Anda di halaman 1dari 30

Principles of Marketing Coursework

Module: Principles of Marketing

Module Code: KOLM04MKT

Submitted to: Lucy Gabrielsen, Lecturer IBA Kolding

Submitted on: 19.12.2016

Word Count: 8219

Submitted By

Pardeep Kour

Alak Baran Dhar

Sahil Sharma

Rajni Rani

MBA (Coventry University)


September 2016
Table of Contents

Chapter 1

Introduction 2

Company Profile 3

Analysis of Internal Environment of ECCO Sko A/S 3

SWOT Analysis 3

STP Analysis 6

ECCO Sko A/S Strategies 7

Chapter 2:

Analysis of External Environment of ECCO Sko A/S 10

PESTLE Analysis 10

Porter‟s Five Forces Analysis 13

Chapter 3: Critical analysis of the organisation‟s current marketing mix 18

Price 19

Promotion 20

Place 21

Chapter 4: Recommendation and Conclusion 23

Reflective Journal 25

Bibliography 28

1
Chapter 1
Introduction
Marketing is an integral part of every organization. Previously it was a seller‟s market
manufacturer focused on mass production and filled the massive demand from customers that
was fueled after industrial revolution (Nickels, McHugh and McHugh, 2010). This is an era
which is the customer‟s market because of technological development and advancement of
internet usage consumers is more aware of their rights, they have increased product
knowledge and many options to choose from. Thus, the marketing strategies of every
organization come to play in order to fight and become successful in this kind of highly
competitive environment, (Haberberg and Rieple, 2008). Organizations are not only focusing
on fighting competition but also want to strengthen their market positions because nowadays
just being profitable is not enough organizations have to build competitive advantage and
attract customers in way so that they can ensure sustainability, (Cateora and Graham, 2015).
According to Bradley (2012), marketing should play an important role in connecting the
customers with the company‟s product, its service and financial capability. The author also
states that if we take broad perspective marketing is more of a tool for value addition then
just an organizational function. Therefore, marketing is everybody‟s task in the organization
as it blends the marketing function roles and also increases its influence in all the other
functions of the organization, (Bradley, 2012).

In this report, we are going to highlight the Danish Shoe company ECCO Sko A/S and their
marketing strategies. The first chapter will discuss the internal environment of the
organization and the organization‟s current strategy and its impact on its competitive
advantage. The second chapter will discuss the external environment of the market and how it
might affect the organization currently and in future. The third chapter will discuss ECCO
shoes‟ marketing mix and lastly, the report will provide recommendations as to how the
company can improve its current strategies so that it can ensure a sustainable future.

Company Profile
ECCO Sko A/s is a Danish shoe company that was established in 1963. The brand name has
strong image and the company is well-reputed in Denmark. The company provides original
Scandinavian design, high quality products, and has a strong focus on its CSR activities. The
company mainly specializes in footwear products, sport shoes, sandals, laces, boots, children
shoes, heels and flat shoes. The company also sells accessories like boot polish, liquid spray,

2
wallets, belts, laces, casual socks etc. the company is headquartered in Denmark. Sweden‟s
Best Organization‟s Survey awarded ECCO Sko A/s as the best company in quality category.
The major competitors of the company are Timberland, Clarks and Geox. As reported in its
annual report (Annual Report, 2015) ECCO Sko A/s had profit growth for six consecutive
years. The company reached a total of net revenue of EUR 1.3 billion and profit before tax
was EUR 183 million. “2015 was characterized by ECCO successfully launching innovative
collections and investing in the future. These results were achieved by the organization
executing our strategies well, a prerequisite for continuous profit improvement in challenging
markets worldwide”.

Analysis of Internal Environment of ECCO Sko A/s

SWOT Analysis

Strengths
Total Quality Management: ECCO Sko A/s is one of the shoe companies in the world that
claims to have total control over their manufacturing process. This means that the
organization is in full charge of knowing what is going on in their production plant. They are
responsible from the tanning of shoes to the delivery to the end users. This gives them to have
total check on their quality and keep up the quality same consistently. This gives the
customers an assurance that their products are going to have consistency in quality and
design.

Global Presence: even though the company is headquartered in Denmark, it has operations
in 90 different countries and they have more than 4000 point of sale. This is a huge benefit
for them because it not only gives them global coverage but also helps to create a global
brand image. Moreover, operating in so many countries diversifies their business risk.

Economies of Scale: ECCO Sko A/s have strong foothold in many countries as the company
operates in five countries where they have established factories. So they get their supplies
from 5 tanneries located in these countries. Their factories are located in all across Asia and
Europe. At least 80% of their shoes are manufactured in their own factories with their own

3
design. This gives them the advantage of achieving economies of scale not only in production
but also in transportation and procurement.

Strong Research and Development Center: the company has invested a lot of money is
developing a strong R&D department. Recently ECCO Sko A/s have been successful in its
research project which aimed at reducing the carbon footprint of the tanning process. Most
consumers all over the world, especially in the Western Europe and United States are
becoming more and more environmentally conscious. In this regard focusing on green
marketing not only attracts this customer group but also fulfills the demand of being
responsible for the environment and community.

Venturing into Leather Accessories: Ecco Sko A/s is not only a manufacturer of shoes
anymore. They have ventured into the leather accessories industry and that was a huge
success. This again helps them to diversify their risk because even if the demand for shoes
slumps at any point the accessories are there to back up the business profit. Moreover, having
a wide range of products help the organization to attract more customers.

Exclusive Retail Stores: the brand has established its own performance centers and they are
huge success. As reported earlier the company‟s revenue grew steadily over the past six years
which indicates that the company‟s product are liked by the customers and there is a demand
for their products. So retailing their products is working for them as a positive strategy.

Weaknesses

Poor Market Promotion and Advertising: the company unlike its competitors invests very
less in marketing. There are competitors who have similar quality products or even inferior
but because of heavy advertisement consumers are more aware about their brand than
ECCO‟s. This is a digital era where competition is very high and company‟s compete at a
global level so advertising and making the brand more visible is important.

Counterfeit and Replicas Affect Brand Image: The company produces fashion item which
are easily imitable and there are many replicas available which are of similar look and almost

4
close quality. So consumers have a lot of choices to choose from that too in a reasonable
budget. This in the long run may affect their revenue growth.

Opportunities
Expanding to Emerging Markets: the global economy is shifting to the east and the middle
income population is increasing in many parts of Asia, Latin America, Eastern Europe, etc.
These countries pose many opportunities for expansion because the young professionals in
these part of the world lives with their parents and have a lot of disposable income. Marketers
tap into these markets. Also because of internet and social media consumers are aware of new
designs and brands and there is a demand for new products in these markets and ECCO
should take advantage of this increasing demand for their products.

Promotion of Green Products: the company is already investing a lot for green
manufacturing. It has recently worked on a project where there tanning process would be
more environments friendly. In this regard, the company should also do enough market
campaign so that it can promote its brand as green manufacturer.

Threats

Highly Fragmented Market: The shoe industry is highly fragmented all over the world.
This is a major threat for the company because there is someone somewhere to fulfill the
demands of the customers. This gives the customers a lot of options to choose from. This
increases the customer‟s switching cost very low and also their bargaining power increases
and they can easily buy other brand‟s shoes.

Economic Pressure: The world has seen many ups and down in the economies of different
countries. Recently Europe and USA has seen one of the biggest economic downturns and
many companies were affected. This threat of economic pressure is always there and
companies need to take proactive actions to stay put during bad economic times.

Non-Branded Cheap Products: There are many non-branded cheap items available all over
the world. First, the industry is fragmented and next there are many non-branded options
available to the customers which are quite cheaper in price when compared to the price of
ECCO‟s products. This poses a threat for ECCO as revenue might decrease and consumer ay
switch anytime if they find any problem with its products.

5
Substitute Products: there are also many substitute products of leather. For instance, shoes
are also made of plastics, rubber, fabric etc. then there is synthetic leather too. The prices for
these substitutes are less and they can be quite fashionable too.

STP Analysis:
Segment: the segment for ECCO Sko A/s can be divided into many segments. If we divide
their consumers according to different group we can see that their target segment includes
people from all sectors, like full-time students. Executives, young professionals, people with
preference for fashion and latest trends.

Target Group: The most important target group is people with a high sense of fashion, who
like to follow the latest fashion trends. There is also an emphasis on customer group who
demands green products, because the company is investing in its green project for green
manufacturing of the shoes. As a result, the most important target group would consumers
who demands green products but also have a very high taste for fashionable products.

Positioning: ECCO Sko A/s promotes itself as the green manufacturer of fashionable leather
footwear and accessories. They position their shoes for almost all target group but mainly
6
focuses on fashion conscious people who are also sensitive about environmental friendliness
of the products. It constantly updates its shoes in social media and its websites and in fashion
magazines. However, there is still scope for stronger positioning of the company‟s brand in
the market.

ECCO Sko A/s Strategies:

Marketing strategies are important in helping companies to remain profitable sustainably and
to hold a stronger position than the competitors. The firm does this by using its own resources
and capabilities to satisfy the consumer‟s needs and preferences, (Wensley, 2000).

As mentioned by Barney et al. (2011) in order to create an organization‟s sustainable


competitive advantage an organization need to identify and examine its own strategic
capabilities. According to Barney, a resource–based approach implies that the sustainable
competitive advantage is build by the organization‟s unique resources and organizational
policies and practices “designed to utilize such resources efficiently” (Proctor, 2000, p. 171).
Johnson, Whittington and Scholes (2011) stated that the distinctiveness of an organization‟s
resources creates its unique capabilities. In fact, resource-based view (BMW) is basically a
theoretical framework which illustrates that the firm‟s competitive advantage is created by its
unique internal resource advantage. Resource-based view is a concept that is contrast of the
Market-based view. MBV is a concept that mainly focuses on the market, the direct
competitors and extended competitive environment. Basically this framework is used to
understand the firm‟s competitive positioning advantage (Haberberg and Rieple, 2008). From
the above discussion we can deduct that to understand ECCO‟s stability and competitive
advantage we need to study its resource capabilities that add value to its end users. (Johnson,
Whittington, and Scholes, 2011)

Resources are an organization‟s assets that are used for implementing the strategic vision and
goals. Resources are tangible, i.e they can be felt and touched because of their physical and
financial implications on adding value to customers (Pearce and Robinson, 2011).

As mentioned earlier ECCO Sko A/s has opened stores in more than 90 countries all over the
world. This shows that they are committed to stay close to their customers. It has a loyal
customer bases which is its pride and creates a positive balance to its business (ECCO, 2012;
Fenn, 2010; ECCO‟s Annual Report 2011). ECCO is one of the largest manufacturers of the

7
leather shoes and accessories. Its own tanneries in the Netherlands, Thailand, Indonesia and
China, and manufacturing facilities in Slovakia, Portugal, Indonesia, Thailand and China.
According to Pearce and Robinson (2011) an organization‟s resources can have an intangible
aspect too. For instance, ECCO is a shoe producer that was established in the year 1963 it has
a well recognized brand image, because of its high quality, Scandinavian design, direct
injection technology and CSR activities. As a result, it is important to place the products in a
broad spectrum so that they can be easily identified as those which will contribute in the
building of the competitive advantage. As suggested by Barney (1991) we can use the VRIN
model for filtering the products to assess their performance. VRIN stands for Value, Rare,
Inimitable and Non-substitutable, (Johnson, Whittington, and Scholes 2011).

It is important to remember that competencies means how well an organization uses its
resources so that they can be exploited. To be more precise it is the combination of assets,
human resource and operational processes that an organization employs to transform its
resources into outputs, (Pearce and Robinson, 2011).

In light of the above discussion if we now analyze ECCO‟s mission statement we will see
that they have promised to provide the consumers the promise that “No matter where you are
in the world, or in your life, we want to deliver you to the most comfortable place on earth”
(ECCO Shoes UK, 2012). In order to achieve this mission and provide more value to the
consumers ECCO chose to keep its entire manufacturing process under its own control and
surveillance. ECCO‟s shoes are manufactured following five simple steps, (ECCO 360
Challenge, 2010):

 Step 1: According to ECCO‟s business philosophy- “shoes must follow the foot”.
This means that the company does extensive research before they come up with shoe
designs.

 Step 2: To use the best raw materials – ECCO produces its own shoes and accessories
it has its own leather tanneries.

 Step 3: To use state-of-art technology and craftsmanship – the organization uses a


unique blend of technological process and handmade craftsmanship. These unique
combinations of production build ECCO‟s core competencies.

8
 Step 4: Unique Scandinavian Design-according to ECCO “the combination of how a
pair of ECCO looks and feels on your feet is the most compelling advantage we have”
(ECCO 360 Challenge, 2010).

 Step 5: Quality assurance and ethical business practices-ECCO promise to conduct


ethical business practices and provide consumers the high quality for its products.

According to Morgan and Piercy (1996) a quality based business focus helps to build
competitive strategy which helps organization to promote their products as differentiated and
unique from competitors. This helps the organization to build a sustainable competitive
advantage. Moreover, ECCO is a family-based business and it does not need to make any
short-term decision like saving money or making compromise on quality or to save on raw
material to increase shareholder‟s wealth (ECCO, 2012). In order to deliver the promised
quality of its product ECCO kept the entire supply chain under its own supervision which it
named the “cow to consumer” chain (figure 2). ECCO claims that they are the only shoe
manufacturer in the world to take this complete approach for production. “ECCO designers
develop our collections, ECCO owned tanneries produce the leather and ECCO owned
factories make the shoes sold in ECCO shops across the world and at the world‟s leading
retailers” (ECCO, 2012).

Figure 1 ECCO's value chain (Nazarchevici, 2012)

According to Pearson and Proctor (1994) ECCO emphasizes on the inside out strategy which
comprises of “resources, skills and capabilities” instead of market gaps and opportunities. As
a result, from the above analysis we can say that ECCO‟s value chain is its major competitive
advantage.

9
Chapter 2

Analysis of External Environment of ECCO Sko A/s

PESTLE Analysis
This part of the assignment will analyze the main macroeconomic issues that will affect
ECCO‟s business profitability. Identifying these factors will help us to understand what are
the external business opportunities that will help the organization positively and the threats
that might hamper the business‟s future performance.

Political and Legal: income tax has strong effect on the business profitability. Many large
organizations try to manipulate their accounts numbers. So in order to avoid tax organizations
use different types of schemes and transfer price is one of those strategies. ECCO SKO A/s
and its Danish subsidiaries are obliged to follow the Danish regulations (ECCO‟s Annual
Report 2015). However, the Danish tax policies are becoming more favorable and one
company facing loss can offset against the taxable income of the other SBUs because they are
subjected to double taxation. The tax rate was reduced to 23.5% in 2015 and 22% in the year
2016, (KPMG, 2014). The figure below shows the trend in profit before taxes, income tax,
effective tax rate and Danish statutory income tax that ECCO was subjected to over the last
few years, (ECCO‟s annual reports 2006-2013).

Source: ECCO‟s annual reports 2006-2013, KPMG, Ministry of Foreign Affairs of Denmark,
Independent analysis.
10
Geo-political risks have also increased all over the world. The recent unrest in most of the
countries affects ECCO‟s business negatively. The main problem areas are Thailand, Egypt,
and Russia. Russia old move into invading Georgia shocked the world in 2008. Again in
2014 they have invaded Ukraine and (BBC News, 2014). Since many Western countries do
not approve this attitude of the Russian government they are imposing many types of bans
and trade barriers with the country affecting the cash flow of the businesses. Other actions
like activist‟s movement, riots and protest in roads and in front of government offices (those
that happened in Egypt and Thailand) also affects their business.

Economic Risks: Effect of GDP can help an organization to understand the overall business
growth and financial health of an organization. GDP is the total monetary value of all the
products that are produced and ready to sale within a country‟s border (Blanchard, 2008).
ECCO‟s products are non-durable in nature. Their expected lifespan as reported in their
sustainability report is 3 years, (Sustainability Report, ECCO, 2015). Therefore, according to
the economists‟ theory durable products are affected more by business fluctuations than non-
durables. However, ECCO‟s products are highly priced and are considered as luxuries during
economic downturn this is something which will be affected by the economic pressure
because during bad financial times customers usually let go of luxuries. The figure below
shows the revenue growth of ECCO over the last five years.

Source: ECCO Annual Report (2015)

This indicates that the GDP was good over the last five years and so was economic business
environment of Denmark. Sometimes the business profitability growth does not increase
significantly because organizations invest in other projects. The figure below shows that the
11
revenue growth rate was positively correlated to the GDP growth rate of the country. So
business was doing well for ECCO as the business environment was favorable.

Disposable income is the income that is left with an individual after all his expenses are
consumed, (Blanchard, 2008). This is the income people keep for savings and investments.
This factor helps organizations to analyze the purchasing power of the consumers. If the
disposable income rate is growing that means people have more money to spend on other
things other than their basic needs. This is an opportunity for ECCO shoe as explained earlier
because their product price is high and they are considered as luxury not necessity.

Interest Rate when the interest rate fluctuates it affects the stock prices and bond interest
rates. It also affects the customer‟s spending and inflation rate (Investopedia, 2014). From an
organization‟s perspective the lower the interest rate the more they would want to borrow
from banks and creditors and invests in business expansion. As there was an economic
pressure since 2008 the interest rate for doing business was decreased to make it tolerable for
investors to invest in business. As the economy recovered from 2013 the interest rate was
slightly increased too (CNBC, 2014; Telegraph, 2014)

Socio-cultural: Societal class and people’s lifestyle affects businesses especially like
ECCO‟s the social class is divided into five classes. The first class is comprised of people
who ages 15 and over. The next group is considered according to their living locality. The
third classification is done according to the gross income of people. The fourth and fifth class
of people comprises 60% of the world‟s population but they earn less than the average gross
12
income of class three. The middle income people are increasing in number in the emerging
nations. These understanding of social class are important for ECCO because it helps them to
define their target market more accurately. Since the company puts a lot of emphasis on high
quality and sophisticated design the price of the product automatically increases. So the target
market will primarily be the first three classes.

Consumer‟s purchasing behavior is important indicator for forecasting demand of a


company‟s products. Consumer‟s purchasing behavior determines the needs and wants of the
end-users which help the company to design their product because every organization aims to
satisfy the customer‟s needs and wants. As the total expenditures have increased all over the
world, the expenditure behind footwear has been stable. Europe has the highest figure in
footwear expenditure.

Technological: Production of goods and services ECCO is famous for using the direct inject
technology since 1981for attaching the soles of the shoes. The last decade has seen many
innovations and improvements in this technology. Shoe-making requires a lot of steps and
processes. ECCO was successfully using the technology to complete the shoe making which
is one of their competitive advantages which gives them an edge over their rivals. There have
been many innovations in the technological sector. The 3D design software is introduced and
this makes the designer to design the shoes with a more realistic approach. Moreover, the
designing of shoes can also be done within a very short span of time.

Advancement in distribution and communication has also led the business organizations to
faster their business cycles. There have been massive improvements in the e-commerce
business and consumer‟s preference for online shopping and home delivery open up new
avenues for businesses for companies like ECCO Sko A/s. Another important factor which is
important in today‟s business is the massive usage of social media for promotion, which is
not only cheap but serves as the best technique for word-of-mouth marketing. Customers can
read other user‟s reviews and make choices so they basically make more informed decisions,
(Euromonitor International, 2012. )

Porter’s Five Forces Analysis


Porter‟s five forces analysis helps the company to understand its industry competitive
positioning. This tool also help to identify any competitive advantage it might have from
studying the various competitive tools. This framework was first proposed by Michael E.
13
Porter, Adam M. Brandenburger and Barry J. Nalebuff respectively. This is tool which is
very important to be analyzed from time to time because the industry dynamics keep on
changing.

At first we can explore the definition of industry: an industry is a group of organizations


which provides the same type of products and services to the same target customers, (Johnson
et al., 2008). It is difficult to compare all the organizations in an industry because an industry
may comprise of many levels, sectors and converging activities and the size and structure of
all the organizations may not also be same. For this analysis we will be comparing ECCO
shoes with other rivals who are similar in size and scope. That means we will include all
those shoemakers who are involved in whole selling and retailing of shoes. In this regard we
will consider al those firms which either manufactures their own products or outsources it.

Threat of New Entrants: Moderate

A new firm is attracted to enter an industry by looking at the industry profitability. Therefore,
industries which provide above average level of the bottom line will surely attract new
entrants which in turn again reduce the profit figure by the law of demand and supply. The
industry profitability is measured using the return on investments (ROE) so if the industry
ROE is above average then it will attract new competition. This measure basically gives the
investors an idea about how much income the company earns with the investor‟s money
(Investopedia, 2014). So the footwear industry will attract more competition because there is
still growth in the industry‟s profit.

Another indicator for potential new comer into the industry is the capital requirement for
investments and possibility of achieving economies of scale. The requirement of huge
investments may discourage potential investors (Porter, 2008). It is interesting to note that in
the footwear industry the investment structure totally depends on the investor‟s business
strategies. If the company wants to manufacture from cradle to grave then the investment will
be huge but in contrast if he wants to outsource then the investment is not very much s there
are many subcontractors available in the emerging markets where raw material and labor cost
is low. Anyway if any new comer wants to follow ECCO Sko A/s business model then it
would require them large capital investment. The good news for new entrants is that the
return on investments is attractive and capital investment is quite efficient so investors may
get their payoff very easily. Moreover, because of globalization the world is interconnected
14
and reaching the suppliers of raw materials is also very easy (IBISWorld, 2010). As a result
the entry of new entrants is moderate to low (MarketLine, 2013).

Bargaining power of suppliers: High

Suppliers are stakeholders who supply the organization with the required raw material to
make the finished goods and services. Suppliers also include human labor and source of
funds, (Johnson et al., 2008). The more important the raw material that the supplier supplies
the organization the more powerful its bargaining power is. Industries that have powerful
suppliers suffers from profitability because the firms have to abide by their terms and
conditions because the supplier provides something that cannot be supplied by other and so
suppliers get a monopoly power (Porter, 2008). In such cases, in order to meet the customer‟s
needs and demands manufacturing companies have to cut down on their profits to meet their
customer‟s needs.

In the footwear industry, it is again dependent on the organizational structure. In case of


ECCO the bargaining power of suppliers is very low because it has ownership of at least five
tanneries in five different countries and that gives them an edge over their rivals. They are in
full charge of their company‟s production facilities so are not dependent on the
subcontractors. According to APICCAPS (2012) most show manufacturers outsource their
production to low-cost countries in Asia. At least 87% of the outsourced supply comes from
India and China and in this China alone provided 60% and the rest by the Indian suppliers.
This fragmentation of supplies lowers the bargaining power of the suppliers. So even if
ECCO manufactures and controls its own supply chain but it still have the opportunity to
outsource its products to low cost producers in Asia. The switching cost of the manufacturers
is high as if one deal closes they have to again go through negotiation and the entire process
of deal with another main buyer moreover the profit margin is also very low as there are
many suppliers so this gives leverage to the branded companies from their outsourcing deal
(MarketLine, 2013).

Bargaining power of buyers: High

Footwear that are sold by ECCO are fashion wear and consumers have a lot of different types
of demand for quality and price for footwear. They also have a lot of options to buy from.
15
They can get reviews and because of internet they have more product knowledge. They can
see the product review and also judge the price and quality of the products with its
competitors. The switching cost for customers are also very less because the firms stores are
located in the same shopping malls as their competitors. In case of ECCO their buyers are not
only the end customers but also the retailers because not all of their stores are self-operated.
Moreover the buyers, whether it is the end user or the retailers are not all located at the same
place so their number is not fragmented. The purchase volume per customer is also very
small. From the analysis we can see that the buyer power is quite high in the footwear
industry (Porter, 2008).

Threat of substitutes: High

Substitutes are products which are made by different inputs but satisfy the same needs and
want, (Johnson et al., 2008). The highest the threat of substitute the lowest would be the
industry profitability. In the footwear industry there are quite a few significant substitutes.
These substitute products are made with plastics, rubber, fiber and different types of fabric.
These products are relatively cheaper in price and as a result consumers may prefer them
because they are not only fashionable but comfortable, easy to maintain and also cheap.
ECCO is producing high quality premium priced products it is not easy for them to easily
reduce the product price and so there is a high threat of substitutes. “More importantly, there
is also a threat of higher value added products that means these products are better
performance for the price to be paid by consumers. There are walking shoes, sport shoes
which are much more comfortable than fashionable footwear which is only required for
parties and exclusive events, (MarketLine, 2013).

Industry Rivalry:

Organizations who offer similar types of product made with almost same type of raw
materials and who try to offer the same kind of value to the consumers are industry rivals.
The last analysis of Porter‟s five is to understand the company‟s competitive positioning in
terms of its competitors. It is important to understand the nature of industry rivals to see
whether the firm has strong or weak competitive position in the market, (Johnson et al.,
2008). In order to gain a better understanding of the level of competition in the footwear
market, it is important to analyze the issues that most directly affect the business profitability.

16
Industry growth affects the intensity of competition in an industry. The economic recession
has passed away and the industry was looking forward to a gradual growth. The industry
operates in an interesting way. The competitive structure is moderate because the few large
industry players and loosely competing with each other and the small companies are not even
challenging the large ones and they have different target customers so they are not even
ECCO‟s way. Many large competitors like Adidas and Nike outsource some of their
production to the low cost countries and other either subcontract the entire manufacturing or
they just buy in huge quantity as wholesaler which they retail later on. The overall industry
rivalry situation is moderate to high.

17
Chapter 3

A critical analysis of the organisation’s current marketing mix


The aim of this section is to analyze the marketing mix of ECCO Sko A/s. This section will
review ECCO Sko A/s marketing mix. As defined by Kotler and Armstrong “a product is
anything that can be offered to a market for attention, acquisition, use, or consumption that
might satisfy a want or need. According to the scholars there are three levels of designing and
promoting a product. These levels are Core customer value, actual product and augmented
features, these levels are involved in the product design, or providing service and license to
the customers. The core customer value is important for marketers to understand because they
need to identify what exactly is demanded by the target customer group. The second level is
the development of the actual product. Here the marketers need to understand the needs and
expectation from the actual product. This stage requires that the actual products to be
developed and also the physical appearance and other tangible features of the products should
be designed. Quality. Brand name etc. are developed also in this stage of product
development. The third stage is the augmented features of the product which is basically
binding the actual products with the augmented features like delivery, after sales service,
retail store experience, warranties etc.

ECCO mainly manufactures and sells fashionable shoes. According to Kotler and Armstrong
(2012) there are four types of consumer‟s products and they are convenience product,
shopping products, specialty products and unsought products.

ECCO shoes want to be the manufacturer of high quality shoes. It wants to keep comfort and
innovation at heart while designing the product. They mainly focuses on the user‟s comfort in
innovative style which they want to offer at reasonable price. ECCO has a strong
organizational culture and it also controls its supply chain that means in Netherlands it has
ownership of its own tannery. So it has full control over the value chain of its product‟s
production process. As reported in its website ECCO named its running shoes category as
Lagoon. And they use this slogan for marketing "We make running shoes not because we
have to, but because we believe we have something to offer to runners". So basically they are
trying to convince consumers to buy their shoes with a promise that customers are going to
have a completely different experience if they buy ECCO shoes.

18
The next step is to analyze how they develop their actual product. ECCO produces leather
shoes. Their shoes in general have attractive Scandinavian design the core products are shoes
but there are many product lines and they are: men's shoes, women's shoes, running shoes,
outdoor shoes and golf shoes. ECCO also manufactures bags, and other accessories like belts,
socks etc and sell them in their retail stores. ECCO also have webshop and customers from
North America or Canada can buy them. This gives customers greater opportunity to get
product information and make informed decision about the product purchase. In their own
web shop they are in full control of their product presentation i.e which font color, style, size
should be used for product description but fo 3rd part websites they do not have any control.
The company has a 28 days money back program for defective items. In Denmark they offer
free shipping to customer‟s place for order more than 499 DKK, in Germany for more than
295 EUR and in France for more than 49 EURO.

To conclude ECCO strives to provide high quality footwear and accessories for a reasonable
price. It puts great emphasis on innovation and comfort of the customers. It uses BIOM
technology which will attract customers who want to have comfortable and safe running and
outdoor experience. Customers also enjoys the exchange system of its webshop where they
can enjoy both the convenience of online shopping and also get to try on the shoes because
they make the actual purchase. ECCO also trains its employees for better customer service
which would enhance consumers purchasing experience further.

Price
In this section the report will highlight the three major pricing strategies that companies can
choose from (Kotler and Armstrong, 2012). This is also another important P among the
marketing four Ps. All the other Ps talk about expenses only price is one strategy that is
designed in way that it will bring money for the organization. The three main pricing
strategies are customer value-based pricing, cost-based pricing and competition-based
pricing.

 Customer Value-based Pricing: in this pricing the main concern for pricing is based on
the customer‟s perception of pricing o f a product and not the manufacturing cost of the
product.

 Cost-Based Pricing: This is a pricing strategy that focuses on the overall cost of the
product, including manufacturing, transportation, assembly, distribution etc.

19
 Competition-based pricing: in this pricing strategy the competitor‟s price is used as a
reference point for deciding the pricing of the products.

ECCO Sko A/s‟ products are relatively high price and have close resemblance to the main
competitors who are also offering high price. However, ECCO controls their own production
plants and tanneries which indicate that their costs are in their control and they can reduce the
price if they want to. There is not enough information based on its price which makes it
difficult for the analysis. However, we can assume that since their price is not very cheap.
They are definitely not using a customer value=based approach for pricing. Moreover, the
pricing strategy may be different for different types of product line, accessories and even for
different types of market. As a result, it is difficult to understand out of the three pricing
strategies which one ECCO is actually following. ECCO gives a lot of emphasis to
innovation and new technology. It follows BIOM technology which indicates that it shoes are
designed more scientifically for ergonomic and natural fitting which provided great comfort
to the customers. Moreover, the marketing slogan for running shoes discussed above also
indicates their promise for offering something more for their customers. This shows that
ECCO designs its products first using latest technology and design and then sets their price.
This price is probably set by the overall costing of their products. Lack of information is
actually a hindrance in the understanding of their actual pricing strategy.

Promotion
Promotion is strategy that helps organizations to attract and create a brand image among
targeted customers. Kotler and Armstrong (2012) suggested five most commonly used
promotional tools and they are as follows:

 Sales Promotion

 Advertising

 Public relations

 Direct Marketing

 Personal selling

20
ECCO offers 30% discounts to its customers who would buy from their online store from
time to time. They at least once a year offer sale of their old shoes through both retail stores
and online to give discounts on old shoes. This way they sell the old shoes in discounts and
offer new ones to the customers. Keeping old shoes is actually burdensome because as the
products have a lifetime of 3 years if they are kept for too long in the store then it will be
damaged and the company will incur more loss. So it is wise strategy to give discounts and
get rid of old shoes. Moreover, the company puts large logos in shelves of those stores which
are not owned by them. This gives convenience to the customers because they can easily
locate the logo and reach the shelf.

Company does a lot of PR activities and the most effective one for creating a positive brand
image is through corporate sponsorship. Recently ECCO has sponsored a golf tournament. It
also sponsored a walkathon and Walk in style tournaments. Every year the company host 1
major global event and 1 or 2 national events for launching of its new stores. The company
also puts all sorts of offers on mother‟s day, Valentine‟s day, ladies night etc. ECCO uses a
lot of advertising mix like advertising on TV, magazine, social media, youtube, celebrity
endorsement etc. for instance the company once used Thomas Bjørn, a famous Danish golf
player, to sign a contract with ECCO where he s supposed to wear ECCO shoes wheever he
will participate in golf competition(Source.emu.dk). This strategy actually works in most
cases because the fans of the celebrity keeps them as their reference point and whatever
branded product their preferred celebrity uses they also tend to use them However, ECCO
does not always use the same advertising strategy in all of its markets. Its marketing strategy
is different is different countries and it all depends on how aware the market is for a
particular brand (Source.emu.dk).

Place
According to Kotler and Armstrong there are roughly two different types of distribution that
the company can choose. The two options are direct and indirect distribution. In a sense
when a company is directly selling its product to its customer it is direct distribution
strategy. If a company decides to do direct selling in this case a lot of personal resources is
required like space, own vehicle more manpower and many more. This approach is good for
in way that the company has to spend fewer shares of its profits with others like wholesalers.

21
On the other hand when a company or ECCO Sko A/s will decide to use third party or an
intermediary to sell its product it is called indirect distribution. In this case there can be a
large number of parties involved with different types of wholesalers. It is an easy way of
penetrating the market s the distributers already has their own distribution setup in the
country and that can be easily used to send and sell products to customers with ease. It is a
very efficient way of reaching to customers very quickly with new products and making it
available to customers in accordance with marketing strategies. The only drawback is that the
profit has to be shared with the wholesalers or distributors/dealers.

Extensive internet research has indicated the fact that ECCO Sko A/s is a premium brand in
Europe and it has many fast moving products in its wide range of products with high quality
unique materials. Their current distribution strategy is selling their product through different
shopping malls departmental stores their own shop and online selling. However, it will be a
much wiser decision to take their products out of sight of their competitors and place them in
their own flagship stores and through franchise. This fact shows that ECCO Sko A/s is
currently using both direct and indirect distribution strategy to sell their product. According
to small business.chron.com, “to their change of marketing strategy in 2009 when changing
their focus to get closer to their costumers and handle every link in the whole value chain
ECCO signals that they will have the total control of every products and sell their products
directly to the consumers”. However ECOO Sko A/s is working on providing the best
experience to their customers by making the interior design of their flagship a one to look at.
I their store special collections of Danish market shoes are available to make it more
lucrative. This direct approach gives their customers a great flavor of the ECCO brand.
According to ECCO Annual Report (2009) “Their indirect distribution includes franchise and
shop-in-shops where as ECCO have 19 franchise stores in Denmark”. They have set strict
rules and regulations for their distributors. The shop sales people are also required to follow
strict rules for providing customer service to their customers. They need to demonstrate the
product benefits as well. The décor of the stores are also instructed by ECCO and the stores
need to have specified interior decoration. This is all done by ECCO with the aim to have full
control over their selling process.

22
Chapter 4

Recommendation and Conclusion


Recommendation
• Expansion to strong emerging nations

As discussed in SWOT analysis that there are many opportunities in the emerging markets as
the economy is growing and the middle income people have young professionals who have
disposable income to spend on luxuries.

• Increased focus on manufacturing core competencies

Regardless of the fact that ECCO does focus on a lot of innovation and technology. There is
still scope for further enhancement of the production process. Especially they can look into
the business model of their major competitors Clarks, Timberland, Adidas, Geox etc.

• Cost savings

They should focus more on cost saving and imply more on online advertisement through
social media and also increase online sales activities in all their destinations.

• Keep up with competitors

ECCO, in order to remain competitive sustainably, needs to keep up with the competitors.
The competitors are also large in number and also follow innovation and advanced
technology.

• Clearly define market

The company should focus on defining the market more clearly. For instance, they must
follow different types of clear focus on their target markets. For example they make golf
shoes they should clearly define the market and do proper campaigning for this group of
customers.

• Increase celebrity endorsement

23
The company should increase its investment in celebrity endorsement, especially in the
Asia markets, and America. It helps to attract customers who take the celebrities as their
referent group.

• B2B marketing of leather industry

Since the entire supply chain is under their control, ECCO Sko A/s can do B2B marketing of
the shoes where they can supply to large retailers or other manufacturers. There are many
advantages of B2B business. They will get small number of large buyers and will get more
economies of scale in marketing, production and finance.

• Tannery Expansion

They can expand their number of tanneries and they can then supply the raw materials to
other producers. This way they will use their tanneries to full capacity and can then decrease
their overall factory overhead cost. They will be using their assets more efficiently.

 Diversify their Business

ECCO can invest in any other industry and diversify their business. Diversifying their
business will reduce their business risk. If for any reason there is a problem in the tanneries or
the overall demand of shoes decreases the profit from other businesses will help the company
to back up the poor loss making one.

• Increase Brand Visibility

No matter how big ECCO is and how well it controls its overall supply chain the company
has still very poor brand visibility than its competitors. When other competitors are so well
known then the company should take this into consideration that it should also increase the
brand visibility because there might be many untapped opportunities that the company could
not reach because of their poor branding.

Conclusion
Marketing is an integral part of every organization. Previously it was a seller‟s market
manufacturer focused on mass production and filled the massive demand from customers that
was fueled after industrial revolution. The marketing strategies of every organization come to
play in order to fight and become successful in this kind of highly competitive environment.

24
This assignment focused on the Danish Shoe company ECCO and their marketing strategies.
ECCO is a Danish shoe company that was established in 1963. The brand name has strong
image and the company is well-reputed in Denmark. The company provides original
Scandinavian design, high quality products, and has a strong focus on its CSR activities. The
company mainly specializes in footwear products, sport shoes, sandals, laces, boots, children
shoes, heels and flat shoes. The major strengths of the company is its design, direct injection
technology, control over its supply chain and major weakness is its poor advertising.
Opportunities include expansion into emerging markets, diversifying the business etc. a
thorough external environment analysis was also conducted and it was found that the industry
rivalry is a little loose and threat of substitution is also very high. The threat of supplier is low
but threat of buyer is high. The marketing mix was also analyzed and based on that few
recommendations were given like diversifying the business, expanding into emerging
markets, do B2B business and have more tannery exposure and brand visibility.

Reflective Journal:

Kolb's Experiential Learning Cycle

(Source:
http://www2.le.ac.uk/departments/gradschool/training/eresources/teaching/theories/kolb)

25
The utmost extensively used learning theory is Kolb's experiential learning cycle. There are
four stages :

Stage Description

Concrete Experience As a part of the group we received the course work brief on
28th September 2016 and asked us to do the following :

We had to Select an organization on the basis of which we


need to analyze Company‟s internal and external
environments. Based on our analysis, classify and rationalize
major analytical tool test, which may be useful for the
organization. Also we need to make recommendations
accordingly.

Reflective Observation We were a group of four members and in this stage we were
trying to accumulate all the secondary data and started
making the report, we confronted a lot of issues such as:
expectation from each team member, idea generation of the
team member also these issues are important so that we can
distribute the work suitably, structuring the report, also
organizing the research plan. These factors that influences the
entire report. Under the leadership of our fellow team leader
we figured out the entire course work report on Ecco Sko A/S
which is a Denmark based shoe company having outlets many
countries in the world.

Abstract When we started the course work preparation we didn‟t have


Conceptualization much knowledge about the subject as out previous
educational background doesn‟t match with this so had some
preliminary complications but all of us together made it
possible. Our course tutor Ms Lucy was really helpful for us
to prepare the report as we practiced a lot of similar case
studies. I found it truly stimulating to use the different
analytical tool for the Ecco Sko A/S. Even though we had
some personal issues during making the assignment but at the
end we found ourselves on track and completed the report on
time. We felt so relieved. Also we learned many things which
we have to keep in mind in the future group course work.

26
Active experimentation As a group we feel that we achieved our specific objective of
while doing the course work. Knowledge we gathered that
definitely will help me to complete in our future course works
and also it will help us to implement the learning in our
professional life.

27
Bibliography
 Annual report 2009web: http://ecco.com, Retrieved 3rd of December

 Barney, J B, Ketchen, Jr. D J and Wright, M 2011, „The Future of Resource-Based Theory:
Revitalization or Decline?‟, Journal of Management, vol., 37, no. 5,

 Bradley, F 2012, International Marketing Strategy, 4th edn., Prentice Hall.

 Cateora, P R and Graham, J L 2015, International Marketing, 15th edn, McGraw Hill.

 ECCO Shoes UK 2012, December 10th, 2016, from http://www.eccoshoesuk.com/about-


us/21-our-beliefs

 ECCO Shoes UK. (2012). Retrieved 10th December, 2012,


from http://www.eccoshoesuk.com/about-us/21-our-beliefs

 ECCO shoes, web: http://global.ECCO.com/en/sport/running#!running/running, Retrieved


10th of December

 ECCO-360-Challenge. 2010, Five Steps. Retrieved December 10th, 2016, from ECCO 360
Challenge: http://360-challenge.com/fileadmin/user_upload/360-
challenge.com/download/Five_Steps.wmv

 ECCO-Consumer-Profile. (2008). Retrieved 10th December,


from www.emu.dk: http://www.emu.dk/erhverv/merkantil_caseeksamen/ecco/dok/koebmand
skab/ecco_consumer_profile.pdf

 ECCO-Consumer-Profile. 2008, Retrieved December 10th, 2016,


from www.emu.dk: http://www.emu.dk/erhverv/merkantil_caseeksamen/ecco/dok/koebmand
skab/ecco_consumer_profile.pdf

 Fenn, D 2010, Clothing & Footwear Industry 2010: Market Review 2010. Key Note Ltd.

 Haberberg, A and Rieple, A, 2008, Strategic Management: Theory and Application, Oxford
Press, UK.

 Hollensen, S. 2010, Marketing Management: A Relationship Approach, 2nd edn., Pearson


Education Limited: England.

 Johnson, G, Whittington, R and Scholes, K 2011, Exploring Strategy: Text and Cases, 9th
end., Essex: Pearson Education Limited: Essex.

28
 Nickels, W G, McHugh, J M & McHugh, S M 2010, Understanding Business, 9th end.,
McGraw-Hill.

 Pearce J & Robinson, R B 2011, Strategic Management: Formulation, Implementation, and


Control, 12th edn., McGraw-Hill Education (Asia): Singapore.

 Phillip, K & Armstrong, G 2012, Principles of marketing. 14th edn., Prentice Hall.

 Proctor, T 2000, Strategic Marketing: An Introduction, Routledge: New York.

 Small business chron, web: http://smallbusiness.chron.com/examples-brandpositioning-


strategy-25213.html,

 Undervisningsministeriet, web:
http://Source.emu.dk/sites/default/files/Kommunikation_0.pdf, Retrieved 3rd of December.

 Undervisningsministeriet, web:
http://Source.emu.dk/sites/default/files/Kommunikation_0.pdf, Retrieved 3rd of December.

 Wensley, R 2000, Marketing Theory: A Student Text. Cengage Learning EMEA.

 http://www2.le.ac.uk/departments/gradschool/training/eresources/teaching/theories/ko
lb)

29