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Case Analysis1 Market Opportunity Analysis: Coach Inc. : Is its Advantage in Luxury Handbags Sustainable? These days, the relative hot discussion never fails to fascinate people whether Coach Company’s advantage in luxury handbags is sustainable. Considering the current situation that Coach is in and the new strategy that Coach will take, we believe that Coach’s advantage in Luxury handbags will be sustainable. Coach is a large, American luxury handbags-made company. In this article, we will first tell some beautiful stories on the background of coach.
For another, we will analysis the reason why its advantage is sustainable depending on 4Ps theory. In the end we feel obliged to give some recommendations based on our analysis. Here are some stories. Coach was built in 1941 when Miles Cahn, a New York City leather artisan, began producing ladies’ handbags.
Over the next 40 years, Coach was able to grow at a steady rate by setting prices about 50 percent lower than those of more luxurious brands. In 1996, Frankfort’s move was to hire Reed Krakoff, a top Tommy Hilfiger designer, as Coach’s new creative director.He believed new products should be based upon market research rather designers’ instincts about what would sell. Frankfort’s turnaround plan also included improved the appearance of its factory stores, discounts were made possible by the company’s policy of outsourcing production, Coach created the “accessible” luxury category in ladies’ handbags and leather accessories by matching key luxury rivals on quality and styling, while beating them on price by 50 percent or more. The low price make Coach become the best-selling brand of ladies’ luxury handbags.
As the evidences accumulate, not only do they possess the idea, but they have already put it into practice as well. But they still have challenges, inside and outside. Competitors from French and Italian Luxury goods are still very strong. Is its advantage in Luxury handbags sustainable? It’s time to begin our analysis: As a special market positioning goods, luxury has the clear definition, not everyone can purchase it, and they are the goods for only the elite classes. But now, there are some of the luxury goods called accessible luxury, this kind of luxury specifically targeted the middle ncome consumers. Coach is one of these companies. There is no denying the fact that 4Ps theory is really important in marketing.
The luxury goods industry also has competition. If we want to analysis the advantage in this industry, the Price, Place, Product and Promotion are the key words. The price can choose the different income class. The place directly determines the net sale. The product is the basically point for consumers to decide their purchase.
The promotion is the basically way to increase the net sale.In luxury goods industry, the product was the most critical competitive advantage, but now the place and price has become increasingly important. Product: Just like Coach’s handbags, Coach had famous for produce luxury leather products in the past, but now, the leather accessories by matching key luxury rivals on quality and styling is the key point to get the advantage in product.
Price: Starting at the new CEO Lew Frankfort came, Coach tried to position in the accessible luxury and use more outsourcing agreements to cut the cost. So another “P”, price become much more important.The price neither expensive nor cheap is suitable for middle-class consumer. Not only did Coach’s $200-$500 handbags appeal to middle income consumers wanting a taste of luxury, but affluent consumers with the means to spend $2,000 or more on a handbag regularly snapped up its products as well. Because of the position of other luxury companies, they don’t have this advantage. They just positioned on the traditional luxury goods, so they can’t develop new markets and increase the net sales.
Place: Another advantage for Coach is the mixed sales methods.Coach sales their handbags in three different ways: the department stores, the full price store and the factory story. In America, Coach’s products could be found in approximately 900 department stores, 218 Coach full price stores, and 86 Coach factory outlet stores. Different consumers can go to the different stores to find their satisfied purses. The different stores have the different products, styles and prices. Coach also expected its licensed international distributors to open new locations in Hong Kong and mainland China.
The social milieus and social class in Asia is suitable for Coach to develop the new market. From the 21 century, many Asia countries become richer, the middle-class and affluent in Asia have become increase, especially Japan and China. Promotion: The recommendation for Coach is The Promotion is another thing that Coach need to be focused. The reasonable promotion can increase the net sale. By use the advertising, Coach can raise brand awareness and let more consumers know this brand. In the new market, just like China and Mideast, more advertising means more consumers.
The more people know Coach, the more investor want to purchase Coach’ share. So Coach will have good gains in stock market. One more thing about Coach to sustain the advantage is without increasing spending while focusing on style and improves quality. It is very difficult.
If Coach wants the industry elites in luxury and have an Anticipate future, they need to do more marketing research and Re-develop their own development strategies. Focus on how to develop the accessible luxury industry and won’t lose the traditional luxury consumers.