Marketing Strategy - Case Analysis (ecco)

Marketing Strategy Case Questions (Galka)

ECCO A/S

Global Value Chain Management

Marketing Strategy Term 4 2011

Team #6

03 August 2011

1. Perform a Porter's Five Force Analysis

Force 1: Barriers to Entry

Questions

Answer

Reason for Barriers to entry

1. Do Larger firms have a cost/performance advantage? Yes (Positive)

Larger firms like ECCO have resources to cut down their production cost and can invest more on technology and R&D to consolidate the market.

2. Are there any proprietary product differences? Yes (Positive) Firms believe in core competencies of product development and production technology focusing on differentiating their product from competitors.

3. Are there Established Brands? Yes (Negative)

Threat from well established brands for market share and profit.

4. Do customers incur large switching costs?

Yes (Positive)

Switching cost incurred in terms of quality and usability which cannot be leveraged by buying other convenient and less expensive products.

5. Is large amount of capital required for entry? Yes (Positive)

High investment in assets like Specialized technology, equipments, infrastructure, etc. Thus hard for new entrants in the market.

6. Is there a steep experience curve?

Yes (Positive)

Relatively low cost of operations is a very powerful strategic advantage that can be achieved by learning and experience curves to dominate market share. This is possible only for large incumbent firms like ECCO, Adidas, Nike, etc.

7. Is it difficult to access distribution channels? Yes (Positive)

Firms have good integration for distribution of their shoes via group distribution centre, sales agents, retailers and supermarkets.

8. Is there a limited supply of skilled personnel? No (Negative) Availability of skilled personnel in the footwear industry holds some opportunity for human resources to new entrants

9. Are there any patents?

No (Negative)

Thus no competitive advantage for firms legally and exposure for new entrants.

10. Do entrants face very strong retaliation? Yes (Positive) Larger firms consolidate the market by their market knowledge, strong customer service, latest technology and high quality shoes. Thus on these factors new entrants face very strong competition and retaliation.

Inference Positive High barrier to entry

(Iqbal, 2009)

Force 2: Intensity of Rivalry

Question Answer Reason for intense rivalry

1. Rapid Segment Growth

Yes (Positive)

Tremendous demand for good quality formal, casual semi-sport and sport shoes making market more attractive and intense for competition.

2. Many incumbent competitors Yes (Negative)

Intense competition for the same customers and resources. Maximizing market share becomes essential.

3. Cyclical demand with intermittent over-capacity Neutral (Positive) Companies are developing shoes that are pleasant to walk regardless of the weather conditions.

4. High fixed cost relative to total cost Yes (Negative)

Cutthroat competition because extra revenues incur little extra expense.

5. Few significant product differences

Yes (Positive)

Products with significant differences like shoes for fashion, elegance, sports, etc. attract varied customers. Thus, good scope to target these segments.

6. Specialized competitors

Yes (Negative)

Competitors like Nike, Timberland, etc. offering complete product line of shoes.

7. High exit barriers

Yes (Negative) ECCO places a high cost to exit from the market in form of expenses incurred in assets. Thus, it has to operate in the market even if it makes less profit.

8. Low customer switching costs Yes (Negative)

Customers switching cost is mostly based on their preferences of quality and price. Thus hard to attract customers in the industry because of established brands and brand loyalty.

9. Fairly simple product Neutral (Positive) The products are convenient and aesthetically designed which is produced by intense R & D and innovation.

Inference Negative Intense Rivalry

(Iqbal, 2009)

Force 3: Competition from Substitutes

Question Answer Reason

1. Those having very similar or superior performance

Yes (Negative)

ECCO has a big threat for substitution from other established firms like Clarks, Geox, Timberland, etc.

2. Little to no customer switching costs Yes (Negative)

Less expensive substitutes

3. Customer likely to substitute Yes (Negative)

Cost driven and brand attracted customers are more likely to switch to substitutes.

Inference Negative Good competition from substitutes

(Iqbal, 2009)

Force 4: Bargaining