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MARKETING MANAGEMENT

FINAL PROJECT – Case Analysis

UNDER GUIDANCE OF

PROF.JOHN F.LANKALIS

SUBMITTED BY

PRANAV RAJEEV GADGIL

GRADUATE STUDENT

DEPARTMENT OF SOCIAL AND ADMINISTRATIVE SCIENCES

MAJOR – MS PHARMACY ADMINISTRATION

FALL 2011

SUBMITTED ON

19th December 2011

Coach Inc: Is its Advantage in Luxury Handbags Sustainable

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COACH INC: COMPANY CORPORATE MISSION STATEMENT

Coach seeks to be leading brand of quality lifestyle accessories offering classic, modern and American styling.

SUMMARY

Coach, Inc is a marketer of fine accessories and gifts for women and men. The company is engaged in designing, wholesaling and retailing of handbags and accessories. Its product portfolio includes handbags, women’s and men’s accessories, footwear, jewelry, apparels, business cases, eyewear, and related products. Coach is involved in the sale related activities of its merchandise through factory stores and retail stores in the US and Canada. The company also sells its merchandise through freestanding flagship, department store shop-in-shop locations, and retail and factory stores in Japan, Hong Kong and China. It wholesales its merchandise through its distributors in over 20 countries. The company principally operates in the US, Canada, Japan, Hong Kong, China and Macau. Coach is headquartered in New York, the US.

INDUSTRY PROFILE

The Apparel and Accessories Industry is very competitive because companies must find a way to constantly year after year capture market share in a market that is constantly changing to fit consumers taste. Many of the company’s that enter this market fail because they come out with a very popular style for their product on year then they rapidly expand only to have their product fall quickly out of style. The ability to keep up with changes in fashion trends and find a niche in the market usually determines which companies can survive in this highly competitive market.

INTRODUCTION

Coach, Inc. is a leading designer, producer and marketer of classic leather goods, accessories and furniture which was a spinoff of Sara Lee in the mid 1980’s These products include handbags, men’s and women’s accessories, business cases, leather outerwear, gloves, scarves, travel accessories, and personal planning products. Coach also sells home and office furniture, footwear and watches with its licensing partners. The products are sold through direct mail catalogs, on-line store, e-commerce websites, 174 retail stores and its 76 factory stores. Coach focuses on continuous improvements and anticipating the needs of consumer’s lifestyles to maintain its stronghold of the market. Key success factors for Coach as a manufacturer include product quality as well as marketing and design. Coach has an exceptionally large and loyal customer base mostly due in part to product quality. Coach takes great pride in using skilled employees, quality natural materials, exceptional leathers, and only the finest hardware. Through the years Coach has earned a reputation for producing a product that is known for its durability, craftsmanship, and incomparable product quality. Coach has become one of the most well


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recognized brands in the United States and is rapidly gaining recognition internationally, especially in Japan.

HISTORY

Coach was founded in 1941, in a loft in New York, as a partnership called the Gail Manufacturing Company. Gail Manufacturing Company began as a family-owned business, with six leatherworkers who made small leather goods, such as wallets and handbags. In 1946, Miles Cahn and his wife Lillian joined the company. Miles and Lillian Cahn were owners of a leather handbag manufacturing business, and were knowledgeable about leatherworks and business. By 1950, Cahn had taken over the business and was running it mainly himself. The workers continued to manufacture small leather goods, like wallets, for small profits into the 1970s. In 1977 the Coach brand of wallets and other small leather goods was introduced. In 1961, Gail Leather Products, Inc. was formed. In the 1960s, Cahn did further research on leather and discovered a very complex method for processing leather to make it strong, soft, and durable. At the suggestion of his wife, a number of women's handbags were designed to be more affordable. In the early 1960s, handbags were added to the Coach lineup. Coach women's handbags were made out of sturdy cowhide, which was of much better quality than the thin leather pasted over cardboard material that was used to make other handbags at the time. This catapulted Coach to a prominent standing among high quality leather products.

Through the 1960s, Gail Leather Products also produced other brands, such as Red Lion and Westminster.

During the early 1960s, Cahn hired Bonnie Cashin to work for Coach. Cashin was already a well-known fashion designer prior to joining Coach; however, this deal proved to be one of her most well-known business alliances. Cashin worked for Coach from 1962 until 1974, and revolutionized their product design. Known as an innovator, she instituted the inclusion of side pockets, coin purses, and brighter colors (as opposed to the usual hues of browns and tans) onto the bags. Cashin also designed matching shoes, pens, key fobs and eyewear, and added hardware to her clothes and accessories alike, particularly the silver toggle that became the Coach hallmark, declaring that she had been inspired by a memory of quickly fastening the top on her convertible sports car. Due to the success that Cashin brought Coach; they ran their first ad in the New Yorker in 1963.

In the mid 1970s, production of handbags in New York City ended, and was moved elsewhere in the United States. Around the same time, the company changed its name to Coach Products, Inc.

Business was strong throughout the 1970s and 1980s. Products were in high demand, and under a new vice president for special products, Coach started a mail-order business. They also owned specialty stores, and began to sell Coach bags outside of department stores. Sales increased, and soon demand was greater than the supply. Eventually, Coach would restrict sales to hand-selected vendors. In 1979, Lewis Frankfort, Coach's current CEO, joined the company as vice-


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president of business development. He was mentored by the then executive vice president, Richard Rose. Rose was a maverick and is responsible for turning the Coach brand into a household name.

In 1980, the company changed its name to Coach Leather ware Company, Inc. In 1983, the Cahn’s purchased a 300-acre (1.2 km2) dairy farm in upstate New York that they operated under the name "Coach Farm". It was intended to be a vacation spot away from the New York Coach office, but instead they commuted 2 hours every week from New York City to their upstate farm.

The Cahn’s decided to sell Coach. In 1985 Coach was sold to Sara Lee Corporation for $30 million dollars. The Cahn’s retained ownership of the original corporate entity, Coach Leather ware Company, Inc., originally Gail Leather Products, Inc., which was now renamed The Coach Farm Corporation and produced goat cheese under the Coach Farm trademark. The Coach Farm


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Corporation continued to be headquartered at the Coach headquarters at 516 West 34th Street in New York. Sara Lee took over the factories, the 6 boutiques, and its main store on Madison Avenue in New York City. Shortly after, new boutiques were opened in Macy's stores in New York and San Francisco. Additional Coach Stores were under construction in Denver and Seattle, and similar boutiques were to be opened in other major department stores later in the year. Coach also opened mall storefronts in New York, New Jersey, Texas, and California. By November, the company was operating 12 stores, along with nearly 50 boutiques within larger department stores.

Sara Lee divested itself of Coach first by selling 19.5% of their shares of Coach at the Coach IPO in October of 2000, followed in April 2001 with the distribution of their remaining shares to Sara Lee’s stockholders through an exchange offer.

Coach Inc. has distribution, product development, and quality control operations in the United States, France, Italy, Japan, Hong Kong, China, and South Korea.

Lewis Frankfort has been involved with COACH for more than 30 years. He has served as Chairman and Chief Executive Officer of Coach since November 1995. He has served as a member of Coach’s Board of Directors since June 1, 2000, the date of incorporation. Frankfort transformed Coach from the relatively small company that it was in 1985 into the worldwide known brand that it is today. He is also known for making Coach bags affordable. Up until the 1990s, women's handbags were either very expensive, or very inexpensive department store knock-offs. Coach was the middle ground between the two, therefore filling a gap in the market. Today, Coach operates 25 stores in the United States that carry full Coach collections, including women's footwear, men's briefcases and the new jewelry line. Six are located in New York City and two in Hawaii. Other locations are in East Hampton, NY, Short Hills, NJ, Philadelphia, Nashville, Atlanta, Houston, Boston, Los Angeles, San Francisco, Palo Alto, Scottsdale, Seattle, Washington D.C., Louisville, Omaha, and Westchester County, New York.

In 2011 the company announced that their headquarters would move from 516 West 34th St to the nearby Hudson Yards Redevelopment Project.

Key Dates

1941: The Company is founded as a family-run workshop, making small leather goods in Manhattan. 1946: Miles Cahn joins the company. 1950: Cahn begins running the factory for its owners. 1960: The Coach brand of sturdy cowhide purses is introduced and becomes the company's signature, luxury, and trademark. 1961: Cahn and his wife, Lillian, buy out the factory's owners. Late 1970s/Early 1980s Company begins a mail-order business and opens its first specialty stores.


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1985: The Cahn’s sell Coach to Sara Lee Corporation for about $30 million; Sara Lee begins expanding Coach's product line and its channels of distribution. 1988: The Company begins international push, opening boutiques in England and Japan. 1989: Sales reach $100 million, five times the level of 1985. 1992: The product line is expanded to include outerwear and luggage. 1997: The Company enters into its first licensing agreement, a deal with Movado Group for a line of Coach Watches. 1999: The Company enters the e-commerce realm with the launch of coach.com. 2000: Sara Lee sells 17 percent of the newly named Coach, Inc. to the public through an IPO. 2001: Sara Lee spins off its remaining interest in Coach to Sara Lee shareholders.

PRODUCT LINE OF COMPANY

Coach makes fine leather products. Handbags, purses, and wallets are the original offerings of the company and still account for a substantial amount of revenues. Handbags generated 57 percent of net sales in 2001. Women's accessories, wallets, and belts accounted for 12 percent of sales, while men's accessories were 8 percent. Business cases and computer bags, duffel bags and travel accessories combined posted 10 percent. Other small items such as gloves, scarves, and leather folios accounted for the remaining profits. The next several years will reveal the acceptance of the newly created lifestyles division and its offerings.

COMPETITOR

Coach is the brand which manufactures several ranges of products from high quality leather goods to night ware for women. It also manufactures watches and huge range of gift and accessories article for men as well as women. Coach is the leading market brand and there are strong competitor company of coach such as Chanel, Louis Vuitton, Hermes, Fendi, Christian Dior, Marc Jacobs, Prada, Celine, Cartier, Bally, Anya Hind march, and Versace. But considering the segment of the brand, there are few strong competitors which are positioned equally in the segment of Coach Inc. The companies like Hermes and Louis Vuitton are amongst the top strong competitors of the company. Dooney and Burke and Kate spade are also among the major competitor for the company.

COMPETITIVE FORCES

A) Current Competitors Coach Inc is the brand which is positioned in such a way that it becomes affordable to the current users. Coach Inc as a company has done an excellent job as a company building up its brand image. Reliability and brand image of coach has made a good increase in new customers while retaining its original consumers. The current competitors in the segment are Louis Vuitton, Hermes or Marc Jacobs. But as Coach is positioned in price range lower than the competitors it has very less effect of the rival companies in same


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segment. Price lowering of brand named Dooney ad Burke which is in same segment may have a little effect on the sales and business of Coach Inc.

B) Competition from New upcoming companies in similar segment and product lineCoach as a company is very established brand with very good brand image in society. Coach has very little threat from new companies which come in same segment. As Coach is good brand and have loyal consumer with higher level of consumer satisfaction, Coach has very meager threat from new entrants in segment. As it’s a luxury good, consumer has a belief for going towards traditional purchase rather than trying out new. Consumer demography aimed by Coach is elderly women, who are least likely to try new product. So as a result Coach has very little risk from new upcoming companies.

C) Threat from Counterfeit Products Coach is highly threatened by counterfeit product and products of lower quality. Coach as a brand is highly reliable and offer high quality and fine products. Counterfeit products are similar in look and poor in quality. As it offers very poor quality, they sale cheap products with lower prices and similar design. Major suspect of producing counterfeit products are terrorist organizations who manufacture for capital generation. Coach is taking strong and firm steps to avoid counterfeit products as it leads to decrease in company sales and revenue along with tarnishing brand value and image.

D) Low bargaining power from users and suppliersDue to brand positioning in the specific class, Coach product face very less negotiations from users as well as suppliers. Users have brand awareness and brand image about the product. They are aware about the quality of products offered by company and as it is positioned in luxury category, it is least likely by the consumer to negotiate on price. Coach requires fine leather which they purchase from different suppliers from emerging countries like India, China and many more. So there is very less bargaining or negotiation from suppliers as they have long term relationship with company.

COMPETITIVE ADVANTAGE

Coach maintains a sizable pricing advantage relative to other luxury brands. Coach handbags are priced from $200 to $500, well below the $700 to $800 prices from other luxury brands


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SWOT ANALYSIS

Internal Environment

Strengths

The coach company has the biggest strength of matching key luxury competitors on its high and superior quality leather with unique and innovative styling which attracts the consumers using the segment or luxury. Coach Company’s strong strength is that their products are sold and is available at price less than 50% or more than its competitors. It is segmented in price of $200-$500 whereas the competitors’ price is $700-$800. It has provided additional services to the customers like customer representative services to guide and help customer difficulties. Due to this extra service provided there was huge customer satisfaction among the consumer. Customer satisfaction is major strength of the company. Reed Krakoff brought the idea of fresh new arrival every month. Fresh collection attracted many consumers and helped company in increasing its sales. Coach made strategic alliances with company like Movado and many others which brought them into segment of other luxuries as watches, fragrances, foot wares, and also products for men. This outsourcing helped them in low cost manufacturing and cost cutting to maintain its low price compared to competitors and proved it as competitive advantage. Channels of distribution used by the company such as full price store, factory outlets, internet and catalogs were the major strength of the company indicating greater sales.

Weakness and Risk

There are several internal weaknesses of the company. Change in fashion trends is the major weakness of the company. Factory outlet stores outperforming full price stores. There is a diluting of the brand due to increased growth of factory outlet stores. Men’s accessories only account for 2% of the total sales of the company. Less number of men products is the major reason behind the lower percentage of sale. Outer ware and luggage accounts for only 2% and 1% respectively. High level of requirement of inventory is one of the major weaknesses of the company. Coach Inc has a particular geographical concentration. Geographical concentration in particular areas can also be considered as weakness of the company. As it’s a luxury category, products of coach of inaccessible to most consumer segments. Consumers are cutting back on discretionary goods in light of a challenging economic environment, which is likely to pressure near-term sales and profitability for Coach. Also if Coach adds higher-priced novelty bags to its handbag collection, as an expansion into the higher priced market, it risks tarnishing its image as an affordable luxury brand.


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External Environment

Opportunities

Coach Inc has the growing demand as a luxury good in emerging global markets such as India and China. India is now proving to be one of the major consumers of the coach luxury goods due to higher raise in Indian standards and increase in affordability among the society. There is tremendous and rapid increase in wealth of consumers in other emerging markets like Asia, Middle East, Australia and Mexico. There is large number of opening of new stores across the globe. Development of market in domestic as well as internationally is the great opportunity for the company. Product expansion and increased product line serves as an opportunity for the company.

Threats

As company has lot of external competitors there is lot of threats to company’s progress. Strong competition from the competitors like Louis Vuitton and Hermes and many other brands in same segment is the major threat for the company. Rise of counterfeit goods under same brand name declines the sale of original and high priced goods manufactured by the company. Company suspects the major role of terrorist groups like Al Qaeda in manufacturing of counterfeit goods and considers it as major threats. Due to economic depression there is change in consumer behavior, people try to save a lot and less attracted. Fashion trends changes due change in consumer taste of luxury and new arrivals from other competitors in vogue of current fashion can lead the a major threat to company if it continues business on same old design and trends

Evaluation of SWOT analysis

Considering the performed SWOT analysis, comparison is made between both internal as well as external environment. Coach Inc as a company has lot of internal strength. Brand image of coach is very good and has large number of consumer response and affection towards the brand. As coach is priced in moderate range, the middle income group also gets a chance to use the brand and these increase sales as contrast to comparing brands costing more than Coach Product. Fresh arrivals keeps the consumer repeatedly buying the product and there is good rush of people in both factory as well as full price store. Large number of stores makes the consumer accessible to get the product. Strategic alliances with company like Movado and licensing manufacturing keeps the cost low for same quality. So the typical good brand image overcomes the threats from the competitor company and makes it a still leading brand in the segment. There are certain weaknesses like geographical concentrations, but as it is improving its international market and large business development in emerging countries this is not going to be weakness anymore and this weakness is going to turn into strength. Due to innovative designers, Coach is maintaining its fresh arrival and new designs according to changing trends in world of fashion and luxury.


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There are threats from competitor companies and counterfeit products, but large awareness about using genuine product and rise in affordability overcomes the problem. Considering all the facts of internal and external environments, analysis concludes that Coach is doing very well in the business in current situation even in the cutting edge competition, but it needs to maintain and concentrate on business to continue same success in future. More market penetration and market development in emerging countries like India, China, and Brazil can improve their brand image and sales.

FINANCIAL ANALYSIS

Financial analysis of the Coach Company is from year 1996 – 2006. There is tremendous growth seen in the company and there is growing net sales and profit margin from 1996 to 2006 fiscal year. In fiscal year 1999 the net sales was approximately 500 million and there was increase in net sales every year leading to 2.1 billion net sales in fiscal year 2006. Reed Krofoff’s appointment may be the main and important reason behind company’s success and tremendous revenue growth as it is definitely related to extensive market research conducted. Net income of Coach Company was 16 million in fiscal year 1999 and it showed a tremendous growth and later in 2006 the net income of company was 494 million.

Balance sheet of the company shows the results from July 2, 2005 to July 1, 2006. As of July 1, 2006 cash and cash equivalents was $143 million and short term investments were $394 million Total assets as of July 1, 2006 was $974 million which was better than total asset calculation as of July 2, 2005. Total increase in calculation of total asset from fiscal year 2005 to 2006 was 265 million.

CORPORATE LEVEL STARTEGY

Coach Inc. designed and marketed ladies handbags and accessories with varied product lines including a range of products from outerwear, gloves, hats, scarves along with high quality traditional and luxury leather handbags. Company entered into licensing agreement with the Movado Group in 1998 to make coach watches available in retail store and with Jimlar Corporation in following year for the manufacturing and marketing Coach branded ladies footwear. Similar to aforementioned companies, Marchon eyewear became a licensee for Coach branded eyewear and sunglasses in year 2003. Coach Company used an approach to differentiation. They used strong market research technique under leadership of executive creative director Reed Krakoff which was the basis development of differentiated product line. Coach decided to launch new and fresh arrival every month. Initially there were two-three arrivals every year. New product introduction improved and maintained brand image and brand recognition. Coach Inc also converted their old shops to newly decorated shops with aesthetic attractiveness similar to similar brand shops. Aesthetic improvement also contributed increase in luxury image of the company. Coach developed customer representation services for serving their customers better leading to more and more customer satisfaction. Customer satisfaction was


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a differentiating aspect of the brand. Introduction of improved retail distribution channel was one of the major corporate strategies adopted by the company. Full price store and factory outlets along with internet sales and catalogs in both United States and Japan contributed a large increase in sales of the company. Coach strategy of location of flagship full price store in areas like New York, Chicago, Beverly Hills and San Francisco improved their sales and made them a symbolic luxury brand. Factory stores were discounted stores and it lead to success in retail distribution as many people tend for a purchase in discounted or low price store rather than full price store. Coach’s factory stores outperformed full price stores in term of sales growth.

MARKETING STRATEGY

Coach’s marketing strategy is to deliver a consistent message each time the consumer comes in contact with the Coach brand through our communications and visual merchandising. Coach also has a sophisticated consumer and market research capability, which helps us assess consumer attitudes and trends and gauge the likelihood of a product’s success in the marketplace prior to its introduction. Coach’s wide range of direct marketing activities includes catalogs, brochures and email contacts, targeted to promote sales to consumers in their preferred shopping venue. In addition to building brand awareness, the Coach catalog and www.coach.com serve as effective brand communications by providing consumers a chance to look at product or fresh arrivals or discount if any available. Catalogs and email contacts are Coach’s principal means of communication and are sent to selected households to stimulate consumer purchases and build brand awareness.

Coach Inc is building market share in the ever popular U.S. women's accessories market by leveraging our unique position as an accessible luxury lifestyle brand. As part of this strategy, they are emphasizing new usage occasions, such as weekend or evening, and offering items at a broader range of prices as well.

Another strategy is the continued acceleration of growth in U.S.retail. By planning to add 100 U.S.retail stores over the next 4-5 years, they hope to bring the retail store to nearly 300 stores

Third, they are aggressively expanding market share with the Japanese consumer, by jumping 3% during the next few years. They will continue to open new retail locations including Flagships stores. This year they are expecting to open at least 10 new. They are continuing for gross margin higher than before by leveraging more marketing strategies. Expansion of business in China and India is the major marketing technique intended to attract largely populated countries. As these countries are emerging, affordability is increasing and there is formation of huge market.


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CONCLUSION

Consumers are cutting back on luxury good purchasing due to adverse economic environment which is likely to affect sales and profitability for Coach Inc. The number of millionaires is expected to increase by 23% by 2009, to reach 12 million along with the rapid and considerable increase in new wealth occurring in Asia and Europe. Demand for luxury goods in emerging markets are projected to grow at annual rates approaching 10%. Luxury goods producers are opening retail stores in India, which is emerging market for luxury goods. China accounts for 11% of luxury good purchases due to its increasing income and rapid development of country. International sales is expected to increase as a percentage of total revenue over the next 10 years as the company expands into emerging markets

New store openings, both domestically and abroad helped the company for expansion and improving sales and brand image. U.S. Full price stores including Flagship stores and fashion stores, factory stores, the internet, and the catalog is expected to continue to make up the majority of Coach’s revenue. Under the eminent leadership, Coach Inc has designed outstanding corporate and marketing strategy and positioned brand into particular category. Marketing strategy along with competitive advantages with its internal strength and external opportunities will take Coach Inc to more and more milestones. Maintaining its brand positioning in the price segment which is affordable to middle income group and also attracting higher income group due to its high quality and durability with great styling makes Coach Inc a sustainable and advantageous in category of handbags and other leather accessories.

RECOMMENDATIONS TO THE COMPANY

Coach Inc must be very strict in following its company’s mission statement and aim to be leading brand of leather goods and accessories in luxury market. If they compromise on price or make lower quality product for short term profit there will be decline of brand image and sales in coming years.

Increase in sales of Men’s wear and accessories, outerwear and luggage by using fresh product lines and different marketing techniques will increase their market share in segment giving a cutting edge competition to rival companies’ product offering.

Expansion in Asian markets like Singapore and South East Asian countries will help expansion of company to greater extent.

Company must keep bringing new ideas in the products which will keep consumers attracted and loyal to the brand.


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SITUATION Your company has just been bought by another company. The new company is looking to down size your company to make it more efficient. The new company has informed you, and the rest of your company's employees, that they are going to have a meeting with each employee to determine if they should be retained or fired. You have to present your case on why you should be retained. As indicated, what would you do to show that you should be one of the people who should not be fired?

I am very glad to be the part of new organization where I can contribute my knowledge and experience towards the betterment of the company and achieving mission statement. I am the part of company since 5 years and served my company to my best of knowledge and experience. Over the past 5 years of my experience in the company, I have developed an array of skills that will help company for achieving targets.

I developed skills that help me remain calm and excel during high intensity assignments andWork towards making them exceeds expectations. Being a part of company and working in different roles have successfully taught me the ability to multitask effectively and learn crucial skills in time management. I am task oriented person with good relationship skills. I am driven person who believes that work comes first on priority list. I am a good team player. Being a good team player I always go along with co workers very well by avoiding any kind of conflicts. Along with being a good team mate, I am a good motivator for my team and have a capability to motivate my team towards achieving company goal.

In the same company, I have been awarded excellence award of the year for my innovative thinking and critical problem solving skills. Being in a Pharma company, innovativeness counts a lot as innovations brings development. In my schooling and graduate school I was involved in research activities and worked on different research project. Research experience helped me to develop an ability to overcome difficulties and find solution towards it.

I have been travelling a lot to different international destination. Living in these countries has given me a great deal of exposure to interacting with people from varied regions and cultures. They have instilled in me an ability to readily adapt to a new environment and amalgamate into the new culture successfully.

Finally I believe that my contribution towards the company will prove me as an asset to the company. It would be great opportunity for me if company assigns me for the job and retain my job position.


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Coach Inc - Weeblypranavgadgil.weebly.com/uploads/6/7/1/9/6719151/coac… · Web viewCOMPETITIVE FORCES. Current Competitors . Coach Inc is the brand which is ... to changing trends