Introduction
The company Coach Inc. deals with production, distribution, and sales of handbags. The past company’s direction included low-cost handbags that were not really luxurious though reliable and ‘resilient to wear and tear’.
The shift in consumers’ preferences made the company introduce more luxurious designs of handbags to be more compatible to the rising fashion on Italian and French stylish luxurious brands. Thus, the company used the differentiation and cost leadership strategies to learn about the needs and expectations of consumers and meet their requirements implementing uniqueness competencies and low cost competencies in the narrow market scope.
Thus, the differentiation and cost leadership strategies enabled the company to address the customers who require unique goods and those who search for something less expensive. In other words, the company managed to divide the potential buyers in accordance with their buying power to ensure that both categories will get the goods at a relevant price.
Strategic Issue
The company coach Inc. is one of the largest manufacturers and owners of best-selling handbag brand on the territory of the United States and Japan as these two countries were reported to be the greatest consumers of luxurious goods hence leading to the targeting of the goods to the American and Japanese consumer markets.
The strategy of the company includes a wide range of goods claimed to be luxurious manufactured and sold within the company-owned full-price stores, retail department stores, and factory stores. Agreements made with producers of eyewear, shoes, and watches are aimed at manufacturing high-quality luxurious goods of these categories under the brand of Coach.
Thus, differentiation strategy was used to address the category of customers who have already built the loyalty to a certain brand but are ready to try goods manufactured under other brands. Cost leadership strategy was used to ensure that the category of customers who have been loyal to this brad for years would not be eliminated from the company’s plans.
The strategic issue for the company is the increase in the number of full-price company-owned stores and the number of factory stores in the United States and in Japan. Another strategic plan of the company is the production of fragrance and other goods that are positioned in the category of luxurious goods. Besides, the gifts and customer attendance should be the main focus of the company, especially talking about holiday periods.
Knitwear and cashmere women’s collections designed in alliance with manufacturers of such goods are aimed at addressing more luxurious audience as the price range is higher than the one for handbags though the handbags remain the main focus of the company. The major strategic initiative concerning the handbags includes the launching of new designs and collections as a part of the differentiation strategy to ensure that the brand is recognizable in the broad market scope.
In this respect, the company successfully exercises the segmentation strategy to ensure that the company managed to meet the needs of two categories of customers by applying the differentiation and cost leadership strategies taking into account the uniqueness and low cost competencies. Moreover, every new item produced by the company is also an implementation of the differentiation and cost leadership strategies.
Reference
Gamble, J. E. (2008). Coach Inc.: Is its advantage in luxury handbags sustainable? In J. E. Gamble & A. A. Thompson (Eds.). Essentials of strategic management: The quest for competitive advantage (pp. 303-316). New York: McGraw-Hill Irwin.