The integrity of a company can be gauged by the quality of the product distributed. The Danish shoe company, ECCO values not only the quality of their attire but their business model of internationalization through internalization. ECCO’s fully integrated vertical value chain system puts the company in a decent position to produce a quality line of shoes, but at a disadvantage in an economic sense by not looking for outside means of product generation.
Founded in 1963, ECCO prides itself on being a fully self-sufficient company. That is, that all of ECCO’s shoe production is internally managed. From a globalization perspective, ECCO’s organizational method of international productions based on appropriate locality for product manufacturing and internal quality standards has helped the company build a solid comprehensive reputation (2) – which assists in their ultimate goal of providing a quality product, through exclusively internal methods of production. As ECCO’s business model is to assure quality, the appropriate location of production factories to ensure accessibility to a reliable amount of workers and affordable labor is vital in accomplishing this. Five factories, the largest factory in Xiamen, China help make this possible. ECCO has access to a large amount, and sustainable numbers of consistent and cheap manpower via China’s overpopulation by being located in Xiamen. To maximize production, the implementation of a leather tannery in close proximity to the Xiamen factory was planned to be erected within five years of the establishment of the Chinese factory. The intricate processes involved in creating the ECCO brand of shoe, demands the leather production to be readily accessible by the factories generating the shoes.(6) Through this combination of an affordable workforce and shoe textiles being readily accessible to the ECCO Chinese factory workers, the projected amount in 2004 of 5 million shoes to be exported (8) – would make the Xiamen location the largest ECCO production site, and supports their strategy of quality production through internal means.
Competitively, ECCO’s fully integrated vertical value chain makes for both advantages and disadvantages. Looking at ECCO’s three main industry competitors: Geox, Clarks, and Timberland - there can be a better understanding of the components ECCO has to address to maintain positive business revenues. While there are some similarities in business models, ECCO’s main competitors outsource most of their production, which leads to a lack of quality control of product, but a cheaper means of producing a product.(10) ECCO has acknowledged that unless the consumers’ market becomes enamored with the ECCO’s product line, no amount of quality will be able to sustain the company for extended periods of time.(11)
As important it is for clothing attire to be quality, affordability is just as paramount. Though ECCO strives to achieve both, (and reasonably has done so for a number of years) the business model that is in place currently may not be enough in itself. When competing with such large companies that design their products, but don’t internally assemble them – ECCO may be able to feel good about being that much closer to their consumer by designing and manufacturing their goods, they may not be able to realistically compete with larger corporations on a global scale.
Ecco A/S. “Global Value Chain Management.” Richard Ivey School of Business. April 24, 2008.