Competitive Market Analysis of Coach, Inc - Case Study Example

Competitive Market Analysis of Coach, Inc.

Introduction

Coach, Inc. has a long history in the fashion sector, famous for its manufacture and sale of leather products. The organization went through a notable growth towards the end of the latest recession, utilizing development of factory openings and widespread discounts to obtain a big customer base within the cheap extravagance retail sector (Marriner et al., n.d.).

On the other hand, the provision of affordable merchandise, the firm’s brand value quickly has been linked with discounted products and unattractive factory items. While the American economy has enhanced, Coach has encountered countercyclical performance, with numerous clients changing their focus to the firm’s direct rivals such as Michael Kors and Kate Spade. The current situation of Coach is not favorable. It lost its place as the best supplier of cheap luxury fashion clothes with discounts and lowering of its merchandise’s cost. It goes on to open additional branches while minimizing the number of its retails shops while at the same time giving reductions on its goods.

In a somewhat contradictory way, Coach has improved the quantity of its superior goods while pricing its items the same as its direct rivals. Therefore, that has contributed to divided brand identity that has lowered the demand for its products and disjointed Coach total strategy (Marriner et al., n.d.). In the absence of important strategic modifications, the brand perception has been tainted and deliberate closure of particular retail shops that are probable to more inadequate performance in the years to come.

Nonetheless, Coach also gains from heading into a provisional time of brand uniqueness armed with the liquidity required to swivel the organization and guarantee a vigorous future development. The firm has recently acquired an additional creative manager, therefore taking advantage of the fresh team and fresh financial records; Coach is able to develop value by focusing on a number of primary strategic suggestions. Although these suggestions such as recovering brand worth, aggressively following growth openings and improving e-commerce transactions are universal, within individual comprehensive strategic initiative depend on precise and actionable instructions allowing Coach to retrieve its brand image and performance to the maximum levels.

Coach, Inc. Background

Coach, Inc. is an American Fashion organization that is well recognized for producing leather items such as ready to wear and outerwear among other products. It was established in 1941 in New York with only six employees (Marriner et al., n.d.). However, at the moment it has approximately 17,000 staff members and also over a thousand stores within forty nations. In addition, thirty five of its sales are generated from International markets. The organization aims at retaining quality of its merchandise so that it have an added advantage from its rivals.

Although for many years it has been recognized for producing leather handbags that generated a lot of revenue for the firm for a long time, Coach has of late added the production of other items. Some of these elements include watches, jewelries and scarves for both genders. Therefore, this aspect of mixing products is a way of the organization to become the leading organization in luxurious items in the world.

Coach obviously planned for this modern luxury to be available and the discounting and factory contributions within the 2000s so that they can have a reasonable market share within the current recession (Marriner et al., n.d.). The prices of its products were clearly lower than that of its rivals and hence Coach was able to attain highest sales and levels of turnovers.

On the other hand, lagging local sales and falling market share within a period of one year have contributed to low in investor assurance. Due to the increase in stock costs to the highest levels in 2012, the organization is presently trading at approximately $42. Also, since the company only just hired a new chief executive officer and creative manager, it is hopeful that the market will be able to trust it again after saving its performance and brand image.

Competitive analysis

Coach is the top most manufacturer of cheap luxurious handbag as it is evidence of their total annual sales levels. On the other hand, it is exposed to high competition from its rivals. A number of its direct rivals within the North American region include Michael Kors and Kate Spade (Nodak, n.d). These competitors have improved their popularity in the recent times hence making Coach to be worried about its market segment in the future. At the same time, Coach has fought to compete against numerous top European fashion organizations such as Louis Vuitton, Gucci and Longchamp. Its stock has fallen in value within the last few years especially due to the reduction of sales within the Northern American areas and changes in consumer preferences.

Equally, both Michael Kros and Kate Spade have enhanced their sales levels and sales per square foot rations hence demonstrating that the operations of the two organizations are refining. At the moment, Coach is going through a revolution strategy in order to obtain modern markets for example extravagance foot wear and accessory sales. Similarly, there are areas hat Michael Kros and Kate Spade have not ventured in (Nodak, n.d). therefore, this diversification will make Coach to have an added advantage in contesting with other organizations, all of which possess their own group of established rivals.

• Threat of New Entrants

The brand value connected to the present organizations in the luxury apparels and handbag sector is an important deterrent for any prospective new entrant. Hence, Coach together with other firms in the industry have in the past delight in a reasonable amount of safety against the entry of new organizations. Further, there are huge levels of fixed prices from the development of a new retail firm for example remunerating for store localities, lining up suppliers and making a brand image using marketing. The current emergence of Kate Spade, nonetheless demonstrates how fluctuating distribution techniques and improved consumer connectivity can permit recently formed businesses to quickly gain a noteworthy market share (Nodak, n.d). This together with the growing importance of e-commerce makes it more believable that barricade to entry could be circumvented so that one can smoothly enter into the industry.

On the other hand, given the time and resources needed to create adequate brand acknowledgment amongst clients, it is not possible that a new direct rival will provide noteworthy destruction of Coach’s market segment in the likely future.

• Substitutes and Complements

Coach normally offers to the middle and wealthy individuals. These individuals have the wealth to purchase the luxury items and therefore they are able to buy many types of merchandise reliant on their preferences. Hence this situation subjects Coach to substitution impacts from their clients moving their attention to different companies as a result of costs, quality or style inconsistencies (Nodak, n.d). This has been especially noticeable recently with a number of Coach’s rivals poaching Coach’s long term customers.

Both Michael Kors and Kate Spade have experienced accumulative sales amounts while Coach’s profits have reduced. Most of this change is connected to the substitution impacts as Coach is seen as a lower class as opposed to its rivals. Another type of substitution is seen in the context of counterfeit merchandise especially overseas in emerging markets. These challenges not only reduce the sales of Coach, Inc but also can damage the brand image of the firm due to the low standards of these Substitutions. Strengthening the guidelines of online sales especially in China will go a long way in limiting the substitution danger from such imitations.

Despite the fact that the impacts of substitution can minimize the demand of Coach’s merchandise, luxury products are regularly complementary in respect to other luxury goods. Basically, if an individual has the purchasing power and interest to buy an expensive leather bag, they have more chances of having the money and longing to buy other luxury items (Nodak, n.d). Coach is well place in the market to take advantage of this complementarity by increasing the number of its products and transitioning in the direction of becoming a lifestyle brand instead of merely a handbag manufacturer.

• Supplier Power

Coach, Inc depends on producers that are based within a number of nations for example China, Vietnam, India and the United States. As per of 2013, a single vendor provided twelve percent of the items to Coach, contributing to fears that this supplier could have substantial influence in the future pricing discussions (Coach, Inc, n.d). On the other hand, the rest of Coach’s vendors have comparably small shares of Coach’s general unit aggregate, giving a particular level of protection. Nonetheless, additional sourcing determinations could lead to further sanctuary from exercises of dealer authority. In addition, the strong point of the United States dollar could permit Coach, Inc. to save while buying from International suppliers.

• Buying Power

Coach utilizes the direct to customer methods together with wholesalers. The direct methods of sales account for the largest share of sales. Therefore, since the largest portion of the sales are generated using the business to consumer networks, the consumer power from wholesales for example Nordstroms or Sak’s is relentlessly restricted. Thus, considering that, there is a huge amount of buyer power that is obtained from the direct to customer of Coach. Coach, although they market themselves as the affordable luxury, is seen as a luxury brand nonetheless (Coach, Inc, n.d).

Notwithstanding the organization’s long term image, its merchandise remains exceedingly flexible goods. This exposes the firm to hostile impacts when optional expenditure is minimized. In addition, the products that Coach offers are based on individual preferences, making Coach to be vulnerable to client’s judgment. Given its decreasing revenue amounts, minimizing sales per foot metrics and extensively accredited ruining of its brand’s name, it is obvious that Coach has great levels of exposure to changes in the spending of the customers.

Competitive advantage of Coach, Inc.

As mentioned previously, Coach retains robust financial statements since it has huge cash balances and does not have long term liabilities. The organization has been vigorously handling its cash flows by producing significant free cash, making prudent capital investments and improving its return on investment (ROI) (Coach, Inc, n.d). This solid liquidity places Coach to move future growth through spending while providing safety from harsh market events that are likely to happen.

Similarly, Coach has a strong e-commerce presence. E-commerce is among the most vital growth drivers for retailers. That is because there is an Internet purchases developing from four percent of the total retail sales in 2009 to six percent of retail revenues in 2014. This is especially important to premium goods with approximately fifty percent of United States customers conducting Internet investigation of luxury products prior to making a purchase. Coach is exceptionally placed to benefit from cheap luxury share of an e-commerce market that is anticipated to be worth $500 billion by the year 2018. Although the direct rivals of Coach for example Michael Kors and Kate Spade have strong Internet presence in America, neither of the two organizations has a direct customer selling channel in China. Therefore, Coach has an added advantage as the global largest e-commerce market.

In addition, since it was established in 1941, it has been growing its brand name for manufacturer of superior leather items (Coach, Inc, n.d). On the other hand, under the management of the chief executive officer, the name of the organization modified from its present setting as a company of affordable luxury. This standing, and the antagonistically expansionary strategy carried out by the firm for many years projected the organization in the forefront of the United States fashion. Best sales amounts in 2012 swamped the market with difference selection of merchandise from Coach.

A current research project demonstrated that Coach had formed a brand respect with approximately ninety percent of participants. Similarly, the brand obtained high amounts of publicity (Coach, Inc, n.d). A single greatest assets of the firm, as clients with constrained mental memory will likely prefer items from organizations that they are familiar with. Coach can influence this acknowledgment so that it can appeal consumers to its merchandises.

Opportunities within the International markets

Coach has been gradually aggregating the number of international outlets within the former few years. It has about 475 outlets beyond the border of North America. Regardless of this development, Coach still remains comparatively undersaturated in a majority of the markets especially since nearly fifty percent of its international outlets are located in Japan. Therefore, this gives room for huge opportunities both using physical shops and online stores. The main focus within the international markets is Chinese market since Coach’s quarterly revenue rose by thirteen percent in the initial quarter of 2015 (Coach, Inc, n.d). Further, Coach has less than fifty stores in the entire region of Europe, giving another geographical location of unexploited sales for Coach to take advantage of.

For many years, Coach has performed well in respect to its business model that is associated with huge discounting and saturating the market with factory offerings. Although this offered a period of huge growth within the former years, the sustainability of the approach has reduced as consumer preferences have altered. Coach has a chance to recreate its brand reputation using a growth in the diversity of its merchandise, an improvement in the quantity of superior offerings and also using strategic promotions drives. These approaches are principally intended at rescuing the brand reputation of Coach.

In the latest period, Coach has acquired a footwear organization, widening its goods mix to comprise of footwear and jewelry among others in addition to its former leatherwear products. This shows Coach’s commitment to becoming famous as the inclusive lifestyle brand, offering fashion and lifestyle management is all facets of life. That would permit the organization to take advantage of the complementary characteristic of luxury fashion (Coach, Inc, n.d). Through selling consumers a larger selection of products, Coach will get the opportunity to improve its sales by having a consistent merchandise adept of offering consumer’s varied interest.

Coach is seen as an affordable luxury organization in America, and has a huge level of direct competition. Even though brand distinctiveness has been created for a long period, it is presently seen as more than usually manageable and untrendy. Through the important liquidity of its balance sheet, it can perform a number of few actionable suggestions so as to increase the perception of its organization. The best way for Coach to save its reputation and rescuing its image is through minimizing the share of discounted offerings.