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Sustainable Advantage in Luxury Handbags


Company Overview Salient features of the industry/company Competitive forces Position of the company in the industry Competitors analysis SWOT analysis Current strategy and its evolution The draw-backs/pitfalls of the strategies Analysis of the emerging threats in the environment Recommendations for the future


American luxury leather goods company Established in Manhattan, New York, in 1941 Headquartered in New York City, NY Coach went public on the NYSE in 2001. By 2007, revenue was $2,612.5 million By 2007,Employed 10,100 people, Coach has 272 retail stores in 24 countries

Coach Inc Revenue Breakdown .

Coach Inc Contribution to Revenue .

Coach Inc.S. U. Market & Coach¶s Share .

Industry Analysis FASHION INDUSTRY .

 What is fashion?   Fashion is the life some people are advocating in a short period Fashion has been characterized by change. which decides the vibrancy of fashion industry .

the first fashion designer Charles Frederick Worth. Short History      In1845. After 1900. After 1990. . fashion stepped into the allround development stage. Around 1900. fashion industry continuously rapidly developed. From 1970 to 1980.Fashion had become an industry. was born in Paris. fashion went into a period of globalization.

Issue & Features FASHION INDUSTRY  Outsourcing issue  Producing the products in low-cost countries VS. locally manufacturing their products Intellectual property and piracy issue  European countries: offer more protection  America: fashion designs are not protected  Developing countries: incomplete legal system  .

Christian Dior. Coach. and Versace. Prada. and Louis Vuitton  . Marc Jacobs. Bally. Cartier. Hermes. Louis Vuitton. Stronger competitors: Hermes. Coach Inc. Fendi.Competitors  Competitors: Chanel. Anya Hindmarch. Celine.

1980) .Porter's Five Forces Model Potential entrants Threat of new entrants Bargaining power of suppliers Industry competitors Bargaining power of buyers Suppliers Rivalry among existing firms Buyers Threat of substitutes Substitute products Source: Michael E. (The Free Press. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors.

Market Positioning Price High United Airlines American Airlines Low Delta JetBlue Southwest AirTran Frontier Low Quality Position Map .

Combining the two types of competitive advantage with the scope of activities or customers leads to four strategies. The two narrowly focused strategies are often considered a single focus strategy with two variants. Competitive Advantage Lower Cost Broad Target Narrow Target Overall Cost Leadership Cost Focus Differentiation Broadly Targeted Differentiation Differentiation Focus Competitive Scope .

and mens outsourcing to cut cost and maintain low price channels of retail distribution from full-priced store. glasses.SWOT Analysis         STRENGTHS: matching key luxury rivals on high quality leather and innovative styling beating competitors price by 50% or more high level of customer service monthly introductions of fresh new handbag designs strategic alliances to bring Coach brand of handbags into luxury categories such as: watches. footwear. fragrances outerwear. factory outlet. internet and catalogs .

SWOT Analysis       WEAKNESSES: factory outlet stores outperforming full-priced store diluting brand with increased growth of factory outlet stores men¶s accessories only account for 2% of sales outerwear only accounting for 2% of sales luggage only accounting for 1% of sales .

Middle East. and Mexico . such as China and India increased wealth of consumers in global markets of Asia. Australia.SWOT Analysis    OPPORTUNITIES: growing demand of luxury goods in emerging global markets.

SWOT Analysis     THREATS: French and Italian designer brands such as Gucci. Counterfeiting of luxury merchandise. Dolce & Gabanna launching ³D&G´. a sub brand sold at modest price points. Prada. For example. Louis Vuitton. Dolce & Gabanna. totaling $500 billion worth of goods sold in countries throughout the world in 2006. and Ferragamo Brand diffusion: Manufactures of the finest luxury goods launching diffusion lines to exploit middle-income consumers. .

they are emphasizing new usage occasions. COACH is building market share in the ever popular U. MARKET STRATEGY  First. . such as weekend or evening.S. As part of this strategy. women's accessories market by leveraging our unique position as an accessible luxury lifestyle brand.Coach Inc. and offering items at a broader range of prices as well.

Coach Inc. they hope to bring the retail store base to nearly 300 . By planning to add 100 U. retail stores over the next four to five years. MARKET STRATEGY  Their second strategy is the continued acceleration of growth in U. retail.S.S.

by jumping 3% during the next few years. This year they are expecting to open at least 10 new locations in Japan.Coach Inc. they are aggressively expanding market share with the Japanese consumer. including Flagships. MARKET STRATEGY  Third. . They will continue to open select new retail locations.

)  Finally. . they are continuing to drive gross margin higher and leverage their expense base.MARKET STRATEGY (CONT.

000 Endorses include famous celebrities like Rebecca Romijn. Household income averages $100. in the white collar workforce. Eva Longoira The Signature "C" one of the popular product demand intended for a younger generation of consumers .CUSTOMER PROFILE      Accessible luxury accessories brand The average consumer is in her mid-to-late 30's. college educated.

The products must be shipped all over the world which in turn requires planning and logistics. This requires a broad platform of products to market and appeal to a wide range of consumers.RELATIONSHIP TO SUPPLY CHAIN  COACH customer base is very broad and diverse from both a demographic and geographic basis. Factories have to be nimble and able to work with a wide variety of materials and products. .

which are NOT COACH owned. around the world Shipping lines are done by air and ground transportation . FL) Warehouse in Tokyo 16 Production facilities.COMPANY ORGANIZATION      50 individual factories all around the world in terms of production Distribution center (Jacksonville.

It is then picked and packed and sent to our stores or wholesale customers. sample makers in NYC. raw materials sourced (development of raw materials starts well in advance). design card with "recipe" for product prepared. usually via ship across the Pacific and either thru the Panama Canal (all water) to a southeastern US port or into California docks to go via train (mini land bridge) and truck to Jacksonville DC. pattern is sent to factories. . production begins.SIGNATURE C START TO FINISH  Designed in NYC. line presentation to business units to determine demand levels. finished product is sent.

Now the jobs are outsourced to several different countries to lower cost and increase quality .Where does the leather come from?    Leather is obtained as a by-product of the meat industry across the globe COACH is very picky and the top 10% of hides are purchased to go to tannery facilities.

FL Finished Goods Transport Suppliers (FedEx) Retail and Department Stores .COACH SUPPLY CHAIN SYSTEM Finished Goods Transport Suppliers (FedEx) Retail and Department Stores Finished Goods Received at Distribution Center in Jacksonville.

Signature C in the Supply Chain     COACH controlled the distribution level of Signature "C´ Even within the factory division. currently not every factory store even carries the "C" products It took COACH the better part of 3 years to release old "C" to select factory stores This limited supply has helped to increase customer demand as well as brand equity .

dynamic. Automatic. unit stock replenishment systems in stores. Direct shipments from the Jacksonville Distribution Center are Shipments are sent to stores 4 times a year.    . at the beginning of each main product phase. 'tell' our Distribution Center in Jacksonville when to replenish our stores.INVENTORY CONTROL  Internal Corporate Merchandising Planning group which works with our business units to determine production from the SKU level and roll it up to an overall forecast/order.

Who can distribute Coach?    COACH stores. authorized department stores. and online catalogue. On-line store at started in The catalogue is important in the USA and abroad. . factory stores. catalogues.

Shipping     Jacksonville fills individual store needs using Fed-Ex ground. an example would be a discontinued product . 3rd party trucking lines are used in Japan Store distribution needs are also met with transfers from other stores Full price to factory is the most common. Fed-Ex Express.

Use of Information Systems      The use of CAD/CAM systems Customer Service modules for order fulfillment Warehouse management system that allows pick n pack in the distribution center Online routing guide that lets the stores know what day of the week orders are pulled and when they should be shipped Shipment reports are generated that report exactly how many cartons are shipped and what is shipped .

Quiz Time     Does COACH use FedEx or UPS? What is the average income of COACH customers today? What is the most popular current product? What other country is a big player in COACH? .

coach. Inc. NY 10001 212-629-2618 telephone 212-643-1743 fax aresnick@coach.REFERENCES  Phone Interview Andrea Shaw Resnick Vice President .com/fashion/coach_purses.indianchild.htmCoach   .Investor Relations Additional website http://www. 5th Floor New York. 516 West 34th Official website of COACH www.

outerwear and luggage by at least 5% each. retain status of premium goods and prevent brand dilution. to total 7%.Recommendations    Keeping inline with the company¶s mission statement of seeking to be the leading brand of quality lifestyle accessories offering classic. and open 3-5 factory-outlet stores a year to increase expansion. . modern American styling Increase the amount of weak sale¶s revenues of mens¶ accessories. 7% and 6% respectively to compete with rivals containing a larger market share of these products Open 30 new full-priced stores a year.

Recommendations  Short term    Website Promotion Purchasing information Expansion in Asian Market Item Distinction Designers  Long term    .