Executive Summary
This paper presents a case analysis report on Coach Inc. The case analysis is comprehensive and focuses on the nature of operations in the company. The first part focuses on the operations of the company and the issues that face the sustainable operation and positioning of Coach Inc. in the competitive industry.
The second part of the paper presents an analysis of the issues of competitiveness of the company based on the SWOT analysis framework. The third part of the paper explores the strategic choices as far as the future competitiveness of the company is concerned. This is followed by the development of a number of recommendations and how they can be implemented by the company to ensure sustained performance.
Coach Inc.: Is its Advantage in Luxury Handbags Sustainable?
Background & statement of the problems/issues
Coach Inc. has molded its operations around the production of simple handbags since it began its operations in 1941. The company was acquired by a new investor, Sara Lee, after more than forty years of operation. Coach Inc. continued to embrace the strategy that had been adopted by the founder company.
A marketing research that was conducted by Frankfort resulted in a shift in the nature of products and product delivery by Coach Inc. The company shifted from the delivery of simple bags to classy and sophisticated bags. At the same time, Coach Inc. ensured that the prices of these products were relatively lower than the prices set on such products by its competitors.
Attractive pricing has made the company remain appealing to a lot of customers considering that pricing is a critical factor in determining the behavior of consumers in the market.
In addition, the company has progressively adopted aggressive expansion strategies that are aimed at seeing it attain a large market share in both the mother country of operation and the foreign market. According to the case, these strategies saw the annual sales of the company swell to $2.1 billion in 2006 from $500 million in 1999.
The trends in the global industry depict a lot of opportunities in the industry. However, the industry has attracted a relatively large number of players. Therefore, there is bound to be a lot of pressure on Coach Inc. as one of the leading players in the industry to overcome the competitive pressure that emanates from the industry and the market.
It is important for the company to maintain a high level of vigilance in the changes in demand and patterns of consumption in the industry, as well as monitor the other sources of competition. This is vital in the choice of strategies that will see the company maintain a sustainable level of competitiveness in the market.
Situation Analysis
Competitive strengths
According to the case, one of the main strengths of the company lies in the choice of its target market. The company targets middle income consumers. The middle income earners form the largest part of the market in which the company operates. Moreover, the strategy that the company uses is quite appealing. The company embraces quality and styling.
It also offers the luxury handbags at prices that are far much lower that the prices that are offered for such products by competitor firms. Marketing literature provides evidence that pricing is one of the vital considerations when it comes to the efforts of any company to attain a competitive position in the market. It is one of the things that influence the perception and buying patterns in the market.
Expansion strategies are often used by firms to attain a higher market share. The addition of retail stores in its major markets, the United States and Japan, has helped the company to gain a stronger footage and a better position over its competitors.
This is strength as far as the competitiveness of the company is considered. Gaining footage in the mother market enables the firm to make more revenues. This is critical for expansion into new markets.
Weaknesses
As noted in the case, Coach has built its reputation and competitiveness on offering luxury products at appealing prices. This is a risky strategy considering the fact that the global economy is characterized by inflation and increment in the prices of supplies.
The company is bound to incur significant cuts in its sales and profits when it adjusts its prices upwards as a cost adjustment measure. A compromise in quality as a cost adjustment measure is likely to make most customers change their perception about the company and its products.
Prevailing opportunities
New markets present new opportunities for the company. The Asian market is one of the most promising markets for a substantial number of companies. This is based on the fact that most economies in the region are expanding at a quick pace. The plan by the company to open new stores in the Asian region, particularly Hong Kong and China, means that the company is bound to further increase its market share.
These markets are the most promising markets as indicated by global patterns in fashion trends. Successful entry into these markets further offers the company an opportunity to venture into other lines of products. This will cushion the company from the shocks that emanate from the competitors in the luxury handbag sector.
Planned expansion through strategic alliances is another factor that opens up the company to more opportunities. Most companies in the contemporary globalized markets are opting for strategic partnerships and alliances as a way of bridging the cultural and operational impediments in new markets.
Strategic alliances are bound to help the company to broaden the range of products it offers. These include venturing into the production of fragrances and women’s knitwear, besides the specialization in luxury handbags.
Threats
Coach Inc. faces stiffer competition in the market from other competitor companies that are up to the task in terms of adjusting their strategies. From the case, it is clear that other industry elites, such as Gianni Versace, Giorgio, Dolce, Armani, & Gabbana are also proactive in terms of the expansion of their operations in the market.
These firms are bound to give cut-throat competition to Coach Inc., more so in the mother operational markets where these companies are presumed to have a deeper touch with the customers. Also, companies from France and Italy have continued to dominate the luxury goods industry. This makes it difficult for Coach Inc. to penetrate and establish a desirable market position in the European market.
Issues of copyright infringement and other unethical practices keep emerging from the industry as the global luxury industry continues to expand and attract a larger number of stakeholders. As a strong brand in the market, Coach Inc. is at risk of losing lots of revenue to the counterfeit products from fraudulent operators who may choose to make use of the Coach’s trademark in their operations.
Setting precedence in the production of quality products at affordable prices has made the company appealing to most consumers. However, this is also a risk for the company. The stiffening economic conditions in the global market denote high rates of inflation. This means that the Coach Inc. is bound to get its supplies at relatively higher prices than the current prices.
In such cases, the company may be forced to implement an upward adjustment in the prices of its products to cater for the inflationary pressures and their implication on costs. When this happens, pricing will no longer be a competitive force for the company.
Analysis of Alternatives
Dealing with pressures from other companies in the market requires the company to embrace strategic alliances in the market. Strategic alliances can help in boosting the market position of the company by enabling the company to expand the range of places where its products can be acquired. It can also enable the company widen its product range.
Part of the increase in the sale of luxury goods across the world is attributed to the growth of the big discount stores such as Target and Wal-Mart. Therefore, one way the company can gain access to newer markets across the world is by targeting the large discount stores in different countries. This way, the company can easily match the strategies that are being deployed by the rival companies in the market.
Europe is one of the largest markets in the world. It presents opportunities for any company dealing in the production of luxury goods. However, competition in the luxury goods industry is quite high in the region due to the long held experience and dominance of French and Italian firms in the industry.
The best strategy for penetrating such a market is through mergers with firms in Europe, or the acquisition and rebranding of underperforming firms in the market. This is also a way of defending the company from the competition pressure that comes from the increased entry of luxury goods from France and Italy in Asia and North America.
The company should embrace further diversity in terms of the range and quality of products that it offers to its customers as it targets the middle and emerging economies in the world. Most people in the emerging and developing economies in Asia, South America, Africa, and the Middle East do not have high incomes.
This is contrary to Europe and North America where most people lie in the middle income category and can afford the luxury goods. Therefore, the company should consider producing goods of quality and prices that can meet the income of these people.
It is impressive to note that the company has already diversified the range of products that it deals in. This implies the ease of further considerations to meet the demands of customers in the target markets.
The enforcement of copyright laws seems to be a problem for most companies in the market. Coach’s brands are bound to be used as a platform for money making by fraudulent operators in the luxury industry since its brands are highly recognized in the industry. Therefore, the expansion strategies need to be accompanied by consumer awareness.
It is important for the company to constantly and aggressively disseminate information about its products to all its consumers in the market. Consumers are bound to make wise choices as they become more aware of what they want. This way, they can easily detect counterfeited products in the market and reduce the susceptibility of the company to counterfeiting.
One of the strategies that were used by the company to establish its brand in the market was the enhancement of customer service. However, the company is bound to widen the gap between it and its customers as it enforces a rapid expansion program.
The management needs to ensure that customer service is taken to another level to sustain the market share. This means that both the direct retail stores and the indirect stores need special people to respond to the concerns of the customers. The other consideration is e-marketing.
Recommendation(s) & Implementation
Coach Inc. needs to focus more on product differentiation, instead of dwelling on offering high quality luxury bags. Differentiation can be best attained through the establishment of strategic partnerships with other companies in the market. The company can establish a foundation in the production of other luxury and beauty products. It also has an opportunity to use these partners as retail outlets for selling its products.
The stock price of the company showed an upward movement between 2000 and 2004. This denoted an increase in the number of customers and a substantial increase in market share.
The ability to increase customer confidence in the company and increased investment by customers in its stock depends on how the company will continue to appeal to the customers. There is a need for the company to attain a ‘green tag’ to sustain its attachment with the customers.
E-commerce is one of the desirable platforms as far as keeping touch with the customers and sustaining the market share are concerned. One way through which Coach Inc. can enhance sales and embrace customer service is through the adoption of online marketing techniques.