Coach Inc. Case Analysis Essay

1870 Words Apr 20th, 2009 8 Pages
Identification of Case Situation

Six years after deciding to be an independent public company in late 2000, Coach Inc.’s net sales had grown at a compounded annual rate of 26 percent and the stock price had increased by 1,400 percent due to a strategy keyed to a concept called accessible luxury. Coach crafted the accessible luxury category in women’s handbags and leather accessories by differentiating themselves on price, but matching competitors on styling, quality, and customer service. The accessible luxury strategy mirrors a focus (or market niche) strategy based on low costs. Coach concentrates on a narrow buyer segment and outcompetes rivals by having lower costs than rivals and thus being able to serve niche members at a lower
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Buyers’ costs to switch brands are low because of the many options of styles and quality of handbags. Price is a factor for the luxury goods industry, but industry experts argue consumers today are buying necessities at very low prices and then splurging on indulgences. Coach has direct competitors that have equal capabilities to luxury items and other similar product lines, therefore products and ideas are necessary to keep customers interested in a specific brand name. Lastly, leather quality and marketing promotions are a main concern for the luxury good industry that ultimately provides assurance to customers of the quality products. Substitute products are another strong force within the luxury goods industry. With the strong competition among the luxury goods industry, substitutions are readily available and attractively priced and differentiated compared to other stores. A handbag is similar in many different stores which creates a low switching cost for customers, unless they have strong brand preference or loyalty. Counterfeited goods that mimic brand name companies accounted for 9% of all goods sold within the luxury goods industry in the mid-2000s. Individual consumers within the luxury goods industry make up a strong competitive force (see table 12). The luxury goods industry provides many different options for consumers to choose from. Due to recent decreases in consumer spending, postponing of purchases and the threat of buyers

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