Coach Inc free essay sample

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. The consequence was the Coach’s demand began to outstrip the supply. However, Miles Cahn refused to change the way they worked since the beginning, even if his refusal implies to sacrifice quality for larger production volume. Miles Cahn sold the company to Sara Lee Corporation and Lew Frankfort taking over the reigns as president. International expansion started in 1988. Stores opened in England and Japan. Today, the company still maintains large profit margins and show a strong worldwide presence. Greatly expanded, Coach Inc. continues to purpose the highest standards for materials and workmanship to their customers. Values The Coach brand respect different values that represent its way of think and its creativity. The company and its brand represent a synthesis between magic and logic. This assembly allow it to purpose luxury goods with high quality and a traditional authenticity. Moreover, the company focus the satisfaction of their customers. This is the main objective to fulfil because a satisfied client is a loyal customer. Coach Inc. wish for establish a long-term relationship with its customers. Then, the company puts emphasis to respect concepts of integrity, honesty and fairness. It is on these points that Coach Inc. built its image and its reputation. It wishes to remain respectful and engaged. To offer new products to meet changing customer needs, the company moves constantly in a process of research and innovation. Finally, Coach Inc. considers its workforce like a real strength. It gathers collaborative people in a dynamic culture of mutual respect. The link between them is the passion for the Coach brand and its luxury leather goods. They are together, with a same goal, same objective to fulfil. Question 1: Characteristics and particularity of the luxury goods industry The luxury goods industry has the particularity to include brand recognition, high quality and that means to have high-income elasticity of demand. Indeed, the demand varies depending on the wealth of people. When this characteristic increase, the luxury goods demands too and it is the same fact when the wealth decrease. Moreover, luxury goods companies attract the customer attention by using the image of some models and famous persons. This type of advertising contributes to increase the demand of luxury goods. Indeed, this market knows a constant evolution with 9% of growth per year. In the luxury goods industry, customers buy products for self-satisfaction. It is not a real need, but more a desire to have fun and boost their self-esteem. To explain more, a purchase of luxury goods don’t fill a primary need like food or housing for example, even if this need’s satisfaction can help the person to feel ease and give her comfort. The luxury goods industry shows important changes at different levels. We can observe that with the case of Coach Inc. Indeed, the company have two types of stores: factory stores with discount prices and upscale stores with high prices. Today, the American crisis has a bad impact on factory stores. This phenomenon is due to the drop of incomes and, in consequence, to the fall of budget reserved for this type of purchase. On the contrary, upscale stores don’t know any problems and can hope a great future because of the rise of number of very rich people like millionaires. Question 2: What is competition like in the luxury goods industry? What competitive forces seem to have the greatest effect on industry attractiveness? What are the competitive weapons that rivals are using to try to outmanoeuvre one another in the marketplace? Is the pace of rivalry quickening and becoming more intense? Why or why not? Coach in luxury goods industry is strong and market continues to increase thanks of the growing demand in emerging markets what makes the competence be less fierce. The demand in emerging markets continues growing in countries as China and India because of the growth of the middle class. Growth is the luxury industry is mainly attributed to the increase of incomes and wealth in developing countries in Eastern Europe and Asia, and also to a change in buying habits in the US. One of the competitive forces that have effect on industry attractiveness is the treat of new entrants and how hard is to build a brand name. It needs a huge investment to get this. That is why it can be difficult for new entrants to catch up strong brand such as Prada or Coach. One good way to get a stronger brand image is hiring celebrities and obtains higher status. For instance, Coach calls on famous Chinese actors or model and Louis Vuitton also uses celebrities to promote his brand image introducing fashion trends. But the biggest weapon is customer services where some companies are failing, more than half luxury store shoppers are unhappy with their shopping experience. For instance, Coach commits to refurbish or replace damaged bags without looking the age of the bag. Question 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? The change in luxury handbags’ market is mainly due to an evolution of needs and buying habits. Indeed, the new generation is different; it has different perspective and a strong opinion concerning branding and dressing. The market for handbags is growing rapidly in North America what has helped Coach to get a great deal in the last few years. One of the main drivers of change is the rapidity of communication and information thanks to technology. Nowadays, consumers are well informed and can know all the fashion trends easily. It changes the industry because as trends appear and disappear very quickly, luxury brands often have to launch new products base. Indeed, consumers are searching for novelty so it is necessary to introduce new products regularly. We also have to notice that there is an increasing demand for consumer services in the luxury industry. Indeed, when customers pay a high price product they expect for quality and status Question 4: What key factors determine the success of makers of fine ladies handbags and leather accessories? In order to guarantee the success of a handbag and leather accessories brand, several key factors have to be taken into account. First, the quality and design of the product. Indeed, it’s one of the most important points: a luxury brand has to select the highest quality leather and to propose styled products designed by famous and competent designers. A luxury handbag is a real investment and women have to be sure that this investment worth it. It is possible to increase the margin by outsourcing production to lower cost market (egg: Coach outsources in China) Then, women are looking for novelty that’s why the regular introduction of new product is necessary. An accessories brand has to develop new style and new usage collection in a regular way in order to keep the interest of customers. It’s also necessary to have effective advertising and TV programming that glorified suspicious consumption. A good promotion is essential to underline the features and advantages of the product. Finally, a good corporate image supposes to have a good merchandising strategy and good looking premises. For instance, Coach got 160m? in Haussmann overflow with marble, gold, †¦. Which allow the brand to keep it luxury image. Finally, having good channel of distribution is necessary. Coach use direct-to-consumers channels (full price and factory stores) and indirect channel (wholesale accounts, international market). Question 5: What is Coach’s strategy to compete in the ladies handbag and leather accessories industry? Has the company’s competitive strategy yielded a sustainable competitive advantage? If so, has that advantage translated into superior financial and market performance? The strategy adopted by the company is a concept called accessible luxury; with this concept, the company can propose handbag and leather accessories of high quality (selection of the highest quality leather) at an accessible price (about 50-75% lower than other luxury brand). It helps the company to differentiate itself of other luxury brands. In order to continue in this logic of differentiation, Coach also introduces regularly new handbags and leather accessories on the market, and provides a very good customer services. So the competitive advantage of the company is its styling, quality and pricing; and it allowed it to reach two kind of consumers: middle income consumers with tastes of luxury and affluent consumers (lots of means) who will buy regularly coach products. This strategy allows the brand to have a sustainable growth. Indeed, thanks to the accessible luxury, the brand is first in the US with 25% of the market share, and second in Japan (8% of the market share) and the company plans to add lots of retail location in the US and, and expected its licensed international distributors to open new location in Hong Kong and mainland China. Thus, in the US , Coach has been ranked ahead of much more expensive luxury brands such as Hermes, Prada, Fendi. Coach adopted a growth strategy in order to increase the sales. That involved store expansion in the US, Japan, HK and mainland China (opportunity to double the number of full-price retail stores in the US and increase the number of North Americain factory stores by a thord; add 70 additional Coach stores in Japan, †¦) Another initiative is to increase same-store sales by developing new styles, new usage collections and exploiting gift giving opportunities. It also developed its website by creating a new section for gift givers (ex: the site recommended handbags preferred by professional women, handbags for formal events,†¦) The company also put in place agreement with other brand like for instance Lutz and Patmos or Estee Lauder (launch of a fragrance sold since spring 2007) Question 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? The Strengths are multiple. First they have a good pricing strategy of accessible luxury, with prices below the actual luxury brands of 50%. Moreover they are reputed for their high levels of customer services and this is a competitive advantage of Coach. In fact they are in 2006 the number 1 in the United States in women’s luxury handbags and leather accessories. Their success comes from the monthly launching of new designed products. What’s more Coach Inc. has many ways of distributing channels that helps attract new customers. They also have Weaknesses, like the inventory turnover. In fact the inventory turnover is pretty low, a little bit too low: during holidays the manufacturers receive 3 to 5 messages a day to be update on the most selling goods to adapt its production. A more bothersome problem for coach is that they almost only target women; men’s sales are only 2% of the total sales. Moreover with their strategy of implanting new stores, there would be too many stores open and would consequently decrease the brand name. Opportunities are the growing demand of accessible luxury and the growth of the luxury industry in developing countries, like those in East Europe. They currently in 2006 target mainly people in the USA, Japan and some East Asia countries, like Hong Kong, Korea, Malaysia†¦ But they can develop themselves in Europe and South America too. Moreover in the countries in which they already are, more and or middle-income people become customers of luxury industry. We also see an augmentation of sales via internet, so online advertising, online marketing and online sales are also opportunities The competitors are of course a main threat of Coach furthermore they launched â€Å"diffusion line† that’s to say a sub brand with goods the same price as Coach’s. These brands are Italian and French, the main rivalry is with Dolce Gabbana, Gianni Versace and Gorgio Armani. Another threat in the market in the growing counterfeiting often made in China. ? Coach Inc. has to develop itself in new countries, keep the high quality products and customer services. But it has also to target more people, to stay a foot ahead of competitors. Resources (VIRN and –tangible, intangible, no HR because we don’t have any data in the case-) Tangible: Financial: Coach Inc. has a great net income of $ 494,277 and a good leverage ratio of (437,786 / 1,626,520) = 0. 27. This ratio means that the company uses well debts to finance its assets the risks for bankruptcy is very low. Physical: The number of owned locations and retail locations Full price stores (flagship stores), factory stores, locations in Japan and outside Japan and USA are the owned locations of Coach Inc. Moreover we can also find Coach’s goods in 500 US-department stores and Coach’s retail stores. Coach owns also its own trademark but agreed that Movado Group could sell Coach branded watches. They also had an agreement with Jimlar Corp. and Marchon Eyewear. Jimlar can manufacture and sell women footwear and Marchon Eyewear can do the same for Coach’s eyewear and sunglasses. Intangible: Managerial: Lew Frankfort was placed at the head position when he already worked for 18 years for the company. ? The top managerial resource of Coach Inc. is that important people like Lew Frankfort or Reed Krakoff know the market and the needs to stay in the competition. Capacity to innovate: They indeed launch new products with new design monthly. This strategy is thanks to Reed Krakoff, the Executive Creative Director. He worked before for Tommy Hilfiger as designer. Krakoff thought that a good selling company of luxurious goods was to base itself on a market study to know the desire of customers and consumers but to not base itself on designer’s instinct. Capabilities Innovative Product: As said above, Krakoff is on market research more than in designer’s instinct, that’s why Coach is so close to consumers. It watches out for customer’s needs and trend. Services: The after sales service is also a capability of coach Inc. provoking an increase of loyalty among customers. Type of distribution: Coach has a lot of channels distribution and it is really a great capabilities. They can target different type of people in different area of the world. We can find again in the competencies of Coach Inc. the different channels of distribution and the management. Question 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? We can differentiate short term-recommendations and long-term recommendation. Concerning the short term, Coach should start by reinforce the brand awareness and to maintain the quality of its products. These two recommendations are linked: indeed, the fact that Coach produces its products in China has been really criticized. For the consumers, â€Å"luxury† can’t go hand in hand with â€Å"made in China† so the positioning of the brand has been cast doubt on. Thus, Coach has to work on its branding in order to still be accepted as a luxury brand. Coach, as other luxury brand, also has to be careful concerning the counterfeit problem because it represents about 9% of all good sold worldwide. In the long-run, Coach has to identify opportunities within Eastern Europe, Asia or South America, that is to say emerging markets which could generate an important growth and with joint ventures. But before entering in new market, Coach has to consolidate its presence in current market. It has to exploit opportunity for expansion in mature markets such as the US and Japan. Indeed, the USA and Japan are the two largest consumers of luxury goods and people focus on them to set the standard of this industry. It would be interesting to develop an important international presence in developing countries and create a global strategy. Then, to adapt more its strategy to the industry changes, Coach should the store count goal in light to understand what has happened on the economy during the last couple months. We think that it would be interesting to put more emphasis on factory stores that allow customer to purchase luxury goods at accessible prices. Indeed, with the actual conditions of the society, customers have less money to spend in this type of expensive product and they reduce their budget part for that. Develop more factory stores with products factory out at accessible price without taxes that are attractive for the customer. To progress on this luxury industry, Coach must also observe the industry’s leader, using these observations to advance in its strategy. Coach can apply characteristics of leader’s strategy to offer affordable luxury goods to go along side its full-price stores. It would be interesting too, to open flagship stores in order to build a luxury image. After few years, opening factory stores, customers that like the brand, its collection and its image, but that can’t afford them until that time, will rush in factory stores to purchase luxury leather goods at accessible prices. Finally, we also think that it can be an opportunity to reach a new target: men. Indeed, lots of brands already produce men bags and leather accessories and it could be an opportunity for sales’ growth to launch a new product base for men.