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External Analysis
Population and demographics
As the population increases in number, it is necessary to take into account the needs of the population and their buying capacity. In this respect, the Coach Inc main directions for operation include the countries where the population growth is supported by the economic growth and the increased buying power. Thus, the industry can produce more goods and locate more stores in populated areas to ensure that all potential buyers are approached.
Societal values and lifestyles
The values and lifestyle typical for population change as well as the strategic initiatives imposed in industry to meet the buyers needs and expectations. In this respect, the industry introduced luxurious goods that are sold in specialized stores to make sure that every customer is maintained at the appropriate level.
Besides, the increasing economic level enables consumers to buy luxurious good manufactured and distributed in different areas. Thus, luxurious brands enable customers to feel a special approach performed via specialized stores while the Coach Incs stores are perceived among the most aesthetically attractive stores within the industry (Gamble, 2008, p. 311).
Economic condition
Though the situation in the industry was stable in the period of 2000-2006, the company had to ensure that the increase of the number of the company-owned stores and factory stores all over the world would not influence the expenses reducing the opportunity to expand into the industry.
Thus, the company addressed the existing market where it was operating and expanded the number of stores hence increasing its overall revenue without increasing largely the cost of the products that were still perceived as luxurious goods at a reasonable price.
Industry Analysis
Situation introduction
The industry of luxurious goods is very large in terms of a number of categories presented in this branch. In other words, the Coach Inc is dealing with brand extension by means of making agreements with manufacturers of watches, womens footwear, eyewear, and other branches that can produce goods under the brand name of the company.
Though the market has a great number of competitors that produce similar goods under famous worldwide known brands including European fashion designers, the Coach Inc obtains another niche in this sector.
The goods produced under the brand of the Coach Inc are characterized as being as luxurious as similar goods produced under other brands though more affordable than goods manufactured under European designer brands. Besides, the company should implement strategic changes in order to remain competitive.
However, the approach to customers can be considered one of the competitive advantages that make the company competitive without implementation of innovative changes. In this respect, the situation in the industry suggests that luxurious goods manufactured by the Coach Inc that are of lower cost than other goods of the same category that are distributed at higher costs will be in demand.
Driving forces
The main driving forces that exist in the industry include bargaining power of buyers as the cost of products should be aimed at a certain target audience, threat of new entrants as competition helps companies to sustain their advantages and search new methods of improvement, and threat of substitutes as fake products contribute negatively to the reputation of the brand.
In this respect, it is necessary to analyze the driving forces in this industry with regard to the changes that can be introduced by the Coach Inc to remain competitive.
Bargaining power of buyers influences the pricing policies of the companies making them reduce prices or enabling them to increase prices respectively. If buyers are ready to purchase the same goods at higher prices, the company can increase prices whereas the Coach Inc manages to reduce prices in their factory stores enabling people with lower income rates to purchase their goods at reduced costs.
Threat of new entrants is one of the driving forces in the industry as well as threat of substitutes. These two forces are closely connected because the new entrants can start with copying of designs established by the Coach Inc thus spoiling the reputation of the company. In this respect, the company should create new collections using new designs every month.
Key success factors
The key success factor that can be potentially acquired by all representatives of the industry includes the approach to customers that consists in company-owned stores and the environment in stores that is typical for the luxurious brands only and seasonal sales that attract more customers that are eager to purchase the goods under this brand but cannot afford the full-price goods.
In this respect, the approach of the company to customers with regard to pricing policies and sales, the stores and work with customers can be considered the key success factor for the segment of industry that deal with manufacturing and distribution of luxurious goods.
When the company enters the market and launches its goods manufactured under a definite brand, it should ensure that these goods are sold in specific stores and customers feel special which the essence of the luxurious goods category is. In this respect, the industry key success factor is the approach/the way of presenting the brand that includes a store, environment in it, and work with clients.
Porters forces analysis. Propose
The industry can be characterized with strong Porters forces leading to less attractive image of the companies in the industry. I this respect, it is necessary to indicate that the industry is affected by strong threats of substitutes because the reputation of the company depends on the quality of goods that can be ruined by substitutes.
Bargaining power of suppliers can be considered strong because they can purchase good expensive materials in order to provide the manufacturers with high-quality materials for their work leading to high prices of final goods. Buyers bargaining power is high as well; it makes the difference between similar brands that exist within the industry almost elusive.
Finally, potential new entries are also very probable in the industry meaning that the companies that already operate in the industry should implement strategic changes and apply new technologies to the manufacturing and distribution sectors to be more competitive. Rivalry among competitors can be as positive as negative leading to decrease of costs hence making the brand less luxurious or resulting in low quality of the products that is sure to affect the customer loyalty.
Addressing the forces.
Competitive rivalry
The companies should implement new strategies in terms of competition and advertising. The competitive rivalry is strong and it increases the costs of ready-made goods making buyers with similar bargaining powers choose the most appealing brand.
The approach used by the company is very important as well as advertising strategy. In this respect, sustainable competitive advantage can facilitate the implementation of new strategies and attracting of new customers. When the companys competitive advantage is not sustainable it is sure to lose its positions in the market.
Substitutes
Substitutes can be considered a great threat for the industry making manufacturers implement new technologies. However, sometimes buyers are eager to buy substitutes due to lower costs or variety of designs.
Thus, the number of substitute products available in the market makes the manufacturers create new designs every month and rush for the more exclusive materials to offer their clients. The strong threat of substitutes is a good aspect that sustains the industry in shape and helps customers receive the most qualitative goods at lower prices because companies implement new pricing policies to remain competitive.
Buyers
The buyers can be considered a strong Porters force because the limited number of buyers does not limit the number of brands within the industry though this can make buyers change their priorities and choose other brands after appearance of high-quality substitutes.
In this respect, the companies that operate in the industry of luxurious goods can attract their buyers and even make customers loyal to existing brands change their priorities. In other words, companies can increase the number of factory stores and double the number of sales that provide customers with the same goods at lower prices than when the collection is new at the beginning of the month or season.
Suppliers
The suppliers can be considered a weak Porters force due to the stability of the industry and the buyers bargaining power. In this respect, even the increase of costs by suppliers that will affect the cost of products can have no influence on the buyers due to their strong bargaining power and ability to change priorities. When a buyer can buy goods manufactured under a certain brand, the manufacturer should think about the ways to reinforce the loyalty thus the suppliers can be changed in accordance with pricing policies of the company.
Entry
The threat of new entries is strong due to common aspects that can be found within the industry including loyalty to established brands though this cannot guarantee the loyalty in future after appearance of new more appealing brands. In this respect, the companies should find other sources of investment and develop their distribution nets in order to obtain absolute cost advantages. Besides, the threat of substitutes can force the companies in the industry use exclusive materials leading to increase of costs paid by the manufacturers for materials and by customers for goods excluding a large part of customers who purchase the goods at sales and in factory stores.
Industry profile and attractiveness
The sector of industry that deals with luxurious goods is attractive because it has strong buyers bargaining power that enables the company to operate effectively and find its niche in the industry.
Besides, suppliers can be considered a weak force according to Porters analysis of five forces because it does not affect the success of the company in the market to the same extent as rivalry among competitors and strong threat of potential new entries. Moreover, the threat of substitutes is strong as well which makes the industry challenging and attractive to companies that have good suppliers or sustainable competitive advantage that will help them to keep their positions in the market.
The five forces approach helps to analyze the situation in the industry making it clear that it is attractive for the companies that have competitive advantages, powerful competitive strategies, and can introduce changes in order to keep their positions. Though the bargaining power of buyers is strong, it is aligned with the weak bargaining power of suppliers.
Reference
Gamble, J. E. (2008). Coach Inc.: Is its advantage in luxury handbags sustainable? In J. E. Gamble & A. A. Thompson (Eds.). Essentials of strategic management: The quest for competitive advantage (pp. 303-316). New York: McGraw-Hill Irwin.
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