COACH Inc. in 2012Its Strategy in the “Accessible”Luxury Goods Market

严岩

（格上理財成都分公司）

Abstract：Now Coach is a famous luxury brand to people all around the world . This article introduces the background of Coach and analyses its current strategy. Then the article points out issues the company faced and give the suggestions further.

Key words： Coach， accessible luxury， competition，luxury market

Executive Summary

Established in 1941， Coach has a reputation for its simple classic style of handbags which are resilient to wear and tear. To successfully position itself in the accessible luxury goods market， Coach had experienced an impressive market and financial success. Coach had differentiated itself by offering the latest trendy goods catered to consumers with excellent values under relatively lower price comparing with other luxury companies. The multiple distribution lines and outsource manufactures also contributed to its success. Due to the stagnant of American economics， Coach began to focus on developing the global market by entering into the European market and continuing expanding the emerging market in China and Japan. Coach also made a plan to expand its men products lines in order to gain the market shares. However， facing with the intensive competition from other luxury companies and the potential problem of diffusion of the companys brand image， Coach needs to scrutinize its existing strategy and make some necessary modification to be better positioned in the industry.

Solutions to Questions

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

“To be unique and exclusive you cannot be ubiquitous.”

USA， Europe， China， and Japan are four main markets for luxury goods. The primary competitors in the industry are most from Europe， specifically， French， Italy， and Swiss. The market for luxury goods was divided into three main categories： haute-couture， traditional luxury， and the growing submarket “accessible luxury.” The haute-couture was offering extremely expensive goods for the very wealthy. The traditional luxury was leading by Prada， Burberry， Louis Vuitton， Hermes， Gucci， Polo Ralph Lauren， and Calvin Klein. The emerging accessible luxury market was formed by Coach， DKNY， Micheal Kors and other less luxury brand. Due to the economic slowdown resulting from the financial crisis between 2007 and 2009， many traditional luxury companies began to develop a new collection line to attract customers who are value sensitive. Industry sales in the United States had become more dependent on the success of diffusion lines in the accessible luxury market.

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 outmaneuver one another in the marketplace？ Is the pace of rivalry quickening and becoming more intense？ Why or why not？

The competition in the luxury goods industry is very intensive and there is a trend of shifting focus from traditional luxury market to the accessible luxury market.

The competitive pressure from the rivalry places the greatest effect on industry attractiveness. There are a number of rivalries in the industry. All of them are similar equal size and rich resources to compete against each other. Furthermore， the economic slowdown forced them to come up aggressive strategies to develop new market and boot the sales. With the growth of the emerging market of China and India， it attracted many luxury companies to enter and take the advantage of the opportunities. Therefore， the fight for the new market would be fierce.

The competitive weapon to out compete among rivalries are relied on creative design， high quality， and brand reputation.

The pace of rivalry quickening and becoming more intense. First， with the advancement of globalization and the improvement of technologies， companies are able to make a swift counter-movement to their competitors actions. They can quickly learn others successful strategy moves and practices after competitors originally move. Second， because of the stagnant demand of developed countries， most companies view the emerging market as a revenue driven and are making ambitious actions to enter and capture the emerging market. Third， the tastes and preferences of customers change quickly， companies have to provide new seasonal products very soon to sustain customers.

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？

There is a preference change of consumers for handbags and leather accessories. At first， consumers favored the simple classic style handbags with high quality to wear and tear. While in the middle 1990s， consumers more liked the stylish bags coming from French and Italy.

The changed might be caused by the improvement of economic situation. Consumers had more incomes to enable them to spend more on the luxury goods. In addition to that， the advertisements on public media and images in the films influenced the tastes of consumers， and build companies brand images. The driving factors may make companies have to come out with a new collection with creative design in the short period of time to capture the consumers. They also indicated that the design should be carter to consumers preference to be successful in the industry. Building a strong reputation and maintain the customers loyalty are also important factor to out-perform.

4.What key factors determine the success of makers of fine ladies handbags and leather accessories？

Creative and fashionable design， good quality with a reasonable price.

5.What is Coachs strategy to compete in the ladies handbag and leather accessories industry？ Has the companys competitive strategy yielded a sustainable competitive advantage？ If so， has that advantage translated into superior financial and market performance？

Coach positioned its brand in the lower part of the accessible or affordable luxury pyramid. It focused on sales in China， Japan， and the United States because they lead global luxury goods spending. In order to optimize the mix of cost， lead time， and construction capabilities， Coach outsourced all its production to contract manufactures. Coach used the market research design process and procurement process to differentiate itself with trend fashionable products with high qualities and values.

While the competitive advantage is valuable， it is not necessarily be sustainable because it is not rare and hard to copy. Competitors can easily adopt the similar strategy.

From the above chart， Coach seems to have a stagnant gross profit margin and a decreasing operating profit margin that are supposed to be upward. Also， from the article， its stock price had an upward trend which is good， but dropped abruptly in 2012. However， it is generating profit and the current ratio and working capital look good. Therefore， it is safe to say that Coach is doing ok financially. In terms of market share， Coach was well performed because it accounted for 28% of global handbag and accessories market， and the market is expanding.

6.What are the strengths and weaknesses of Coach Inc.？ What competencies and capabilities does it have that its chief rivals dont have？ What new market opportunities does Coach have？ What threats do you see to the companys future well being？

7.What recommendations would you make to Lew Frankfort to improve the companys competitive position in the industry and its financial and market performance？

In addition to expanding the Asian market and domestic market， and opening the men exclusive stores， it is more important to enhance the brand image of Coach to have a clear marketing position which is luxury goods with the lower price. It is also advisable to slow down the growth of factory outlets to avoid from turning Coach products from luxury goods to common commodities which everyone has one. Moreover， in order to capture the market share， Coach should put more resources on developing a good team of designers which can contribute to the latest trendy designs to attract more consumers who are concerned about the new fashion trend and are willing to pay more for it， and to enhance the customer loyalty.