO struggled to find technical consultants with the in-depth understanding required to implement the SAP BPC solution successfully. As a result, implementation was slow, and timely completion eventually thrown into doubt. It was at this point that we

were introduced to Affecto, who said that they would be able help us. Naturally, we leapt at the chance, says Jrn K Olesen. Having carried out a thorough onsite assessment, Affectos consultants advised ECCO to change tactics and opt for a staged implementation instead of attempting to implement the whole solution at once. In this way, ECCO would reduce its risk by ensuring the successful completion of each stage, before moving on to the next. Affectos consultants then successfully completed implementation of the first stage covering ECCOs wholesale operations, capacity costs and overall balance and profit statements. Says Morten U F Christensen, Business Controller, ECCO: Our budgeting and planning process is paramount to our business, so we need absolutely certainty that it works. Affectos consultants helped structure the implementation of our SAP BusinessObjects Planning and Consolidation solution in such a way that we maximised our benefits, while minimising the risk of errors. As a result, we were able to make the most of our investment. Affectos consultants used Affecto Solution Framework (ASF) to help ensure a successful completion. ASF is a unique methodology which lets consultants draw on Affectos experience from implementing more than 250 successful Business Intelligence projects across the Nordic region. It provides consultants with useful guidelines, templates and best practice as well as real-life sample documents from past Affecto projects. For ECCO, this meant that Affectos consultants were able to complete the SAP BPC solution more quickly. It also helped minimise the risk of delays due to technical issues. Finding consultants with the right mix of technical skills and in-depth understanding of business processes proved vital to ECCO. Jrn K Olesen is in no doubt that Affecto was crucial to securing the success of the project. Says Olesen: Only Affecto offered the understanding of both general financial processes and SAP BusinessObjects Planning and Consolidation that we needed in order to implement our new budgeting solution successfully. Simply put, without Affecto it would not have happened. ECCO is currently testing its SAP BPC solution, running it in tandem with its existing solution. Complete migration to BPC is scheduled for the near future, to tie in with the companys budget cycle. Following this process, Affectos consultants will be extending SAP BPC to cover all areas of the ECCO business, including tanneries, footwear production and all-important retail. ECCO expects to reap considerable benefits from the new solution. Now, ECCO will have a user-friendly, standard planning and consolidation tool with maximised traceability and transparency. This will reduce ECCOs risk, as the company will no longer bedependent on key members of financial staff to complete processes. Morten U F Christensen explains: In the past, our systems were so complicated that very few members of staff were able to work with them. This made us vulnerable in case of staff illness or other unscheduled absence. Also, it made it difficult for our staff to collaborate efficiently. Now, collaboration is easy, and we can be certain that all of our processes are completed on time. SAP BPC gives ECCO a single repository for all planning and consolidation data, as opposed to previously when the company had to work from multiple data sources. With a single, reliable version of the truth, fully SAP integrated, the company can improve and speed up financial decision making. Also, because automation is increased and fewer manual processes are required, ECCO can expect faster cycletimes for planning and consolidation. For example, staff will no longer have to perform the time-consuming task of collecting, correcting and distributing budget data via email and Excel sheets. And staff can update budget models easily, whenever ECCOs business needs change. Consolidation in particular is expected to be faster than in the past when ECCOs financial staff relied on Excel to complete processes. In due course, when the SAP BPC solution is fully implemented, the company expects its consolidation cycle-time to be reduced from two weeks to approximately two days. This means that ECCOs financial staff will be able to spend more time on strategic tasks such as data analysis. Jrn K Olesen sums up the many benefits: Overall, thanks to our SAP BPC solution, implemented by Affecto, we expect our planning and consolidation processes to be a lot more efficient than in the past. This will benefit ECCO and support the business as it faces the market challenges of the future.