Ecco a/S – Global Value Chain Management

1709 Words7 Pages
Case 3

The International Firm in a Global Economy

ECCO A/S – Global Value Chain Management

Question 1: 1. Relate the Ecco case to the conceptualization of the organization as a global factory. What similarities and dissimilarities with the global factory conceptualization do you see and what solutions may it present?
Similarities: As ECCO had been very successful in the footwear industry by focusing on production technology and assuring quality by maintaining full control of the entire value chain, ECCO grew and faced increased international competition, various value chain activities. The global factory conceptualization need a fully integrated value chain to tied up significant capital and management attention in tanneries
…show more content…
Therefore, manufacturers face a trade-off between gain from the efficient technology and loss from paying the information rent. When a firm decides on in-house production instead of outsourcing, although a manufacturer can obtain the entire profit, it loses the gain from the cost efficiency of outsourcing. When outsourcing is selected, although a manufacturer can acquire the gain from cost efficiency, it is required to share the gain with the outsourcer.

The objective of these establishments, apart from achieving labor cost savings, was to spread risk. Initially, the various production sites were capable of producing the same types of shoes, indicating an insignificant degree of specialization in the production units. However, in recent years ECCO had strived to narrow each unit and capitalize on its core competencies.

We should consider this trade-off from ECCO case, between in-house production and outsourcing when faced with cost uncertainty and competition with a rival manufacturer in a differentiated goods market. When the management decides on selecting organizational forms, technological uncertainty on production activities often ensues. Thus, a manufacturer faces uncertainty when choosing between in-house production and outsourcing. Moreover, because almost all modern firms are in a competitive position, they have to choose organizational forms and take the

More about Ecco a/S – Global Value Chain Management

Get Access