coach
TRANSCRIPT
COACH Inc.Sustainable Advantage in Luxury Handbags
Agenda
Company Overview Salient features of the industry/company Competitive forces Position of the company in the industry Competitors analysis SWOT analysis Current strategy and its evolution The draw-backs/pitfalls of the strategies Analysis of the emerging threats in the
environment Recommendations for the future
Coach Inc. – BRIEF BACKGROUND American luxury leather goods
company Established in Manhattan, New
York, in 1941 Headquartered in New York
City, NY Coach went public on the NYSE
in 2001. By 2007, revenue was $2,612.5 million
By 2007,Employed 10,100 people,
Coach has 272 retail stores in 24 countries
What is fashion?
Fashion is the life some people are advocating in a short period
Fashion has been characterized by change, which decides the vibrancy of fashion industry
Short History
In1845, the first fashion designer Charles Frederick Worth, was born in Paris.
Around 1900, fashion stepped into the all-round development stage.
After 1900,Fashion had become an industry. From 1970 to 1980, fashion went into a period
of globalization. After 1990, fashion industry continuously rapidly developed.
Outsourcing issue Producing the products in low-cost countries
VS. locally manufacturing their products
Intellectual property and piracy issue European countries: offer more protection America: fashion designs are not protected Developing countries: incomplete legal system
Issue & FeaturesFASHION INDUSTRY
Competitors
Competitors: Chanel, Louis Vuitton, Hermes, Fendi, Christian Dior, Marc Jacobs, Prada, Coach, Celine, Cartier, Bally, Anya Hindmarch, and Versace.
Stronger competitors: Hermes, Coach Inc, and Louis Vuitton
BuyersSuppliers
Substituteproducts
Potentialentrants
Industry competitors
Rivalry amongexisting firms
Threat ofnew entrants
Bargaining powerof suppliers
Bargaining powerof buyers
Threat ofsubstitutes
Porter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
Market Positioning
Price
Low
High
QualityLow
Southwest
American Airlines
United Airlines
Delta
Frontier
AirTran
JetBlue
Position Map
Combining the two types of competitive advantage with the scope of activities or customers leads to four strategies. The two narrowly focused strategies are often considered a single focus strategy with two variants.
Competitive Advantage
Lower Cost Differentiation
Competitive Scope
Broad Target
Overall Cost Leadership
Broadly Targeted Differentiation
Narrow Target Cost Focus Differentiation Focus
SWOT Analysis STRENGTHS: matching key luxury rivals on high quality leather
and innovative styling beating competitors price by 50% or more high level of customer service monthly introductions of fresh new handbag
designs strategic alliances to bring Coach brand of
handbags into luxury categories such as: watches, footwear, glasses, fragrances outerwear, and mens
outsourcing to cut cost and maintain low price channels of retail distribution from full-priced
store, factory outlet, internet and catalogs
SWOT Analysis
WEAKNESSES: factory outlet stores outperforming full-
priced store diluting brand with increased growth of
factory outlet stores men’s accessories only account for 2% of
sales outerwear only accounting for 2% of sales luggage only accounting for 1% of sales
SWOT Analysis
OPPORTUNITIES: growing demand of luxury goods in
emerging global markets, such as China and India
increased wealth of consumers in global markets of Asia, Middle East, Australia, and Mexico
SWOT Analysis THREATS: French and Italian designer brands such as
Gucci, Prada, Louis Vuitton, Dolce & Gabanna, and Ferragamo
Brand diffusion: Manufactures of the finest luxury goods launching diffusion lines to exploit middle-income consumers. For example, Dolce & Gabanna launching “D&G”, a sub brand sold at modest price points.
Counterfeiting of luxury merchandise, totaling $500 billion worth of goods sold in countries throughout the world in 2006.
Coach Inc.MARKET STRATEGY First, COACH 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.
Their second strategy is the continued acceleration of growth in U.S. retail. By planning to add 100 U.S. retail stores over the next four to five years, they hope to bring the retail store base to nearly 300 locations.
Coach Inc.MARKET STRATEGY
Third, they are aggressively expanding market share with the Japanese consumer, by jumping 3% during the next few years. They will continue to open select new retail locations, including Flagships. This year they are expecting to open at least 10 new locations in Japan.
Coach Inc.MARKET STRATEGY
MARKET STRATEGY (CONT.)
Finally, they are continuing to drive gross margin higher and leverage their expense base.
CUSTOMER PROFILE Accessible luxury
accessories brand The average consumer is
in her mid-to-late 30's, college educated, in the white collar workforce.
Household income averages $100,000
Endorses include famous celebrities like Rebecca Romijn, Eva Longoira
The Signature "C" one of the popular product demand intended for a younger generation of consumers
RELATIONSHIP TO SUPPLY CHAIN COACH customer base is very broad and
diverse from both a demographic and geographic basis. This requires a broad platform of products to market and appeal to a wide range of consumers. Factories have to be nimble and able to work with a wide variety of materials and products. The products must be shipped all over the world which in turn requires planning and logistics.
COMPANY ORGANIZATION 50 individual factories all around the
world in terms of production Distribution center (Jacksonville, FL) Warehouse in Tokyo 16 Production facilities, which are
NOT COACH owned, around the world
Shipping lines are done by air and ground transportation
SIGNATURE C START TO FINISH
Designed in NYC, sample makers in NYC, line presentation to business units to determine demand levels, design card with "recipe" for product prepared, raw materials sourced (development of raw materials starts well in advance), pattern is sent to factories, production begins, finished product is sent, usually via ship across the Pacific and either thru the Panama Canal (all water) to a southeastern US port or into California docks to go via train (mini land bridge) and truck to Jacksonville DC. It is then picked and packed and sent to our stores or wholesale customers.
Where does the leather come from?
Leather is obtained as a by-product of the meat industry across the globe
COACH is very picky and the top 10% of hides are purchased to go to tannery facilities.
Now the jobs are outsourced to several different countries to lower cost and increase quality
Finished Goods
Finished Goods
Finished Goods Received at Distribution Center in Jacksonville, FL
Transport Suppliers(FedEx)
Retail and Department Stores
Retail and Department Stores
COACH SUPPLY CHAIN SYSTEM
Transport Suppliers(FedEx)
Signature C in the Supply Chain
COACH controlled the distribution level of Signature "C“
Even within the factory division, currently not every factory store even carries the "C" products
It took COACH the better part of 3 years to release old "C" to select factory stores
This limited supply has helped to increase customer demand as well as brand equity
INVENTORY CONTROL Internal Corporate Merchandising Planning group
which works with our business units to determine production from the SKU level and roll it up to an overall forecast/order.
Automatic, dynamic, unit stock replenishment systems in stores, 'tell' our Distribution Center in Jacksonville when to replenish our stores.
Direct shipments from the Jacksonville Distribution Center are
Shipments are sent to stores 4 times a year, at the beginning of each main product phase.
Who can distribute Coach?
COACH stores, factory stores, catalogues, authorized department stores, and online catalogue.
The catalogue is important in the USA and abroad. On-line store at www.coach.com started in 1999.
Shipping Jacksonville fills individual store needs
using Fed-Ex ground, Fed-Ex Express. 3rd party trucking lines are used in Japan Store distribution needs are also met with
transfers from other stores Full price to factory is the most common,
an example would be a discontinued product
Use of Information Systems The use of CAD/CAM systems Customer Service modules for order fulfillment Warehouse management system that allows
pick n pack in the distribution center Online routing guide that lets the stores know
what day of the week orders are pulled and when they should be shipped
Shipment reports are generated that report exactly how many cartons are shipped and what is shipped
Quiz Time Does COACH use FedEx or UPS? What is the average income of
COACH customers today? What is the most popular current
product? What other country is a big player in
COACH?
REFERENCES Phone Interview
Andrea Shaw ResnickVice President - Investor RelationsCoach, Inc.516 West 34th Street, 5th FloorNew York, NY 10001212-629-2618 telephone212-643-1743 [email protected]
Official website of COACH www.coach.com
Additional website http://www.indianchild.com/fashion/coach_purses.htmCoach
Recommendations Keeping inline with the company’s mission
statement of seeking to be the leading brand of quality lifestyle accessories offering classic, modern American styling
Increase the amount of weak sale’s revenues of mens’ accessories, outerwear and luggage by at least 5% each, to total 7%, 7% and 6% respectively to compete with rivals containing a larger market share of these products
Open 30 new full-priced stores a year, and open 3-5 factory-outlet stores a year to increase expansion, retain status of premium goods and prevent brand dilution.
Continue to produce top quality luxury goods difficult of counterfeiting
Recommendations Short term
Website Promotion Purchasing information
Long term Expansion in Asian Market Item Distinction Designers