Executive Summary: ECCO was founded by Karl Toosbuy in 1963 in Bredebro, Denmark.

The goal of the company is to manufacture all weather shoes which are comfortable, designer and perfect fit. The vision of the company to become the most sought brand in innovative and comfortable footwear. The employee strength was 9657 in 2004. To get the employees prepared for a global task with a global mindset, ECCO spent huge amounts on training and education development programs for it s employees. Developing the higher managers and leader from inside the organization was a key principle. USA, Japan and Germany were the main markets for ECCO and contributed to about 90% of its total production in 2004. In foot ware industry, ECCO is one of the successful names. It has developed production methods which not only ensures quality but also improved technology. This was achieved by controlling the whole value chain from "cow to shoe". This values chain has faced quite a lot of management challenges in the form of stiff market conditions. Many of its tanning and production facilities were shifted to low cost countries. This brought complex scenarios in terms of global management communication, coordination and logistics. The given case questions the relevance of set-up in financial and managerial challenges while maintaining appropriate value chain. ECCOs Global Value Chain System: The complete value chain at ECCO can be defined as from raw material which is cow to completely finished product i.e shoe. ECCO purchased raw animal hide and transformed it to useable leather for manufacturing shoes. The major suppliers of raw hides were from Denmark, Germany, Finland and France. It owned its own leather processing units which supplied to its factories all over the world. The R&D centres major job was to improve and promote methods with least possible pollution. The distribution system of ECCO comprises of two centers, one in Denmark and other in USA. Situation Analysis: ECCO is trying to expand its value chain model across the globe. To bring in this challenge profitably and successfully, it has to implement certain changes in its system and processes and strategies. It is targeting China, the emerging market for developing a global export platform to add to its value chain model. To capture a major market share, it has done huge investments in Chinese market. To assess the nature of competition in the shoe industry, I will use Michael Porter's Five Forces Model. Porter explains that there are five forces that determine the industries attractiveness and long-run industry profitability which are: Competitors, barriers to entry, threat of substitutes, suppliers bargaining power and buyers power. Competitors: The major competitors for ECCO are the luxury shoe makers in the industry like Geox, Clarks, and Timberland. The importance of branding in the Chinese market and hence creating brand awareness in the presence of such International high-end brands create a lot of competition for

Ecco. Due to the huge growth in the Chinese fashion industry competition will be less intense as already existing players will not try to take market share of their competitors for growing their sales. Most of the above mentioned luxury companies are investing heavily to create brand awareness and maintain the buzz around their brands. Because of the presence of Asian and particularly local Chinese players, which the consumers can attach and associate is also a major issue. With the rise in incomes, the consumers will spend even greater amounts on clothing and shoes. Therefore new high-end suppliers of clothing as business will be really growing. Barriers to Entry: Taxes, Longer term returns, government policies on pirated or counterfeit goods, requirement of capital resources were the major barriers to entry. The advertising media mainly was newspaper and television which were flooded with advertisements of local competitors and various small businesses. So to promote itself as a luxury brand was also a difficult task. The return on the huge capital investment with a high initial cost turned out to be profitable after some years, so it was also difficult to survive with low budgets. Threat of substitutes: The threat from substitutes included threats from local tailoring businesses, other fashion houses as well as counterfeit products. The luxury brands are always under the threat of getting copied and losing business to cheap imitations. Suppliers bargaining power: The suppliers for ECCO were the tanners supplying leather. The quality of the leather supplied was not consistent and not timely. Thus the production was inefficient. While all the assembly line was ready , with the late arrival of leather, cost was increased. Therefore ECCO decided to setup its own tanneries. Buyers Power: The companies today have to make it sure that the customers are engaged in the product and show interest in buying it. The more loyal the customers are towards a specific brand, the less bargaining power they have. With advertising and media playing their good game the buyers power has increased with awareness of brand, price and quality. The buyers for ECCO are mainly high end customers who are updated with the latest brands and newest trends. Financial Analysis: The net profits from 1999 to 2004 declined in 2000 and 2002 while otherwise they were slow but steady. Same was happening with the operating margins for the company during this years. The capability to pay off the current liabilities i.e the liquidity ratio increased in all years except 2002. A sharp dip in operation margin and productivity was seen in 2000. Evaluation of Alternatives and Recommendations: Time management, Operations Control, Cost and involved Risk should be analyzed thoroughly for all company processes. Thus, Ecco has to improve upon its value chain by implementing following: 1) Inventory management

2) 3) 4) 5) 6)

Processes improvement Transport management Reduce Over production Reduce waiting times Improve efficiency

By Improving market insight and planning ahead and improving stock turn and responsiveness , Enhancing Flexibility, Integrating the suppliers, Advanced Logistics Service and Customer Integration would lead ECCO towards its Global Value chain model.The above mentioned factors can be improved by implementing the following: 1. Equal weight age should be given by the management to design as well as quality. 2. By producing shoes in house, any problems encountered while negotiating prices with the suppliers were avoided, which also complemented their value chain strategy from cow to shoes. 3. Tanneries should be opened near production sites as well as near or in countries where demand is most to have the distribution properly. 4. It could be beneficial for the company to segment operations from Denmark to Indonesia, Netherlands, and Thailand, etc to have specific research, development and marketing according to the cultural tastes of different regions. This would also help reduce cost by reducing time of shipping prototypes. 5. Production units in loss where sales have decreased should either be closed or quantity produced should be decreased like the ones in Portugal and Denmark. 6. The Ecco management should analyse and research, the key factors of success: a sales strategy, market studies, a deep knowledge of customers and a good distribution network before entering in to a new market.