Case analysis

Company Overview

Coach Inc. is mainly involved in the production and marketing of gift products for both men and women. Its headquarters are in New York City, New Jersey and employs around 18,000 people as per the figures released in 2014 of which 7300 are full time employee. Its major markets are Japan and the United States of America. In the financial year ended June 2013, the company registered revenues of $ 5.1 million, which were the highest in its history. In 2014, Coach Inc. reported a drop of revenues to $ 4.8 million accounting a growth rate of -5.3%. This growth rate drop was the first since the 2006-2009 economy crisis. This drop is growth rate is interpreted as a decline phase of Coach Inc. life cycle which was introduced in 2008, showed a growth rate in 2009-2012, matured in 2013, and declined in 2014.

The inclining growth rate observed in 2010 is largely due to store expansion as 33 North American stores were added (11% increase), 9 new factory outlets (9% increase), 6 new jalanese stores (4% increase) and 4 new China stores (17% increase). This increase in sales coincided with 20%

 

 

SWOT analysis of Coach Inc.

Strengths

  • The company is well known in the market for its competence in merchandising and design. Coach Inc. has been in business for over 70 years and has a rich archive that helps it come up with some of the unique products in the market. Coach has vast experience in handbag design that gives it a competitive advantage over its competitors. The long history of the company has also given its marketing team a lot of experience in identifying the trends in the market.
  • Multi-layered pricing strategy. Despite the fact that the company’s products are classified as luxury, it is able to sell them to people of all financial abilities. This is achieved by pricing products depending on the financial ability of different customers. This is important because there is a product for everybody including the rich and the middle class. Many analysts have noted that unique pricing strategy by Coach Inc is not common in the luxury goods market. This is the main reason why the company continued to perform well even in the recent global economic crisis (Cotten, 2005).
  • Established brand name- Coach Inc. has been in the business for over 70 years. This has made it develop one of the most popular brands in the market. Throughout its history, the company has insisted on quality and value therefore winning over many royal customers who buy its products.
  • Health financial position- compared to its competitors, Coach Inc. has a lot of liquid cash that it can use to finance it operations. This is a huge advantage in the luxury market especially in these uncertain economic times. The availability of money is advantageous because it makes it possible to fund operations without depending on external financing which is expensive.

Weaknesses

  • Small geographic concentration- Coach Inc. mainly concentrates on the Japanese and American markets only. These two markets comprise 97% of the company’s total sales. This is dangerous because they may become saturated in future leaving it with no market to sell its products.
  • Reducing margins- in the last few years, the company’s margins have been declining largely due to impact of the economy on luxury products. Despite the fact that its net sales have remained strong, Coach Inc. has mainly been depending on its low priced products. This is because many people are trying to save as much as they can on luxury products.

Opportunities

  • Expanding to new markets- Coach Inc. mainly sells its products in the Japanese and American markets. This is not good for the future of the company since there is a high chance of these two markets becoming saturated. There are many upcoming markets like China and Brazil that the company should consider expanding its operations. The Chinese market in particular has established itself as ideal for luxury products.

Threats

  • Vulnerability of luxury products to recession- many companies went through a rough time during the global economic crisis in 2008. Most affected were luxury products because many people were only willing to spend on essential commodities. The global economy has not recovered fully and luxury products are expected to continue performing poorly.
  • Brand dilution – for a long time, Coach Inc. has relied on its image of uniqueness to advertise and sell its products. This is risky because it can loose its appealing brand after it becomes too common in the market. It risks losing its luxury status by selling its products through factory outlets. These outlets are cheaper compared to conventional ones and make Coach’s products available to customers of different demographics compared to its traditional luxury customers (Gamble, 2007).
  • Presence of counterfeit goods- There are many counterfeit products in the market that threaten the image of coach Inc. Because some customers do not know how to differentiate between the fake and the original, the company may end up loosing it reputation of original and genuine products.

Why Threats is the most important for COACH Inc

Threats are the most important concern for Coach Inc because they outline risks that it faces. Unlike other considerations, risks are important to the company because they can help it identify ways of strengthening its market share. Threats are important because they help the company to identify risk that it faces and take action to evade the threat.

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