How well is ECCO positioned (vis-a-vis the competitors) to take advantage of changes in the industry?
Most competitors have outsourced production to focus on marketing, but ECCO maintains in house end to end production. Its focus is value chain’ it has a global network of production facilities, tanneries, and distribution and research centers. Thus, ECCO can meet its customers’ demands promptly across the world, hence boosting its customer satisfaction. According to Somjai (2017), outsourcing is an important approach for improving business core competency, boosting a firm’s competitiveness, and reducing production costs while safeguarding the firm from periodic uncertainties that can cause volatility of production quality. Nevertheless, ECCO still enjoys indisputable advantages over the firms that outsource because of the obvious setbacks that come with such an approach, including late delivery of products, the issues of quality of the goods, and lower skills of the labor.
According to Porter’s value chain framework, a firm can add utility to its products by breaking down the chain of its functions into strategically pertinent activities (Elloumi, 2004). In this manner, ECCO achieves efficiency and responsiveness throughout its global value chain by strategically breaking down its functions. For example, the firm has launched strategic programs to rationalize logistics, concentrate more on modern shows, and monitor the market (Ivey, 2017). Therefore, although it appears as if the company focuses more on production than marketing, these strategic initiatives will still make the business overcomes changes in the industry.
ECCO has adopted a vertically integrated value chain as a way of gaining competitiveness. The vertically integrated value chains are positioned in different countries across the work, taking advantage of the local expertise. As a result, competitors find it extremely hard to establish an equivalent level of technology. This approach also helps the firm take advantage of various synergies, gain increased control, and improve its operations across the world. However, as an industry develops, competition tends to evolve. Vertical integration motivations tend to decline because it may be more cost-efficient to outsource essential products than manufacturing them in-house (Lehtinen, 2010). Therefore, rather than having actual ownership of the essential infrastructure, the company should embrace the ICT systems that are currently allowing vertical integration digitally.
The company also enjoys economies of scale of its brand, considering wide production capacity and a strong distribution channel. It has direct injection technology and capital-intensive machinery, a production process that is hard to imitate. However, whether these capabilities can leverage the changes in the industry is the bigger question. Furthermore, a strategically valuable resource because it is hard to copy does not mean it will enjoy the superiority forever; eventually, the competitors will gain more knowledge and come up with similar technology (Collis & Montgomery, 2019). The management should consider if the advantages are sustainable.
ECCO uses advanced production technology to manufacture high-quality shoes, but marketing is even more important. Furthermore, it does not make sense to manufacture high-quality shoes that are not known in the market. If consumer preferences change, the company will have challenges to overcome. Furthermore, ECCO competitors can adapt fast to changes by switching to a manufacturer dealing with the trending product. They can also adjust their marketing campaigns to mirror the current consumer preferences. Therefore, while the strategy in which ECCO focuses on the production is significant, in contemplation of whether the current strategies are sustainable, ECCO management must consider how the company is prepared to respond to the volatility that may result from changes in the industry.
References
Collis, D. J., & Montgomery, C. A., 1995. Competing on Resources: Strategy in the 1990s. Harvard Business School Publishing Corporation
Elloumi, F., 2004. Value chain analysis: A strategic approach to online learning. Theory and practice of online learning, 61.
Ivey, R., 2017. ECCO A/S — Global Value Chain Management. Ivey Publishing.
Lehtinen, T., 2010. Advantages and disadvantages of vertical integration in the implementation of systemic process innovations: Case studies on implementing building information modeling (BIM) in the Finnish construction industry.
Somjai, S., 2017. Advantages and disadvantages of outsourcing. The Business and Management Review, 9(1), 157-160.