ECCO A/S – Global Value Chain Management: Case write-up
Executive Summary
ECCO is a Denmark-based, global footwear company that produces
shoes for work and leisure. It prides usability as its highest design
priority, stating that “ECCO is not a fashion brand and it never will
be”. ECCO’s main markets are the United States, Germany and
Japan.
ECCO produces 80% of its shoes in-house and has a global value
chain that spans from “cow to shoe”. Operating five distinct
factories in Portugal, Slovakia, Indonesia, Thailand and shortly in
China, ECCO has a vertically integrated supply chain that includes
tanning, manufacturing and distribution. More specifically, its
tanning and manufacturing units in Indonesia and Thailand are
generally engaged in full-scale production to meet high volume
expectations, whereas those in Europe are relatively more focused
on high-end technology as well as research and development.
Since its establishment, ECCO has emphasized on production
technology and is well known for its cutting-edge techniques. Its
“direct injection” production technology, which attaches shoe uppers
to soles under very high pressure utilizing capital-intensive
machinery, is at the core of its product strategy. (80% of ECCO’s
shoes are based on the “direct injection” technology) Due to its
complex nature, competitors have yet been able to imitate or license
ECCO’s production techniques.
The lifestyle casual footwear market that ECCO competes in is
highly competitive and subject to changes in consumer preferences.
ECCO’s major competitors include: Geox, Clarks and Timberland.
All three firms engage in greater degrees of production outsourcing
as opposed to ECCO; Geox has its own production facilities in
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Joycelyn Woo
Slovakia and Romania and outsourced to manufacturers in China,
Vietnam and Indonesia, Clarks sourced shoes from 12 different
manufacturers located primarily in China and kept less than 1% of
its production in-house, Timberland manufactured 10% of its shoes
in-house and outsourced the remaining to factories in China,
Vietnam and Thailand.
ECCO’s approach enabled it to have the highest control over its
production inputs, allowing it to ensure material standard and
product quality without the need to devote substantial resources to
scrutinize and monitor the supplier network. The in-house
production of leather also shields ECCO from the risks of price
increases in leather, which is generally not transferrable to
consumers. In addition, developing a vertically integrated supply
chain allows ECCO to make high demands on quality and lead times
that are unattainable by third-party suppliers. These benefits together
enable ECCO to possess competitive advantages over its peers.
Although in-house production has its merits, it also inevitably causes
ECCO to have reduced exposure towards alternative technologies,
materials and shoemaking techniques. Without the means to come
into contact with and learn from the industry’s best practices,
ECCO’s current competitive advantage in manufacturing may
become obsolete in the future. Therefore, I would recommend
ECCO to explore joint-ventures with other manufacturers such that
it can gain exposure to new technology and at the same time retain
control of its supply chain.
ECCO can also consider diversifying its business or expanding its
leather sales so as to reduce business risks caused by sudden shifts in
consumer tastes. Geox and Timberland have both diversified their
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 ECCO A/S – Global Value Chain Management: Case write-up Joycelyn Woo

business portfolios into clothing, which may also be a viable

strategic alternative for ECCO.

ECCO’s Value Chain by Activity and Location

Raw Materials: Tanning: Manufacturing: Distribution:

 ECCO bought  ECCO’s tanneries in the  ECCO has factories in Portugal, Slovakia,  ECCO has two main
raw hides and Netherlands, Thailand and Indonesia, Thailand and shortly in China distribution centers in
transformed these Indonesia supplied leather to  Portuguese factory: focuses on technology United States and
into leather factories around the world due to increasing labor costs; leading Tønder, Denmark
usable in shoe  Dutch tannery: providing developer within laser-technology  The majority of
manufacturing “wetblue”; exploring less  Indonesian factory: produces 40%-50% of ECCO’s shoe
 The majority of polluting tanning methods; ECCO’s shoe uppers production goes
raw hides experimenting with various  Thai factory: produces 40% of total unit through Tønder
originated from kinds of leather for the volume; specializes in most complicated although the Danish
Germany, France, coming generation of shoes shoes (eg. golf shoes, advanced trekking market is only
Denmark and (prototype, laboratory and boots) due to the Thais’ first class responsible for 6%-9%
Finland ramp-up) workmanship of global sales
 ECCO also sells  Indonesian and Thai  Slovakian factory: primarily assembles  The majority of
leather to the auto tanneries: full-scale shoes and uppers; established due to its ECCO’s North
and furniture processing proximity to promising markets like Russia American sales went
industries  ECCO plans to set up an and Poland; provides leeway in terms of through exclusive
advanced tannery in driving up volume between plants and department stores such
conjunction with factories in thereby alleviate risks of production as Nordstrom’s and
China interruptions Dillard’s

Human Resources: ECCO has invested aggressively in vocational training, career development, developmental conversations and
expatriation and has given high priority to the continuous education and training of its employees

Research and Development: ECCO has a dedicated research center, Futura, in Tønder, Denmark to experiment with new materials,
processes and technologies

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