ECCO Shoes UK

 Marketing Contributions to the Development

of Sustainable Competitive Advantage

 

The aim of this paper is to present and evaluate the role of marketing in creating sustainable competitive advantage. For the practical aspect of the present work, ECCO Shoes Company will be examined and pertinent examples provided. It has to be specified that it was observed that, within the literature as well as the commercial use, the terms sustainable, sustainability and sustained are used interchangeable. For the purpose of this paper it will be considered, if not otherwise specified, that sustainable imply sustained/ long-term/ persistent, and sustainability (Porter and Kramer, 2006) emphasises the responsibility towards people, environment and community (p. 81).

Marketing strategy contributes to the achievement of “persistent success in the marketplace over the competitors” using firm’s resources and capabilities to satisfy the changing needs of the consumers (Wensley, 2000).

As early as 1991, was found that in order to discover the foundation of a firm sustained competitive advantage its strategic capabilities have to be identified and examined (Barney et al. 2011). Barney’s resource-based approach implies that the foundation of competitive advantage comes from company’s superior resources and specific practices “designed to utilise such resources efficiently” (Proctor, 2000, p. 171). In other words, the competitive advantage and superior performance are elucidated “by the distinctiveness of its capabilities” (Johnson, Whittington, and Scholes, 2011, p.83). More precisely, Resource Based View (RBV) (Brennan et al. 2008) is a theoretical framework which believes that a firm’s competitive advantage originate from internal resources advantages. RBV is in contrast with Market-Based View (MBV) which focuses on “the market, direct rivals, and on the extended competitive environment” representing firm’s competitive positioning advantages (Brennan et al. 2008, p 69). 

Therefore, in order to identify ECCO’s durability and competitive advantage it is suggested (Johnson, Whittington, and Scholes, 2011) to carefully consider its strategic capabilities – resources and competences – which add value to the customers (Johnson, Whittington, and Scholes, 2011, p. 84).

First, according to Pearce and Robinson (2011) resources are agency’s assets used to conceive and implement strategies. On one hand, they can be tangible – representing “the physical and financial means a company used to provide value to its customers” (Pearce and Robinson, 2011, p.154). For instance, ECCO is where its customers are – it currently owns branches in over 90 countries across the globe; it prides with its loyal customers and positive results on balance sheet (ECCO, 2012; Fenn, 2010; ECCO’s Annual Report 2011). The company is also one of the world largest producers of quality leather, owning tanneries in the Netherlands, Thailand, Indonesia and China, and production sites in Slovakia, Portugal, Indonesia, Thailand and China. On the other hand, company’s resources can also take an intangible aspect (Pearce and Robinson, 2011). For example, ECCO is a Danish shoe manufacturer and retailer founded in 1963 with a well-established brand name and reputation for its Scandinavian design, innovative and high-quality products, direct injection technology, and deep CSR philosophy.

As presented above, resources can be represented by a large spectrum of internal elements of an organisation. Thus, there is a need to identify those that build sustainable (long-term) competitive advantage and higher economic performance using a filter of four criteria – VRIN – Value, Rarity, Inimitability, and Non-substitutability (Barney, 1991, cited in (Johnson, Whittington, and Scholes, 2011).

Secondly, competences refer to the manner in which the resources of the company are exploited. In other words, they are “the skills – the ability and ways of combining assets, people, and processes – that a company uses to transform inputs into outputs” (Pearce and Robinson, 2011, p.154).

In addition, a firm should identify a resource or a competence that will be highlighted the most – the core competence, which represent:

“the linked set of skills, activities and resources that, together, deliver customer value, differentiate a business from its competitors and, potentially can be extended and developed” (Hamel and Prahalad, cited in Johnson, Whittington, and Scholes, 2011, p. 89).

From marketing perspective, to build competitive advantages, a company has to be customer-oriented and (Porter, 1998) capable of generating value for its buyers trough cost leadership (lower price for the same benefits as its competitors) or differentiation (exclusive benefits that justify a higher price) (p. xxii). Although a market-led vision and (Mathur, 1992, mentioned in Proctor, 2000) understanding of the importance of the firm’s positioning within its external environment is important, Mathur (1992) argues that “customers are not sensitive to inputs such as costs, resources, culture and skills, but are sensitive to the benefits and drawbacks of product/service offerings”. If considering current economic climate, the Mathur statement appears to be unrealistic, because (Johnson, Whittington, and Scholes, 2011) “customers do not value product features at any price”. Accordingly, the implementation of cost efficiency strategies could lead to competitive advantage (Johnson, Whittington, and Scholes, 2011).

ECCO’s mission statement promises to deliver the consumers “the most comfortable place on earth” (ECCOShoesUK, 2012):

“No matter where you are in the world, or in your life, we want to deliver you to the most comfortable place on earth”.

To accomplish its mission and bring added value to the customers, ECCO chose to manage the entire shoe manufacturing process which is achieved through the following 5 Steps (ECCO-360-Challenge, 2010): Step 1: The Foot – According to ECCO’s philosophy – the “shoes must follow the foot”. Thus, the company claims vast researches prior to producing a shoe; Step 2: The Best Materials – ECCO manufactures its own leather and holds and operates its own tanneries; Step 3: Technology and Craftsmanship – The company uses a mixture between technology and handmade craftsmanship. The technological and managerial capabilities represent ECCO’s core competence; Step 4: Design – “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 & Ethics – ECCO promises to deliver “quality without compromises”.

As suggested by the study of Morgan and Piercy (1996), such “quality-based” competitive strategy is used as marketing differentiation technique in obtaining “non-price competitive advantage”.

Furthermore, ECCO is family held and “has no need to make short-term decisions, save on material or compromise on quality” (ECCO, 2012). In order to deliver perfect quality and comfort to its customers, ECCO decided to own and manage its entire value chain “from cow to consumer” (figure 1 below), and claims to be the only major shoe company who does that:

“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

According to Pearson and Proctor (1994) ECCO focuses on inside-out strategy, represented by the company’s “resources, skills and capabilities” rather than on “market opportunities or competitive gaps” (Pearson and Proctor, 1994, p. 22). Nevertheless, it appears that ECCO’s operations strategy is its main competitive advantage. The fully integrated vertical value chain sets ECCO apart from its competitors (i.e. producing its own supply) who are doing the exact opposite (i.e. outsourcing). This inside-out strategy, based on company’s resources and capabilities within its operations, allows ECCO to deliver innovative and high-quality products to its customers.

According to Porter and Kramer (2006, p. 85): “Value chain social impacts are those that are significantly affected by the company’s activities in the ordinary course of business”. Having great control over the shoemaking process permits ECCO to carefully monitor and control the impacts of all its operations, giving ECCO the “opportunity and obligation to make a difference” (ECCO, 2012). ECCO’s pursuit for competitive advantage emerges to overcome the pure profit orientation view.

Examining ECCO’s corporate website, it can be observed that the company projects a Social Corporate Responsibility philosophy throughout. This could be easily described following Blowfield and Murray’ perceptive on CSR (Blowfield and Murray, 2008; ECCO, 2012) and comprises:

•    firm’s philosophy which guides the relationship with the members of a community: “Our commitment to being a responsible company is incorporated in the ECCO Code of Conduct”;

•    firm’s role in wider community and the nature of the relationship between the firm and the community: “The ECCO Code of Conduct provides information to guide employees and partners around the globe so that they conduct business in accordance with the company’s ethical standards”; and

•    firm’s groups of interest (stakeholders) are discussed: “Corporate responsibility includes how we behave towards our employees, communities, the environment and our business partners”.

It can be said that both – CSR and Ethics – search for values, goals, and choices beyond Friedman’s argument of sole profit making/ maximisation. Yet, it has to be specified that CSR is concerned with company’s accountability for all its stakeholders, not only shareholders, while ethics is looking at moral principles when determining if an actions is right or wrong. Hence, As a result, ECCO is visibly engaging in CSR actions (Walk for Life charitable programmes: Walkathon, Walk in Style). It also decided to act morally right integrating ethics and responsibility into the heart of its social and environmental goals, claiming that “we want to be good corporate citizens, wherever we work” which demonstrates company’s ethical intent regarding its role and responsibilities towards society and environment. The company also states that “as a large employer, ECCO understands its responsibility and accepts it” (ECCO, 2012).

ECCO’s CSR efforts regarding its employees seem to have an enormous impact on company’s internal marketing strategy: “continuous learning ensures that all employees are familiar with the core values and high ethical standards of ECCO formulated in our Code of Conduct and also helps teach our employees how to prevent and minimise the risk of accidents” (ECCO, 2012). CSR is seen as an indispensable element for internal marketing strategies, “fulfilling employee needs and drawing them to identify strongly with the company” (Bhattacharya, Sen, & Korschun, 2007). In addition, company’s behaviour and actions taken regarding the community and the environment in which it operates dictates the manner in which the company will be perceived by the local communities and other pressure groups.

 This different approach to competitiveness adopted by ECCO could be described (Hollensen 2010, p. 326) as responsible competitiveness. Moreover, Porter and Kramer (2006, p. 89) state: “When value chain practices and investments in competitive context are fully integrated, CSR becomes hard to distinguish from the day-to-day business of the company”.

As a result, ECCO is trying to achieve what Obermiller, Burke, and Atwood (2008) describe as: competitive advantage by use of sustainable (responsible) business practice as marketing strategy. To succeed (Hansted Blomqvist & Posner, 2004) CSR and marketing departments must be in alignment and decide collectively upon the brand communication approach, which “can range from fully integrated to invisibly linked and should be determined based on an assessment of purchase drivers and the business strategy” (Hansted Blomqvist & Posner, 2004) (figure 2 below).

Figure 2: The three approaches to aligning brand and CSR. Source: Hansted Blomqvist and Posner, 2004, p. 34

It is interesting that Scott Otte (Otte, 2011), ECCO EMEA’s Marketing Director, explained at GRASP conference[1] (where I met him personally) ECCO’s Corporate Social Responsibility strategy and mentioned that the company do not have a separate department for CSR and that it is handled with the marketing department, yet it takes care to issue CSR reports and create CSR strategies and plans. Moreover, at a further workshop it was discussed the manner in which ECCO chooses the get involved into CSR. From the workshop observations, but also analysing company’s CSR activities and media appearances, it can be said that ECCO adopts an invisible approach. In other words, ECCO is a brand that has an impeccable CSR record, but keeps its CSR activities behind closed doors. Why ECCO does not use its core competences and differentiation as a bold manner of communication? ECCO has embedded CSR in its business strategy and philosophy, but opts not to maximise it in the external communications and initiatives.

ECCO’s Corporate Social Responsibility efforts are not used as a USP (or point of differentiation) within the marketing communication strategy.  Initially, this strategy might appear to be wasteful and missing the opportunity to leverage CSR in building competitive advantage. Particularly because it is suggested that firms are using reputation to “justify CSR initiatives on the ground that they will improve a company’s image, strengthen its brand, enliven morale, and even raise the value of its stock” (Porter & Kramer, 2006, p. 82). For instance, opposite to ECCO, its direct competitor Clarks is proudly expressing its CSR activities and tries to achieve competitive advantage through the ethical products (i.e. Clarks shoes for life, Soul of Africa), online and in store promotional materials and personal selling (“bye our shoes to support our noble causes”), and employees and customers engagement (Race for life – in support for Cancer Research).

On the other hand, Van de Ven (2008) argues that similar to other types of communication, and adopting an ethical position, branding “can be manipulative” and questions the use of branding of CSR and as a result “it is not hypocritical for a company to be careful not to stress the business case for CSR in their marketing of CSR” (Van de Ven, 2008) p. 349), because it could “have a negative influence on the perceived sincerity of the firm and its CSR endeavours” (p. 350). ECCO is using CSR to build a solid base of trust in the brand and company and, in Hansted Blomqvist and Posner’ words, its “messages regarding corporate responsibility initiatives never really become part of the company’s mainstream communications” (2004, p. 35).

As argued thus far, strategic marketing is concerned with developing sustainable competitive advantage by exploiting the capabilities of the company in order to satisfy the volatile needs of the customers, in long-run and in a better way than the competitors.

RBV state that company’s specific resources (VRIN) are the foundation of value, but it was argued that they have to be enhanced through value chain and marketing activities. ECCO appears to understand its customers’ wants, the importance of differentiated positioning, and make use of its strategic capabilities to build and maintain competitive advantage. ECCO’s is chosen by its customers due to renowned shoes quality (ECCO-Consumer-Profile, 2008), and as justified by the founder of the company – Karl Toosbuy: “It has always been our philosophy that quality is the only thing that endures” (ECCO, 2012). Due to the fact that ECCO’s customers are mostly searching for quality and comfort, but are ready to pay the price, the company is challenged to offer an appropriate level of value in order to build and maintain competitive advantage.  In consequence, ECCO’s pursuit for competitive advantage emerges to overcome the pure profit orientation view. Although ECCO already has consistent commitments across environmental, community, employee welfare, financial performance and corporate governance, and could easily adopt and benefit from an integrated approach it chooses not to, probably, because although the business strategy and philosophy is directly and clearly connected to CSR, its brand image is not. ECCO’s marketing strategy resulting from its sustainable (as in responsible) approach to business is contributing to the company sustainable (as in long-term) competitive advantage. Thus, ECCO’s decision to keep CSR messages out of its marketing communications is clearly strategic.

It has to be mentioned that while marketing contributes to the development of sustainable competitive advantage in an organisation, it cannot do so in isolation and requested the contribution of other disciplines and departments (i.e. management, CSR, operations, etc.).

References

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[1] GRASP – Global Romanian Society of Young Professionals (www.mygrasp.org). The conference discussed the role of civic engagement in Romania’s development. 

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