Coach’s Strategy for Competing in the Luxury Handbag and Accessories Industry
Since the early days of Coach when it was still being managed by the original owners, the Cahn Family, the luxury handbag maker has always adopted an overall best cost strategy with regards to its products. In its early days, Coach was able to gain significant market share and achieve incredible financial success by offering products with good quality and differentiating their products with the use of leather that had distinctive properties. The use of such leather not only helped coach differentiate itself from others in the luxury handbag industry, it also made their products extremely resilient to wear and tear thereby providing impeccable quality. This coupled …show more content…
In 1996, under the stewardship of new Creative director Reed Krakoff, Coach would begin to improve upon its differentiation strategy through the implementation of a few initiatives. The first initiative was to make market research a major contributor in product design. Through numerous consumer surveys and focus groups, Coach began asking customers about preferences with regards to style, comfort and functionality. This allowed Coach to gain a better handle on product trends, and customer desires. As a result, Coach was able to enjoy significant improvement in product innovation. The company also improved on the architecture and design of its flagship and factory stores by giving them a distinctive design that provided a boost to Coach’s luxury image and served complementary to the overall company vision. The decision makers at Coach were also able to improve on the low-cost provider aspect of their strategy in the late-1990s. The company was able to implement and execute an outsourcing policy that allowed it to outsource production to over 40 suppliers in 15 countries. While most of Coach’s production was outsourced, management was still able to control the quality of the products throughout the entire production process. These outsourcing policies and agreements helped the company achieve price points that were up to 50% lower than its …show more content…
Annual sales of coach products grew from $555 million in 1999 to more than $4.2 billion in 2012. Coach also enjoyed significant increase in earnings ($16.7 million to $880 million) over the same time frame. The successful implementation and execution of Coach’s best-cost provider strategy also resulted in favorable performance of Coach’s stock prices after its initial public offering in late 2000.
Exhibit 3 above provides an illustration of the performance of Coach stock prices by themselves and in comparison with the S&P 500 between 2001 and 2012. This shows a steady increase in stock prices with a brief period of decline around 2007 due to the economic downturn. In general, Coach’s strategy of being a best-cost provider has served it well because it has been able to appeal to middle-income consumers and wealthy consumers due to its ability to offer its products at roughly 50% below market price of other industry members without sacrificing on quality of its luxury
Since the early days of Coach when it was still being managed by the original owners, the Cahn Family, the luxury handbag maker has always adopted an overall best cost strategy with regards to its products. In its early days, Coach was able to gain significant market share and achieve incredible financial success by offering products with good quality and differentiating their products with the use of leather that had distinctive properties. The use of such leather not only helped coach differentiate itself from others in the luxury handbag industry, it also made their products extremely resilient to wear and tear thereby providing impeccable quality. This coupled …show more content…
In 1996, under the stewardship of new Creative director Reed Krakoff, Coach would begin to improve upon its differentiation strategy through the implementation of a few initiatives. The first initiative was to make market research a major contributor in product design. Through numerous consumer surveys and focus groups, Coach began asking customers about preferences with regards to style, comfort and functionality. This allowed Coach to gain a better handle on product trends, and customer desires. As a result, Coach was able to enjoy significant improvement in product innovation. The company also improved on the architecture and design of its flagship and factory stores by giving them a distinctive design that provided a boost to Coach’s luxury image and served complementary to the overall company vision. The decision makers at Coach were also able to improve on the low-cost provider aspect of their strategy in the late-1990s. The company was able to implement and execute an outsourcing policy that allowed it to outsource production to over 40 suppliers in 15 countries. While most of Coach’s production was outsourced, management was still able to control the quality of the products throughout the entire production process. These outsourcing policies and agreements helped the company achieve price points that were up to 50% lower than its …show more content…
Annual sales of coach products grew from $555 million in 1999 to more than $4.2 billion in 2012. Coach also enjoyed significant increase in earnings ($16.7 million to $880 million) over the same time frame. The successful implementation and execution of Coach’s best-cost provider strategy also resulted in favorable performance of Coach’s stock prices after its initial public offering in late 2000.
Exhibit 3 above provides an illustration of the performance of Coach stock prices by themselves and in comparison with the S&P 500 between 2001 and 2012. This shows a steady increase in stock prices with a brief period of decline around 2007 due to the economic downturn. In general, Coach’s strategy of being a best-cost provider has served it well because it has been able to appeal to middle-income consumers and wealthy consumers due to its ability to offer its products at roughly 50% below market price of other industry members without sacrificing on quality of its luxury