ECCO Case Study - Question 1

ECCO has a fully integrated vertical value chain. What are the pros and cons of that strategy? What economic and strategic factors should be analyzed to answer this question?

The pros of a having a fully integrated vertical supply chain for Ecco include the following:

* Improved supply chain coordination between tanning, manufacturing and distribution. This would ultimately help maintain quality and improve operational efficiencies such as logistics.

* There is also an increase in the areas possible for differentiation, as Ecco can control more inputs. An example might be in the tanning process, in which their competitors may have less control over.

* Ecco can also create greater barriers of entry for competitors. By differentiating competition out of the market such as marketing their strict in house controls of the tanning process.

* Ecco can also access downstream distribution channels that may otherwise have been inaccessible if they were to just sub out distribution and be at mercy to what the market can provide.

* Opportunities for control over investment or innovation both upstream or downstream which may otherwise not be possible will be advantageous for Ecco.

* Facilities in different countries can take advantage of local resources and expertise in different areas like the leather research center in Denmark.

* Overseeing operations throughout the whole value chain.

* Better control and monitoring of inventory, quicker response to market means that lesser lead times will allow Ecco to track and respond to economic conditions better.

The cons of a having a fully integrated vertical supply chain for Ecco include the following:

* Challenge to balance capacity between upstream and downstream operations.

* Lack of supplier competition may increase upstream costs