Good Coach Inc. Case Study Example

1. List and elaborate some strategic issues facing Coach Inc.? (One small paragraph listing top 5 strategic issues for Coach).
Coach Inc.’s top 5 strategic issues are as follows: dated and worn out image and design of handbags, style does not have a lot of variety with fresh color and fabric options, handbags are designed to last too long, their luxury brand is “too accessible” to the high end luxury consumer who wants exclusivity, and their outlet options tarnish their branding image.
2. What are the key elements of Coach’s strategy?
Historically speaking, Coach Inc. had a lifetime strategy that was they would produce reliable handbags that would stand the test of every trend of the moment. They achieved this by designing classic styles that were made with high quality leather. They offered repair services for their bags, which was an attempt to make them seem more reliable to consumers. Where Coach Inc.’s strategy failed them was when they ran out of marketing for their traditional and predictable styles. This is precisely why Coach Inc.’s CEO decided to implement a major change to Coach Inc.’s marketing strategy in order to allow the brand to become more competitive and gain more profits. This drastic marketing strategy implemented new designs with fresh patterns that made a sizeable difference in Coach Inc.’s profit margins.
3. Please apply Porter’s Five Forces model to the luxury goods industry. While doing so, clearly identify who is behind each force – for instance Suppliers, Buyers, Substitutes, Competitors, etc. And what is the impact of each force on the profitability of the industry – in terms of the following levels - High/Medium/Low. At the end, also provide a summary of all the five forces and propose whether you think the luxury goods industry is attractive industry or not an attractive industry.
In applying Porter’s Five Forces as they pertain to the luxury industry and particularly to Coach Inc., it is important to look at the bargaining power of suppliers, thereat of new market entrants (competition), threat of market substitutes, industry rivalry, and the bargaining purchasing power of buyers. To begin with the bargaining power of suppliers, Coach Inc. does not have a huge burden with the bargaining of their suppliers because they manufacture their own leather in house. They do order their leather from outside sources, but they perform a unique treatment to their leather that makes their handbags distinct. Thus, the effect on the profitability of Coach Inc. is medium with regards to the bargaining power of their suppliers.
Threat of New Entrants is one of Coach Inc.’s largest threats. It has a high impact on the profitability of Coach Inc. because the new entrants have been surpassing Coach Inc. for years due to Coach Inc.’s historic lack of versatility.
The Threat of Substitutes is also an enormous issue for Coach Inc. because there are so many possible substitutes in the handbag market that are more appealing than Coach Inc.’s handbags. The reason for this is that the handbag market is oversaturated. Thus, Coach Inc. has an enormous burden to stay current with the trends while still differentiating themselves with their products and their marketing campaigns. The Threat of Substitutes has a high threat on the overall profitability of coach.
Industry Rivalry is also a potential issue that could affect Coach Inc.’s profitability in a “high” way pertaining to Porter’s Factors. The reason for this is that the other competition to Coach Inc. that has more trendy products that have kept up with the current trends. Since Coach Inc. has tried to take a piece of this market share, Coach Inc. has become more susceptible to an industry rivalry, which could greatly affect their profitability in the long run.
The bargaining power of buyers has a large impact on Coach Inc.’s long term profitability. This effect is ranked as high on the effect on profitability because Coach Inc. is known as the “accessible luxury brand.” If Coach Inc. tries to keep their current customer while branching out to additional luxury customers that want new patterns and prints, they are going to have to satisfy the needs of a wide range of prospective buyers. This is why Coach Inc. is in a tough position because the success of their next business move rides on the option of their consumers and how their next marketing campaign is received and the ultimate direction that it takes.
4. Evaluate the sources of Coach’s competitive advantage and determine whether or not the company can sustain its advantage.
In my view, Coach Inc. really does not have a great deal of competitive advantage. If they stay where they are, they are stuck in a market that is not profitable with their boring and predictable styles. If they branch out, they are going to have severe competition and will have a great deal of difficulty making a distinct mark in the market that appeals to both the true luxury consumer and the want to me luxury consumer.
5. Elaborate some of the key lessons you have learnt from the case analysis?
The key take away from the Coach Inc. case is the importance of not falling into a predictable product line. That was Coach Inc.’s crucial mistake. The reason for this is that Coach Inc. locked themselves into a market type that is very difficult to escape from. It will take a great deal of effort in order to decide which direction will be the best choice and no matter what theories they use, it will be up to their consumers to accept what they have done and it will determine the future profitability of their brand. It shall be interesting to see how Coach Inc. fares in future years with their traditional bags and their efforts to follow the current style trends.