Q.1
The luxury goods industry is one of the best performing industries in the business world, dealing in quality and stylish leather goods such ladies handbags, ornaments, designer clothes, fine watches as well as writing instruments. In this industry, goods are characteristically defined by their quality, styling, and pricing for factories such as Coach Inc. that have attracted a large number of customers including middle-income earners (Gamble, 2006). The global luxury goods industry has shown a constant growth. From the year 2006, the industry was expected to grow by 7 percent which was equivalent to $112 billion. Statistics conducted in 2005 gave an overview of sales of these luxury goods across the prominent countries with Italy representing 25 percent of the industry's sales, French and Swiss luxury goods companies accounting for 22 and 19 percent of the market share respectively, while the United States accounted for 14 percent of the market share. This growth in the industry had been characterized by the concomitant rise in revenue and wealth in developing nations in Eastern Europe and Asia as well has changes in buying habits in the U.S.
Q.2
The level of competition has been stiff in the Luxury goods industry given the availability of numerous factories and retail stores that produce and sell similar types of products. There has been competition between companies producing different brands to match the key rivals on quality and styling as some of the competitive forces existing in the market. However, the greatest competitive power that has enabled companies like Coach Inc. to leverage a competitive advantage over the rest is its pricing and corresponding production of quality and stylish goods which meet the consumer needs. Unlike other brands whose pricing falls within the entry level pricing at $700- $800, Coach Inc.’s full price store for handbags fall between $200 and $500. This eye-catching pricing empowered Coach Inc. to charm customers who would not ordinarily consider luxury brands, therefore, attracting more customers for their products at the expense of their competitors. Additionally, a survey conducted via the "Women's Wear daily" revealed that Coach Inc.’s eminence, styling, and value mix was so influential such that wealthy ladies in the U.S categorized their products ahead of even the most costly luxury brands such as Hermes (Gamble, 2006). Under this circumstance, rivals in this competitive market began using discount strategies as a weapon of overpowering brands with lower pricing in the market, and in so doing, increasing the intensity of competition in the industry.
Q.3
The market of luxury handbags and accessories has changed, and this fact is reflected in the events that happened to Coach Inc.’s 12 unlined leather bags whose sales grew to 50 percent due to lower pricing compared to more preferred brands. This company continued to build its reputation of long-lasting classic bags until the mid-1990s when Coach’s performance began deterioration due to shoppers' change of preference for French and Italian designer brands. Market research conducted to reveal user preferences showed that customers were looking for more edgy styling, softer leather and trimmed fabric handbags and accessories. This outcome is an indication that consumer preferences is the driving force for change or production of new products and not the designer’s instinct. Customer's choice in relation to quality and style as well as the changing buying preferences of the middle-income earners as driving factors might change the luxury goods industry even to grow and develop more given that companies will be able to deliver what customers expect or want, thus achieving client satisfaction and with such an effect, more sales would be made in the industry as a whole.
Q.4
Three crucial aspects determine the success of a maker of sufficient ladies bags and accessories; these are the quality, styling, and value. Most women prefer goods of high quality that radiate to a particular class in the society, thus a maker of ladies handbags and accessories must incorporate high fashion and edgier designs with the finest leather available to be able to sell at the expense of other competitors just as Coach Company. Most important factor is the pricing of the bags which ought to incorporate a broad range of customers including the middle-class earners as this category of buyers makes up the vast majority of individuals in developing and developed countries. Attracting more consumers with lower pricing for goods places the seller at an edge due to small profit margins but at a position to grow in business. A suitable blend of these three factors that is quality, styling and pricing can emerge very powerful in the success of a designer's line of ladies handbags and accessories.
Q.5
Coach Inc.’s growth initiative of 2007 involved the expansion of stores in U.S, Japan, Hong Kong and China as well as enhancing the sale of the already existing consumer goods to enable steady store growth were some of the competitive strategies established by Lew Frankfort. Alongside this initiative, the company also ventured into alliances to allow exploitation of the Coach brand in additional luxury categories as leverage over other competitors. Apart from increasing the company's full-price retail stores, Coach as ventured into the improvement of new styles, innovative usage collections and firsthand gift-giving opportunities as some of the ways to attract more customers over its rivals. These competitive strategies have given the company advantage over other competitors to become the best-selling brand of ladies handbags and accessories in the U.S with a 25 percent market share and 8 percent market share in other brands (Gamble, 2006). With a stellar performance, Coach’s financial status increased from $500million to $2.1billion.
Q.6
Coach Company’s strength lies on its exemplary and winning combination of price, quality, and styling, as well as its extensive resources, spread globally in different parts of the globe. Additionally, in terms of resources, Coach is staffed with employees who provide high levels of customer service which show its competencies that have contributed efficiently to its competitive advantage. Its ability to expand has also placed the company in a better marketing position compared to its competitors and also provided a market opportunity for the business. The weakness the company exists in its split personality which incorporates Coach and luxury diffusion brands that analysts think might one day dilute the company’s image.
Q.7
Upgrade the brand’s image: it is crucial for Coach Inc. to take more advertising strategies into consideration as alternatives to the internet to be able to stay ahead of its international rivals. For instance, the company could venture into T.V commercials which are more eye-catching than emails and information listed on their website.
Uplift men’s product offering: most luxury goods made by Coach Inc. are majorly ladies handbags and accessories with a few products designed for men. However, current research has revealed that men now have more appetite for luxury goods than women and thus producing cool products for men will not only create a market opportunity for growth but also improve the firm’s financial performance.
References
Gamble, J. (2006). Coach Inc: Is Its Advantage in the Luxury Handbag sustainable', 283-296.
