Ecco

Case 4-2: ECCO A/S – Global Value Chain Management

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”. 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.

Facts:

* ECCO A/S is a Danish shoe manufacturer. It plans to open five factories in China for export needs and Chinese markets.

* It also operated five distinct factories in Portugal, Slovakia, Indonesia, Thailand and shortly China to integrate the global value chain.

* ECCO focus on shoes’ quality rather than a fashion brand. It maintained focus on entire value chain (from raw material sourcing, tanning, manufacturing to distribution), (没有outsource, ownership of factories are in ECCO’s hand) because it made high demands on quality and lead times – higher than any of its suppliers can accommodate. It produced 80% of its shoes in-house. Its production process has 5 processes: full-scale, benchmarking, ramp-up, prototype, laboratory production.

* It depends on its “direct injection” technology.

* It’s expanding to new markets, Asia, Central and Eastern Europe.

Issue

* Financial problem: financial constrains in the beginning of 21st century which affected its growth plan. During 1999 to 2003, ECCO experienced stagnating productivity and declining operating margins. Company debts increased.

* Managerial problem: operating on a global scale required employees with international...