Business: Luxury Good and Competitive Advantage Essay

5. What is Coach’s strategy to compete in the ladies handbag and leather accessories industry? Has the company’s competitive strategy yielded a sustainable competitive advantage? If so, has that advantage translated into superior financial and market performance? A business strategy refers to the means by which it sets out to achieve its desired objectives and goals. Coach’s competitive strategy deals exclusively with management’s game plan for competing successfully and securing a competitive advantage over rivals Michael Kors, Salvatore Ferragamo, Prada, Giorgio Armani, Dolce & Gabbana, and Versace. The different types of strategies used by these companies include, but are not limited to, low-cost provider strategies, differentiation strategies, focused low-cost and differentiation strategies, and best-cost provider strategies. Coach Inc. ’s strategy that created the accessible luxury market in ladies handbags made it among the best-known luxury brands in North America and Asia and had allowed its sales to grow at an annual rate of 20 percent between 2000 and 2011, reaching $4. 2 billion. The company’s strategy focuses on five key initiatives. First, Coach built a market share in North America by 15 new full- price retail stores and 25 factory outlets. They have built a market share in Japan through the addition of 15 new locations. Coach seeks to raise brand awareness and build share in underpenetrated markets, including Europe and South America, and Asia, with 30 new locations planned in the region. It also looks to increase sales of products targeted towards men by offering dual gender lines. Lastly, Coach raised brand awareness and built market share through coach. com, global e-commerce sites, and social networking initiatives. Coach Inc. implements various advertising strategies, marketing strategies, sourcing strategies, and differentiation strategies, etc. Coach’s strategy, which focused on matching key luxury rivals in quality and styling while beating them on price by 50 percent or more, yielded a competitive advantage in attracting middle-income consumers desiring the taste of luxury, but also affluent and wealthy consumers with the means to spend more money. Another distinctive element was its multichannel distribution model, which included indirect wholesale sales to third-party retailers but focused primarily on direct-to-consumer sales. Coach appears to be using the best-cost provider strategy because it gives customers more value for their money while satisfying buyer expectations on key quality features, performance and service attributes. For example Coach uses attractive pricing to enable it to appeal to consumers who would not normally consider luxury brands, while the quality and styling of its products were sufficient to satisfy luxury consumers. Coach has the ability to do this through its factory outlet stores and its prices are way below the price of its competitors. Coach also displays differentiation by offering distinctive, easily recognizable luxury products that are extremely well made and provide excellent value. Coach has a unique approach to its differentiation. Each quarter, major consumer research is undertaken to define product trends, selection, and consumer desires. Monthly product launches enhance the company’s voguish image and give consumers reason to make purchases. They also use frequent product introductions because consumers always want the newest items and fashions. Coach sought to make consumer service experience an additional differentiating factor. It has agreed to refurbish or replace damaged handbags, regardless of the age of the bag. Through the company’s Special Request, customers were allowed to order merchandise for home delivery. Overall Coach displays a great mix of low cost and differentiation. A sustainable competitive advantage refers to a long-term competitive advantage that is not easily duplicable or surpassable by the competitors. Coach’s competitive advantage has proven to yield a sustainable competitive advantage. When it comes to anticipating fashion trends, Coach has 1 / 3 proven to be successful. Each year Coach interviews its customers through Internet questionnaires, phone surveys, and face-to-face encounters with shoppers at its stores. Such intense market research has helped Coach executives spot trends well before its competitors. This in turn has helped it to extend the brand far beyond the leather bags that long were its trademark and into watches, accessories, cosmetic cases, key fobs, belts, electronic accessories, gloves, hats, scarves, business cases, luggage, eyewear, fragrance, and clothing. According to the case study and further research, sales have grown an average of 29% over each of the past three years, fueling a strong 63% averaged return on invested capital during the same period. Currently Coach is a leading American marketer of fine accessories and gifts for women and men. Its sustainable competitive advantage is a result of employee engagement, supply chain capabilities, environmental conservation, and community. Coach seeks to hire and train the best employees in a supportive and engaging environment. Coach collaborates with their raw material suppliers and manufacturing partners. Coach continues to improve the way it makes it products in order to protect the resources of the environment. Coach also supports the local communities in which they operate. Results show that Coach has increased its net sales from $3,230,468 to $4,158,507, its market share increased by nearly 6%, and its common stock price is $60, which is a result of superior financial and market performance. 6. What are the strengths and weaknesses of Coach Inc.? What competencies and capabilities does it have that its chief rivals don’t have? What new market opportunities does Coach have? What threats do you see to the company’s future well being? Coach has many strengths and weaknesses. Coach strengths include its wide range of accessories such as its handbags, watches, accessories, cosmetic cases, key fobs, belts, electronic accessories, gloves, hats, scarves, business cases, luggage, eyewear, fragrance, and clothing. It is the leading luxury leather goods company in the United States, with expansion in Japan, China, and Asia. Coach has developed a respected reputation by providing their customers with quality products and its 70+ years of being in business. They do a great job of advertising through press releases, catalogs, internet, and shopping centers. Coach has a larger range of pricing which attracts lower income consumers and wealthier consumers. They also allow their products to be sold at stores (department and full price stores) and online. Coach prides themselves on creating customer value. However, Coach also displays weaknesses as well. They have a limited selection for men and a poor inventory turnover rate. Coach has no direct announcements to the public about the promotion of new products. Their new products first sell at full price which keeps the lower income consumers away. This could lead to the problem of selling more at their outlet stores versus their full price stores. Currently Coach relies on the United States, Japan, and Canada for the majority of its sales by not fully expanding into other countries. A core competency refers to a defining capability or advantage that distinguishes an enterprise from its competitors. Coach believes that external coaching and leadership workshops are powerful tools in increasing a leader’s awareness and insight on their management approach, which leads to core competencies and capabilities. Coach has the skill and expertise to create unique and differentiated luxury items at a lower cost than its competitors. It also has valuable physical assets, human assets, organizational assets, intangible assets, and alliances and cooperative ventures. All of these resources and capabilities are valuable, rare, hard to copy, and non-substitutable. Some of the defining characteristics that distinguish Coach from its competitors include its wide selection of luxury items, its low cost strategy, store location (outlet and full price), advertising, online shopping, meeting customer desires, superior value and quality, its direct-to-consumer channels and indirect channels, 970 wholesale locations in the United States and Canada, specialty retailers in 18 countries, and its relationships with consumers (customer loyalty). Coach’s strategy, which focused on matching key luxury rivals in quality and styling while beating them on price by 50 percent or more, yielded a competitive advantage in attracting middle-income consumers desiring the taste of luxury, but also affluent and wealthy consumers with the means to spend more money. Another 2 / 3 distinctive element was its multichannel distribution model, which included indirect wholesale sales to third-party retailers but focused primarily on direct-to-consumer sales. Coach has many new opportunities in its market of luxury goods. It has a high potential for increased sales with new product lines. The promotion in other countries can bring awareness to the brand and company. Its pricing can attract more customers because of the lower priced items compared to its competitors. Its online option of purchasing will increase as technology increases. Coach also has the opportunity to increase the number of stores in North America, expand stores in other countries, and use its flexible dependency on suppliers. However, Coach also faces numerous threats. There is always the threat of rivalry, competition, and substitutes in the luxury market. One of the major threats is counterfeit products and the economic downturn in the United States. Young adults and teens often go through phases of fashion and may later chose a different brand other than Coach. Coach faces exchange rate risks if they enter new foreign markets. Lastly there is a threat of not having enough stores around the world which could hurt the consumer market. These threats could hurt the well-being of the company, but its strengths and opportunities seem to outweigh them for the time being.