MANAGERIAL ECONOMICS

Case study: ECCO A/S — global value chain management

Alternative A: Production project

With regard to the need of financing its production process of the company, it should be recognized that the various branches it has in China, Indonesia, Thailand, and Netherlands are the main distribution points. This is what kept it to be one of the leading leather manufacturing companies. Additionally, the core of the company’s product strategy is mainly based on the direct injection technology. Although several rivals in the industry tried to copy it, the management authority had the potential of performing various small tasks which in return not only improved the quality but also made it harder for others to imitate.

The production process of the company brands an image of a level of lifestyle and comfort is ultimately linked with fashionable high-end products. This enables the management authority of the company to retail prices which are relatively above the average for the mass market as well as within reach for several customers. Moreover, this is coupled the need of producing shoes of high quality with the aim of increasing its innovative activities (Finne & Sivonen, 2009).

Considering the cost and the revenue impact of this project and before embarking on financing it, the management authority needs to understand the company has been operating a fully integrated value chain production process of which about 80% of it carried in-house. Thus, the management of ownership of tannery operations is what will have the capacity of reflecting the company’s dedication to quality improvement so as to maintain a high-quality level of confidence and ambition (Skjott & Schary, 2007).

Alternative B: update marketing program

As noted above, the aim of improving the company’s production process is to make it compete favorably with other companies in the same industry as well as maintain higher profit margins. For that reason, for the purpose of updating its marketing program, the management authority basically prioritizes employee education and training as well as investing aggressively in career development, expatriation, developmental conversations, and vocational training (Finne & Sivonen, 2009).

Regardless of those considerations, it has been noted that somehow the ECCO is not a fashion brand to many customers and for that reason, it is not more appealing to fashion savvy.  The general assessment to local labor has become one of the decisive factors when establishing its operating activities in other states, particularly China. Therefore, it will be difficult to find competent workers who will match the company’s European values. For this reason, coordinating the general flow of materials, information, and people will also be difficult to undertake with the increase in distance from its corporate headquarters.

Moreover, before embarking on financing this project, it should be noted that the company has not been carrying out heavy marketing activities such as advertisement, personal selling, and so on thus giving its competitors the opportunity of saturating the market. Thus, taking this alternative means that the management authority will be forced to invest more in its marketing and advertising plan. This gives the company the ability to increase their brand recognition (Skjott & Schary, 2007).

Alternative C: distribution process

Venturing in improving the company’s distribution process will be aimed at lessening shipment time to tanneries and factories located in various branches. Despite that, the global production facilities of the company do not always correlate with the retail markets it usually serves. Although Japan, Germany, and the USA has been its main retailing markets, a large percentage of its distribution processes has been taking place outside these geographies. Additionally, this has the capacity of cost down the expenses the company could have incurred as well as decreasing the delivery time of materials.

In meeting the requirements of this project by using the finances allocated to it, it is clear that the company will have the potential of being exposed to several materials and access to various shoemaking technologies. In other words, the main objective of financing this project entails ensuring that the majority of the production activities have been accomplished in low-cost states. This has the potential of enabling the company to react to and changes in demand as a result of improving distribution channels (Skjott & Schary, 2007).

Best alternative and recommendations for it

According to the revenue and cost information, the production process is the best alternative the company ought to consider first before embarking on financing the other alternatives. Thus, this will assist the company to improve the quality of its products through manufacturing newer designs which has the capacity of competing with others in the market. Equally, amongst the three alternatives, the company should also take into consideration the best distribution channel to use. In line with this, outsourcing production will include a wide range of suppliers, cheaper redundancy, and lower cost through having a large network of suppliers (Skjott & Schary, 2007).

Likewise, the operating strategies of the company are established in pursuit of the business strategy, resources, and capacities that lie within its operations. Therefore, the management authority should ensure that they have prioritized reliability and quality. This will enable them to configure their supply chain to manufacture its products with specifications. This has the ability to offer huge flexibility as well as allowing the company to maintain and sustain highest levels of quality (Finne & Sivonen, 2009).

 

References

Finne, S., & Sivonen, H. (2009). The retail value chain: How to gain competitive advantage through Efficient Consumer Response (ECR) strategies. London: Kogan Page.

Skjott-Larsen, T., & Schary, P. B. (2007). Managing the global supply chain. Denmark: Copenhagen Business School Press.