Analyzing Marketing Cases: Coach, Inc.

Analyzing marketing cases: Coach, Inc.

Analyze and record the situation.

• Economic

                Luxury goods are said to have high income elasticity of demand as people become wealthier, they will buy more and more of the luxury good. This also means, however, that should be a decline in income then its demand will drop. Euromonitor International (2013) reports that the world’s wealthiest consumers are increasing in number. The US, Japan, China, Germany and France were home to some 8.5 million households with an annual disposable income over $300,000 in 2012. And as the luxury industry is growing accordingly, the luxury company as if Coach extends its firm to Asia and Europe, as well as South and Central America. “Coach plans to add ten new retail stores and 100 wholesale locations in Europe in fiscal 2015, with revenues expected to grow to ~$100 million.” (Soni, P., 2015). The Chinese are the biggest spenders when it comes to luxury goods. It is about 27 percent of global luxury spending in 2012 at home and aboard. So Coach plans to open 20 stores and close 10 stores in China in 2015.

        The luxury goods category in the US remained by far the world’s largest and continued to experience positive current retail value growth in 2015. However, the growth was slower than in 2014, as sales of luxury goods to foreign tourists, especially from China, reduced due to the strong US dollar and economic slowdown in China is. Instead, local consumption supported luxury goods in 2015. US luxury consumers returned to buying luxury goods thanks to improving consumer spending backed by rising pay and more buoyant job market (Euromonitor, 2016). In addition, Wal-Mart and Target low prices on everyday items that could allow people to spending their money on luxury goods

• Social

        Changing societal concerns, attitudes, and lifestyles represents both opportunities and risks to the luxury accessory industry. The changing preferences by middle class consumers towards luxury goods inevitably create new opportunities for growth within mature markets. Companies that shift manufacturing jobs overseas for lower wages have been criticized by consumers. Companies need to evaluate the potential costs as well as benefits before manufacturing or dispersing their products into a country or region (Midgley, 2016).

Luxury brands have such a diverse range of customers. It could identify individual levels in society and personality, regardless of their wealth, age, style, culture, or location, (Doran, S., 2014). People believe that having a big house and nice job, driving an expensive car, and wearing or possessing luxury brands can express how successful they are.

Additionally, when people travel abroad, they often spend a lot of money on luxury brands because it is cheaper than purchasing in their home countries. For example, price of luxury brands in china is 50 percent more than a shopper would pay elsewhere. Therefore, Chinese spend nearly 2,800 per person per trip. It has no problem for them to spend on Prada but sleep in two star hotels by night, (S.N., 2014). Coach is one of luxury brands that diverse range of people can access and its products can meet requirement of successful people who are in a middle class or upper level because of the company provides wide range of product price.

• Political and Legal

Coach widespread its business to several other countries, hence different political and legal of each country must be concerned. For example, China’s crackdown on corruption and government spending. It affects on the global luxury goods. Since the state council and other agencies started issuing bans on extravagance, china’s growth in luxury spending dropped from 7 percent in 2012 to just 2 percent in 2013, (Donovan, 2014). In order to accomplish these objectives, Coach has established the Global Business Integrity Program. This Program sets forth the ethical and legal responsibilities all Coach employees and those who represent Coach's good name are expected to uphold.

        Coach has developed a set of guidelines for firms from whom Coach sources products, including contractors, joint venture partners and suppliers of goods and services. These principles are set forth separately in a statement of Supplier Selection Guidelines. These principles and philosophies that govern the operations and businesses of Coach are based not only on laws and regulations, but are also founded on dignity and respect for the individual, a strong commitment to common sense, fairness, diversity, and ethical business practices and policies. As Coach continues to expand its operations and businesses to more and more countries in order to effectively compete in the global marketplace, these fundamental principles will extend to all the corporation's locations with the aim of achieving Coach's mission to build its brand worldwide while creating stockholder value. Coach is committed to the promulgation, application, and continued development of these principles at each location where it operates (Coach, 2016).

2. Industry

• Competition

As the Paul & Donnelly (2013) state, Coach creates the accessible luxury category by matching key luxury rivals on quality and styling while the price is 50 percent lower or more. So the target market of Coach is a middle-income or two-income household customer, who wants to taste of luxury goods. Because of the product and price, it will identify two category competitors, which are direct and indirect competitors.

The main direct competitor would be Kate Spade and Michael Kors. These two brands are similar to Coach in term of price range, product offering, and American image. Then an indirect competitor would be luxury brands with higher price such as Louis Vuitton, Ferragamo, Prada, Gucci, Dooney & Bourke, and Cole Haan. These competitors tend to focus on higher income people. The competitions in the luxury goods industry are pretty intense. Having superior brand recognitions and strong impacts on global luxury goods market make them become dangerous rivals of Coach, Inc.

        Even though Coach Inc. has come up with good strategy, it still suffered from harsh competition. The profit margin was still below the level achieved prior to the onset of a slowing economy in 2007 and its share price had experienced a sharp decline during the first six months of 2012. Due to the changing environment and harsher competition, it was not clear whether the company’s recent growth could be sustained and its competitive advantage could hold in the face of new accessible luxury lines launched by such aggressive and successful luxury brands.