Ch. 4 - The Marketing Environment

　

"Classic American style"--for 60 years, these words have defined the character and spirit of the Coach brand. Today more than ever, Coach embodies "classic American style"--now across a broad and modern product offering of lifestyle accessories in a number of distinctive categories, styles and fabrications. Coach is a very sophisticated brand who seems to mainly target women ages 16-54. That age bracket is definitely a broad range, however, Coach putting forth numerous product lines with distinct differences has allowed them to target such a large range of people. As the brand has grown and evolved, so has the company: from manufacturing to marketing driven; and from a small family business based in a New York loft to a publicly traded company with worldwide sales of $600 million in fiscal 2001. At Coach, the brand is at the core of the company's vision and strategy. The values of the brand--customer satisfaction, integrity, innovation and collaboration--are the reasons Coach's people come to work each morning. The strength of the Coach brand is, ultimately, what makes Coach the company it is today.

Since 2000 Coach Inc. has expanded its distribution to countries around the world such as France, Italy, Hong Kong, Japan, and South Korea as well as holding a strong lead in the luxury handbag industry within the United States. Coach Inc. (NYSE: COH) is a leading retailer of premium handbags and accessories, located primarily in North America and has recently expanded into Asian markets. Basing its image on "affordable luxury," Coach seeks to establish a premium brand that caters to affluent consumers but also provides lower-priced goods to appeal to the demand of middle-class customers. Due to its effective merchandising and brand-building, Coach has boasted high operating margins and increasing popularity within the U.S. and Japan for years, even in the suffering American economy. COH also intends to take advantage of increasing luxury consumption in China by taking more control of its retail operations there and building its own stores instead of relying on third-party retailers. As COH continues to develop its ultra-luxury collections, it will share in the recent increase in spending in luxury good markets as the affluent release pent-up spending power from the last year.

Coach Inc has zero tolerance policy for counterfit products.
Coach vigorously pursues counterfeiters and the shops, websites, vendors, and flea markets that sell counterfeit Coach merchandise. Coach work with local, state, and federal law enforcement as well as U.S and foreign customs officials to try to stop the sale of counterfeit goods at every point in the supply chain. Coach DOES NOT authenticate merchandise or determine whether serial numbers match actual Coach items. If you purchase an item from an authorized Coach retailer, you are guaranteed the item is authentic.


Coach’s plans for geographic expansion during this recessionary environment are cause for a bit of concern. The company’s 1.6% increase in sales from ’08-’09 were driven purely by expansion while same-store sales declined 6.8%, gross margins dropped 4%, net margins dropped 5% and earnings dropped 20%. Aggressive expansion as the comparable earnings of the company decline is a very risky strategy. Coach management appears to have a rosy outlook regarding its positioning in the economy beyond this current recession. Despite its expansionary plans there are not many markets for Coach to expand in outside of the North America, Japan and China. The luxurious and niche nature of its product don’t necessarily attract consumers in lower income economies. This geographic concentration may limit Coach’s growth opportunities in the long term and potentially prohibit upward movements in its stock.



sources http://en.wikipedia.org/wiki/Coach_Inc

Ch. 3 - Ethics & Social Responsibility

 

Code of Ethics

Coach has adopted a code of ethics, the Coach Global Business Integrity Program. The purpose of the Program is to convey the basic principles of business conduct expected of all Coach officers and employees, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, Controller and other senior financial personnel performing similar functions. We require every officer and employee at or above the level of Manager to attend training on the Program and other matters of business ethics at least once a year. All Coach employees worldwide are expected to comply with the Global Business Integrity Program Guide. If compliance with United States law appears to conflict with local law, employees should discuss their concerns with the Law Department.

 

The Global Business Integrity Program Guide is not a comprehensive document intended to address everyethical issue an employee might face, nor is it a summary of all laws and policies that apply to Coach’sbusiness. Most importantly, the Global Business Integrity Program Guide is neither a substitute for good judgment, nor a restraint on the entrepreneurial initiative of employees and managers which Coach strongly encourages.

 

Coach also believes in being a responsible corporate citizen and socially sensitive employer in every community, locality, and country in whcih the corporation operates. To accomplish this, Coach strongly encourages each of its operating facilities to become actively involved in the life of the community by developing plans to participate in and sponsor initiative that results in the advancement of the community's interest, and in the betterment of the quality of life of the communities in which employees live. These involvements have taken many forms. For example, Coach encourages employees to become involved in their communities through company-sponsored events like AIDSWALK NEW YORK, American Cancer Society's Daffodil Days, Arts and Business Counsil Anual Fundraiser, Dress For Success Clothing Drives Holiday Toy Drives, Jacksonville Chapter of Dreams Come True, March of Dimes Walkathon, Meal on Wheels Anual Campaign, Miami Corporate Run to Benifit Leukemia, New York Women's Foundation Annual Fundraiser and Thanksgiving Food Drives. Coach is proud of it contribtution to the economic and social development of the locations where Coach has operations.

souce-http://www.coach.com/online/handbags/genWCM-10551-10051-en-/Coach_US/CompanyInformation/CorporateGovernance/GovernanceDocuments/

 

Ch. 2 - Strategic Planning for Competitive Advantage

Coach Inc. is one of the most recognized brands in the luxury goods industry. It is a leading marketer of fine handbags and accessories for women and men. Coach was established in 1941 and sold to Sara Lee for $30 million in 1985. Sara Lee Corporation then sold 19.5% of the shares in an IPO in October 2000. Since listing on the New York Stock Exchange, Coach Inc. ( COH ) has grown to be the number one brand of premium handbags and accessories in the U.S. market

Coach's merchandise is sold through Coach stores, factory outlets, department and specialty stores, duty-free locations in airports and online. Coach Inc. has two business segments, Direct-to-Consumer and Indirect. Over 85% of the company's sales are generated by its Direct-to-Consumer segment, with the majority of the sales coming from handbags and accessories.

Coach markets its products as "accessible luxury." Its pricing strategy for a handbag ranges from $298 to $1,000, which means that its product reaches a larger consumer demographic than other high-priced competitors such as Louis Vuitton and Prada which focus on the very wealthy. The strategy of targeting the higher and upper middle income shoppers differentiates Coach from its competitors and also helps to establish it as the poster child of tapping into this global trend of consumers wanting to trade up in the quality and style of what they buy.

As Warren Buffett said, "In business, I look for economic castles protected by unbreachable moats." Coach Inc. has a narrow moat and a competitive advantage. It has a strong brand presence in the luxury market, not easily eroded by other competitors. New competitors in the luxury brand industry would have to spend a large amount of money and resources to build up competitive brand awareness and image. Coach also has consumer loyalty as it has been delivering high-quality products that are simple and reliable, with a perceived value.

To further grow the business, Coach has outlined its strategy as:

1) Raising its brand awareness and market share in the under-penetrated Asian market with China being the top targeted market
2) Growing its women's business in the North American and European markets
3) Increasing its men's business in North America and Asia
4) Maximizing e-commerce sales

SWOT Analysis

Strengths

Core Competence in design and merchandising: Coach has over 70 years worth of design archives to assist it in producing products for each season. This long history in the handbag/accessory market gives it a competitive advantage as it has a vast amount of previous designs to build off of when producing products for each season. This long company history has also given the merchandising team strong experience in developing consumer research capabilities and given it a keen sense of what its target demographic wants.

Multi-tiered pricing strategy: Coach’s product is classified as a "luxury" item but is accessible to a larger market due to the variety of price points that the company offers. These include high end retail and department stores as well as the cheaper factory outlets. Analysts have noted that this tiered pricing strategy is not common in the luxury goods industry, which on average has higher entry-level price points than that of Coach.　 This pricing structure allows the company to attract affluent consumers while also providing lower-income consumers access to a brand they would not be able to afford otherwise. Throughout the recession this has kept overall sales numbers stable though it has caused margins to dip.

Established brand name: Brand names are what allow companies in the apparel industry to de-commoditize clothing/accessory products and extract premiums from the market. Throughout its history Coach has developed a reputation for providing its customers both quality and value. This has helped the company establish a following of consumers that buy Coach products exclusively.

Lots of cash and almost no debt: Coach has a strong balance sheet which allows it to finance its operations internally. This is a huge boon to a luxury brand business in a recessionary economy and provides it with a strong financial competitive advantage as luxury competitors’ may not have access to such financing. This cash advantage allows Coach to expand without the need to rely on currently expensive (or unavailable) leverage.

Weaknesses

Geographic concentration: Coach currently relies on just the U.S. and Japan for 97% of its sales and it may be difficult to expand this limited geographic reach.

Coach is very limited in its expansion possibilities. Europe is entirely dominated by the elite European luxury brands while there is not yet a market for luxury items in many emerging markets. This leaves Coach with expansion potential in its existing markets: the U.S. and Japan. However, these markets are beginning to saturate and it may be risky to further expand in these markets in this economic environment. China is the major new market that Coach intends to expand in and this will be an extremely competitive expansion as the elite European brands will also enter the Chinese market.

Declining margins: Coach is experiencing declining margins on its products. This is primarily due to the economy’s impact on luxury brand purchases which has caused sales at its factory stores to increase as more consumers seek bargains. Coach has been relying on sales at its lower price points and though net sales have remained steady the margins have shrunk from 36.1% in fiscal year 2008 to 30.1% in fiscal year 2009. This is a troubling trend for a luxury company that relies on its brand to produce superior margins on its sales.

Opportunities

Expansion in the U.S., Japan and China: As previously mentioned Coach’s sales take place predominantly in the U.S. and Japan. The company’s CEO feels that, while the company has 330 stores in North America, that this market can support up to 500 stores. And while there are currently 155 Coach locations in Japan management believes that the Japanese market can support a total of 180 stores. With the rise of China’s middle and affluent classes the Chinese market has become increasingly important for luxury brands such as Coach. Over the next 5 years Coach plans to open a total of 50 retail locations in China and increase its market share from 3 to 10%.

Threats

Luxury brand susceptible to recessionary environment: Retailers have had to weather a　 HYPERLINK "http://www.wikinvest.com/wiki/U.S._Economic_Cycles" \o "U.S. Economic Cycles" difficult economic environment　since 2008. Consumers are unsure of their financial security as companies have resorted to laying off workers in an effort to cut costs. In an uncertain economic environment consumers seek to cut costs and save as much money as they can, and clothing is usually the first to go. Luxury clothing and accessory items, in particular, have been and will be affected the most in this New Normal economic environment.

Brand dilution: As a luxury retailer, Coach heavily relies on an image of exclusivity to fuel interest and sales of its products. A luxury company can lose its allure if the brand becomes too popular or too accessible. Coach risk’s losing this luxury status by selling through its factory outlet stores. This cheaper sales channel makes Coach’s product available to a different target demographic than Coach’s traditional luxury consumers. This accessibility to a lower end market may put off Coach’s high end consumers who value the exclusivity of the brand. In the long run this brand dilution may negatively impact both Coach’s margins and its brand image.

Four P's

 

Place:

 

Coach primarily operates in the United States, Japan, and East Asia. There are approximately 190 Coach stores in the United States. Of these stores 120 are retail and the rest include factory outlets, catalogs, and an online store. Outside of the United States 175 Coach stores are spread in 18

countries.
Product:

Coach Inc. is an American designer of handbags, leather goods, outerwear, travel

goods and accessories for men and women. Coach has been in existence for 64 years
maintaining the strongest brand in affordable luxury. 

Price:

Coach price range from  $100 to $500.00 US dollars

 

 

Promotion:

 

Coach has great success because of the strength of its brand. The brand has three

brand equities: Product innovation, Relevance and Excellent value. Product innovation

is implemented by designing fresh, stylish new products consistently. The company

offers new products that are innovative and relevant to the customers’ lifestyle.

 

 

Ch. 1 - Overview of Marketing (Brief History and Mission Statement)
Coach Inc was founded in 1941 as a family-run workshop. In a Manhattan loft, six artisans handcrafted a collection of leather goods using skills handed down from generation to generation. Discerning consumers soon began to seek out the quality and unique nature of Coach craftsmanship. Now greatly expanded, Coach continues to maintain the highest standards for materials and workmanship. Coach’s exceptional work force remains committed to carefully upholding the principles of quality and integrity that define the company. We attribute the prominence of the Coach brand to the unique combination of our original American attitude and design, our heritage of fine leather goods and custom fabrics, our superior product quality and durability and our commitment to customer service.

Coach seeks to be the leading brand of quality lifestyle accessories offering classic, modern American styling. The Coach brand represents a unique synthesis of magic and logic that stands for quality, authenticity, value and a truly aspirational, distinctive American style. Everything we make, advocate or engage in reflects the attributes of the brand. Customer Satisfaction is Paramount. Our responsibility to our internal and external customers calls for impeccable service to ensure that their needs are always met. By treating customers like guests in our own home, we seek to establish long-term relationships based on trust and satisfaction. Integrity is Our Way of Life. Our success is rooted in uncompromising devotion to honesty and fairness where our people, our business and our community are concerned. We stand behind our products, staking our name and reputation on everything that we make. Innovation Drives Winning Performance. We constantly challenge ourselves to be the very best we can in every aspect of our business. We strive to be a nimble and flexible organization committed to increasing consumer and shareholder value. Our Success Depends on Collaboration. Our brand flourishes through our people. Coach brings together strong, collaborative people in a dynamic culture of mutual respect, support and passion for our brand and product. Our team bands together in the face of adversity and celebrates our victories.