Coach Inc. Case Preparation:
Low cost provider strategy
Focused on matching key luxury rivals in quality and styling while beating them on price by 50 percent or more; competitive advantage Multichannel distribution model (indirect wholesales to third-party retailors vs. direct-to-consumer sales. Priorities increase global distribution and improve same-store sales productivity Build market share in NA, Japan
Raise brand awareness and build share in underpenetrated markets Increase sales of products targeted towards men
Create an online marketing presence using coach.com, etc
4.2 billion in sales in 2011 (20 percent annual increase)
63 percent were handbags, 27 percent accessories, 10 percent other products 16.7 million to 880 million in net income 2012 direct-to-consumer accounted for 87% of 2011’s net sales, indirect wholesaler had net sales of 540 million
Coach, Inc. in 2012: Its strategy in the ‘accessible’ luxury goods market
1. Describe the macro environment of the luxury goods industry. Political Factors: The market in China was restricted for some time by the Chinese government Economic Conditions: the economic downturn in 2007-2009 hurt the luxury goods industry Sociocultural Forces: healthy/green movement, more conservative with money after the downturn etc Technological Factors: more ways to talk to consumers, provide brand awareness, and allow consumers to buy (websites, mobile apps, etc.) Environmental Factors: weather not really a concern in the luxury goods industry Legal/Regulatory Conditions: none mentioned in the case really, other than the counterfeit laws which are in place to help the luxury goods industry
2. What are the defining characteristics of the industry? What is the industry like? Defining characteristics of the industry/what is the industry like includes many competitors, growing demand as middle class and upper class expand, diversity in luxury products (using your brand name and attaching it to other products/lines i.e., men’s products for coach).
3. How is the market for luxury handbags and leather accessories changing? What are the underlying drivers of change, and how can these forces change the industry? The market doesn’t seem to be changing very much, maybe expanding as more money and other countries are becoming wealthier (India). Drivers of change are new internet capabilities and applications, product and marketing innovation, changing societal concerns, attitudes, and lifestyles Different wants handbags for the more on the go lifestyle, environmentally friendly bags/processes.
4. What key factors determine the success of makers of fine handbags and leather accessories? KFSs are: diverse products, ahead of trends (fashion), marketing research, lower price point than competition, brand loyalty/recognition/awareness
5. What is competition like in the industry? Which of the five competitive forces is the strongest? Which is the weakest? What is the industry’s potential for profitability?
Many competitors in the luxury goods industry.
Strongest of the five forces I believe is rivalry, competitive pressures come from other firms in the industry, competitors numerous equal size and competitive strength, face high exit barriers, diverse countries of origin Weakest of the five forces I believe is potential new entrants, because brand recognition is so important in the industry Industry’s potential for profitability is high, markets are large and expanding, their sales are already high etc.
6. What does your strategic group map of the industry look like? The three main categories: haute-couture, traditional luxury and accessible luxury The first two are not where Coach competes but where some of its competitors are, where they have created other product lines that compete in the accessible luxury category. DKYNY, Calvin Klein, Louis Vuitton, (last two created diffusion lines) are competition in the accessible luxury category
7. What recommendations would you make to Lew Frankfort to improve the company’s competitive position in the industry and its market performance? Follow their current plans and strategies to open up and pursue growing markets to improve market performance, and increased market share will help their competitive position.
Courtney from Study Moose
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