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Key Topics
- Requirement
- Solution
- What strategy has Coach used to grow its business?
- What are the challenges Coach is facing? How should it prepare to face these challenges? Explain.
- Which ones of the five generic strategies has Coach used to differentiate itself? Will this strategy work as it moves towards becoming more of a global company?
Requirement
1. What strategy has Coach used to grow its business?
2. What are the challenges Coach is facing? How should it prepare to face these challenges? Explain.
3. Examine the financial results of the company and calculate various ratios. Based on these ratios what is your assessment of the company's performance?
4. Which ones of the five generic strategies has Coach used to differentiate itself? Will this strategy work as it moves towards becoming more of a global company?
Solution
Coach Inc. in 2012: Its Strategy in the "Accessible" Luxury Goods Market
What strategy has Coach used to grow its business?
Coach’s strategy focussed on matching key luxury rivals in quality and styling while beating them on price by 50% or more. This gave them a competitive advantage over other companies. They could attract customers ranging from the middle-income consumers to the highly wealthy and affluent who could spend more. The company adopted a low-cost strategy to counter their rivals and create an advantage which would give them an opportunity to expand into different market segments.
The multi channel distribution model of the company allowed the company to be in direct contact with customers through direct to consumer sales. This helped them focus on customer relationship and build brand loyalty. The company also engaged in indirect wholesale sales by selling their products to third party retailers.
The main strategic focus of the company was to increase global distribution and improving same store sales productivity. Their strategy was based on five key initiatives, viz. Building market share in North America by opening new full-price retail stores and factory outlets. Increasing the market share in Japan by adding new business locations. Raising brand awareness in under penetrated markets like Asia, Europe and South America. Increasing selling of products focused on men and raising brand awareness on ecommerce platforms through the site Coach.com.
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Under the designer Krakoff, the company focused on building and introducing new products based on thorough market research. The company started introducing more collections per year as compared to the original strategy of two collections per year. They also focussed on improving the appearance of their stores to match their contemporary designs. They introduced new lines of products which would be sold at discounts ranging from 15 percent to 50 percent to target the customers who would not normally consider luxury items. The company could afford to offer such discounts owing to the pricing advantage they gained due to their strategy of outsourcing production to different suppliers across 15 countries and signing agreements with them to maintain the required quality of products.
The strategies adopted by the company Coach enabled them to provide a strong quality, styling and value mix which is attractive for customers belonging to segments from middle class to the wealthy class. The company enjoyed low supplier bargaining giving them price advantage and the ability to create competitive advantage based on cost.
What are the challenges Coach is facing? How should it prepare to face these challenges? Explain.
The challenges faced by Coach are mainly based on the areas of expansion of their markets in the different countries, high rivalry and competition and the issues revolving around counterfeiting. The general economic slowdown had affected the markets in countries like Japan which experienced little or flat growth for luxury goods. Establishing their position and expanding the market share was a challenge for Coach. The company can focus on using their price advantage and provide the discounted line of their luxury good in this market to increase the market share.
Coach also experienced high rivalry in China from the existing brands and the markets which demanded more product variants for men. To compete in these markets, the company should focus on introducing more variants in products for men. They must customise their product offerings based on the market segment and use their strategy of intensive market research based product offerings. Another challenge faced by the company is reducing profits in the US market due to most of their trade in the US was through the department stores and the popularity of these stores was reducing in the country, thus affecting sales. To address this issue, the company must focus on partnering with other retailers and also opening their own full price and discount stores in US.
Another challenge faced by Coach was of the entry barriers in the Indian market where the popularity of the local brands was difficult to fight. Also the country has different tastes in the product requirements and demanded a great level of customization in the product offering based on the market segments. Here again the company must follow a market research based product offering strategy. A major challenge faced by Coach was that of the counterfeit goods being produced across different countries. The company must collaborate with the other luxury goods manufacturers to fight counterfeiting industry.
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Place Your OrderWhich ones of the five generic strategies has Coach used to differentiate itself? Will this strategy work as it moves towards becoming more of a global company?
The generic strategy adopted by Coach out of the five generic strategies is the best cost provider strategy. This strategy is a mix of the elements of low cost and differentiation strategies and aims to have the best cost among all its rivals. The low cost that the company provides for its products owing to the price advantage it gains from outsourcing its production has been the key competitive advantage for the company. The company has also focused on improving customer relationships by improving customer service experience by recruiting the adequate staff members to cater to the customers even during peak sale seasons and by making product replacement and ordering easy.
The company has achieved product differentiation by using market research based product launches by and also aimed at catering to different customer segments by the means of tiered system of stores. The company adopted monthly product launches to increase sales frequency and cater to the segment of customers who wish to use new products more frequently. The company has successfully raised awareness and achieved growth in market share by opening the correct mix of full price stores and factory stores.
This strategy adopted by the company will help the company grow as it moves towards becoming more global. Cost advantage is always beneficial in local as well as global markets as it increases the customer base who can now afford the product sold by the company. Additionally, using the strategy for product differentiation based on the market needs helps improve customer satisfaction. Thus the strategy adopted by the company can gain sustainable competitive advantage for the company.
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