Coach Inc. is a luxury trendsystem company with a strong presence in handbags and accessories, working in the fashion industry. The business has experienced a phenomenal growth that has brought a massive market success. It reported higher sales rates, resulting in higher profitability. In the business field, Coach Inc. has increasingly expanded. The focus of the business on product differentiation and a strong brand strategy have formed a significant foundation for its success. The delightful strategies have permitted it to be connected with manufacturers of luxury products that have well established in the market influencing the customer choice and claimed territories not only in the domestic market but also internationally. Coach Company is one of the strongest players in the market of handbags and it has provided changing fashion trends that are rich in differentiation and better customer service.
Keywords: Coach Inc., Competition, External Environments, Value Chain, Internal Environment,
Analysis of Coach Inc. External and Internal Environments
Since the birth of the company, Coach Inc. is well known to be a company of luxury and durability. The excellent brand has been the major driver in positioning the company on the global scale market statistics. The company has continuously maintained product line characterized by greater depth and width which consists of varieties and differentiated products. Its primary collection is in handbags and other leather accessories offering an excellent product mix. The company faces stiff competition from other rivals in the market such as Burberry, Armani, Polo, and Gucci (Coach Inc., 2017). However, its spirit of maintaining differentiated products at affordable rates has enabled it too well place itself in the minds of consumers and outperform some of its competitors. This term paper will provide an analysis of Coach Inc. external and the internal environments and demonstrate how it has managed to keep a high flag in the fashion industry characterized by stiff completion.
Porters Five Forces of Competition
Competitive Rivalry within the Industry
Coach Inc. takes approximately 28% market share in the United States in the handbag market. The company also is competing with the major players in the industry such as Gucci, Vuitton, Vera Bradley, Guess, Juicy Couture and Marc Jacobs. The company is facing intense competition in North America from the fashion companies that are upcoming in the region like the Tory Burch, Michael Kors and Kate Spade. The sales in this region of the upcoming companies are of tremendous growth. Trefis Team reports that in 2015, Michael Kors registered a growth of 64.5%, 55.11% was recorded by Tory Burch, 47.6% was registered by Kate Sade (Trefis Team, 2017). These figures profoundly outpaced Coach Inc. which took a growth rate of 6.6% in the region. Coach Inc. (2011), stipulates that the rising competition in the North America in the market of handbags and other accessories is an overriding concern for the company’s level of stock in the future years. The decline in the store sales in the last quarter is likely to continue due to the intense competition that is evident in the North America. Coach Inc. is formulating favorable strategies that will take few more quarters to realize the desired goals. The increase in the private label offerings by wholesaling customers also possess a significant competition threat to the company.
Bargaining Power of the Customers
The company is involved in selling its products both “the direct to customer and the wholesale channels” (United States Securities And Exchange Commission, 2016). The company’s operated stores and the e-commerce sales sell directly to the customers accounting for around 89% of Coach’s total sales in the year 2015. The other customers only make 10% of its total sales and thus depicting a limited bargaining power. However, the bargaining power of the end-users is likely to be moderate. Additionally, the company has positioned itself to be a company whose products are affordable to the market while at the same time maintain luxury brands (Trefis Team, 2017). Therefore, Coach Inc. does enjoy a strong brand recognition owing to the quality of its products. Nevertheless, the customers in the North America are gravitational towards newer fashion brands from other companies such as Kate Spade and Michael Kors (Emmanouilidou & Chardakis, 2015). The company is thus slowly losing some of its particular appeal to these company brands in the North America. The bargaining power of the customers is likely to continue being moderate, and the attempts of the company to reinvigorate its brand appeal faces a threat of being offset by the upcoming competition in the then industry.
Threats of other Entrants
Massive capital expenditure is required by a potential company that wishes join the market industry and this acts as a huge barrier to potential entrants. Loyalty and brand recognition tend to be among the primary factors which drive the middle income to high-income earners towards luxury companies like Coach Inc. however; new potential entrant is faced with the challenge of achieving the position without making fundamental investments (Coach Inc., 2011). The internet business present low barriers to entry and therefore the new companies that sell apparel, footwear, and accessories online could be able to emerge in the online sector.
Bargaining Power of the Suppliers
The company does not involve in the manufacture of its products but rather relies on the manufacturers who are located in the different nations like Vietnam, China, Philippines, and India. The US, Italy, and Thailand are also significant suppliers to the company. The manufacturers hold bargaining leverage due to the huge switching costs that are encountered in changing the suppliers (Devinney & Johnson, 2010). However, the bargaining power is also limited to other suppliers. The increase in the cost of the raw materials and the labor used in the manufacturing process is shared by the end user and the supplier. The company sources its products from different geographies in attempts to limit the impact of inflationary pressures.
The Threat of the Substitute Products
The products from Coach Inc. Company are brought particularly by people from the middle-income level. The consumer from this group likes to wear high-end luxury products in the effort of displaying affluence. Therefore, the demand for the company’s products remains to be stable. However, there is the threat of the counterfeit products which depict to be a major problem for the company and particularly from the emerging markets like China. Notably, the counterfeit products quality has been improving in the past years and therefore is presents to be a challenge to the sales of the company.
The government policy in the industry is conducive to encourage market. The amount of taxes charges to the forms in this industry are relatively small, and this is driven at encouraging business. The environment in which Coach Inc. operates in is also politically stable. In the overseas markets, the nations are also politically stable. The tax policy along with the foreign trade policy encourages the trading, and the company does not face any trade restrictions (Coach Inc., 2017. However, the labor law is threatening to the company as the labor providers continually demand a pay rise.
A rise in the interest rates that is sometimes evident in the industry affect the sales of the company. This is because it leads to inflationary effect which discourages the customers from buying its products. Additionally, the competition in the industry poses a threat of a decrease in the growth rate of the company (Proffessional Academy, 2017). The stability in the macroeconomic environment profoundly impacts on the company positively.
There are also the social- cultural characteristics that are within the area that the company operates. Notably, the company operates in an environment where the customers believed in quality and luxury, and thus the company sells high-quality brands to capture the market. The population growth in the regions is also relatively rapid and thus increasing the number of sales.
Coach Inc. believes in the production of high-quality products, and thus its manufacturers employ the new forms of technology in the production. The quality of the products has aided in building brand loyalty and attract more customers (Devinney & Johnson, 2010). The distribution channels are also technologically embraced with the use of new modern ways. The use of the internet as a new technology. The new forms of technology has enable the company to sustain in the market.
The legal factors on equal opportunities, health, and safety along with standards of advertisement are adhered to by the company. Additionally, the company abides by legal factors that concern the rights of the consumer, product safety and labeling and the laws and regulations stipulated in the local and overseas markets.
With an increasing impact of globalization, coach Inc. strategies have to be directed towards the growth of a company. For it to achieve growth objectives, the company has to seek a market development through e-commerce expansion and geographical expansion. Growth will also be achieved if it seeks to penetrate the market and aim at developing its market share hence facilitating future growths. It should participate fully in annual fashion seeks and strengthen its appearances in the fashion magazine. Moreover, it should focus on product development which has an appealing to the existing market. It has to form strategic alliances with other companies to strengthen its competitive level and complement its strategic initiative. It should go for outsourcing when concentrating on the design of its products.
The company should aim at becoming the best employer in the industry and it will do this through hiring skilled, vibrant and motivated staff which will help to underpin the growing business. For Coach to attract the best employees, it has to offer a competitive wage pay, a conducive working environment, support career development, and give benefits. Besides, it should target entering new market segments. This will significantly increase its market share and make more profits. It could invest more in women wear and menswear in the line of clothes, shoes and other products. It should carry surveys to its customers and find out which products the customers are interested in. The risks faced in the market will be spread across the portfolio. The company should consider entering more international markets and strengthen its products overseas. It should closely review its strengths, opportunities, weakness and threats to keep a competitive edge.
Coach Fashion Company has a focus on restructuring strategies based on its objectives to build a company brand that is committed to quality products, customer satisfaction, and continuous innovation. Through the company analysis, it is revealed that the company operates in a very competitive market and it has to formulate strategies that will drive its success and address its weaknesses. The company has more potential of growth and the competitive price, integrity and the expertise design have increasing led to the company victory.
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