Coach Inc.’s Advantage in Luxury Handbags Market

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Table of Contents

External Analysis
Industry Analysis
Porter’s Five Forces Analysis of Coach Inc.
Reference

External Analysis

Population and Demographics

Coach Inc. operates in a number of countries, including United States, Canada, Japan, Hong Kong, and China; in addition, whilst operating such widespread and successful business in different nations, both the company and the demographics of those countries have interconnection between each other. The United States, being the country of origin of the company, is the most important factor that has close connections with the firm’s business operating strategies.

This is because the biggest market of Coach Inc is in the US and all the demographic factors, including the age structure, population growth rate, etc., have links with the sales of the company. The total population of the US is 310,232,863, with the highest population growth rate amongst any developed countries and a fertility rate of 2.06 per woman; moreover, in 2010, the number of women in the nation was 156m, and the number of men was 151m; the following table shows a few more facts of US demographics:

Age-structure of the Population (2010)
0 to 14 yrs	20.2 percent
15 to 64 yrs	67 percent
65 yrs and above	12.8 percent
Median-age of the Population (2010)
Total	36.8 yrs
Men	35.5 yrs
Women	38.1 yrs
Population Growth-rate (2010)
0.97 percent
Main Religions
Protestant	51.3 percent
Roman-Catholic	23.9 percent
Mormon	1.7 percent
Other-Christian	1.6 percent
Main Languages
English	82.1 percent
Spanish	10.7 percent
Other Indo European	3.8 percent
Asian & Pacific-Island	2.7 percent
Other Languages	0.7 percent

Table 1: – Demographics of the US. Source: – Self generated.

Economic Conditions

The economic condition of Coach Inc is now in a strong position in spite of some severe adverse effects of the global financial crisis in the US economy and consequently in the operations of the company; in order to maintain its position during the recession period it has reduced its expenses in all the sectors. At peak times of economic downturn (in the fiscal year 2008), the gross profit of Coach was $ 2,407,103, operating income was $ 1,147,129, income from continuing operations was $ 783,039, working capital was $ 934,768, and total assets $ 2,273,844.

This performance of the company was quite unimpressive to every stakeholder related to the business. In such circumstances, to cope up with the economic conditions, the company undertook several strategies to lessen their operating expenses. However, along with the recovery process of its operating countries like the US, Canada, Japan, etc., the financial condition of the company is also improving recently.

Legal Concerns

The business operations of Coach have to face some legal and legislative barriers in all the countries in which it has an operation. Different countries possess different rules and guidelines regarding commercial laws and FDI regulations. The company needs to comply with every employment laws, environment laws, and other industrial legislation as well. In the US, for example, legislations like the Fair Labour Standards Act, Occupational Safety and Health Act, Employee Retirement Income Security Act, and many other regulations of the US Environmental protection Agency (EPA) binds the actions of the company from every sphere.

Socio-cultural Factors: The Company is very much concerned about its responsibilities for the societies and the communities in which it operates; it always privileges the issues that relate to social welfare and the collective benefit of all its stakeholders. The corporate social responsibility policy of Coach Inc places special regard on the community, ecology, health, and safety of personnel and suppliers of the business irrespective of the country in which it operates.

In context, it also has a commitment to the communities and environment of the different operating countries, and it affords its highest effort to stay in compliance with the socio-cultural environment of each of them. Furthermore, the company provides equal opportunities for all its employees, disregard of their race, nationality, religion, or ethnic background. On the other hand, in order to safeguard the environment and reduce the impact of the business on the atmosphere, it has undertaken several pollution reduction programs and some other preventive measures to ensure an eco-friendly workplace.

Technology: For Coach Inc, technology is one of the most important issues among many other factors; since 1945, it has been manufacturing different hand-mixed products as well as commercial products using hi-tech technological infrastructures. Presently, most of the multinational companies in this sector of the industry are emphasizing implementing INSIS functional system to serve their purpose in the main production process, object system, maintenance, and data security.

In such a circumstance, Coach has planned to upgrade its technological features to sustain in this highly competitive market because the technical advancements are the only effortless measure in today’s business environment to gain a competitive advantage over the competitors. The integration of e-commerce websites and incorporation of the most contemporary IT infrastructure could help the company in attaining the goal of gaining a competitive advantage.

Industry Analysis

Situation Introduction

Coach Inc belongs to an industry where the trends and scenarios change rather rapidly; here, factors such as environmental pollution and global warming have considered being the key concern of recent times, which binds the major players around the world by imposing rigid conventions and a set of laws. Nevertheless, it is important to argue that in spite of the recovery of the global financial downturn, the economic conditions of some countries are still quite unstable and factors like exchange rates fluctuate more often between countries; moreover, increasing prices of fuel results in rising charges of air transport causing difficulties for the players of this industry.

Driving Forces

Brand name businesses, leather suppliers, and changing consumer demands are the key driving forces of the industry; the brand name businesses are companies like Coach Inc, Claire’s Stores Inc, Genesco Inc, and many other industry giants. These players form the main skeleton of the industry by providing a wide range of products to the customers and meeting their rising demands. The leather suppliers also fuel up the industry by offering competitive prices of their raw materials.

Key Success Factor

The key success factors of Coach Inc has configured in the table below:

Success Factors	Explanation
Management and People	Coach possess an extremely efficient top management that has amazing administrative skills for controlling such a large business
Promotion	It has special promotional packages that includes discount-vouchers, Coach Inc promotional-codes, money-off coupon codes for great discounts, and many other packages for customers
Designing	Its key competency is its expert team of designers who are indeed very creative and imaginative in the designing works of handbags and footwear
Outlets	Its retail outlets are located near busy streets so that more customers can keep visiting the stores; moreover, decorations of outlets are eye-catching too
Pricing	Because the company offers apparels at relatively cheaper prices, the pricing of the products is its key success factor

Table 2: – Key Success Factors of Coach Inc. Source: – Self generated.

Porter’s Five Forces Analysis of Coach Inc.

Purpose

The purpose of this Five Forces model is to identify and analyze the competitive environment of the industry in context of the Coach Inc in order to evaluate the impact the external influences over the business.

Addressing the Forces

Coach Inc is a player of an industry where the threats of new entrants is quite low, bargaining power of suppliers is at average level, whereas bargaining power of buyers, threat of substitute products, and rivalry among existing firms are rather high.

Threats from new entrants

Threats from new entrants are quite low in the industry due to various barriers to enter the market; new entrants more often lack sufficient funds, expertise, adequate knowledge about specialized handbag manufacturing techniques, and skilled workforces. Moreover, once established, it gets difficult for the new players to sustain in the highly competitive business environment and to join in price competitions with the industry giants.

Threats of substitute products

Every single products of Coach Inc need to compete with many other products with similar qualities from the rival firms; such substitutes pose a great trouble for Coach resulting in lower annual sales for the company.

Bargaining power of buyers

Owing to the occurrence of numerous firms, the switching costs of the buyers are relatively high; however, there are some customer loyalties in the industry as well. The purchasing power of the customers seemed to diminish during the recession, which, however, has recovered by this year.

Bargaining power of suppliers

The suppliers of Coach are generally raw materials’ firms delivering leather, plastic, steel, textile products, and aluminium handles for bags; in different countries of its manufacturing operations, the bargaining power of these suppliers varies in accordance to differences of quality and price. Additionally, the industry possesses abundant raw material providers for which their bargaining powers are not too high.

Rivalry among existing firms

The industry is highly competitive because of the existence of a large a number of manufacturers along with their plentiful offerings; in addition, Coach has to confront many smaller and larger competitors at both domestic and international levels. It is important to argue that the rival firm like Polo Ralph Lauren Corporation, Phillips-Van Heusen Corporation, Guess Inc, Gildan Activewear, Under Armour Inc, bebe stores, etc generate special practical difficulties for Coach by creating price wars and increasing competition in the industry.

The following figure shows how the influence of all these forces acts collectively over the operations of the company:

*Figure 1: Porter’s five forces model of Coach Inc.*

Industry Profile and Attractiveness

Gamble & Thompson (2007) stated that this industry covers an extensive-range of products and services as shown in the figure below:

Figure 2: Industry Profile.

It is arguable that this industry is highly attractive for all for its stakeholders and new investors because of its attributes and profitable performances as outlined in the following figure:

Reference

Gamble, J. & Thompson, A. A. (2007) Essentials of Strategic Management: The Quest for Competitive Advantage. (2^nd ed). London: McGraw- Hill.

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