Coach Inc. Essay

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Coach Inc. Essay
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  • University/College:
    University of California

  • Type of paper: Thesis/Dissertation Chapter

  • Words: 1732

  • Pages: 7

Coach Inc.

Recommendations and Justification

First, Lew Frankfort should continue to make new, high quality handbags that will impress customers. This will help Coach to continue to grow and prosper. New designs will help attract more customers to buy Coach products. The company can only benefit with new and unique products in the market. If Lew Frankfort can continue to do this Coach can be a leader in the market, which will help the company grow. Second, brand awareness should be increased. It can be increased through social media and e-commerce sites. This will help Coach be well known around the world. The more people know about the company and it’s products the more customers it will attract. Third, Coach should protect its products against counterfeiting. Coach can do this by making sure that no patterns or fabrics are stolen so that they can be made into fakes that look similar to the authentic products. It should also pursue knockoff sellers in Asia. Knockoffs can attract customers to the shops that sell them, which will decrease the customers that shop at actual Coach shops. Fourth, Coach should continue to expand its market globally. It should increase its factory stores to help with the market. In the case it says that factory stores should be no closer than 50 miles from full price stores. This is important because it is a marketing strategy. All of this will continue to expand Coach. Finally, Coach should continue pursuing its plans to expand in Asia. Japan is an important market for luxury goods and China is suppose to become the world’s largest market for luxury goods. Coach needs to build a presence in important locations where competitors have yet to expand to.

Dominant Economic Features (PESTEL)

Total luxury market is $220 billion with an expected growth rate of about 7 to 8 percent annually through 2015 to get to $350 billion. Most of the growth will come from China and India, which are some of the countries that seem to be emerging. In the case, Coach’s specific target market is identified as being $24-$28 billion. Furthermore, the luxury handbag, leather goods and accessories market is at about $120 billion. It can be noted that the luxury brands are mainly targeted to wealthy customers who want a well-known luxury brand. This luxury brand market continues to prosper since many wealthy people want the status and value of owning these luxury products. It can also be noted that the luxury market is worldwide. The United States owns 30 percent of the market and Europe also owns 30 percent of the market. Additionally, all of these luxury goods companies use unique strategies to try and create high differentiation. These differentiating factors can include all of the following: styling, reputation, quality, image, and customer service. The case also shows that there is a growing desire for luxury goods by middle class consumers. This could be since most middle class families want to reward themselves with some form of luxury goods. Most of the luxury goods manufacturers in the case were vertically integrated into the function of retail stores. Other designers were made under the supervision of the designer while products by Coach were made by low-cost contract manufacturers.

Five Forces Model

There is a strong rivalry amongst competitors in the market. Interfirm rivalry is the strongest competitive force in this market. These competitors try to make their products of the finest material and newest styles to compete with one another. Buyers have little leverage in negotiating with manufacturers of luxury goods. Consumers do not have the ability to negotiate the price of luxury goods when in retail stores. According to the case Coach Inc. and several other luxury goods makers continued to maintain the same price each year. The consumers and retailer buyers are weak competitive forces in the market. The bargaining power and leverage of suppliers is also a weak competitive force. There is a competition from substitutes in the market. For instance, there are many substitutes for luxury goods in almost every product category. Several consumers who do not want a luxury good will purchase a substitute product because it is most likely at a much lower cost. There is not a really a threat of a new entry. This can be considered a weak competitive force since it is quite difficult for a new luxury brand to enter the market. The majority of current luxury brands have strong reputations that were built years ago. Because of this they have a strong sense of loyalty from their customers. In summary, there is a small chance of their being a threat of a new entry to take over the market. Buyers and suppliers have almost no leverage when negotiating with sellers, and the rivalry in the industry excludes price competition. Most consumers are brand loyal and want the actual luxury product, which shows that substitutes will not hurt the market much.

Driving Forces

As stated before Coach is looking to globalize by expanding in emerging markets in Asia. Coach will continue to expand through social media and e-commerce sites. There is a high preference for differentiated products. The more differentiated the better. Coach also wants to expand its market into Europe. Currently Coach is not very well known in Europe so it could drastically help the company with sales if they can get a growing market in Europe.

Market Position of Rivals

Coach’s rivals are not leaders of the market as Coach is; however, they do still compete. For example, Coach is not as popular as some of the other competitors in Europe. Each rival has some unique aspect that continues to drag in customers. This could be the fabric, design, or quality of the product being sold. Not only that, but other rivals can be in a less competitive environment in certain countries which can give that industry the upper hand.

Key Success Factors for Future Competitive Success

To continue to succeed Coach needs to be innovative with all future products. This tends to attract more customers to the market. Coach needs to keep up with rivals to see what is selling that they do not have. This will help Coach compete against its rivals.

Industry Outlook

Coach as an industry is doing extremely well in the market. It is currently the leader of the market because of its effective marketing strategies. Competitive forces are growing stronger since they have some markets in continents that Coach is not as popular in yet. Furthermore, some of the competitor’s branch out to male customers more that Coach does. The industry does have a sufficient competitive strength to defend against unattractive industry factors. The industry has a few problems here and there, but there is nothing severe. The industry still has plenty of room for growth. Coach can expand into Europe and into the men’s market to grow
even larger.

How Well the Company’s Present Strategy is Working

Coach is currently targeting the lower part of the luxury products (the cheaper part). This market provides the opportunity for more customers than more expensive markets. Coach targets the top 20 percent of Americans by household income unlike other markets who target the top 5 percent. Coach has a multi-tiered retail strategy that has full-price retail sores, department stores, and factory outlets. Coach’s flagship stores carry all of the high priced products. Core stores have the widely demanded products. Having a discount factory outlet store allows Coach to maintain a year-round full price policy in its full price retail stores. Overall Coach has established a great competitive advantage. It’s profit growth performance and its high volume of sales has shown the effectiveness of Coach’s strategy.

SWOT Analysis

Coach has contracts that guarantee the company access to the highest quality leathers. Coach has negotiated offshore production contracts that helped deliver high product quality and low manufacturing costs. Coach has also leveraged existing brand names by adding various accessory lines. Additionally, Coach has built a multi-tiered retailing approach. They have also cultivated a strong brand awareness around the world. These are all of Coach’s strengths at the current time. Some of Coach’s weaknesses include: a small European presence. Coach is not very well known in Europe as it is in the United States and other parts of the world. Coach has a very small role in the men’s market. Some of Coach’s market opportunities are developing retail locations in Europe since it currently is not well known there. If Coach can do this it can open up a whole new market to increase its sales. Coach needs to develop new product lines that are geared towards men. Coach needs to expand into Asia in countries such as China, Japan, and India to help the growth of the company. Some external threats are as follows: weakened brand image and restricted sales outlook.

Company’s Strength/Weakness compared to other Rivals

One of Coach’s strengths is the industry’s strong customer loyalty. Coach has customers who will pay a lot of money for one of its deluxe products and it has customers who have been fans of Coach product’s for a long time. One of Coach’s weaknesses compared to other rivals is the fact that it has very little European presence. Some of its rivals have a strong presence in Europe, but this is not the case with Coach. Not only that, but Coach has a very small portion in the men’s market. Some of Coach’s rivals have a strong presence in the men’s market. Furthermore, Coach’s penetration in ancillary markets is small when compared to some of its rivals. These are all of Coach’s strengths and weaknesses compared to other rivals.

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Coach Inc. Essay

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Coach Inc. Essay
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  • University/College:
    University of Arkansas System

  • Type of paper: Thesis/Dissertation Chapter

  • Words: 1342

  • Pages: 5

Coach Inc.

Coach Inc. in 2012: Its Strategy in the “Accessible” Luxury Goods Market Coach was founded in 1941 when Miles Cahn, a New York City leather artisan began producing leader handbags. In 1981, Coach was able to grow at a steady rate by setting prices about 50% lower than those of more luxurious brands, adding new models, and establishing accounts with retailers such as Bloomingdale’s and Saks Fifth Avenue. After 44 years of family management, Coach was sold to diversified food and consumers goods producers, Sara Lee. The company continued to build a strong reputation for long-lasting, classic handbag. By the mid-1990s Coach’s performance began to decline as consumers developed a stronger preference for stylish French and Italian designer brands.

In order to solve the problem, in 1996, Coach hired a new creative director and began to conduct the extensive customer surveys and focus groups to ask customers about styling, comfort, and functionality preferences. By 2000, the changes to Coach’s strategy and operation allowed the brand to build a sizeable lead in the “accessible luxury” segment of the leather handbags and accessories industry and made it a solid performer in Sara Lee’s business lineup. At the last quarter of 2000, Sara Lee management elected to spin off Coach through an IPO. After that, Coach Inc.’s financial result and stock price performance proved to be stellar, as its quadrupled growth in annual sales reach $4.2 billion in 2012.

As coach was evolving more of a global growth-oriented in 2012, it was believed that the key growth initiatives was stores expansion in the U.S, Japan, Hong Kong, and mainland of China. In addition, Coach was considering expanding to the European and North America market but the threats from the existing prestigious brand are too strong. Coach was also racing to build brand loyalty in China, India, and other developing countries. These strategies are the tools to boost Coach’s profit margin and stabilize its stock which fell by nearly $20 in the first six months of 2012.

Coach Inc. – Internal Analysis

SWOT analysis: Identifying Strength and Weakness
Strength

The quality of the product is equal with the rivals, but Coach can sell it with 50% lower price. The product is distinctive, easily recognizable, extremely well made, and provided with excellent value Excellent service for its customer: Coach replace damage handbag regardless the age of the bag Weakness

The model of the product can be easily imitated
The fact that the share price of coach is declining in the beginning of 2012 showed us that this company is vulnerable toward economic condition

Competitive Advantage and Core Competencies: Resource Based View A company’s resources and capabilities represent its competitive assets and are big determinants of its competitiveness and ability to succeed in the marketplace. Resource Based-View should rely on: (Thompson, Peteraf, Gamble, & Strickland III, 2014) Tangible asset: Coach has many stores around the world, Coach is flexible in terms of sourcing, it have a good control and research and development system Intangible asset: Coach has really good reputation, Women‘s Wear Daily survey stated that Coach quality, styling, and value mix is really powerful. In 2014, Coach Inc. became one of 100 most valuable brands in the world by Forbes. (Forbes.com, 2015).

Coach Inc. also has a really good partnership in term of product manufacturing with China, Vendors in Vietnam and India, and also product development in Hong Kong, China, South Korea, also India and Vietnam. Those two kind of assets must be: (Jurevicius, 2013) Heterogeneous: Coach has different bundle of resources that make it different from the other. It have good knowledge in term of consumer preference, it have a good manufacturing and product development contract with outsourcing company Immobile: Coach’s resources and capabilities will stay in the company for quite a long time. Coach brand reputation and good relationship with outsourcing companies will create good core competencies for Coach Inc.

Value Chain Analysis

Primary Activities

Supply Chain Management: Coach’s procurement process only selected the highest quality of leather. Operations: The operation process of Coach’s product is based on its sourcing agreement with quality offshore manufacturers, this contract help Coach in building reputation for high quality and value. Distribution: Coach’s channel distribution involved direct to consumer channels and indirect channels. Direct channels included full-price stores in the U.S, internet sales, catalog sales, and stores in both China and Japan. Indirect sales included wholesale account with department stores in the U.S and other international market. Sales and Marketing: Monthly product launches to make purchase in regular basis to increase the frequency of consumer visit.

The full-price stores’ designed to show luxury image, so it enhance the brand awareness to grow market share. In marketing, Coach communicates with customers through wide range of direct marketing activities including email, website, catalogs, and brochures. Service: Coach provides service to its customers by refurbish or replace damaged handbag regardless of the age of the bag. In peak shopping periods Coach provide additional store employees to ensure customers’ satisfaction. Company allow customers to have special request service as they are allowed to order merchandise for home delivery if particular handbag not available in the store

Supporting Activities

Product R&D, Technology, and Systems Development: Coach is doing major consumer research quarterly to define product trends, selection, and consumer desires. Human Resource Management: Coach provides its store employees with regular customer service training programs. General Administration: Coach is forming collaboration with offshore manufacturers with 40 suppliers in 15 countries. It allows Coach to maintain sizeable pricing advantage relative to other luxury hand bag brands.

VRIO Approach

Is the resource “valuable”? Coach has very valuable resources. It has many stores around the world; it has a good relationship with offshore manufacturers so Coach can keep competitive in term of price. Coach also a brand with a good reputation. Is the resource “rare”? A reputation is not something that easily obtained by a brand. Having a reputation of the world’s most valuable brand give Coach a good competitive advantage in this industry. Is the resource “imitable”? Coach is having a valuable research about its partnership with offshore manufactures, it something that can be imitated by the competitors, but to imitate something like this will take a really long time, difficult, and costly. Is the resource “organized to capture value”? Coach’s products give value to middle income woman to feel the experience of having luxury brand.

Conclusion and Recommendation

To conclude based on the RBV, VRIO, and value chain analysis, Coach Inc. has already the competitive advantage that can help it to sustain in this industry. But as Coach Inc. want to penetrate to European and North America market, I recommend it to elaborate more strategy of differentiation, because many luxury brand in Europe and North America can provide the same price as Coach did. The differentiation can be in term of value given to the customers, so Coach will not be considered as luxury brand only but also something that give impression to its customers.

Bibliography

The World’s Most valuable Brand. (2015). Retrieved March 8, 2015, from Forbes: http://www.forbes.com/powerful-brands/list/ Jurevicius, O. (2013, October 14). Resource Based View. Retrieved March 8, 2015, from Strategic Management Insight: http://www.strategicmanagementinsight.com/topics/resource-based-view.html Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J. (2014). Crafting and Executing Strategy The Quest for Competitive Advantage Concept Cases. McGrawHill Education.

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Coach Inc Essay

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Coach Inc Essay
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  • University/College:
    University of Arkansas System

  • Type of paper: Thesis/Dissertation Chapter

  • Words: 1846

  • Pages: 7

Coach Inc

1) 1. What are the defining characteristics of the luxury goods industry? What is the industry like?

A luxury brand may have profound influence on an overall product strategy since its position may determine how the company is going to make its next step. A luxury brand like Coach epitomizes elegance and combines classic beauty with modern design. According to John E. Gamble, not only has Coach become one of the most respected and known brand names in the ladies’ handbags and leather accessories luxury brand industry, it is also one of the most best-selling luxury brand companies in the world, with net sales reaching 2.1 billion in 2006 (Gamble).

When a company like Coach decides to set up a product strategy for the next season, the manager will need to take the brand’s established style into account, since their incoming products must fit with the existing brand. When a manager, such as Lew Frankfort, chairman and CEO of Coach, Inc., aims to build a luxury brand like Coach, he invests millions of dollars in setting up a series of business strategies, including advertising on television, organizing fashion shows, and gaining the approval of fashion designers.

These actions are decided based on how a luxury brand is built; essentially, the brand will guide the future steps of the company to a certain degree. Coach, Inc. is different from other more expensive luxury brands, such as Hermes, Prada, Fendi, and Louis Vuitton in the sense that Coach focuses more on middle-income consumers who want to purchase their hand bags from a price range of $200 to $500. Coach is the alternative to these competing companies, matching their key luxury products on quality and styling, while beating them on price by 50% or more (Gamble).

2) 2. What is competition like in the luxury goods industry? What competitive forces seem to have the greatest effect on industry attractiveness?

The Luxury branding decision will influence an organization’s pricing decisions because its position is related to the product’s price. Take Coca Cola, for example. It is the most valuable brand in the world. The brand makers intend to compel everyone to drink Coca and provide a feeling of happiness. Thus, the price of the product will be cheap, since the brand is aimed at inducing the public’s joy. If the company sets the prices high, people may not be able to afford Coca Cola. Since the brand targets consumers of all backgrounds and income levels, it aims to market itself as a cheap beverage that tastes remarkable. This is how the brand is related to the pricing. Similarly, Coach, Inc. succeeds in maintaining a balance between affordable price and luxurious design. Coach is a less expensive luxury brand compared to its more expensive Italian and French counterparts.

The type of brand will directly influence an organization’s distribution system, especially if it is a luxury brand, since the brand may tell people where the product is distributed. According to the website (americanessays.com) “Coca Cola has its own distribution channel including direct and indirect selling.” By using this strategy, Coca Cola is able to provide Coke all over the world. Coach, Inc. keyed into “accessible” luxury ladies’ handbags and leather accessories. The brand will influence a company’s promotion decision because of its nature. For a brand like Louis Vuitton, customers barely receive any discounts or find any promotions since it is a very well-known brand with French elegance.

The company may not perform any promotions since it may hurt the brand. In contrast, a brand like Best Buy frequently holds promotions, usually every season or every month since this brand is meant to be economic. Thus, the company will execute promotions quite often. Coach, Inc. created its business model, which has different kinds of stores, including full-price stores, factory stores, wholesale department stores, and internet sales stores. Full-price stores sell the newest designer hand bags, leather accessories, fragrances, and women’s knitwear collections. Factory stores sell slightly out-of-season products. Coach, Inc. selects the highest quality materials to produce its products in order to maintain its reputation of exceptional quality.

Under the manager’s marketing team, Coach launches new collections every month to attract customers to return and browse its product selection. On the other hand, customers can find their favorite handbags and accessories in factory stores at discounted prices. Coach has become the best-selling brand of women’s luxury handbags and leather accessories in the United States, with a 25% market share. Moreover, Coach is the second best-selling brand of those products in Japan, with an 8% market share. With its successful global business strategy, Coach, Inc. has rapidly grown in the last six years after its initial IPO in 2000 (Paul. 283).

It attracts mostly middle-income consumers, who purchase its products rather than those of other name brands on the same price level. The growing desire for luxury goods in middleclass consumers is thought to be a result of a wide range of factors, including effective advertising and TV programming that glorifies conspicuous consumption. On the other hand, the demanding daily rigor of two-income households is thought to be another suggested factor.

Additional factor are the rising sales of luxury goods and the growth of big box discounters, such as Wal-Mart and Target (Gamble). Therefore, in the contemporary market environment, should the company want to build its business successfully, the key points are great design, high quality, and luxury styling in an acceptable price range. If the company doesn’t adhere to those key points, it will lead itself to loss of its market share or bankruptcy.

3) 3. How is the market for luxury handbags and leather accessories changing? What are the underlying drivers of change and how might those driving forces change the industry?

In the current luxury handbags and leather accessories market, any competing company faces two sets of challenges in continuing the development of its business and succeeding in growing its market share. First, when Coach, Inc. was founded in 1941, it was a small family-owned handbag business in New York City. After 44 years of family management with a steadily set price 50% lower than more luxurious brands, Coach was sold to Sara Lee. Coach continued to grow rapidly until the mid-1990s. Then, in an abrupt change of events, consumers quit purchasing Coach’s handbags in order to focus on French and Italian brands, such as Gucci, Prada, and Louis Vuitton. The company’s market share fell from 40% to a tragic 5%.

Reed Krakoff, the top Tommy Hilfiger designer, was hired by Sara Lee to save the business that had more than half a century’s worth of history. In the beginning, Reed did the extensive consumer surveys and held focus groups to get the information of styling, comfort, and functionality preferences. After doing consumer surveys, Reed found that customers wanted handbags with edgier styling, softer leather, and leather-trimmed fabric. After six months, Coach launched redesigned, brand-new handbags to the market. Furthermore, Reed improved the appearance from dark, wood-paneled interiors design to a bring and air ambiance design. Reed planned to launch new collections every month instead of twice a year.

Reed introduced the test models and the discontinued models sold at discounted price. After innovation, Coach sales continued to grow from $500 million in 1999 to more than $2.1 billion in 2006 (John E. Gamble). In addition, luxury brand name products face counterfeit goods, which threatened their market sales in current years. In 2006, more than $500 billion worth of counterfeit goods were sold all over the world. As a result, it seriously threatened the profit of name brand companies. Combating counterfeit goods requires the government to take a step to combat and convict intellectual property rights crimes.

4) 6. What are the resource strengths and weaknesses of Coach Inc.? What competencies and capabilities does it have that its chief rivals don’t have? What new market opportunities does Coach have? What threats do you see to the company’s future well-being?

Coach, Inc. is the well known luxury brand of handbags and leather accessories which that originated in the United States. It should be more popular and widely-accepted by Americans since it is an American luxury brand. Furthermore, Coach, Inc. continues to attract consumers by launching new collections every month, marking up full-priced new products and over-seasonal products’ low price level. Those business characteristics hardly occur in its chief rivals, such as Hermes, Ralph Lauren, Prada, and Louis Vuitton.

Therefore, it creates a long-term relationship with its customers. In recent years, Coach, Inc. has continued to expand and develop its business all over the world. For example, it builds more flagship stores in different countries. Moreover, Coach, Inc. tries to diversity its business. For example, Coach, Inc. now launches women’s knitwear collections, and ladies’ footwear. To the contrary, Coach, Inc. sets up too many stores in the nearby areas, which will hurt the luxury brand name’s reputation.

If one can buy Coach’s products anywhere, will one still find Coach to be luxurious? The economy is now getting better and better. Companies will compensate their employees well, and grant them more buying powerful to purchase Coach’s products. However, the challenge of Coach, Inc. is to compete with other luxury French and Italian brand goods and to combat the threat of counterfeit goods (John E. Gamble).

5) 7. What recommendations would you make to Lew Frankfort to improve the company’s competitive position in the industry and its financial and market performance?

In conclusion, Coach, Inc. is one of the most successful luxury brands of women’s handbags and leather accessories. Its products match key luxury rivals on quality and styling with pricing level focus on middle-income consumers (John E. Gamble). In the company’s future development, I would recommend that Lew Frankfort focus on market situations and customers’ perpetually-changing desires.

It would be to his benefit to do market surveys prior to a new product’s creation. The company should set up stores only in locations where expansion is profitable. The company should follow current business models, such as different price levels, launch new collections every month, continue with high quality production, and provide excellent customer service, which can develop and reach higher level returns on shareholders’ equities.

References:

1) Case 5. John E. Gamble. Page 238-97
2) Marketing Management (J. Paul Peter/James H. Donnelly, JR.) 3)http://www.americanessays.com/study-aids/free-essays/education/the-coca-cola-enterprises.php

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