Coach Case

COACH INC.
IN 2012:
ITS STRATEGY IN THE
ACCESSIBLE LUXURY GOODS MARKET
STRATEGIC MANAGEMENT
MBA ENGLISH PROGRAM #8
CHULALONGKORN UNIVERSITY
1
KEDSARA
LERTPANASAN
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KRAIVICH
VIRIYAVISUTTISKUL
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KONTAPAN
CHAITANTRAKUL
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JITBOON
LAOMANIT
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PACHAYA
PISUTWACHARAKUL
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PHITCHAKORN
WATCHARANURAK
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SASIMA
LEELAPOJCHANAPORN
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AROCHA
SAPSAKULTONG
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AMPASCHA
ARIYAPOKAKUL
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10
HOI KI
LEUNG
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CONTENT
Topics
Question 1
Question 2
Question 3
Question 4
Question 5
Question 6
Question 7
Question 8
Question 9
Question 10
Question 11
Question 12
Question 13
Question 14
Question 15
Question 16
Question 17
Question 18
Question 19
Question 20
Question 21
Question 22
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Coach Inc. in 2012: Its Strategy in the Accessible Luxury Goods Market
______________________________________________________________________________
Question 1: Describe and summarize the history, development, and growth of the company
over time.(Including best selling goods or services, sales revenue, market share and so forth.)
Answer:
Coach was founded in 1941 as a family business when Miles Cahn, a New York City
leather artisan, started to produce ladies handbags. Coach became popular because it provided
superior quality leather goods in classic style. Afterward, they generated the loyalty customers by
the initial of 12 unlined leather bags. Over the time, the company grew at the steady rate because
they created the new designs and set the price 50% lower than other luxurious brands. Moreover,
they established the account with retailers and opened own-stores which sold Coach Handbags and
the leather accessories.
In 1985, Coach was sold to Sala Lee, a food and consumer goods producer. Although the
company gradually built a strong reputation of the classic leather handbags, its performance
dropped as consumers had higher interest in French and Italian brands- Gucci, Prada, Louis
Vuitton, Dolce&Gabbana and Ferragamo. This caused the annual sale growth dropped
significantly.
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In 1996, Sara Lee entrust the handbag division to Lew Frankfort. Franfort hired Reed
Karkoff, a top designer from Tommy Hilfiger, to be creative director. At Karkoffs mercy, Coach
believed in market research, so they conduct the survey, the focus group and market test to know
the consumer insight which allowed Coach to know about styling, comfort and functionality
preferences. From these practices, Coach was able to launch new collections every month.
Moreover, Franforts also redesigned the flagship store to be contemporary new design, as well as,
enhanced the image of its factory stores.
Coach had a companys policy to outsource the production. The outsourcing agreement
allowed Coach to consumers who would not be interested in luxury brands. At the same time, its
quality and styling also satisfied traditional luxury consumers. Women Wear Daily survey revealed
that due to Coachs quality, styling and value mix, the affluent women in U.S. ranked Coach ahead
of much more expensive luxury brands such as Hermes, Ralph Lauren, Prada and Fendi.
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Coach was able to lead in the accessible luxury segment of the leather handbags and
accessories industry and went to public in October 2000. Coachs annual sales growth was
quadrupled from $555 in 1999 to more than $4.2 billion in 2012. Anyway, its share price fall in
2007 and recovered in 2010. According to Coachs revenue compared to its competitors, Coach
had higher market share than Gucci, Kate Spade and Michael Kors.
The companys array of product included handbags, leather accessories and outerwear.
Coach continually expanded product offering by licensing agreements for watches, footwear,
eyewear and fragrance. For companys product mix, handbags valued 63% of 2011 sales, while
accessories and other products made up 27% and 10%, respectively.
Handbags
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Wallets
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Accessories
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Outerwear
Watches
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Footwear
Fragrance
Eyewear
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Question 2: Companys business model.

a) Identify all the activities associated with selling something (such as finding and reaching
customers, transacting a sale, distributing the product or delivering the service and so on).
Are there any innovation can you reveal?
Answer:
Coach use multichannel distribution model which included indirect wholesale sales to thirdparty retailers but focused mainly on direct- to- customer sales. In 2012, Coach operated 345 fullprice retail stores and 143 factory outlets in North America, 169 stores in Japan and 66 stores in
China along with internet and catalog sales. The main proportion of company 2011 net sales came
from the direct- to- customer segment which equaled to 87%. Coachs full- price stores were
designed by an in- house architectural group to enhance the companys luxury image increase
brand awareness.
In 2012, Coach tried to increase global distribution and improved same- store sales productivity
by the following:
Increasing market share in existing markets
Coach opened approximately 15 new full- price retail stores and 25 factory outlets in North
America.
Raising brand awareness in underpenetrated market
Coach planned to open 30 new locations in Europe, South America and remarkable Asia.
Extending product line toward new target market
Coach started focus on mens products in North America and Japan and dual- gender
product line in China.
Applying online channel
Coach raised brand awareness and built market share via coach.com and social networking
initiatives.
The company provided store employees with the customer service training programs and
scheduled additional personnel during peak shopping periods to ensure all customers satisfaction.
Coach might offer delivery service, if the particular handbag or color was not available during a
visit at store.
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Coach communicated with customers via a wide range of direct marketing activities which
included emails, websites, catalogs and brochures. In 2011, Coach revealed that the customer
contacts increased 52% to 625 million. Moreover, Coach distributed approximately a million
catalogs in its stores in Japan, Hong Kong, Macau, and mainland China.
b) Identify all the activities associated with making something (such as designing it,
purchasing raw materials, manufacturing, and so on).
Are there any innovation can you reveal?
Answer:
Coach launched new collections every month. Companys new products were based on
market research. Coach conducted extensive consumer surveys and held focus groups to ask
consumers about styling, comfort and functionality preferences. The prototypes which had been
developed by designers, merchandisers and sourcing specialists were rated by hundreds of existing
customers. After that, Coach did market test in selected Coach Stores for six months before
released the new products.
All of company leather products were manufactured by suppliers in Asia, China 85% and
Vietnam and India 15%. Coach controlled the quality throughout the process with product develop
offices in Hong Kong, China, South Korea, India and Vietnam. While Coach made the licensing
agreements to made footwear, eyewear, watches and fragrance.
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Question 3: Review the corporate strategic direction (vision, mission, objective, and
philosophy.) How coherent are they?
Answer:
Companys vision:
To become the company that defines global modern luxury.
Companys mission:
To build our brand worldwide and create stockholder value.
Company's objective:
To be a good employer and a responsible and socially sensitive corporate citizen in
the locations in which the corporation conducts business.
Companys value:
At Coach, we believe an inspirational and modern work environment is where exceptional
talent thrives.We nurture a culture infused with creativity, innovation, entrepreneurship, learning
and achievement to allow our people to always bring their best. We are inspired, talented, and
diverse individuals who work collaboratively to drive the continued success of our brand.
And, we know the Coach culture is truly a reflection of our Coach peopleboth who we
are and who we strive to be, simply defined by our Coach Values.
There is consistency among the above statements of vision, mission, objective and value.
To be global modern luxury, we have to build our brand worldwide. To be worldwide, we need
skilled people. To draw talented people, we need to be a good and responsible employer and
provide the inspirational and modern work environment which allows skilled coach people to
present their best.
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Question 4: Functional Level Strategies

a) Describe all activities of the company by using Porters Value Chain. Compare the
companys value chain with other competitors value chain. Draw the picture to see the
differences and summarize your findings.
Answer:
Every companys business consists of a collection of activities that a company performs
internally combining to form a value chain. It allows the firm to understand the parts of its
operations that create value and those that do not. As shown in the figure 4.1, a companys value
chain comprises two categories of activities that drive costs and create customer value as follows:
The primary activities add value to the final product directly for customers
The support activities add value indirectly facilitating and enhancing the performance of the
primary activities
Figure 4.1 Porters Value Chain
Support activities
Firm infrastructure
Human Resource Management
Technology
Profit Margin
Primary activities
Procurement
Inbound
logistics
(raw
materials
handling and
warehousing)
Operations
(Broad-based
global
manufacturing)
Outbound
logistics
(Multichannel
distribution)
Marketing
& Sales
(Product,
Price, Place,
Promotion)
Services
(repair
parts)
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Primary Activities
Inbound logistics
Coach has good procurement process that select only the highest-quality leathers and its
outsourcing agreements with quality offshore manufacturers which contribute reputation to the
company for high quality and value. All of Coachs leather products are manufactured by the third
party suppliers in Asia, while Coach-branded footwear, eyewear, watches, and fragrances are made
available through licensing agreement Company outsources its production to 40 contract
manufacturers in 15 countries. However all product sources, including independent manufacturers
and licensing partners, must achieve and maintain Coachs high quality standards, which are an
integral part of Coach strategy, which focuses on matching key luxury rivals in quality and styling.
It manages suppliers raw material quality through product development offices in Hong Kong,
China, South Korea, India and Vietnam that work closely with our independent manufacturers. One
of Coachs keys to success lies in the rigorous selection of raw materials. Coach has longstanding
relationships with purveyors of fine leathers and hardware. Efficient outsourcing leads to reduce its
inventory holding costs. Lower inventories mean lower costs and, hence, greater value to company.
Operations
Because of Coachs outsourcing production, its contract manufacturers are located in many
countries, including China, Vietnam and India where are labor intensive countries and have low
labor costs comparatively. Vendors in China account for 85 percent of its production requirements.
Vietnam and India are produced the remaining 15 percent of product requirement. Coach also
expand its accessories product offering through licensing agreements with external company.Coach
also have management teams who control and ensure quality of products is reach throughout the
process with product development offices in Hong Kong, China, South Korea, India and Vietnam.
Coach also evaluates each facility by conducting a quality and business practice standards audit
before signing licenses with a vendor. All manufacturing partners need to pass material compliance
with Coachs integrity standards. This broad-based, global manufacturing strategy is designed to
optimize the mix of cost, lead times and construction capabilities for Coach. This activity results
Coach maintains the finest quality products at the lowest cost and help limit the impact of
manufacturing. This broad-based, global manufacturing strategy is designed to optimize the mix of
cost, lead times and construction capabilities.
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Outbound logistics
Coach operates a large area of distribution and consumer service facility in Jacksonville,
Florida. This automated facility uses a bar code scanning warehouse management system. Coachs
distribution center applies radio frequency scanners for reading product bar codes, which allow
employees to more accurately process and pack orders, track shipments, manage inventory and
generally provide excellent service to our customers. Coachs products are primarily shipped to
Coach retail stores and wholesale customers via express delivery providers and common carriers,
and direct to consumers via express delivery providers.
To support its growth in China, the region and Japan, Coach has an Asia distribution center
in Shanghai and in Japan owned and operated by a third-party, allowing its to better manage the
logistics in this region while reducing costs.
Part of outbound logistic strategy which is distributing product to buyers is another
distinctive element. Coachs strategy is multichannel distribution model, which includes indirect
wholesales to third-party retailers but focuses on primarily on direct-to-customer sales.
In 2012, Coach operated 345 full-price retail stores and 143 factory outlets in North
America, 169 store in Japan, and 66 stores in China, along with internet and catalog sales. Exhibit 5
shows it extends its stores every year.
Table 4.1 Coach Inc.s Retail Stores by Geographic Region
North
American
retail stores
North
American
factory stores
Coach Japan
locations
Coach China
locations
Total stores
2007
259
2008
297
2009
330
2010
342
2011
345
93
102
111
121
143
137
149
155
161
169
16
24
28
41
66
505
572
624
665
723
Source: Exhibit 5 Coach Inc. in 2012 its strategy in the Accessible Luxury Goods Market
The direct-to-customer segment accounts for 87 percent of the companys 2011 net sales.
Coach s indirect wholesaler segment had 2011 net sales of $540 million, with the U.S. wholesale
segment serving about 970 department store locations and the Coach International group supplying
211 department store locations in 20 countries.
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The direct-to-customer channels include full-price stores in the U.S., factory stores in the
U.S. and other international markets. Coachs full price stores comprise 70 percent of its total U.S.
outlets. Full price stores are divided into three categories core locations, fashion locations, and
flagship stores. Flagship store are restricted to high-profile fashion districts in famous cities. This
tier carries the most sophisticated and highest-priced items. Core stores place in upscale shopping
center and downtown shopping areas and carries widely demanded lines. Fashion locations stock a
blend of company best-selling lines and chic specialty bags. Site selection of this type likes core
store location.
For factory stores in U.S., they are generally located 40 or more miles from its full-price
stores. Some products sold in shop are specially produced for factory stores. Some are overstocked
items and discontinued models.
Marketing and sales
Coach utilizes a flexible, cost-effective global sourcing model, in which independent manufacturers
supply our products, allowing us to bring our broad range of products to market rapidly and
efficiently.
Product - Coach offers distinctive, easily recognizable luxury products that extremely well
made and provided excellent value. It also approaches to differentiation to offer a unique brand
image to the marketplace so its marketing strategy relates to product quality and styling while
beating competitors on price. Company develop product base on market research. The research
helps Coach to understand its focus group about styling, comfort, and functionality preferences.
Once phototypes have been developed, Coach would test in selected Coach stores for six months
before a launch was announced. Coach also has a sophisticated consumer and market research
capability, which helps it access consumer attitudes and trends and gauge the likelihood of a
products success in the marketplace prior to its official introduction. Coachs product offerings
include womens and mens bags, accessories, wearables, footwear, jewelry, sunwear, travel bags,
watches and fragrance.
Price- Coach has attractive pricing in customer perception. It set up price base on the
product image that they want to communicate with customers and create brand image. Coach uses
the power of its distribution channels to play the main rules in this strategy. According to the
channel, Coach has used the concept of Accessible Luxury Product to approach to their target
customers. They focus on 2 pricing strategies depending on store type in direct-to-customer
channels which are factory stores and full price stores. For full price stores which include flagship
store where present the most sophisticated product line so they are the highest-priced items, core
stores where carries widely demanded lines and fashion locations stock a blend of company bestselling lines and chic specialty bags. The typical full-price store shopper is a 35-year-old, collegeeducated, single or newly married working woman while Coachs factory stores target value14 | P a g e
oriented customers who may not otherwise buy a Coach product. The typical factory store shopper
is a 45-year-old, college-educated, married, professional woman with children. Product which
coach offer in factory stores are specially products for factory stores, overstocked items and
discontinued model. It result Coach can set up product price 10 to 50 percent discounts. Factory
stores are also located 40 or more miles from the full price stores. The factory store strategy
capitalizes on the brands lead luxury image projected at their flagship and retail stores.
Place- For retail distribution, stores are located in regional shopping centers and
metropolitan areas. They carry product lines depend on their sizes and locations. Flagship stores,
which offer the high-profile products, are located in high-visibility locations such as New York,
Chicago and San Francisco.
Our stores are sophisticated, modern, bright and airy ambiance. They enhance the shopping
experience while reinforcing the image of the Coach brand. They are consistent with its strategy of
raising awareness and aggressively growing market share. The modern store design creates a
distinctive environment to display our products. Store associates are trained to maintain high
standards of customer service experiences an additional differentiating aspect of the brand. The
company provide store employees with regular customer service training programs and scheduled
additional personnel during the peak shopping periods to ensure all customers are attend to
satisfactorily.
For Coach Japan and China, they operate department store shop-in-shop locations, retail
stores and factory outlets. Coach China distribution includes districts in Hong Kong.
U.S. Wholesale offers access to Coach products to consumers who prefer shopping at
department stores. Its most significant U.S. wholesale customers are Macys (including
Bloomingdales), Dillards, Nordstrom, Lord & Taylor, Carsons, the Bay and Saks Fifth Avenue.
However overall U.S. department store sales have slowed over the last few years.
Coach International channel represents sales to international wholesale distributors and
authorized retailers involved department stores, freestanding retail locations, shop-in-shop
locations and specialty retails in 18 countries. Coachs most significant international wholesale
customers are the DFS Group, Lotte Group, Shilla Group, TasaMeng Corporation and Imaginex.
Travel retail represents the largest portion of our customers sales in this channel which are
Chinese and Japanese.
On the Internet, Coach views its website as a key communications vehicle for the brand to
promote traffic in Coach retail stores and department store locations and build brand awareness.
With approximately 76 million unique visits to the coach.com e-commerce website in fiscal 2012,
our online store provides a showcase environment where consumers can browse through a selected
offering of the latest styles and colors. Our ecommerce programs also include third-party flash sites
and our invitation-only factory flash site.
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Promotion- Because Coach has a sophisticated consumer and market research capability,
Coach uses its extensive customer database and consumer knowledge to target specific products
and communications to specific consumers to efficiently stimulate sales across all distribution
channels.
Coach engages in several consumer communication initiatives, including direct marketing
activities and national, regional and local advertising primarily driven by increased email
communications. Coachs wide range of direct marketing activities includes email contacts
brochures and website targeted to promote sales to consumers in their preferred shopping venue. In
addition to building brand awareness, the coach.com and reedkrakoff.com websites serve as
effective brand communications vehicles by providing a showcase environment where consumers
can browse through a strategic offering of the latest styles and colors, which drives store traffic and
enables the collection of customer data.
In addition, the Company utilizes and continues to explore new technologies such as global
e-commerce site, blogs and social networking websites, including Twitter and Facebook, as a cost
effective consumer communication opportunity to increase on-line and store sales, acquire new
customers and build brand awareness. The Company also runs national, regional and local
advertising campaigns in support of its major selling seasons. For market outside America such as
Japan, Hong Kong, Macau and China Mainland, catalogs that are distributed in Coach stores are
also one of the popular communication.
On the Internet, Coach views its website as a key communications vehicle for the brand to
promote traffic in Coach retail stores and department store locations and build brand awareness.
Many users visit to the coach.com e-commerce website. Coach online store provides a showcase
environment where consumers can browse through a selected offering of the latest styles and
colors. its e-commerce programs also include third-party flash sites and our invitation-only factory
flash site.
Target specic products and communications which Coach drives brand image to specic
consumers are efficiently stimulate sales across all distribution channels.
Service
Coach sought to make customer service experiences and additional differentiating aspect of
the brand. Coach provides maintenance services: refurbish or replace damaged handbags,
regardless of the age of the bag. Through the companys Special request service, the company
provide home delivery service if the particular product is not available during customers visit.
Store associates are trained to maintain high standards of customer service experiences an
additional differentiating aspect of the brand. The company provide store employees with regular
customer service training programs and scheduled additional personnel during the peak shopping
periods to ensure all customers are attend to satisfactorily.
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Support Activities
Firm Infrastructure
Coachs information systems is its Enterprise Resource Planning (ERP) system. This
fully integrated system supports all aspects of finance and accounting, procurement, inventory
control, sales and store replenishment. The system functions as a central repository for all of
Coachs transactional information, resulting in increased efficiencies, improved inventory control
and a better understanding of consumer demand.
Complementing its ERP system are several other system solutions, the data warehouse
system summarizes the transaction information and provides a single platform for all management
reporting. The supply chain management system supports sales and inventory planning and
reporting functions. Product fulfillment is facilitated by Coachs highly automated warehouse
management system and electronic data interchange system, while the unique requirements of
Coachs internet business are supported by Coachs order management system. Finally, the pointof-sale system supports all in-store transactions, distributes management reporting to each store,
and collects sales and payroll information on a daily basis. This daily collection of store sales and
inventory information results in early identification of business trends and provides a detailed
baseline for store inventory replenishment. Updates and upgrades of these systems are made on a
periodic basis in order to ensure that we constantly improve our functionality. All complementary
systems are integrated with the central ERP system.
Therefore, the supportive system, ERP, has supported each functional level of the
organization to achieve the superior efficiency and compete in the market successfully.
Human Resource management
Coach employed approximately 18,000 people, including both full and part time employees
cover the retail field in North America; Japan; Hong Kong, Macau, and mainland China; Taiwan;
Singapore and Korea. Approximately 70 of Coachs employees are covered by collective
bargaining agreements. Coach believes that its relations with its employees are good, and it has
never encountered a strike or work stoppage.
Coach employees are diverse, talented and aspiring workforce. Coach is committed to
attracting the best talent and engaging them by providing opportunities to succeed personally and
professionally in a supportive, positive, and diverse working environment.
It has always been its belief that the Coach brand is driven by the power of our people
strong, talented and dedicated employeeswho share Coachs vision, believe in brand, strive for
excellence, and bring a sense of pride and ownership to their work.
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Coach have view that is the character of Coach employees. They like the ambassadors of
brand who drive Coach success, through the strong bonds they build with each other and in the
lasting relationships they establish with Coach customers.
Coach set high standards and recruit employees based on their ability to meet and exceed
expectations. Staffs that it seeks out individuals who are not only technically skilled and
knowledgeable but who enjoy challenges, who seek to develop themselves and who have excellent
interpersonal skills.
Coach expect a lot from our employees and know that our employees expect a lot from
Coach as an organization as well. It works to ensure a healthy work-life balance for company
employees and strive to make coming to work every day a positive experience. The following
sections will outline how Coach engages with our employees to promote a supportive and
accepting work environment.
Table4.2Employeesbenefits
Source:COACH SustainabilityReport,2013,p. 20
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Table4.3Global workforce ofCoach
Source:COACH SustainabilityReport,2013,p. 15
Technology development
Technology development comes up with market researchs result. Coach conducts

extensive consumer surveys and holds focus groups to ask customers about styling, comfort, and
functionality preferences. The design process allow Coach to launch new collections every month.
Hence, company need to deal with product and process innovation and improvement.
To develop new style product, Coach also emphasizes on its website. Internet sales
(Coach.com), online store provides a showcase environment where consumers can browse through
a selected offering of the latest styles and colors. Because of a Consumer-Centric Focus, Coach
listens to its consumer through rigorous consumer research and strong consumer orientation. Coach
works to anticipate the consumer's changing needs by keeping the product assortment fresh and
relevant.
Coach believes that these differentiating elements have enabled the company to offer a
unique proposition to the marketplace and expand the market share with better quality.
Therefore, the innovation and a consumer-centric focus strategy of Coach can contribute the
superior efficiency, quality, innovation, and customer responsiveness that enables Coach to lowers
its costs, charge higher price, and earns strong brand loyalty.
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Procurement
According to manufacturing part, all of Coachs production was outsourced to contract

manufacturers, with vendors in many countries. To maintain the high quality standard, the
companys procurement process needs to select only the highest quality leathers and also provide
the sourcing agreement with quality offshore manufacturers, contributed to the companys
reputation for high quality and value.
Coachs design and merchandising teams work in close collaboration with all licensing
partners to ensure that the licensed products are conceptualized and designed associated with the
Coach brand and to achieve profitable sales.
Coach utilizes a flexible, cost-effective global sourcing model, in which independent
manufacturers supply its products, allowing Coach to bring its broad range of products to market
rapidly and efficiently. One of Coachs keys to success lies in the selection of raw materials. Coach
has longstanding relationships with purveyors of ne leathers and hardware.
In addition, Coach has implemented ERP system in order to support all aspects of finance
and accounting, procurement, inventory control, sales and store replenishment. This daily
collection of store sales and inventory information results in early identification of business trends
and provides a detailed baseline for store inventory replenishment including fasten the procurement
process to reduce shortage or excessive inventory
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Compare the companys value chain with other competitors value chain
Activities in
Value Chain
Coach Inc.
Direct Competitors
(Kate Spade, Michael Kors)
Primary Activities
Inbound Logistics
Operations
Outbound
Logistics
- Broad-based global
manufacturing
and Licensing
agreement
- Rigorous selection of
raw materials
- Quality control through
agreement and product
development office
- Long relationship with suppliers
because Coach due with them
for
time global
- long
Broad-based
manufacturing
- operational diversification;
outsourcing and licensing
- On site quality inspection
- Multichannel distribution
- Direct distribution (Retail
stores,
Flagship stores, Factory store,
Coach Japan, Coach China,
Internet and Catalog sales)
- Indirect distribution
(wholesales, department store)
Licensing agreement
Not too long relationship with
suppliers compared to Coach
- Control quality through agreement
to ensure the quality and on-time
delivery of raw materials.
Broad-basedglobal
manufacturing
On site quality inspection
Multi-channel international
distribution model but the numbers
of distribution channels is less than
Coach
- Direct distribution (Retail stores,
Flagship stores, Internet and
catalog
sales)
- Indirect distribution (wholesales,
department store)
- Kate Spade depends on only one
sourcing agent by using Li & Fung
company as the outsourcing logistic
company to distribute products to
their retails and wholesales.
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Activities in
Value Chain
Sales and
Marketing
Coach Inc.
Product
- Differentiation strategy,
Coachs product quality and
styling look modern and
beautiful
- Launching new collection
frequently based on customer
research
- High quality product at
comparative price.
Direct Competitors
Product
- Differentiation strategy, product
quality and styling (Kate products are
modern characteristic and bright
colors, Michael product are beautiful
and stylish brand design)
- Slow launching new product
- Moderate and standard
quality
Price
Price
Price discrimination
- The price level and strategy close to
Positioning the brand as
Coachs as being accessible
Accessible Luxury Products
luxury products
The price is moderate.
- Products have moderate price. Kate
Focusing on the affluent
focuses on fun, colorful and
customers who seek for high
modern, rather than an expensive
quality, good look at a lower
luxury. Michael is a luxury product
price. With a group of middlethat looks good and general people
class people who want the
can purchase.
Luxury
Place
- Great variety of distribution
channels including full price
retail store, factory outlet,
internet, sales representative or
department stores.
Place
- Kate has powerful distribution
channels both retailers and online.
Using E-commerce sale of
distribution channels which
successfully increased its customer
base and driven business.
- Michael has moderate distribution
channels in regular stores as well as
in leading department stores and
online. But the number of branches
may not be as much as other brands
and locations may be limited in
major cities or fashion city
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Activities in
Value Chain
Services
Coach Inc.
Direct Competitors
Promotion
Promotion
- Pull strategy creating reputation, - Pull strategy
Michael Kors, he is not only
brand awareness
- Push strategy, catalog, shop,
founder but also brand ambassador.
launch new collection, attract
He is the American Fashion Icon
customer to visit the shop and
and celebrities. This brand is active
buy product
communication to their customers,
- Create customer experience
through advertising while using lots
- After sale service
of celebrities endorsement strategy.
Also, using direct marketing to
arouse the brand awareness. The
website of michaelkors.com is also
another marketing channel online,
also quickly response to the
customers online order.
- Kate Spade uses its unique idea
using innovative marketing by
taking advantage from social
network such as Facebook,
Youtube or Instagram and Ecommerce sales. Kate Spade is now
become Queen of Digital
Marketing.
- Create Customer experience in - Create
Customer experience in
store (give well-trained
store (give well-trained employees
employees to serve customers at
to serve customers at store)
store, increasing the number of - After sale service (warranty and
repair service offering)
employees during peak shopping
periods
- After sale service (refurbish or
replace damaged handbags,
regardless of the age of the bag,
special request service for
customers to order goods for
home delivery)
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Activities in
Value Chain
Coach Inc.
Direct Competitors
Support Activities
Firm Infrastructure
-
Human Resources Management

-
ERP (Enterprise Resource

Planning) implication, fully
integrated system of the firm to
improve inventory and operation
process
Employee diversification
Employee engagement
(training program, rewards and
compensation)
Employees have knowledge,
skills, expertise and know-how
comparatively comparing to
other luxury brands.
Innovative IT system with SAP,

ERP
Monitoring Global Working

Conditions to ensure the benefits
of employees
- Providing development
opportunities at all levels
- Reward and compensation
- Employees may have less
knowledge, skills, expertise and
know-how comparing to other
luxury brands Since the company
is very young comparing to long
outstanding competitors.
Technology
Development
Product development
Differentiation strategy, product quality and styling based on
Consumer research in each
quarter to design new collection
and launch Monthly product to
make purchases on a regular
basis
Consumer-centric focused strategy

Design and develop new
technology for new collection
Procurement
The highest quality material

selection
Outsourcing agreement and
licensing partners
Longstanding relationships with
suppliers
Enterprise Resource Planning
(ERP) implication
Depends on only one sourcing

agent Kate Spade using Li & Fung
company as the outsourcing logistic
company to reduce their cost in
supplying products to their retails
and wholesales.
Advance purchase commitment
with main materials through
approved vendors
24 | P a g e
b) Identify functional Level Strategies that the company is employing. How can those
Functional Level Strategies improve the effectiveness of a companys operations and thus its
ability to attain superior Efficiency (E), Quality (QR:QE), Innovation (PDI:PCI), and
Customer Responsiveness (CR)?
Answer:
b1)
Inbound Logistics Strategy

Inbound logistics relates to material section that faces with minimizing raw materials, and
inventory. They also have high quality same as Coachs standard.

Coach outsources production to its manufacturers so it has utilized a flexible, costeffective model, in which independent manufacturers supply their products, allowing Coach to
bring the broad range of products to market rapidly and efficiently.
Coachs material management strategy is the minimization of the inventory holding in
order to lower their cost structure. This implies that Coach tends to lower their inventory from
materials to finished products.
Therefore, the implementation of Coachs Inbound Logistics Strategy can contribute the
superior efficiency and quality that enable the company to lower its costs and charge a higher
price.
b2)
Operations Strategy
Operation strategy determines how and where a product is to be manufactured and
source of produced physical products, and quality.

Although Coach Products are manufactured by independent manufacturers; the company
maintains control of the raw materials that are used in all of their products. Compliance with
quality control standards is monitored through representative office. Coach evaluates each facility
by conducting a quality and business practice standards audit. This activity supports Coach to
customize production that response to the customer preferences. This implies that Coach has
implemented the flexible manufacturing by improving quality control at all stages of
manufacturing process.
The implementation of can contribute the superior efficiency that enables the company to
lower its costs.
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b3)
Outbound Logistics Strategy

Outbound logistics relate directly to logistics function that deals with the flow of
products into and out of the manufacturing process.

Coach has implemented A Multi-Channel International Distribution Model this
allows Coach to maintain a critical balance as results do not depend solely on the performance of a
single channel or geographic area. Their distribution channels are Direct-to-Consumer and
Indirect-to- Consumer channels. The direct ch an ne l , it provides s e r v i c e s a n d c o n t r o l to
consumers through retail stores, flagship stores, factory stores, and internet while the indirect
channel is wholesale stores, department store or international shops. These multi-channels of
Coach are offered to customers to access to Coachs products easily that enables the
company to expand the market and communicate to customers including response rapidly to their
needs.
The strong multi-channel distribution model of Coach can contribute the superior
efficiency, quality, innovation and customer responsiveness that enables Coach to lowers its
costs, charge a higher price and earns strong brand loyalty finally.
b4)
Marketing and Sales Strategy (Product, Price, Place, Promotion)

Marketing and sales strategy relates to marketing function that deals with pricing, selling,
and distributing a product. Coach has implemented strategies in terms of delivering a consistent
message to consumers who come in contact with the Coach brand through their communications
and visual merchandising
Product: New product design is developed based on market research that differ from
the products from their competitors which develop based on their designers.
Price: Coach offers both full-priced and discounted products for the different stores in
order to approach to the multi-level customers.
Place: Coach uses a multi-channel international model to distribute their products
to customers with different price level and target group. So customers can access to Coach easily
and the company can expand their market around the world.
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Promotion: As Coach has world-wide channels, the company has implemented regional
and local advertising, direct marketing activities and national, e-commerce, public relations, and
customer service in order to communicate to customers. The company can use its extensive
customer database and consumer knowledge to target specific products and communications
to specific consumers to efficiently stimulate sales across all distribution channels and build brand
awareness and brand loyalty.
The strong marketing strategy of Coach can contribute the superior efficiency,
quality, innovation, and customer responsiveness that enables Coach to lowers its costs,
charge higher price, and earns strong brand loyalty.
b5)
Services Strategy
Service strategy relates to marketing that deal with post purchasing service and providing
channel for customers to receive the support from the company.

Coach offered many services to guarantee the most benefit for customers for example
special request service to deliver goods to home, damage claim throughout products lifetime and
refurbish or replace damaged handbags offering.
The effective service offering of Coach can contribute the superior customer
responsiveness that enables Coach to earns strong brand loyalty.
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b6)
Firm Infrastructure (Information Technology, Accounting, Finance, Strategic Planning)

Coach applies ERP system which is the fully integrated system supporting all
aspects of finance and accounting, procurement, inventory control, sales and store replenishment. In
addition, the point-of-sale system in ERP supports all in-store transactions, distributes management
reporting to each store, and collects sales and payroll information on a daily basis. This daily
collection of store sales and inventory information results in early identification of business trends
and provides a detailed baseline for store inventory replenishment (10-K Report of Coach Inc.,
2011, p.8).
ERP system can automate many of the company activities which reduce the costs of
supply chain coordination for company and suppliers. In terms of company and customers, the
point-of-sale system can replace the capital-intensive physical location with a much less costly
web site. Moreover, the system also supports the information of defect rate monitoring,
coordinating cross-functional and cross-company product development work, and the web-based
information also increases the speed of response to customer demands.
The ERP implementation of Coach can contribute the superior efficiency, quality,
innovation, and customer responsiveness that enables Coach to lowers its costs, charge higher
price, and earns strong brand loyalty.
b7)
Human Resource Management Strategy (Recruiting, Selecting, Training, Developing,
Evaluating, Compensation and Retaining)

Coach has intensive human resource management in order to employ the employees who
are good attitudes, service lovers, and being ready to be trained all time. Coach believed that the
people of Coach is the ambassadors of the brand, who create the success, through their behavior
they build with each other and in the lasting relationships they establish with Coach customers
(COACH Sustainability Report, 2013).
HR system of Coach which consists of recruiting, training, and compensation programs also
allows their employees to learn and manage their team by themselves. There are many learning
programs that all employees can attend in order to increase their productivity. In addition,
employees benefits are offered according to their roles and regions including the companys stock
in order to enhance the morale and productivity of their employees.
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The human resource strategy of Coach can contribute the superior efficiency, quality,
innovation, and customer responsiveness that enables Coach to lowers its costs, charge higher
price, and earns strong brand loyalty.
b8)
Technology Development Strategy

Technology and development strategy relates directly to product innovation. Coachs
development process based on consumer research by cooperating with marketing department in

order to design the products matching with customers needs and behaviors. In addition, the design
process allowed Coach to launch new collections frequently. So Coach Consumers have a
specific emotional connection with the brand and Coach believes its customers have loyalty toward
brand.
Coach is strong consumer orientation brand. it listens to its consumer through consumer
research. The consumer's changing needs when time passes, thus Coach works to anticipate by
keeping the product assortment fresh and relevant. Coach believes that these differentiating elements
have enabled the company to offer a unique proposition to the marketplace and expand the market
share with better quality.
The development and differentiation strategy of Coach can contribute the superior
efficiency, quality, innovation, and customer responsiveness that enables Coach to lowers its
costs, charge higher price, and earns strong brand loyalty.
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b9)
Procurement Strategy
Procurement strategy relates to purchasing function that deals with obtaining raw materials,
parts, and supplies needed to perform operations function.

According to manufacturing part, all of Coachs production are outsourced to contract
manufacturers, with vendors in many countries. To maintain the high quality standard and cost
effectiveness, the companys procurement process needs to select only the highest quality leathers
and also provide the agreement with quality manufacturers, contributed to the companys reputation
for high quality and value. This strategy supports inbound and operation functions in terms of
reducing defect occurrence during production.
In addition, ERP system can support procurement by reducing shortage or
excessive inventory (10-K Report of Coach Inc., 2011, p.8).
Therefore, the Procurement Strategy of Coach can contribute the superior efficiency and
quality that enables Coach to lowers its costs and charge higher price.
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d) Draw a table to summarize all Functional Level Strategies that the company depends on. Which effectiveness that the
company puts most emphasis on.
Functional
Level
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
and Sales
Strategies
- Outsourcing agreement and
licensing partners
- Rigorous selection of raw
materials
- Broad-based global
manufacturing
- operational diversification;
outsourcing and licensing
- Multichannel distribution
Product
- Differentiation strategy,
product quality and styling
- Launching new collection
frequently based on customer
research
- High quality product at
comparative price
Price
- Price discrimination
Place
- store classification
- various locations
- Direct to customer store
- indirect to customer store
- International channel
- Internet
Efficiency
E1
E2
Quality
Reliability
Excellent
QR1
Innovation
Product Process
Customer
Responsiveness
QR2
E3
E4
E5
QE1
PDI1
PSI1
CR1
E6
PDI2
CR2
QE2
CR3
E7
E8
E9
E10
E11
E12
E13
CR4
PSI2
31 | P a g e
Functional
Level
Service
Firm
infrastructur
e
Human
Resource
Technology
Development
Procurement
Strategies
Promotion
- Pull strategy, reputation, brand
awareness
- Push strategy, catalog, shop,
launch new collection, attract
customer to visit the shop and buy
product
- create customer experience
- After sale service
- Enterprise Resource Planning
(ERP) implication
Efficiency
Innovation
Product Process
Customer
Responsiveness
CR5
CR6
E14
- Employee diversification
E15
- Employee engagement
- Product development
E16
E17
- Differentiation strategy, product

quality and styling
- The highest quality material
selection
- Outsourcing agreement and
licensing partners
- Longstanding relationships with
suppliers
- Enterprise Resource Planning
(ERP) implication
E18
Total
Quality
Reliability
Excellent
E19
QR3
QR4
QE3
QE4
PSI3
QE5
QR5
QE6
QE7
CR7
CR8
CR9
CR10
CR11
CR12
PDI3
QR6
E20
E21
QR7
E22
QR8
QE8
22
PSI4
CR13
13
32 | P a g e
Question 5: Business Level Strategies

a) Describe business level strategies that allow a company to attract customers away from
its competitors in the industry from past until present.
Answer:
Period 1: 1941-1984 The company beginning - Focused Differentiation Strategy.
What need to be satisfied?

Customers need a luxury handbag at an acceptable price
Luxury product with a classic style.
Who will be served?
Stylish women who like to own a luxury handbag in a reasonable price in US.
How would the company satisfy them?
Design 12 unlined leather bags, which soon developed a loyal following.
Pricing the product at 50% cheaper than its rival.
Reach them by establish an account at Blooming dales and Saks Fifth Avenue.
Open the company-owned store.
Period 2: 1985-1995 Sara Lees period Focused differentiation
What need to be satisfied?

Customers need a luxury handbag at an acceptable price.
Strong preference for European style brand and accessories.
Who will be served?
Stylish women who like to own a luxury handbag in a reasonable price in US.
Company continued to build strong reputation for long lasting classic handbags.
Being known by the customers who want a luxury bags at reasonable price.
Pricing at 50% cheaper.
Period 3: 1996-2000 Lew Frankfort and Reed Krakoff Broad differentiation
What need to be satisfy?

Edgier styling, softer leathers, leather-trimmed fabric handbags.
European style accessories.
Who will be served?
Stylish women who like to own a luxury handbag with famous brand in a
reasonable price in US and starting to go for global market.
33 | P a g e

Outsource production to 40 suppliers in 15 countries.
Start to design product based on consumer survey and test the prototype for 6
months before launching.
Distribute product through multichannel.
Redesign its store to enhance the brand image.
Pricing at $200-500 compared to entry price of rivals handbags entry price at
$700-800
Start penetrating to Japan market by its company store.
Period 4: 2000-2011 expanding to global market - Broad differentiation
What need to be satisfy?

Brand also needs to have strong identity.
Functions of the bags become more significant.
Variety of product is needed.
Who will be served?
Women who like to own a luxury handbag in a reasonable price.
Men also targeted.
Target middle to upper income class
Global market entrance, China, India, Japan and north American
Penetrate to China market due to its relieved in restriction by Chinese government
Use effective advertising and television programming to create conspicuous
consumption.
Design product based on consumer survey and tests the prototype for 6 months
before launching.
Distribute product through multichannel.
Better segmented the market through its multichannel distribution.
In 2000 coach start to enter the stock market through IPO.
Established company store in China and India.
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In summary
The business level strategy that Coach Inc. presently use is a broad differentiation, in
which they positioning themselves as an accessible luxury brand name, it different from other in
the sense that the typical luxury brand positioning them towards the high end and try to targeted
the top 5% of household income in US and design the product to match the positioning they
flagged while the positioning that coach try to developed are an accessible tier which they
targeted top 20% of household income using the key style of rivals design corporate with
market survey and use a highest quality material possible but 50% cheaper than its rival, while
its rival cant lower the price otherwise they will lose their superior image. To do the pricing at
50% less than others, Coach outsource its production to 40 suppliers in 15 countries make Coach
have an efficient cost structure than the other luxury firm. There are plenty of brand try to entry
this market but Coachs perceived value from customer are far higher than any other brand in its
positioning area and moreover theres a research that women in the US ranked Coach ahead of
much more expensive luxury brands like Hermes, Ralph Lauren, Prada and Fendi. From these
reason, it can be claim that the business level strategy of coach are allow a company to attract
customer away from its competitors.
b) How well do the strategic managers adopt for using functional level strategy to create
competitive advantage over its rivals.
Answer:
An appropriate functional strategy should support the business level strategy,which coach
try to differentiate its product and use the price to beat (broad differentiate), Coach use
functional of E = 22 QR = 8 QE = 8 PDI = 3 PSI = 4 CR = 13.
Strategic manager was doing well in term of using functional level strategy to create
competitive advantage over its rivals, he use e of 22 which makes the firm attain low cost to
maintain a sizable pricing advantage and also use QR of 8 , QE of 8 , PSI of 4 , PDI of 3 and CR
of 13 to differentiate, Which resonance with the business strategy of broad differentiation.
Reed Krakoff the former top designer from Tommy Hilfiger was hired and he implement
functional strategy as follows:
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Cost control function. (Efficiency -Involve in its operation strategy area)

- Outsourcing production to 40 suppliers in 15 countries, which allow coach to maintain a
sizable pricing advantage relative to other luxury handbag brands in its full price store as
well. For example: handbag sold in coach full price store range from $200-$500, while its
competitors entry price are $700-$800.This broad based global manufacturing strategy
was designed to optimized the mix cost, lead time and construction capabilities.
- Monthly product launched in limited number to reduce risk with owning inventory
Differentiate function. (Involve in its marketing strategy, service strategy and Research and
development strategy, procurement strategy area)
-
Redesign its flagship stores to complement Coachs contemporary new design and make
it enhance the coach brand, which also raising awareness and aggressively growing
market share.
Improve the appearance of factory store, which carried segmented product, the test
model, discontinued model and special lines.
R&D based on what customers want, previous customer were asked to rated prototype
design against existing hand bags and tested in selected coach store for 6 month before
launch.
Monthly product launches enhanced companys voguish image and gave consumer
reason to make purchases on a regular basis and also to capture customer who want the
newest items and fashions
Improving the classic product line such as a iconic handbags to be lighter and call it
update version from 1970s, 1980s make this collection become its best selling in 2012.
Maintain the service after sale policy, coach sought to make customer service experiences
an additional differentiating aspect of the brand. It had agreed to refurbish or replace its
handbags, regardless of the age of the bag.
The company provided store employees with regular customer service-training programs
and scheduled additional personnel during the peak time to ensure the entire customer
were attended to satisfactorily.
Coach also provides home delivery when the product requested was not available during
the store visit.
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Coach also saw communication with its customers as an opportunity for further
differentiation. It communicated with customers through direct channel such as email,
customer contact and catalog, which reach millions of people around the world.
c) Draw the Value-Creation Frontier to explore the position of company business strategy
and summarize your findings.
Answer:
37 | P a g e
The position in Value creation frontier of Coach is the broad differentiator, which coach
use functional of E = 22 QR = 8 QE = 8 PDI = 3 PSI = 4 CR = 13.
The estimate position are located as illustrate in the figure, Additionally according to the
case, coach is the leading in its market, hence the position in value creation frontier is on the
frontier.
d) How well do the business and functional level strategy help the company to accomplish
its strategic direction?
Answer:
We first consider at its vision and mission, which their vision & mission can be found on
their official website:
Vision: To become the company that defines global modern luxury.
Mission: To build our brand worldwide while creating stockholder value.
Objective: To be a good employer and a responsible and socially sensitive corporate
citizen in the locations in which the corporation conducts business.
We found that the strategic direction Coach want to be is a worlds leading accessible
luxury brand, the business strategy coach implementing is broad differentiation, which allow the
company to lead and influence the market as stated on the mission, its functional level strategy
support its business level strategy to achieve the differentiate and efficient in cost, for example
try to use the best quality of material possible, design the product based on what customer want
(consumer centric), redesign its new store to enhance the modern contemporary awareness, use
outsourcing in broad-based, etc.
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Question 6: Business Level Strategies

a) What kind of Corporate level strategy that the company have been pursuing from the
past until present? Can you notice the evolution of Corporate level strategy?
Answer:
Period 1941-1984: Intensive Growth Market Penetration Strategy
Coach was founded in 1941 in United State as a family-business run by Miles Cahn.
Cahn began producing lady handbag crafted by hand in simple style. Over 40 years Coach tried
to grow and increase market share in United State by setting the price 50% lower than luxury
brands.
Period 1985-1995: Stability No change
Sara Lee acquired Coach in 1985. Under Sara Lees management, Coach did not
introduce new product. They continued to build classic handbag. However, by the mid-1990s,
consumer changed handbag preference to stylish French and Italian designer brands, then Coach
sales started to decline.
Period 1996-2000: Intensive Growth Product Development Strategy
In 1996, Lew Frankfort, Chairman and CEO of Coach at that time hired Reed Krakoff as
Coachs new creative director. Under Krakoffs management, Coach conducted survey to find
customer need and develop new design of handbag with edging styling, softer leathers, and
leather-trimmed fabric handbags. In addition, Coach launched new collections every month
instead of only two collections per year. Price of Coach handbags sold in full-price stores was
lower than luxury brands which made Coach gained competitive advantage. However, in 2000
Sara Lee spanned off Coach through IPO.
Period 2001: Intensive Growth Market Development Strategy
Coach Japan was formed to expand their presence in Japanese market. Coach Japan was
initially formed as a joint venture with Sumitomo Corporation. Under joint venture agreement
Coach supplies its merchandise to Coach Japan for distribution and sale in Japan. At that time,
Coach could expand its products through 63 retail and department store locations in Japan.
Coach continued to drive market share by focusing on the United State and Japan. They
grew their distribution through store opening, expansion and relocation. They enter new markets
as well as strengthen the existing ones. In Japan, Coach accelerated flagship stores which
allowed them to increase its brand awareness in Japan. In addition to gaining greater market
share, Coach intensified brand awareness by offering aspirational, stylish and well-made product
with accessible price. Coach emphasized new usage occasion and offered product at a broader
range of price. They evolved marketing programs in order to increase customer experience.
39 | P a g e
Period 2005-2006: Intensive Growth Market Development Strategy

Apart from expanding stores in two core markets which were United State and Japan, in
2005-2006 Coach focused on driving growth in Hong Kong as the gateway to greater China.
Coach had 10 stores in Canton Road, Hong Kong in 2006.
In 2007, Coach continued to develop opportunity by adding new stores in new locations
both in United State and Japan. In addition, Coach had strengthen on-the-ground presence in
Greater China by opening eight new stores in key cities on Chinese Mainland as they focused on
rapidly growing distribution and raising brand awareness in this emerging market for luxury
goods.
In 2008, Coach keep increasing stores in North America and Japan. New Store opening
in North America and Japan was strength and made Coach gained more market share. For
emerging market like Greater China, Coach acquired their domestic business in Hong Kong,
Macau and Mainland from its former distributors which enabled them to raise brand awareness
and aggressively grew market share with Chinese customers. Moreover, they entered into new
market i.e. Turkey, Greece and Russia with international distribution partners.
In 2009, Coach expanded stores location in North America, Japan and especially in
Greater China through merchandising initiatives including Coach collection to drive brand
creativity and reinforce their brand to be known as great American design house
In 2010, Coach still increased Coach-operate stores in their existing markets. For Direct
to consumer segment, they maintained high standard of merchandising and customer services for
retail stores. For indirect segment: US wholesales, Coach continue to drive sales volume by
giving promotion at point-of-sale. For Coach International, they continue to drive growth by
expanding distributions to reach local customers in emerging markets as well as increase brand
image.
In addition, by mid of Year 2010, Coach had formed joint venture agreement to expand
Coach International business in Europe.
Period 2011: Intensive Growth Market Development Strategy/ Market Penetration
Strategy
Coach acquired non-controlling interest in a joint venture with Hackett Limited to expand
the Coach International business in Europe. Through joint venture, Coach opened retail stores in
Spain, Portugal and Great Britain and anticipated to expand more in 2012. In addition, Coach
tried to raise brand awareness in under-penetrated existing markets. They also refocused on
Mens opportunity. Coach implemented a number of initiatives to promote Mens product
offering through image-enhancing and accessible locations.
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41 | P a g e
b) Draw the web of Corporate level strategy to concluding the finding

Answer:
Coachs Web of corporate Level Strategy
Intensive Growth
Strategy:
"Product Delopment
Strategy" i.e.
redesigning
handbags
Core Industry:
Intensive Growth
Strategy: "Market
Development
Strategy" i.e.
expanding to China,
Europe etc.
"Accessible
Luxury Goods"
Intensive Growth
Strategy:
"Market Penetration
Strategy" i.e. increasing
stores in North
America, Japan etc.
c) How did each Corporate level strategy help company increase revenues and profits from
the past until present? Will each Corporate level strategy maximize long-run profitability
of the company? Draw the straight line graph including Revenue, Profit, Return on sales
and ROIC on the same picture to support your finding.
Answer:
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Coach generated revenue by selling its product directly to consumers, indirectly to

wholesale customers and through licensing its brand name to selected manufacturers. During
2007-2011, sales continually rose driven by Coachs Market Penetration strategy/ Market
Development Strategy to grow market share by increasing stores in North America, Japan and so
on, Coach sales, in 2008 (Market Penetration Strategy) was still strong, sales rose 22%, Direct to
consumer sales both in North America and Japan rose 21% generated by new and expanded
stores as well as comparable store sales. In 2008, Coach gained excellent market share (13%)
upon number two position in Japan and grew more market share in China, these resulted in
increase in sales and net profit (16% increase) compare to prior year. In addition, year 2008 was
another record year of unit distribution growth for Coach. Coach added more stores in North
America and Japan and China.
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In 2009 (Market Penetration Strategy), though sales increased from new and expanded
stores, net profit and return on sales dropped as gross profit decline. Decline in gross profit was
driven by promotional activities in Coach-operated North American factory stores and channel
mix which gross profit was impacted by Coach sharper pricing initiatives, in which retail prices
on handbags and womens accessory had been reduced in response to customers reluctant to
spend. Apart from those mentioned reasons, there was change in sales mix, foreign currency
exchange rate and fluctuation in material costs that affected gross profit. Meanwhile, Coach had
increase in SG&A expense affected by the number of Coach-operated stores increased. These led
to lower net profit and return on sales in 2009.
In 2010 (Market Penetration Strategy), Coachs sales still went up from expanding more
stores in existing markets. Net profit, Return on sales and ROIC also increased compared to prior
year.
In 2011 (Market Development Strategy/ Market Penetration Strategy), Coach sales
continued to be stronger and increasing from adding stores in North America and China.
Furthermore, Coachs international wholesales also rose. These led to higher sales compared to
previous year. Net profit and ROIC increased; however, Return on sales was almost same as
Year 2010 as Coach still spent high SG&A expense to support higher sales.
Each Corporate level strategies Coach pursued over 2007-2011 may not maximize longrun profitability due to following cases. For Market Penetration Strategy, when the market in
North America, Japan etc. saturates or Coach does not gain economy of scale from increasing
stores then this strategy would not be effective strategy and maximize long-run profitability of
Coach anymore. For Market Development Strategy, It could not be appropriate when Coach does
not have excess production capacity anymore. However, each corporates strategy could
maximize long run profitability if the company achieve economy of scale from increasing
production capacity and gain customer satisfaction over the time as customers would keep
purchasing on those products, then the company could benefit from increase in revenue and
profit.
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Question 7: How is the effectiveness of the companys strategies?

a) Drawing the straight line graph to compare sales revenue, profit, profitability (ROIC)
and profit growth of all companies for the last five to ten years and summarize your
findings.
Answer:
Revenue in
thousand USD
Louis Vuitton
Coach
Gucci
Kate Spade
Michael Kors
2007
17,231,500
2,612,456
2,828,020
2,850,070
312,655
2008
2009
2010
2011
20,697,705
3,180,757
2,868,320
2,457,642
397,074
19,959,192
3,230,468
2,894,320
1,928,754
508,099
22,643,877
3,607,636
3,465,930
1,623,235
803,339
28,042,115
4,158,507
4,086,160
1,518,721
1,302,254
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Net Profit in
thousand USD
Louis Vuitton
Coach
Gucci*
Kate Spade
Michael Kors
ROIC
Louis Vuitton
Coach
Gucci
Kate Spade
Michael Kors
2007
4,036,500
1,034,670
637,143
(372,282)
60,117
2007
35%
54%
-38%
-26%
0%
2008
3,924,700
1,194,949
936,455
(951,559)
13,039
2008
24%
109%
-68%
-52%
0%
2009
2010
2011
4,026,100
977,081
803,010
(306,410)
30,788
7,010,900
1,158,132
984,360
(252,309)
56,877
6,071,000
1,301,219
1,232,010
(171,687)
126,137
2009
26%
85%
121%
-33%
0%
2010
46%
101%
91%
-19%
42%
2011
34%
118%
-329%
-17%
47%
46 | P a g e
Profit Growth
(Profit before tax)
Louis Vuitton
Coach
Gucci
Kate Spade
Michael Kors
2007
2008
2009
2010
2011
-2.77%
15.49%
46.98%
155.60%
-78.31%
2.58%
-18.23%
-14.25%
-67.80%
136.12%
74.14%
18.53%
22.58%
-17.66%
84.74%
-13.41%
12.35%
25.16%
-31.95%
121.77%
When compare sales of all companies, we can see that Louis Vuitton generated revenue
more than other brands. Also, its net profit tended to go up according to sales. Coach, Gucci,
Kate Spade and Michel Kors had sales following Louis Vuitton, respectively. Coach and Guccis
Profit were in the same level while Kate Spade experienced loss over five years. However, when
compared ROIC, Coach had highest ROIC over five years and was more than average ROIC.
Coachs ROIC was likely to increase. However, Profit Growth of Coach was below average. We
can see that Michel Kors had highest Profit Growth during 2009-2011, following is Louis
Vuitton, Gucci, Coach and Kate Spade.
In summary, although Coach sales tended to increase, profit was not high and lower than
average. However, Coachs ROIC over five years is above average which showed that Coach
had high efficiency to generate profit from invested capital than other companies in this industry.
47 | P a g e
b) Compare profitability (ROIC) and profit growth of all companies for the last five to ten
years by plotting the graph with ROIC (Horizontal axis) and Profit Growth (Vertical axis)
and conclude your findings.
Answer:
Coach had highest ROIC compared to others which meant that Coachs strategy is
efficient in that they could generate high profit from invested capital. However, when compared
Profit Growth rate, we can see that Coachs Profit Growth rate did not much resulting from high
SG&A expense from Coach effort to expand market share.
48 | P a g e
c) Prepare BCG Growth-share Matrix to show the competitive position of all companies for
the last five to ten years.
Answer:
BCG Growth-Share Matrix as of 2007-2011 (Considering major luxury competitors)

Revenue in thousand USD
Louis Vuitton
Coach
Gucci
Kate Spade
Michael Kors
Company
Louis Vuitton
Coach
Gucci
Kate Spade
Michael Kors
2007
17,231,500
2,612,456
2,828,020
2,850,070
312,655
2008
20,697,705
3,180,757
2,868,320
2,457,642
397,074
2009
19,959,192
3,230,468
2,894,320
1,928,754
508,099
2010
22,643,877
3,607,636
3,465,930
1,623,235
803,339
Total
2011
Sale (2007-2011)
28,042,115
108,574,389
4,158,507
16,789,824
4,086,160
16,142,750
1,518,721
10,378,422
1,302,254
3,323,421
39,109,768
155,208,806
Relative
CAGR Revenue
Competitive
Market Share
2007-2011
Position (2007-2011)
6.47
12.95%
69.95%
0.15
12.32%
10.82%
0.15
9.64%
10.40%
0.10
-14.56%
6.69%
0.03
42.86%
2.14%
From BCG Growth-Share Matrix, Coach had been categorized as Question Marks which
meant that Coach has not much high business growth rate over 2007-2011 and its market share
still be low. Coach status is same as Gucci. Louis Vuitton is between Star and Cash cows as its
market share were highest. For Michel Kors, we can see that it had highest business growth rate
but market share is lowest.
49 | P a g e
Calculation
1. Coach
Coach: Consolidated Income Statement
1,194,949
411,910
783,039
2009
3,230,468
907,858
2,322,610
1,350,697
971,913
5,168
977,081
353,712
623,369
2010
3,607,636
973,945
2,633,691
1,483,520
1,150,171
7,961
1,158,132
423,192
734,940
2011
4,158,507
1,134,966
3,023,541
1,718,617
1,304,924
1,031
4,736
1,301,219
420,419
880,800
Cash
Current asset
Current liability
Fixed asset
Tax rate
2007
556,956
1,740,196
407,996
368,461
40%
2008
698,905
1,385,709
450,941
464,226
36%
Balance Sheet
2009
800,362
1,396,409
459,652
592,982
36%
2010
596,470
1,302,641
529,036
548,474
37%
2011
699,782
1,452,388
593,017
582,348
32%
Invested captal
ROIC
Return on sales
1,143,705
54%
40%
700,089
109%
38%
725,609
101%
32%
741,937
119%
31%
Unit: thousand dollar
Revenue
Cost of sales
Gross profit margin
Selling & Admin expense
Operating income
Interest Income
Other expense
Net Profit (Income before tax)
Income taxes
Profit
2007
2,612,456
589,470
2,022,986
1,029,589
993,397
41,273
2008
3,180,757
773,654
2,407,103
1,259,974
1,147,129
47,820
1,034,670
398,141
636,529
729,377
85%
30%
50 | P a g e
2. Louis Vuitton
LVMH: Consolidated Income Statement
Exchane rate:EU/USD
2007
21,425
7,522
13,904
7,478
1,804
4,622
164
4,458
269
59
(211)
4,037
1,109
3,138
(398)
2,633
2008
20,698
7,816
14,535
7,935
1,884
4,716
186
4,531
334
31
(303)
3,925
1,161
3,067
(380)
2,634
2009
19,959
8,013
14,156
7,866
1,932
4,358
248
4,109
243
202
(42)
4,026
1,104
2,964
(283)
2,282
2010
22,644
9,339
17,077
9,227
2,232
5,617
198
5,420
196
992
796
7,011
1,910
9
4,315
(373)
3,942
1.3
2011
28,042
10,520
20,237
10,868
2,527
6,842
142
6,700
196
(118)
(315)
6,071
1,889
8
4,505
(520)
3,985
30%
27%
27%
31%
Cash
Current asset
Current liability
Fixed asset
27%
Balance Sheet
Unit: USD million
2007
2,027
12,997
9,637
7,036
2008
1,317
13,460
8,600
7,905
2009
3,180
14,268
7,862
7,982
2010
2,980
14,559
9,178
8,753
2011
2,994
17,247
12,472
10,422
Invested captal
ROIC
8,369
35%
11,449
24%
11,207
26%
11,154
46%
12,203
34%
Unit: USD million
Revenue
Cost of sales
Gross profit
Mkt.& Selling expense
General & Admin expense
Profit from recurring operation
Other operating income & expense
Operating profit
Cost of net financial debt
Other financial income & expense
Net Financial income (expense)
Net Income before tax
Income taxes
Income (loss) from investments in associates
NET PROFIT BEFORE MINORITY INTERESTS
Minority interest
NET PROFIT
Tax rate
51 | P a g e
3. Michel Kors
MK: Income Statement
Revenue
Cost of sales
Gross profit margin
Selling & Admin expense
Operating profit
NET PROFIT
Tax rate
2007
312,655
165947
146,708
108407
38,301
60,117
2008
397,074
208283
188,791
147490
41,301
13,039
2009
508,099
241,365
266,734
191,717
75,017
30,788
2010
803,339
357,274
446,065
279,822
166,243
56,877
2011
1,302,254
549,158
753,096
464,568
288,528
126,137
40%
41%
29%
46%
41%
2010
5,664
2012
106,354
464,063
165,006
170,755
299,057
363,458
47%
Balance Sheet
2008
Cash
Current asset
Current liability
Fixed asset
Working capital
12,167
13,739
51,263
2011
21,065
245,398
127,725
119,323
117,673
Invested captal
ROIC
12,167
189%
13,739
176%
45,599
118%
215,931
42%
2009
4. Gucci
Gucci: Income Statement
Exchane rate:EU/USD
2008
2,868.32
936.46
34%
2009
2,946.32
803.01
34%
2010
3,465.93
2,481.57
984.36
28%
2011
4,086.16
2,854.15
1,232.01
23%
Balance Sheet
Unit: USD million
2007
2008
2,227
1,452
10,332
9,434
12,190
11,821
2,827
2,929
2009
1,228
6,847
7,600
2,420
2010
1,652
9,023
8,443
1,851
2011
1,817
6,860
7,114
1,784
440
121%
778
91%
(288)
-329%
Unit: USD million
Revenue
Cost of sales
Operating profit
tax rate
Average tax rate
Cash
Current asset
Current liability
Fixed asset
Invested captal
ROIC
2007
2,828.02
637.14
24%
(1,258)
-38%
(910)
-68%
52 | P a g e
5. Kate Spade
Kate Spade: Income Statement
2007
Revenue
2,850,070
Gross profit margin
2,034,246
Operating profit
(433,028)
Net income
(372,282)
Net income applicable to preference shareholder
Tax rate
30%
Balance Sheet
2007
Cash
205,401
Current asset
1,564,841
Current liability
770,385
Fixed asset
580,733
Invested captal
ROIC
1,169,788
-26%
2008
2,457,642
1,835,790
(733,885)
(951,559)
2009
1,928,754
1,352,325
(318,058)
(306,410)
2010
1,623,235
1,238,521
(179,514)
(252,309)
2011
1,518,721
809,391
(96,252)
(171,687)
30%
30%
30%
30%
2008
25,431
1,059,403
627,229
572,428
2009
20,372
886,931
642,552
444,688
2010
22,714
611,923
572,880
375,529
2011
179,936
551,745
426,973
238,664
979,171
-52%
668,695
-33%
668,695
-19%
391,858
-17%
Question 8: What issues does the company need to address?

Answer:
According to Coachs strategies and external factors, there are 4 issues that the company
should take into account. External factors such as highly competitive market, the economic
slowdown and internal factors from the current strategic planning are discussed as follows.
1) The accessible luxury industry becomes more competitive.
According to Coach Inc.2012, no. of competitors was increased. Since the attractiveness
of this segment persuaded both new competitors and the existing traditional brands such as Louis
Vuitton, Gucci extending their product lines such as DKNY, Giorgio Armanis Emporio Armani
line into accessible luxury. Because for accessible luxury segment barrier to entry was low for
the existing luxury brand, thus Coach had to be aware of this issue in order to maintain their
market share. (Threat)
53 | P a g e
2) The economic growth at slow rate after recovery.

Resulting from the economic crisis in 2008-2009, GDP growth rate in EU country and
U.S. dropped significantly in 2008-2009. It affected the spending power of consumers especially
in the major market share from U.S.and Europe which were about 60%. Its consumption would
drop at rate 0.6%/year except in the emerging market like China and India. It can be observed
from almost all top ten luxury brands revenue was dropped in 2009. However, from 2009-2012,
the economic was recovered but at the slow growth and those still was lower than the period
before the economic crisis. Therefore, Coach had to change the strategies applied in each region
because some regions like EU and U.S. has low GDP growth rate while it had more market share
as compared to the emerging market which had more potential growth but it has lower market
share. (Threat)
Source: Coach Inc,2012
Source: World Bank Group
54 | P a g e
Source: https://www.imf.org/external/pubs/ft/weo/2013/update/02/
3) Dilution Brand
It was from the strategies that Coach used for distribution channel through factory stores,
retail stores and full-price stores and the price strategy applied to each distribution channel. For
factory stores, 75% of the products sold only in the factory and other 25% from the discontinued
products with the price discounted from 10%-50% of the full price. Its location was far from the
full price store at least 40 miles. However, from the attractiveness of the price strategy, some
customers preferred to buy at lower price rather than the full price. This leaded to the successful
of factory stores in 2011 as the no. of factory stores in North America increasing from 20072011 by 54% compared to Retail stores which was only 33%. The strategies for factory stores
that target value-oriented customers affect the customers decision to buy at full price. Another
reason was due to the product discounted price, it could weaken the position of coach as a luxury
brand. (Threat)
Source :CoachInc 2012
55 | P a g e
4) Potential Growth for mens products

Men spending on luxury goods were increasing. From Coach Inc 2012, there were a
proportion of men spending on luxury hand bag. In addition, the annual growth in global unit
sales of luxury bags for men was around 4% and it was relatively at constant growth rate.
Moreover, referred to Euro monitor, from 2010-2014 the price of luxurys bag per volume sold
seemed to increase after 2010. Therefore, there was the opportunity for men product on their
price strategy and market share. (Opportunity)
Source: http://qz.com/332472/man-bags-are-now-one-fifth-of-the-luxury-handbag-market/
56 | P a g e
Question 9: What problems is the company facing?

Answer:
From each issuing, Coach had following problems.
1) Increasing No. of competitors in the accessible luxury market.
Due to the attractiveness of accessible luxury market, many competitors like the existing
luxury brands and Coach had to adjust their strategies in order to maintain their market share by
increasing their brand loyalty and brand identity. (Weakness)
2) Economic slowdown lead to limit budget spending especially luxury products in EU
and U.S. zone.
According to the economic slowdown in 2008-2009, mostly EU and U.S. countries had
been directly affected. As a result, EU and U.S. citizen would concern more on luxury spending.
Therefore the big market share generating revenue more than 60% would significantly affect the
luxury industry because it was considered as unnecessary goods. Especially for Coach which
targets the middle income who had more effects on spending power than the upper-class. It was
observed that after economic crisis in 2008 which Coach revenue was dropped, however after the
economic crisis COACH could recover their situation back at least still on growth rate in 2011.
(Opportunity and Threat)
Source: Coach Inc 2012
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3) Brand dilution due to the strategies of the factory stores and pricing
Comparing to other countries, in the U.S. Coach had many distribution channels in order
to capture all customer segments. However, the one that quite popular and could generate the
revenue was factory stores. This causes the market of full price store was growing slower than
factory store. In addition, it can lower the perception of luxury brand in consumers perspective.
4) Stock Price may drop compared among their peers
During 2009-2011, the stock price of Coach was sharply increased about 60% compared
to 2006. However, their competitors like LVMH or Kate Spread the trend of stock price seemed
to be consistency after 2009. Therefore, their trend of luxury goods may change in the future.
Source:Yahoo Finance
58 | P a g e
Source: Morningstar
Question 10: Assess the impact of general environment factors of the industry. What are
the implications of these factors for the success of the company? Any opportunity and
threat can you reveal?
Answer:
59 | P a g e
1) Economic Factors
(T) Global GDP growth rate was growth at slow rate.

Resulting from the economic crisis in 2008-2009, GDP growth rate in EU country and
U.S. dropped significantly in 2008-2009. It affected the spending power of consumers especially
in the major market share from U.S. and Europe which were about 60%. Its consumption would
drop at rate 0.6%/year except in the emerging market like China and India. It can be observed
from almost all top ten luxury brands revenue was dropped in 2009. However, from 2009-2012,
the economic was recovered but at slow growth rate and those still were lower than the period
before the economic crisis. Therefore, Coach had to change the strategies applied in each region
because some regions like EU and U.S. has low GDP growth rate while it had more market share
as compared to the emerging market which had more potential growth but it has lower market
share. (Threat)
Source: World Bank Group
60 | P a g e
Source: World bank
(O) Increasing Middle-Class Spending worldwide
Source: http://www.kiplinger.com/article/business/T019-C021-S001-middle-class-spenders-will-lead-global-growth.html
From OECD, Kilplinger analysis the middle class spending will be increased from 20.9 to
55.7 trillion of US dollar by 2030. Asia Pacifics spending power is expected to be increased by
579% in 2030 and will be no.1 in their spending power. In addition, India and Chinas
consumption are expected to grow significantly after 2025 which are supported by their
increasing in household income.
61 | P a g e
Source: OECD, Kiplinger
Source: OECD, Kiplinger
62 | P a g e
Source: http://www.gia.edu/gems-gemology/spring-2014-lucas-chinese-gem-industry
Source: McKinsey
63 | P a g e
(T) Global inflation rate increase
During 2009-2011, inflation rate was increased especially in China and UK which were
about 4-6%. On the other hand, US inflation rate was around 2-4%. However, near the end of
2012 all global inflation rate were declined to 2%.
2) Sociocultural Factors
(O) Attitude toward luxury brand in each region.
Source: BAIN & COMPANY, 2013
64 | P a g e
From BAIN & COMPANY, personal luxury market was still on growing even at lower
growth rate. Top 10 countries that spent most on personal luxury brands were U.S., Japan, China
from BAIN & Company. China and India were on enthusiastic stage where U.S., Europe were on
mature stage.
65 | P a g e
Refer to BAIN & COMPANY, attitude toward luxury product of China and India were
relatively considered Brand&logo, price sensitivity, easily influence by advertising and accepting
foreign products more than U.S. and Europe. It leaded to potential in buying luxury brand from
China and India were increasing. (Opportunity)
Source:
http://www.gia.edu/gems-gemology/spring-2014lucas-chinese-gem-industry
66 | P a g e
Source :http://www.mckinsey.com/insights/marketing_sales/tapping_chinas_luxury-goods_market
Source: CLSA Asia-Pacific Markets
However, for India, most of Indian people still preferred local brand, traditional style
which was different from other countries. Therefore, it was challenging for Coach to adapt their
product to fit with Indian consumers.(Opportunity)
67 | P a g e
3) Demographic
(O) Potential to expand luxury products for men.
Source:CoachInc, 2012.
Source: United Nations
From Coach Inc 2012, there were potential for men to buy luxury brand in each region.
For example, U.S., Japan and others the percentage of men who spent on luxury products was
still low only 15%-20%. Refer to world population, the proportions for men and women are
about the same level for age below 60. Therefore, there is an opportunity to persuade men to be
in the luxury market.
68 | P a g e
(O) Increasing Generation X and Baby Boomers spending on luxury market.
Source: BAIN & COMPANY
Refer to consumers distribution and spending on luxury in 2013 from BAIN

&COMPANY, the large proportion of spending were from Baby Boomer (49-67) and
Generation X (34-48 years) which was about 80% of sale in luxury market from 73% from total
population in this segment. Therefore, focusing on the major segment and each segment personal
trait are needed to capture the major market. (Opportunity)
(O) Changing proportion of age group

From the figure, the
proportion of age group is
changing. The old group is
expected to increase double
from 2000 to 2050 while the
workforce (20-64 years old)
are relatively consistence.
Therefore, there is opportunity
for increasing market share in
old group.
69 | P a g e
4) Technology Factor
(O) Customers behavior changing from direct shopping to online shopping
Online shopping was increasing due to customers behavior changing from shopping at
the store to online shopping as no. of customer shopping online had been increasing. Refer to
Bain & Company, online personal luxury goods market is expected to grow. (Opportunity)
Source: Bain&Company
Source: BI Intelligence
70 | P a g e
5) Political/ Legal Segment
(T) Tax or Tariff in each countries.

Tariff or Tax in each countries pay significant role in terms of product cost and price. If
some countries have high tariff or tax, it becomes an obstacle to expand in those countries. For
example, China, the fast growing market had planned to lower tariff to 9.8% from Ministry of
finance, General Administration of customs.
Source: Ministry of Finance, General Administration of Customs
(T) Counterfeiting in emerging market

Counterfeiting became the big issue that affected the industry. It is estimated that
approximately 9% of all goods sold worldwide are fake. It was about $300-$600 billion of fake
goods sold. The company should aware of it especially if COACH expands into the emerging
market like China because most of fake products were from China and Asian countries. Some
country had the laws to protect the right or patent but it was not effective. In addition, if the
number of fake product was high, it might dilute the brand value of that product. Therefore, the
company needed to find the way to protect their product. They might have to increase brand
loyalty on the consumer to buy the authentic production than the fake one. (Threat)
71 | P a g e
Source: http://www.netnames.com/blog/2014/04/the-issue-of-counterfeit-luxury-items-in-the-land-of-fashion/
6) Global Segment
(O) Potential growth in emerging market
According to the GDP growth in India and China were about 10% during 2009-2012
which was higher than the U.S. and Europe during economic slowdown and the market sale on
luxury brand in China was also about 20% in 2010. In addition, no. of stores in China was also
increasing from 16 stores in 2006 to 66 stores in 2011 which was about 4 times within 5 years. In
addition, trend to purchase international brands in China was increasing according to MCkinsey
research. Chinese consumers has positive attitude to buy international well-known brands to
represent their status.
Source
:http://www.mckinsey.com/insights/marketing_sales
/tapping_chinas_luxury-goods_market
72 | P a g e
For India, the population in India was the second largest in population as well as the GDP
supporting that India has potential growth. Currently, Indian prefers local brands and also
traditional dress style like Sahri that the company had to adjust their products based on their
culture.
Source: A Cushman & Wakefield Research Publication
Question 11: Analyzing the effects of industry evolution by using industry life cycle model?
What does the model tell you about the changing industry conditions? Are there any
opportunity and threat?
Answer:
Effect of industry life cycle on luxury model
73 | P a g e
Source:
BAIN&COMPANY
Refer to Bain & Company, luxury industry was growing at lower rate which implied that
the industry during 2009-2012 was in the shakeout stage. For the shakeout stage, the company
must be aware of highly competitive market and lower profitability. In this stage, the company
needs to improve the cost effectiveness by outsourcing. However, if industry is classified into
each region, for emerging market like China and India both are in the growth stage.
When comparing overall industry to COACH, Coachs performance in term of sale was
at rising stage even at lower rate. Even, there was a threat due to lower personal luxury growth
worldwide which was from 10% growth in 2011 to 2% growth in 2012. The company was still
growing at higher rate compared to the industry. When focusing on emerging market like China
and India, there is potential growth because the middle income population and their spending
power are expected to increase. In addition, demand for luxury goods in China also increased.
Therefore, there is an opportunity for company to expand in the emerging market which market
was in the growth stage.
74 | P a g e
QUESTION 12: How is the industry changing? What are the underlying drivers of change
and how might those forces individually or collectively change competition in the industry?
Can you find opportunity and threat?
Answer:
From external and internal analysis, the luxury industry became more competitive.
Company in this industry had to response quickly to the change in order to maintain their
performance. The following are the main underlying drivers of change.
(O) Economic growth in emerging market and consumer spending power especially
in India and China
Due to the potential growth in China and India, the company needs to expand their target
customer to these emerging markets. Therefore, company need to research on each countrys
preference in order to gain the market share. For example, in China, Chinese perceived wellknow brand as having a good quality. In addition, Chinese is relatively easily influenced by
advertising and they has high price sensitive. Therefore, the company needs to take all of these to
develop the product and strategies to apply in China.
(O) The potential growth in e-commerce
From the market trend of online shopping on luxury product, it was shown that there
were some consumers who prefer to buy on line on luxury products. The company needs to
apply this e-commerce for expanding their channel strategies. They may need to consider that
difference countries or region may have barrier due to low technology.
(O) The potential growth of mens products
Because of increasing no. of men population and mens trend to have luxury products,
expanding luxury product to men line was another opportunity. In addition, in women market
number of competitors was relatively high compared to men market.
75 | P a g e
Question 13: What does your strategic group map of luxury goods industry (all segments)
look like? What are the strategic dimensions? Are there any mobility barriers for each
strategic group? Explain the reason to support your answer
Strategic dimensions
Competitors in the luxury goods industry can be divided by strategic dimensions which
are Price Policies / Product Quality and distribution channels.
Price Policies / Product Quality
Price of the luxury goods industry is relatively high. It can be subdivided into many
levels linking to the quality aspects of brand; exclusive, moderate-exclusive, accessible.
Premium brand with a very high price comes with the very high quality of raw materials or
production processes, good-quality materials. For accessible luxury goods, consumers can easily
access good quality with much lower price. Thus, this dimension of price and quality is a clear
criterion to distinguish the competitors.
Distribution channels
The choices of distribution channel of each competitor in the luxury industry are
different. Both in terms of variety and number of distribution channels, such as a limited
distribution channels in order to maintain its brand image. The products could be released in a
limited number or choose a country or a particular channel. In another group diversify its
distribution channels and produce in a large amount via both retail and wholesale sales to reach
customers in a wide range.
76 | P a g e
Segmentation of the strategic dimensions and strategic groups as shown in the map below
From strategic dimension, luxury goods brand can be classified into three strategic groups as
follows:
1) Strategies Group at 1 (Haute-couture); Hermes, Chanel and Dior
Product is expensive and best quality. It is famous in the genuine, meticulous and
authentic history of brand. Using premium quality materials and limited production make its
product exclusive and popular. Target customers are top-level market who has high social class.
These customers buy for collecting and long-term investment.
Haute-couture brands have a small number of distribution channels and selective sales
distribution in order to maintain the brand's exclusive image.
2) Strategies Group 2 (Traditional luxury);Louis Vuitton and Gucci
Traditional luxury brands are most of the famous old brand, as well as the first group. It
gains large group of customers from design by renowned designer, elegant look, and uniqueness.
Currently, some brands may have different product lines at lower prices to compete with lower
groups such as Giorgio Armani, Dolce & Gabbana and so on. Target customers are high-level
market who have high brand loyalty is at a higher level. These customers buy to represent social
status.
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Traditional luxury brands have a moderate number of distribution channels. Stores are
located in major cities, mostly in famous fashion and luxury department stores. It also increases
online channels via the official website of the brand.
3) Strategies Group 3 (Accessible luxury);Coach, Michael Kors and Kate Spade
Accessible luxury brands set low price if compared to other groups. It gain large group
of customers from high quality products at an affordable price and variety of distribution
channels. Coach is in this group
Mobility barriers for each strategic group

Mobility barrier of the Haute-Couture
It is difficult for Haute-couture to move across to the other group, as its mission is to
maintain the image of a premium luxury brand and identity which focused on customer loyalty.
Price is not the main factor of purchasing. If a company chooses to reduce prices in order to
reach more customers or increasing sales channels too much, it will dilute brand image.
Customers will perceive that the brand is no longer exclusive.
Mobility barrier of Traditional luxury
There are few significant factors when moving from traditional luxury to Haute-Couture,
as traditional luxury also has its brand history as well as Haute-Couture. Traditional luxury may
choose to design and launch products that are limited collection and only available in the some
shops. Traditional luxury can set prices higher as customers feel that the products are more
exclusive than usual. Main concern for traditional luxury brands to compete with the accessible
luxury brand is the brand image. Reducing its prices in order to compete with the brands in the
accessible luxury might make their brand image slump down and lose the loyalty of customers.
The strategy of traditional luxury brands is product line extension at lower prices to compete
with accessible luxury instead. Due to the variety of distribution channels compared with
accessible luxury brand, it could lead to a competitive disadvantage.
Mobility barrier of the Accessible luxury
Factor preventing this group to move across to the others is brand positioning. Accessible
luxury is focused on very large sales amount to achieve economies of scale. Customers can
easily afford at a not too high price. If accessible luxury invests more money to enhance the
image or increase profits for the company, it may lead to loss of sales and loss of economies of
scale. To move up in the Traditional or Haute-Couture, brand equity is main discourage factor as
accessible luxury is established recently. Unlike other groups that has brand reputations, long
history as well as customer confidence in the brand and high-quality products.
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Question 14: What key factors determine the competitive success for the company? Explain
the reason and give weight for each factor.
Answer:
Key success factors are a measure of competitive advantage of each company in the
luxury goods industry that any company has the ability to compete with competitors, generate
income and create profits.
From case studies Coach Inc. in 2012: Its Strategy in the "Accessible" Luxury Goods
Market, consumption of luxuries depends on creative design, high quality, and brand reputation.
These factors help to attract customers and build brand loyalty.
Therefore, it was concluded that key success factors and weight of each factor are as
follows.
No.
1
2
3
4
5
Key Success Factors

Brand Image
Design
Quality
Price
Channel
Weight
35%
25%
20%
10%
10%
100%
The weight of each factor will be weight emotional factor more than functional factor as
consumers will give priority to emotional aspect for luxury goods consumption.
1. Brand Image: weighted 35%
Brand image is the most important factor at the most weight. Consumers prefer luxury
goods because need satisfaction, pride, social status representation and recognition from society.
Therefore, it deemed to consumers as emotional value and social value rather than functional use
itself.
Marketing guru, Philip Kotler, describes that image is the combination of beliefs,
thoughts and impressions that people have towards anything. The attitudes and actions are highly
intertwined with the image. Brand Image is formed in consumers minds by focusing on the
unique features. The brand image is based on Positioning of products that the company wants to
make a Differentiation from other brands. It will effectively help to improve their business. Once
the product has a good image, it helps convincing consumers to buy as a result in market share
increased, contributes to trust and brand loyalty. Brand Image factors are below.
Brand history
Brand Positioning
Brand recognition
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2. Design: weighted 25%.

The product is designed to look attractive at the next level. Its appearance is the first
thing customers experience. Appearance of the product reflects the identity of consumers. The
design is not only coming from the designer himself, but also from the company's strategy to
focus on consumer such as a design emphasizing its beauty, usability, etc.
Design factors are below.

Designer: Designer adds a guarantee that the design of the product will be good. Some
customers get stuck in a designer rather than a product.
Design Match-up: The ability to design products to meet customers needs.
Design Frequent: Frequency of new collection to gain customers attention and follow up
with new products all the time.
Design Various: A variety of products or design a result for customer to purchase more
often. By a variety of products both in terms of the type and model of the product will be
able to meet the needs of consumers e.g. bags, wallets, shoes, clothing, hats, and a new
collection.
Design Functional: Functional use is also a factor that customers consider whether
products are practical as customer requirements or not.
3. Product Quality: weighted 20%.

Success products in the luxury goods industry are high quality. Consumers have the
expectations that quality have been high because product is expensive. Therefore, production
process of a certain brand need to be exquisite handmade with the quality inspections. There is
guarantee, consumers can immediately send product to the repair department in case of
production defect. Furthermore, quality can be measured by the quality of the materials used,
craftsmanship, refinement, durability and worldwide standardization of the product.
4. Price Competiveness: weighted 10%.
Since price of luxury goods are relatively high, prices are influencing factor for
purchasing decision at some level. If the price is too high, its difficult for customers to access to
that product. But a strong and recognizable luxury brand which continued to invest in brand
development for many decades can make the product at a high price and do not need to discount
it. Consumers perceive brand value and are willing to buy at higher prices.
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5. Distribution Channel: weighted 10%.

Distribution channels are important because it is the way to reach consumers. The diversified
and convenient distribution channels will enable consumers to access easily. It is the opportunity
to sell their products more, increase sales and market share. Distribution channels have to be
appropriate and consistent with the brand positioning as it might affect the brand image and
consumers perception. High brand positioning should limited stores in exclusive locations or in a
luxury mall and hotel. It should not have too many sales channels. While luxury goods with
moderate level may diverse their stores and location. It may also open factory store to sell goods
cheaper than usual.
Offline Channel: distribution through general stores.

Online Channel: distribution over the Internet.
Question 15: Carry out an industry matrix to see how well the company and competitors
are responding to key success factors in the industry environment? Explain the reason for
giving the score for the company and each competitor. Can you identify any opportunity
and threat?
Answer:
Industry matrix summarize key success factors, weight of each factor and score of each
luxury brand in the industry as below
Industry Matrix
Factors
Coach
LV
Gucci
Kate Spade Michael Kors
Weight Rating Score Rating Score Rating Score Rating Score Rating Score
Brand Image
35%
1.05
1.4
1.4
0.7
0.7
Design
25%
0.75
0.75
Product Quality 20%
0.6
0.8
0.8
0.4
0.6
Price
10%
Competiveness
0.4
0.3
0.3
0.4
0.4
0.4
0.3
0.2
0.3
0.2
Channel
10%
100%
3.45
3.8
3.7
2.55
2.65
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Note: Assign 1 to 4 rating to each key success factor for particular brand based on each
brand current response to that particular factor. Each rating is a judgment regarding how well
that company is currently dealing with each factor, where
4 = major strength
3 = minor strength
2 = minor weakness
1 = major weakness
1. Brand Image: weighted 35%

Brand
Rating
Reason
Coach
Founded in 1941 (70 years) The brand history is long enough and broad
reputation. It is moderate luxury. It not emphasis on luxury too much, but
on the design and price that middle-class consumers can afford instead.
LV
Founded in 1854 (157 years) The brand image with a long history and a
famous in worldwide is a valuable asset of LVMH.
Gucci
Founded in 1921 (90 years) The brand image with a long history and a
famous in worldwide
Kate
Spade
Founded in 1993 (18 years) It was founded not too long compared to its
competitors (founded 1993) It is moderate position which focus on
modern, colorful, fun features to meet customers need rather than an
expensive luxury.
Michael
Kors
Founded in 1981 (20 years) The new brand is renowned medium. Since
its inception in 1981 and has grown steadily reputation. It has been
widely recognized as a brand that put moderate position is not focused
on luxury goods. How prevalent in America It is not widely known
around the world.
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2. Design: weighted 25%.

Brand
Rating
Reason
Coach
An experienced designer equipped with market research can design

products that meet the preferences of customers. It designs and
manufactures products from the survey result rather than only the
sentiment of the designer. Make the product look modern and beautiful.
LV
The highly experienced designer equipped with market research that

takes into account the needs of customers. The market research is to
design products to meet customer preference. The new collection is on a
regular basis.
Gucci
The highly experienced designer with creativity to blend in seamlessly.

There are style and elegance. A variety of products is including bags,
clothing and other accessories.
Kate
Spade
Kate Spade has a modern design for modern women. Products designed
for the modern lifestyle that has modern characteristic and bright colors.
A variety of products are bags, clothing and other accessories.
Michael
Kors
Michael Kors Products are beautiful and stylish brand design. A variety
of products is including bags, watches and other accessories. The new
collection is on a regular basis.
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3. Product Quality: weighted 20%.

Brand
Rating
Reason
Coach
The materials used in the manufacture are at a good level. There is

product quality control to meet the benchmarks.
LV
The materials used in the manufacture are at a high level. Product quality
is much better to make customers aware its specialty. Finely crafted bag
of LV has been hailed as the best quality because effective QC system.
Gucci
The materials used in the manufacture are at a high level.Product quality

is much better to make customers aware its specialty.
Kate
Spade
The materials used in the manufacture are at a moderate level. It has an

agreement to ensure the quality and on-time delivery of raw materials.
Employees may not may well-expertise comparable to other competitors.
Michael
Kors
The materials used in the manufacture are at a moderate level.There is

quality inspection of raw materials and manufacturingprocess to meets
the standard.
4. Price Competiveness: weighted 10%.

Brand
Rating
Reason
Coach
Approximate price range: 200-500 USD. The price is moderate.

Focusing on the affluent customers who seek for high quality, good look
at a lower price. With a group of middle-class people who want the
Luxury
LV
Approximate price range: 1,000 -5,000 USD. The price of goods is high.
There will not be any sale or promotion period. Higher price is what
represents brand value.
Gucci
Approximate price range: 1,000 -5,000 USD . The price of goods is high
to reflect the brand identity and quality.
Kate
Spade
Approximate price range: 200-500 USD. The price is moderate. It

emphasizes on fun, colorful and modern, rather than an expensive luxury.
Michael
Kors
Approximate price range: 200-800 USD. The price is moderate. A luxury

product that looks good and general people can purchase.
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5. Distribution Channel: weighted 10%.

Brand
Rating
Reason
Coach
There is a great variety of distribution channels. This includes full price

retail store, factory outlet, internet, sales representative or department
stores.
LV
LV sells in own stores, high-end department stores and without outlet in

order to maintain the brand image. With the direct management of each
area, it has distribution control by itself and not passes through an
intermediary.
Gucci
Gucci sells in own stores, high-end department stores
Kate
Spade
It has powerful distribution channels both retailers and online. Using Ecommerce sale of distribution channels which successfully increased its
customer base and driven business.
Michael
Kors
It has moderate distribution channels in regular stores as well as in

leading department stores and online. But the number of branches may
not be as much as other brands and locations may be limited in major
cities or fashion city
Chart of industry matrix vs. key success factors

Brand Image
4
3
2
Channel
Design
Coach
LV
Gucci
Kate Spade
Michael Kors
Price
Quality
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We can identify any opportunity and threat in term of key success factors as follows:
Coach (Key Success factor 3.45)
Opportunities: The variety of distribution channels help consumers to access to products
easily. Coach can set the accessible price for customer at the certain quality. Market research
enables a design differentiation that meets customers needs.
Threats: Brand image and reputation are not strong as competitors. Distribution channels
in the factory store make the brand image even more weaken.
Louis Vuitton (Key Success factor 3.8)
Opportunities: LV has a clear and strong brand image with long history. It is wellknown and worldwide respected. The product quality is very high with beautiful design from the
world's top designer.
Threats: The high price without discount to maintain band image led to the difficulty to
access the brand.
Gucci (Key Success factor 3.7)
Opportunities: It has a strong brand image with long history. It is well-known and
worldwide respected. The product quality is high with stylish design from the world's top
designer.
Threats: The high price to maintain band image led to the difficulty to access the brand.
Kate Spade (Key Success factor 2.55)
Opportunities: The price is not too high. Consumers can easily access to the products. It
utilizes E-commerce as a distribution channel to reach a new generation effectively.
Threats: Brand Image is still considered as inferior since it is new brand with shorter
history. The ability to penetrate the high-end market is still inferior to competitors.
Michael Kors (Key Success factor 2.65)
Opportunities: The price is not too high. Consumers can access easily. A variety of
products coverall type of products for both women and men.
Threats: Brand image also cannot create a strong perception as much as competitors.
Distribution channels are not covered globally.
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Question 16: Discuss competition in the industry by using Porters Five Forces Model.
Explain the reason for giving the weight and score for each force.
a)
b)
c)
d)
e)
f)
Threat of New Entrants

Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitute Products or Services
Rivalry among Existing Competitors
Draw the graph for your assessment of overall industry attractiveness. What is the
Industrial Return on sales Summarize your findings. Any opportunity and threat can
you reveal?
Answer:
Source: Porter, M.E. (1980) Competitive Strategy, The Free Press, New York, 1980
The attractiveness of each industry can be analysed using Porter's Five Forces Model, by
determining the ratings on each side of the industry as a whole. A brief overview of each factor
will be made before providing opportunities and threats of company.
The analysis of Porter's Five Forces Model for Coach, a higher score indicates more
competitive pressures. We can conclude as to the effects on each side, as shown in the following
table.
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Porter's Five Forces Model

Bargaining Power of Suppliers
Threat of Substitute Products or Services
Rivalry among Existing Competitors
Total score
Intensity
Industry
Attractiveness
2.5
Low
Attractive
Low
Attractive
1.6
Low
Attractive
Moderate
Unattractive
3.3
Moderate-High
Unattractive
Note: Assign 1 to 5 rating to each force. A higher score indicates more competitive pressures.
5 = High
4 = Moderate-High
3 = Moderate
2 = Moderate-Low
1 = Low
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1. Threat of New Entrants

Threat of new entrants in this business is quite low since there are no potential
competitors that are large enough to come into the industry. New entrants are required a high
investment to build brands and to be recognized in this market. Brand reputation and brand
loyalty is important for all players in this market. If investment fund is not high enough, situation
for the new competitor can be quite difficult.
1. Threat of New
Entrants
Low= Attractive
Score
High if
Luxury good
market
Rating
Weight
Weighted
Score
1.1 Economies of
scale
1.2 Factor
(advantages and
disadvantages)
related to largeand small-scale
entry
1.3 Product
differentiation
1.4 Capital
requirements
1.5 Switching cost
Low
Moderate High
0.1
0.2
Low
Moderate High
0.1
0.2
Low
Moderate High
0.2
0.4
Low
Moderate High
0.2
0.4
Low
Moderate Low
0.1
0.4
1.6 Access to
distribution
channels
1.7 Cost
disadvantages
independent of
scale
1.8 Government
policies
1.9 Expected
retalisation
Low
Moderate
0.1
0.2
Low
Moderate High
0.1
0.2
Low
Low
0.1
0.5
Low
Moderate High
0.1
0.2
2.5
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2. Bargaining Power of Suppliers

Bargaining Power of Supplier is considered relatively low. Coach does not have its own
manufacturing plant. Their suppliers are spread out in several countries for example China,
Vietnam, India including in the U.S. itself. There is no supplier with high production ratio, so the
negotiation power is relatively low. If material and labor costs have risen, these costs will be
spread to the supplier and gradually being passed to the customers. Furthermore, Coach has
broadened supplier to many areas of production to reduce the risk from inflation in the region.
2.
Bargaining
Power of
Suppliers
Low= Attractive
2.1 Number of
substitute
product
2.2 Importance of
industry to
suppliers
2.3 Switching cost
2.4 Backward
integration
2.5 Forward
integration
Score
High if
Luxury good
market
Rating
Weight
Weighted
Score
Low
High
0.4
0.4
Low
Moderate
0.2
0.6
High
Moderate
0.2
0.6
Low
Moderate
0.1
0.3
High
Low
0.1
0.1
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3. Bargaining Power of Buyers

The bargaining power of the buyers is considered relatively low. Coach focus on product
quality at accessible prices. Coach has different position in a market from this policy so
bargaining power of buyers is not very high. Recently, customers also have the ability to
negotiate because there are new competitors into the market by introducing new style like
Michael Kors and Kate Spade. Then, Coach should have strategy to improve their own identity
to maintain differentiation and customer retention.
3. Bargaining
Power of
Buyers
Low= Attractive
Score High
if
Luxury
good market
Rating
Weight
Weighted
Score
3.1 Buyers
characteristics
High
Low (Small)
0.3
0.3
Low
0.2
0.2
(Large/few)
3.2 Purchasing
characteristic
High
(Large
quantity)
3.3 Importance of
buyers to large
order
3.4 Switching cost
High
Low
0.1
0.1
Low
Moderate
Low
0.2
0.8
3.5 Feasibility of
buyers to
influence
producers
3.6 Buyers ability
to produce
High
Low
0.1
0.1
High
Low
0.1
0.1
1.6
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4. Threat of Substitute Products or Services.

The threat of substitute products is moderate because there are many different types of
replacement cost. Still, you cannot fully replace or substitute to meet customers needs. Coach
focus on medium-income to high-income customers who choose products that look elegant to
indicate their status. The key issue for Coach is the increasing in counterfeit products especially
in emerging economies such as China and Asia as these products will continue to develop better
quality with much lower prices. This major obstacle severely impact on brand image and
customers attitudes.
4. Threat of
Substitute
Products or
Services
Moderate=
Unattractive
Score
High if
Luxury good
market
Rating
Weight
Weighted
Score
4.1 Substitute
products
equality
4.2 Price of the
substitute
High
Moderate High
0.4
1.6
Low
Moderate High
0.4
0.8
Low
Moderate
0.2
0.6
4.3 Switching cost
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5. Rivalry among Existing Competitors

Competition in the industry is moderate-high. The growth rate of the industry is still at a
high level. It led to intensified competition because everyone is trying to take market share.
Coach has a market share of approximately 28% is in the bag market in the United States which
was faced with several competitors in the market including indirect competitors such as Louis
Vuitton and Gucci, etc. There is also a new entrant to the industry as direct competitors which
are Michael Kors and Kate Spade. Both companies show a quite high growing number. It can be
indicate that competition in the luxury handbag now being more severe. Consequently, Coach
should prepare for a change to their competitiveness to survive.
5. Rivalry among
Existing
Competitors
Moderate-High=
Unattractive
Score
High if
Luxury good
market
Rating
Weight
Weighted
Score
5.1 Number or
Equally
balanced
competitors
5.2 Industry growth
High
High
0.2
Low
Moderate High
0.2
0.4
5.3 Amount of
fixed cost
5.4 Product
differentiation
5.5 Switching costs
High
Moderate
0.1
0.3
Low
Moderate High
0.2
0.4
Low
Moderate Low
0.1
0.4
5.6 Strategic stake
High
High
0.1
0.5
5.7 Exit barriers
High
Moderate
0.1
0.3
3.3
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Draw the graph for your assessment of overall industry attractiveness. What is the
Industrial Return on sales Summarize your findings. Any opportunity and threat can you reveal?
Rivalry among Existing

Competitors
Threat of Substitute
Products or Services
5
4
3
2
1
0
Bargaining Power of
Suppliers
Analysis from Five force model found out that Rivalry among existing competitors is
the main threat for this industry. The competition is intense due to a large number of direct and
indirect competitors. Each competitor has strengths in different way. Coach must try to maintain
product quality and its features to maintain the market share. Threat of new entrants is quite low.
The market is likely to grow again especially markets in Asia compared to other regions.
Revenue in
thousand USD
Return on
sale 2010
Return on
sale 2011
Coach
32%
31%
Louis Vuitton
20%
21%
Gucci
28%
30%
Kate Spade
-6%
9%
Michael Kors
17%
19%
Average
18%
22%
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Return on sale 2010

31%
Return on sale 2011
30%
21%
32%
19%
22%
28%
20%
17%
18%
9%
Coach
Louis Vuitton
Gucci
-6% Michael Kors

Kate Spade
Average
Industrial return on sales is attractive. The average return of the industry remained
relatively high at approximately 18% in 2010 and 22% in 2011. This average yield over financial
cost is sufficient. The industry has the opportunity to profit from future growth of the market
especially in Asian market. The other barriers are relatively low thus this industry remains
attractive.
Question 17 Conduct a competitive intelligence in gathering information and data on
competitors for better understand:
a) What are the history, development, and growth of each competitor? (Including best
selling goods or services, sales revenue, market share and so forth)
b) What is each competitors direction? (Future Objectives) (Including strategic direction
and so forth)
c) What each competitor believes about the industry? (Its assumptions)
d) What each competitor is doing and can do? (Current strategies)
e) What each competitors capabilities are? (Its strengths and weaknesses)(Including
resources, capabilities and core competencies)
f) What will our competitors response in the future?
g) Prepare BCG Growth-Share Matrix to show the competitive position of the company Vs.
competitors for the present year
h) Draw a table to compare future objectives, assumptions, current strategies, capabilities
and future responses for each competitor. Can you observe any opportunity and threat?
(You must show method of calculation and also attach all financial data to support your answer)
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Answer:
Source:http://ww1.prweb.com/prfiles/2012/06/25/9637805/gI_75851_Top%2010%20Most%20Searched%20Luxury
%20Handbag%20Brands%20Globally.png
Louis Vuitton Malletier, commonly referred to as Louis Vuitton or shorten to LV,
founded in 1854, the star brand of this business group, first focused its development around the
art of traveling, creating trunks, rigid or flexible luggage items, innovative, practical and elegant
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bags and accessories, before expanding its territory and its expertise in other areas of expression.
For over 150 years, its product line has continuously expanded with new travel or city models
and with new materials, shapes and colors. Famous for its originality and the high quality of its
creations, today Louis Vuitton is the world leader in luxury goods and, since 1998, has offered
its international customers a full range of products: leather goods, ready-to-wear for men and
women, shoes and accessories.
Since 2002, the brand has also been present in the watch segment; Louis Vuitton launched its
first line of jewelry in 2004 and its first eyewear collection in 2005. The principal leather goods
lines of Louis Vuitton are:
The Monogram line, a historical canvas created in 1896, also available in Monogram
vernis, mini, satin, patent and matte
The Cuir Epi line, offered in nine colors
The Damier line in three colors, ebony, blue azur and the Damier Graphite line for men,
launched in 2008
The Taga line for men in four colors.
Louis Vuitton merged with Moet-Hennessy in 1987, leading manufacturers of

champagne and cognac to form the luxury goods conglomerate. In 1989, Louis Vuitton operated
130 stores and now it becomes 3,204 stores in 2012.
LVMH has become one of the worlds leading international luxury companies with a
remarkable history of success with more than 100,000 employee worldwide and global
leadership in the manufacture and distribution of luxury goods. Within wide range of products,
LVMH has 5 major business groups:
1)
2)
3)
4)
5)
Wines and Spirits

Fashion and Leather Goods
Perfumes and Cosmetics
Watches and Jewelry
Selective Retailing
LVMH philosophy can be summarized in two words: CREATIVE PASSION

There are 5 Values of LVMH:
1. Innovation and creativity they believe that their future success will come from the
renewal of our product offering while respecting the roots of their Maisons.
2. Excellence of products and servicethey embody what is most noble and accomplished
in the artisan world.
3. Brand image enhancementthey represent an extraordinary asset, a source of dreams and
ambitions.
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4. Entrepreneurshipthey believe that this guarantees their ability to react and their
motivation to create and seize opportunities.
5. Leadership Be the bestthey believe that it is through continually excelling that they
accomplish the best and achieve the best results.
LV is one of the world most valuable luxury brands for a seventh consecutive year. The
quality craftsmanship, heritage, history, and strong consumer loyalty are key factors of success
for luxury brand as well as LV. The LV brand and the famous LV monogram are also among the
most valuable brand that creates competitive advantage.
Source: http://www.lvmh.com/houses/
Best selling LV products
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Source: http://us.louisvuitton.com/eng-us/la-maison/a-legendary-history
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Key Financial Indicator
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Exhibit 17-1 shows major financial data of LV
Source: LVMH 2011 financial report
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Market share of LV comparing to Coach, Gucci, Michael Kors and Kate Spade
Exhibit 17-2 shows Market share of each company computing from total revenue 2007-2011

and so forth)
LV will continue on the path of value-added innovation in the future, accentuating its
high-end image, reinforcing the presence of leather in its collection and introducing many
personalization options in order to maintain a sustainable growth. The brand will also be
expanding its presence to new cities in China and Brazil. LV is stepping up investment in mens
wear, as is its rival PPR, with its acquisition of Italian tailor Brioni to tap demand in Asia and
position itself for future growth in emerging markets. Stores will also be inaugurated in new
countries for the brand; however the growth strategy will continue to slowly expand to protect
brand image, avoiding becoming too commonplace, focusing on high-end products and
strengthening its consumers loyalty program and emphasizing more in in-store services,
personalization, and marketing strategy. By using LVMH synergies significantly strengthen their
store networks, expand into new markets, share research and distribution resources.
102 | P a g e
Design: Whether LV belongs to the world of haute couture or luxury fashion, its brand
has founded its success first and foremost on the quality, authenticity and originality of their
designs that must be renewed with each season and each collection. Thus, a strategic is to
strengthen the design team, ensure the collaboration of the best designer, and adapt their talents
to the spirit of LV. LV believes that one of its essential assets is the ability to attract a large
number of internationally recognized designers to its companies. Marc Jacobs has designed the
LV ready to wear collections since 1998, supervises the creation of shows and is successfully
recreating the great classics of the brand in leather goods. New strategy LV will be implemented
is that using made-to-order bags in exotic skins and created invitation only spaces in its shops.
Distribution: Controlling the distribution of its products is a core strategic vector for LV.
This control allows the group to maintain distribution margins, and guarantees strict control of
the brand image, sales reception and environment that the brands require. It also gives the group
closer contacts with its customers so that it can better anticipate their expectations. In order to
meet these objectives, LV created the first international network of exclusive boutiques under the
banner of its fashion and leather goods brands. This network included 1090 stores as of
Dec2008, including 425 LV stores.
Supply Sources and subcontracting: The fifteen leather goods manufacturing shops of
LV, eleven in France, Three in Spain and one in the United States, provide most of the brands
production. All development and production processes for LVs entire footwear line are handled
at its site in FiessodArtico, Italy. LV uses third parties only to supplement its manufacturing and
achieve production flexibility. Overall, the use of subcontractors for LV operations represented
about 35% of the cost of sales in 2008. LV depends on outside suppliers for most of the leather
and raw materials used in manufacturing its products. Even though a significant percentage of
the raw materials are purchased from a fairly small number of suppliers, LV believes that these
supplies could be obtained from other sources if necessary. For LV, the leading supplier of hides
and leathers represents about 20% of its total supplies of these products.Finally, for the various
Houses, the fabric suppliers are often Italian, but on a non-exclusive basis. The designers and
style departments of each House ensure that manufacturing does not generally depend on patents
or exclusive expertise owned by third parties.

Global environment is always changing; LVMH will be careful but not be pessimistic.
They are close to their markets and keep a close eye on developments as they occur. This enables
LVMH to better understand and respond more quickly to factors such as new challenges for their
brands and businesses, the emergence of new customer segments, developments in the media
world and consumption trends. Ongoing information network across the group enables LVMH to
share the best practices to strongly protect their future growth.
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However, there is more intense in luxury market competitions, all products categories are
driving LVs exceptional performance. In order to maintain this advantage, luxury products
customers are looking for more sophistication and personalization. The brands new high-end
leather goods special order line is also a fine illustration of this strategy, giving customers a
cornucopia of alternatives to choose from to experience the thrill of owning a truly unique
design.
The key success factor of luxury industry is attracting top-tier talent craftsmanship people
working to create the exceptional and challenging projects. Attracting, incubating and nurturing
the most promising talent are strategic priorities for this industry.
As LVMH keep a close watch on the volatility of Europe economic, LVMH will remain
true to its value and managing with the groups businesses with a steady hand and continuing to
invest wisely. Besides, LV believes there is a high opportunity of growth in Asia and South
America since recently they have been attracting growing numbers of new customers from Asia
and South America, further contributing to the brands phenomenal development. Especially in
2011, growth was particularly remarkable in Europe, the United States and Asia especially in
China. LVMH believes that within the luxury sector, LVMH is very powerful within high
network of luxury brands and distribution, also unique enterprise that make them stand out in its
sector.
Current Strategies of LV:
1) Establishing a close relationship between their customers and the brand. Providing unique
outstanding in-store experience that gives customers a sense of being special, which is an
integral part of the pleasure of buying. Using effective communication strategy to maintain
loyal customers, offering the best possible quality, exclusive products, and an unparalleled
level of service and thus find that the brands values mirror their own.
2) Heart of the brands strategy in 2011 was diversified personalized offer. Special-order or
bespoke options are now available in the leather goods, footwear and ready-to-wear business
by using new high-ended leather goods. Customers can create a unique bag under the
guidance of a sales associate that reflects their personality. More focus into men product lines
such as made-to-order footwear and belt service as well as a collection of evening ready-towear that can be personalized.
3) Diversification product lines offer in leather goods by offering precious leather collections
with crocodile, ostrich, and python which are the very finest leathers as well as the hardest
wearing.
4) Setting premium pricing strategy with uncompromising quality. The prestige price and avoid
to give discount are the principles implementing by LV, in the effort of preserving high value
of LV brand.
5) Extraordinary network of distribution strategy. The limited distribution channel is
implemented to control the overall processes. The strategic stores located in the prestigious
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sites such as flagship stores in the most fashionable area globally are key strategy to
internationalize brand and image of the product. Also, at their retail stores are only shows
distinctive image and its iconic products presented in a retail network placing increasingly
emphasis on the highest possible quality.
6) Incredible communication strategy by creating powerful brand and image of the company
and developed strong competitive advantages in the market resulted in massive success of
LV in attracting consumers heart. Using two notable celebritys endorsement by Angelina
Jolie as the new iconic ambassador for its core values campaign and a new website inviting
users from around the world to experience a journey. Connection with culture and art, LV
opened the exhibition retracing the crowning moments in the history of LV at the national
museum of China and the opening of a space dedicated to contemporary art at the Louis
Vuitton Maison in Tokyo.
7) Value human resource by recruit and train craftspeople in pursuit of excellence to develop
wide range of people skills, innovate, enhance the quality and appeal of LV stores and
increase market share.
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e) What each competitors capabilities are? (Its strengths and weaknesses)(Including resources, capabilities and core
competencies)
Resources
Criterias
Valuable
Rare
Costly to
imitate
Nonsubstitutable
Tangible Resources
Financial
Resources
Physical
Resources
Technological
Resources
LV mainly finance by shareholders and debt borrowing. LV has

very limited debt D/E ratio = 1.00 with a plenty of FCF of 2.5 billion
Euros for new investment in production, new innovative product
development, and future expansion.
With a good reputation of LV, it has an ability to borrow money
from financial institutions as needed without difficulties.
The competitors ability to funding more money from financial
institutions can be done easily without high cost to imitate as well if they
have good reputation with trusted financial performance.
LV has high access to raw materials especially the high quality of
leather and precious raw materials.
LV uses third parties only to supplement its manufacturing and achieve
production flexibility. Overall, the use of subcontractors for LV
operations represented about 35% of the cost of sales in 2008. LV
depends on outside suppliers for most of the leather and raw materials
used in manufacturing its products. Even though a significant percentage
of the raw materials are purchased from a fairly small number of
suppliers, LV believes that these supplies could be obtained from other
sources if necessary.
Trademark
LV is the worlds most valuable luxury brand in the world. LV brands
value ranked #14 as of May 2015 at 28.1 Billion USD. Most of these
adorned with the LV monogram.
Source: http://www.forbes.com/companies/louis-vuitton/
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Resources
Criterias
Valuable
Rare
Costly to
imitate
Nonsubstitutable
Intangible Resources
Human
Resources
Managerial Capabilities: Management team of LVMH is very expertise

in business strategy and management with clear vision of future strategy.
Knowledge craftsman: The most prestigious value human resource by

recruit and train craftspeople in pursuit of excellence to develop wide
range of people skills, innovate, enhance the quality and appeal of LV
stores and increase market share
Innovation
Resources
LV value innovation all the time and innovation is its core value to
present the exceptional creativity of its products and its unequaled
savior-faire steeped in exacting craftsmanship.
Reputation
Resources
Brand Name is the most valuable resource for the company
High reputation with customers: LVs loyal customers demand are

always served with the best possible quality, exclusive products and an
unparalleled level of service.
Elegance perception of product quality, durability and reliability
Efficient & Effective interaction and relationship with stakeholders
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Capabilities:
Capabilities
Criteria
Valuable
Rare
Costly to
imitate
Distributions
LV effective use of logistics management techniques and

implementing the most efficient channel of distribution, mostly
through their high-ended retail store locates at prestigious prime
luxury fashion location. LV also takes great advantage of their
numerous retail networks globally.
Human
Resources
Motivating, empowering and retaining employees

LV training system is uniquely to empower passionate of each
employees in order to serve exceptional service to target
customers.
Information
System
Each employees are a coherent universe of men and women

passionate about their profession and driven by the desire to
innovate and achieve
Innovative point-of-purchase data collection methods
LV use new effective IT systems to stay connected with their
loyal customers and the LV websites had been restructured
showing new designation of Angelina Jolie as the new iconic
ambassador for its core value campaign and a new website
inviting users from around the world to experience a journey.
Nonsubstitutable
108 | P a g e
Capabilities
Marketing
Criteria
Effective customer service and using Innovative merchandising
Valuable
Rare
Costly to
imitate
Nonsubstitutable
LV continues on the path of innovative marketing strategy,

accentuating its high-ended image, reinforcing the presence of
leather in its collection and introducing many personalization
options.
Two notable developments during the year were the designation

of Angelina Jolie as the new iconic ambassador for its core value
campaign and a new website inviting users from around the world
to experience a journey. In addition, an exhibition retracting the
crowning moments in the history of LV at the National Museum
of China and the opening of a space dedicated to contemporary
art at the LV Maison in Tokyo were among the initiatives in 2011
illustrating the brands strong ties with the world of culture and
art.
Management
Ability to envision the future and effective organizational

structure
Research &
Development

LV training system is uniquely to empower passionate of each
customers.
Each employees are a coherent universe of men and women
passionate about their profession and driven by the desire to
innovate and achieve
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In summary, there are 4 main core competencies of Louis Vuitton:

1. Brand image: Bring out its value as craftsmanship, outstanding quality and creativity,
timelessness and heritage in every product. LV is the worlds most valuable luxury brand in
the world. LV brands value ranked #14 as of May 2015 at 28.1 Billion USD. Most of these
adorned with the LV monogram.
2. Effective customer service & innovative merchandising: providing unique outstanding instore experience that gives customers a sense of being special, which is an integral part of the
pleasure of buying. Using effective communication strategy to maintain loyal customers,
offering the best possible quality, exclusive products, and an unparalleled level of service and
thus find that the brands values mirror their own.
3. Product design and quality: Elegance perception of product quality, durability and
reliability
4. Innovation resources: LV value innovation all the time and innovation is its core value to
present the exceptional creativity of its products and its unequaled savior-faire steeped in
exacting craftsmanship.
Louis Vuitton Strength

1. Luxurious global brand image, heritage and value with rich history, culture and arts. LV is
the most legendary of fashion house in the world.
2. Premium product quality with superior craftsmanship. LV is one of the few fashion brands
that lead the avant-grade of fashion without compromising traditional craftsmanship. Their
individually hand crafted products which uses exquisite materials, attention to fine details as
well as their no discounts or promotions and immediate disposal of defective products
policies.
3. Largest luxury brand with exclusivity. The high degree of scarcity and exclusivity, evident in
their no discounts or promotions as well as immediate disposal of defective products
policies.
4. Strong presence in leading commercial hubs. LV commands a strong brand identity and
image in the worlds leading financial hubs such as China, Japan, and Hong Kong, which
incidentally also has the highest concentrations of high net worth individuals, with loyal
customers in Europe and the United States.
Louis Vuitton Weakness
1) Limited to high-end customers group only. LV has limited customers consisting mainly of
the elite and super rich who want to make a statement and be distinctive from others.
2) No precedence of offering products on a discount. LV can lost customers to discounted brand
at the same level when competitors offer discount promotion
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1. Product development to satisfy high-end target market with obsession for quality, creativity
and excellence to maintain the quality that guarantees the reputation and success of LV
products and brand. LV always keeps revamping the LV image from time to time to meet
contemporary tastes and styles of its elite customers.
2. To expand market share in a mixed international environment especially in growing of
emerging market to strongly build a solid foundation for the future.
3. Expanded manufacturing capabilities to feed vitality of LV iconic product lines and also the
made-to-order product lines.
4. Brand promotion through exhibitions and events to link brand image with culture and art.
5. Exploring more on the digital media space for brand propagation.
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Gucci is one of the worlds preeminent luxury brands, recognized the world over for its
fashion innovation and impeccable Italian craftsmanship.
Ever since Guccio Gucci founded the house in Florence in 1921, the brand has been a
destination for the worlds most discerning men and women, representing at once contemporary
glamour and traditional Made in Italy craftsmanship. Gucci designs and produces womens and
mens ready-to-wear, handbags, small leather goods, travel accessories, footwear, fine jewellery,
watches, eyewear, fragrances and cosmetics, childrens clothing as well as other timeless
lifestyle items.
Gucci, an Italian fashion and leather goods brand, partly of the Gucci Group is owned by
the French holding company Kering. With the beginning at the end of the 19th century, the Gucci
Company became one of the worlds most successful manufacturers of high-end leather goods,
clothing, and other fashion products. Gucci expanded the company to include stores in Milan and
Rome as well as additional shops in Florence. Guccis stores featured such finely crafted leather
accessories as handbags, shoes, and his iconic ornamented loafer as well as silks and knitwear in
a signature pattern.
Gucci canvas was distinguished by a
signature double-G symbol combined with
prominent red and green bands.
In 1953, Gucci expanded the companys
horizon in New York. Using film stars and jet-set
travelers to Italy during 1950s and 1960s brought
their glamour to Florence, turning Guccis
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merchandise into international status symbols. Movie stars posed in Guccis clothing,
accessories, and footwear for lifestyle magazines around the world, contributing to the
companys growing reputations. Gucci products quickly became renowned for timeless design
and were cherished by iconic movie stars. In the mid-60s, Gucci adopted the legendary
interlocking double G logo, creating yet another chic Gucci visual insignia. Gucci continued its
expansion abroad with stores opening in London, Palm Beach, Paris, and Beverly Hills.
In 1970s, Gucci continued its global expansion, opened stores in Tokyo and Hong Kong.
The company developed its first ready-to-wear collections, featuring GG printed shirts or GG
buttoned fur-trim coats. The brand became famous for its unique mix of innovative audacity and
legendary Italian quality and craftsmanship. Gucci icons were re-invented in new shapes or
colors burning the GG logo through suede - using ever more luxurious materials, like baby
crocodile coats with sterling iGuccier snakehead buckles.
In 1981 Gucci staged its first ever runway show inFlorence. In 1982, Gucci became a
public limited company, and leadership passed to Rodolfo's son, Maurizio Gucci, who held 50
percent of the companys shares.
Gucci is re-launched to global renown through a groundbreaking mix of tradition and
innovation. Tom Ford became creative director of Gucci in 1994 and infused the luxury brand
with a sense of daring and provocation that resonated with celebrity and the fashion world. The
stiletto, and silk cutout jersey dresses with metallic hardware details became instant icons of
Ford's uniquely glamorous vision.
Domenico De Sole was appointed CEO in 1995, and Gucci made the highly successful
transformation to a fully public company. Gucci is named "European Company of the year 1998"
by the European Business Press Federation for its economic and financial performance, strategic
vision and management quality. In 1999, Gucci entered into a strategic alliance with PinaultPrintemps-Redoute, transforming itself from a single brand company into a multi-brand luxury
group.
In 2000s, Gucci achieved astounding global success and is named the most desirable
luxury brand in the world (Nielsen Company, 2007). By exploring Guccis rich heritage,
incomparable craftsmanship and fashion allure, the brand successfully fused its rich history with
the presentcreating compelling collections that reached both commercial and critical success.
Throughout this decade, key house icons, like the Flora pattern, the Jackie Bag and The Bamboo
Bag, were reimagined and rediscovered by a fresh, new audience.
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Gucci continues to focus on strengthening the values upon which its enviable reputation
has been founded for its almost 90-year history: exclusivity, quality, made in Italy, Italian
craftsmanship, and fashion authority. Setting it apart from its competitors, Gucci is able to claim
a unique duality in its brand positioning pairing modernity and heritage, innovation and
craftsmanship, trendsetting and sophistication.
The Gucci Group is now a multi-brand conglomerate with a collection of high fashion
brands like Gucci, Alexander McQueen, Balenciaga, Bedat&Co, BottegaVeneta, Boucheron,
Sergio Rossi, Stella McCartney and Yves Saint Laurent. Today it is one of the worlds leading
luxury brands.
Financial Performance
Source: 2011Kering Financial Report
Best Selling Gucci Products
114 | P a g e

and so forth)
Kering future strategic objective are to ensure revenue and profitability growth of the
group and to assign a specific role to each brand of the group so as to maintain brand image
consistency.
Guccis management team will continue the drive for long-term sustainable growth and
step up its commitment to customers and the focus on products consistent with Guccis DNA:
heritage, exclusivity, craftsmanship, Made in Italy, fashion and sustainability especially more
growth opportunity in Asia countries such as China in order to increase sales revenue, expand
market share and enhancing its luxury identity.
Kering strategy is primarily based onthe organic growth of our existing brands.Kering
will expand into new, growthmarkets, reinforce their presence in maturemarkets and develop
their distributionnetwork and channels, includinge-commerce. In parallel, acquisitionsof small to
medium size, with promisingexpansion prospects and meeting strictcriteria, will strengthen and
complement their brand portfolio.

Kering management team strongly believes in their performance as a cohesive, integrated
and powerful international group. Kering is a world leader in apparel and accessories with an
ensemble of powerful brands. Their entrepreneurial spirit has driven growth and transformation
of the group and currently they are focusing on delivering luxury and sport & lifestyle design,
manufacture and market desirable products to the fast growing luxury segments.
They are developing a set of complementary brands all with strong potential for organic
growth of luxury brands: Gucci, BottegaVeneta, Saint Laurent, Alexander McQueen,
Balenciaga, Brioni, Stella McCartney, Sergio Rossi, Boucheron, Girard-Perregaux,
JEANRICHARD, Qeelin and Christopher Kane. They strongly believe that in the future societal
trends will be increasing in purchasing power, people seeking to affirm their personality and the
desire to look and feel good. Their mission is to allow their customers to express, fulfill and
enjoy themselves through Kering products.
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Kering will take new opportunity to create value and competitive advantage, while
helping to make a better world economically, socially and environmentally.
1) Upscale Differentiation Strategy within brand concept of sophisticated, high-class, highquality, and innovative. Using symbolic-expressive value to appeal to consumers selfconcepts and self-worth, prestige, status and luxury image. In addition, Guccis brand value
is reflected in the perfect balance between its Florentine and Italian heritage and its
reputation as a fashion leader. Gucci got rid of some accessible items and on average,
increasing the price in order to raise the brand image.
2) Market expansion to Asia. For example, Gucci organized its first fashion show in China, in
Wai Tan Yuan. This is to increase more brand awareness and communicate brand value and
image to new target group of customers.
3) There are a great number of projects and initiatives have broadened Guccis digital horizons,
involving new tools, new platforms and an increasingly focused content creation strategy.
These projects include the development of the Gucci Style app in eight different languages,
and the presence on the most dynamic and up-to-date global and local social networks.
Resulting in, Gucci delivered a solid performance, confirming the brands strength and
resilience. A series of signature events, marketing activities and communication initiatives
were carried out, always with the underlying objective to consistently reflect Guccis duality
(fashion & heritage) as expressed in the brands Forever Now advertising campaign.
4) Gucci organized more communication with their customers through social media. For
examples, they were inventing Facebook competition, icons of Heritage Cut & Craft which
invited fans to redesign a famous handbag in paper for charity.
5) With the goal of satisfying the modern consumers desire for sustainable fashion products in
a responsible way, the use of innovative sustainable materials for products and packaging has
also become a key focus at Gucci. The respect for the houses heritage and traditions goes
hand in hand with the desire to keep the brand relevant and vibrant for new generations of
customers today and tomorrow.
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competencies)
Resources
Criteria
Valuable
Rare
Costly to
Nonimitate substitutable
Tangible Resources
Financial
Resources
Physical
Resources
Technological
Resources
Gucci mainly finance by shareholders and debt borrowing for

new investment in production, new innovative product development,
and future expansion.
With a good reputation of Kering group, GUCCI has an ability
to borrow money from financial institutions as needed without
difficulties.
institutions can be done easily without high cost to imitate as well if
they have good reputation with trusted financial performance.
Gucci has high access to raw materials especially the high quality of
leather and precious raw materials.
Trademark
Gucci is the worlds most valuable luxury brand in the world. Gucci
brands value ranked #42 as of May 2015 at 12.4 Billion USD.
Source: http://www.forbes.com/companies/gucci/
Human
Resources
Managerial Capabilities, Knowledge craftsman, Influential designers

and impeccable. Within Gucci group promotes sharing of knowledge
among its various brands capitalizing on specific expertise.
Innovation
Resources
Capacity to innovate.
Gucci value innovation all the time and innovation is its core value of
quality, creativity and Italian craftsmanship. Nevertheless, Gucci
cannot just keep reviving past icons, Gucci needs to have
breakthrough innovation and design.
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Resources
Criteria
Valuable
Rare
Costly to
Nonimitate substitutable
Reputation
Resources
Brand Name
Brand reputation of fashion leader with perfect balance between its
Florentine and Italian heritage. Broad diversified brand portfolio.
Gucci has repositioned to own the category of jet-set chic, a more
exclusive space within the luxury market.
Unfortunately, Gucci brand reputation becomes negatively affect

once them increasing price sharply more than 40% in the past five
years. Result to high inventory in stock affecting in clean up its
wholesale distribution network, affecting revenues, after department
stores offered too many discounts, devaluing the brand.
Source: http://www.businessoffashion.com/articles/news-analysis/gucci-needs-newideas-talents-combat-brand-fatigue
Capabilities:
Capabilities
Distributions
Criteria
- Effective use of logistics management techniques & Channel
of Distribution. Including online distribution channel.
- Sell products at only own store and high-end store with limited
number of supplies to make the brand exclusive. Gucci strictly
controlled its distribution networks.
Valuable
Rare
X
Costly to
imitate
Nonsubstitutable
118 | P a g e
Capabilities
Human
Resources
Information
System
Marketing
Management
Research &
Development
Criteria
- Motivating, empowering and retaining employeesGUCCI
training system is uniquely to empower passionate of each
customers
- The Gucci brand involves more than just their eponymous
fashion house. Gucci Group is a collection of designers who
specialize in high fashion luxury retail. The members include
Gucci, BottegaVeneta, and Yves Saint Laurent, as well as Sergio
Rossi, Stella McCartney and Alexander McQueen
Cost Synergies are generated through centralizedadministration,
sourcing, inventory delivery systems within conglomerate
Kering company.
- Effective customer service in retail experience and Innovative
merchandising.
- Promote brand heritage and traditional of craftsmanship.
- A series of signature events, marketing activities and
communication initiatives to reflect Guccis duality (modern
fashion and heritage)
- There are a great number of projects and initiatives have
broadened Guccis digital horizons, involving new tools, new
platforms and an increasingly focused content creation strategy.
Ability to envision the future and effective organizational
structure
- Innovative technology. Gucci still lack of innovation and
struggling to regain the sparkle their fashion comparing with
other competitors such as LV which affects brand desirability
and ultimately investor sentiment and growth prospects.
- Gucci still stick with the past successful design of products
such as including some natural materials mix and match with the
precious bag such as bamboo handles, a central fixture of Gucci
bags for decades.
Valuable
Costly to
imitate
X
Rare
Nonsubstitutable
119 | P a g e
In summary, there are 2 main core competencies of Gucci:

1. Brand image with the signature of red and green stripes to bring out its core values of
craftsmanship, outstanding quality and absolute made in Italy.
2. Effective customer service & innovative merchandising by using the retail stores network
globally. There are a great number of projects and initiatives have broadened Guccis digital
horizons, involving new tools, new platforms and an increasingly focused content creation
strategy to support the online selling channels.
Gucci Strength
1. Strong brand image
2. Broad diversified brand portfolio
3. Control its distribution channels and process efficiently
4. Strong Supply Chain Value with suppliers and retailers
5. Cost synergies are generated through centralized administration, sourcing, inventory delivery
systems.
6. Directly operated their own retail stores networks.
Weakness
1) Instability of its management.
2) Gucci still lack of innovation and struggling to regain the sparkle their fashion which affects
brand desirability and ultimately investor sentiment and growth prospects.
3) Being its own competitors among other brands within conglomerate Kering Company. There
is a risk of brand dilution.

Kering is developing a set of complementary brands all with strong potential for organic
growth of luxury brands: Gucci, BottegaVeneta, Saint Laurent, Alexander McQueen,
Balenciaga, Brioni, Stella McCartney, Sergio Rossi, Boucheron, Girard-Perregaux,
JEANRICHARD, Qeelin and Christopher Kane. They strongly believe that in the future societal
trends will be increasing in purchasing power especially in Asia especially China and Asia
Pacific countries since people seeking to affirm their personality and the desire to look and feel
good. Their mission is to allow their customers to express, fulfill and enjoy themselves through
Keringluxury brands targeting more high status of youth customers.
Gucci will take new opportunity to create value and competitive advantage by increasing
more customers loyalty using broadened Guccis digital horizons, involving new tools, new
platforms and an increasingly focused content creation strategy. The Gucci Style app in eight
different languages, and the presence on the most dynamic and up-to-date global and local social
networks in order to increase distribution channels and provide real time updates of products and
brand events to increase customers network and take advantage from social media sharing and
increasingly the integration of the digital and in-store experience.
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Michael Kors is a world-renowned, award-winning designer of luxury accessories and
ready-to-wear. His namesake company, established in 1981, currently produces a range of
products under his signature Michael Kors Collection and MICHAEL Michael Kors labels.
These products include accessories, footwear, watches, jewelry, mens and womens ready-towear, eyewear and a full line of fragrance products. He is the honorary chairman and chief
creative officer for his company, Michael Kors Holdings Limited (KORS), which deals in
fashion accessories. Michael Kors stores are operated, either directly or through licensing
partners, in some of the most prestigious cities in the world, including New York, Beverly
Hills, Chicago, London, Milan, Paris, Munich, Istanbul, Dubai, Seoul, Tokyo, Hong Kong,
Shanghai and Rio de Janeiro.
Behind this burgeoning empire stands a singular designer with an innate sense of
glamour and an unfailing eye for timeless chic. Michael Kors has won numerous accolades
within the fashion industry, been honored for his philanthropy, and earned the respect and
affection of millions. Wholly dedicated to a vision of style that is as sophisticated as it is
indulgent, as iconic as it is modern, he has created an enduring luxury lifestyle empire with a
global reach. In addition to the Michael Kors runway collection, the MICHAEL Michael Kors
and KORS Michael Kors lines were launched in 2004. The MICHAEL line includes women's
handbags and shoes as well as women's ready-to-wear apparel. The KORS line contains
footwear and Jeans. Currently, Kors has full collection boutiques in New York, Beverly Hills,
Palm Beach, Manhasset and Chicago. In the year of 2011 marked Michael Kors's thirtieth
year in business.
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Bestselling Michael Kors products
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b) What is each competitors direction? (Future Objectives) (Including strategic

direction and so forth)
Since there is the significant demand opportunity in accessible luxury goods, Michael
Kors aim to expand more product lines in accessible luxury collections which match with
their target market needs. Michal Kors are planning to increase their presence overseas,
especially in China where luxury goods are very popular. They also have great opportunities
to expand the brand to include more items for men and add children into the mix. The
combination of elegance and sport attitude drives Michael Kors to find new jet-set luxury
style to serve the new lifestyle of their customers in order to satisfy the constant changes in
consumer behaviors and using new innovation into the new lines that shows the inspirations,
fabric choices and designs are constantly evolving to become more competitive to the next
level.
Michael Kors brand identity has been from Michael Kors, who is the honorary
chairman and chief creative officer for his company. In addition to, he is an American fashion
designer best known for serving as a judge on the popular television show Project Runway. He's
also known for designing Michelle Obama's dress for her first official portrait. Michael Kor
himself is an asset to the brand and his celebrity friends help him to gain notoriety and
popularity. From his long and successful reputation in fashion designs positively influence the
great successful of Michael Kors brand for its stability and accomplishment within the apparel
industry.
123 | P a g e

Currently Michael Kors is using differentiation strategy to use their uniqueness style of the
products to their international broad targeted customers. They are using the founder, Mr.
Michael Kors as the brand ambassador who is the American Fashion Icon and celebrities.
Michael Kors collections are primarily offer in 2 product lines at different price range
level. Taken together, their two collections target a broad customer base while retaining a
premium luxury image.
o Michael Kors Luxury collections which including accessories, handbags and small
leather goods, many of which are made from high quality leathers and other exotic
skins, footwear and apparel, including ready-to-wear women wear and menswear.
The Michael Kors collection establishes the aesthetic authority of their entire
brand and is carried in many of their retail stores as well as the finest luxury
department stores in the world. Generally, the handbags and small leather goods
retail from $500 to $6000, the footwear retails from $500 to $1300 and the
womens apparel retails from $400 to $4000
o MICHAEL Michael Kors collections, offering accessible luxury collections, was
introduced in 2004 with the strong focus on accessories, in addition to offering
footwear and apparel and it is carried in all of the lifestyle stores as well as
department stores throughout the world to address the significant demand
opportunity in accessible luxury goods which are broad target customers.
MICHAEL Michael Kors collection are accessories, primarily handbags, which
are created to meet the fashion and functional requirements of their broad and
diverse consumer base, and small leather goods, such as clutches, wallets, wristlets
and cosmetic cases; footwear, exclusively in womens styles; and womenswear,
including dresses, tops, jeans, pants, skirts, shorts, and outerwear. Generally, the
handbags retail from $200 to $800, the small leather goods retail from $45 to $200,
the footwear retails from $70 to $500 and the womens apparel retails from $50 to
$500.
Michael Kors separate their market into 3 mains segments retail, wholesale and
licensing. For retail, they are strategically controlled global distribution network focused
on company-operated retail stores. As of March 31, 2012, their retail segment included
191 North American retail stores, including concessions, and 46 international retail stores
including concessions in Europe and Japan. For wholesale, they are using leading
department stores and specialty stores. Their wholesale segment included wholesale sales
through approximately 2,027 department store and specialty store doors in North America
and approximately 650 leading department stores and specialty store doors internationally.
For licensing partners, they license to third parties certain production, sales, and/or
distribution rights. During fiscal 2012, their licensing accounted for approximately 5% of
their total revenues, earned on licensed products and their geographic license from Fossil
watches, Marchon sunglasses, Fossil jewelry and Estee Lauder fragrances.
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competencies)
Resources
Criteria
Valuable
Rare
Costly to
imitate
Nonsubstitutable
Financial Position: Michael Kors mainly finance by shareholders

with a strong financial performance with approx. $1.2 million
cash on hand ready for new product lines or investment
opportunities for international expansion.
Tangible Resources
Financial
Resources
With a good reputation of Michael Kors, they have an ability to

borrow money from financial institutions as needed without
difficulties.
institutions can be done easily without high cost to imitate as well
if they have good reputation with trusted financial performance.
Physical
Resources
Channel of distribution:
As of March 31, 2012, their retail segment included 191 North
American retail stores, including concessions, and 46 international
retail stores including concessions in Europe and Japan. For
wholesale, they are using leading department stores and specialty
stores. Their wholesale segment included wholesale sales through
approximately 2,027 department store and specialty store doors in
North America and approximately 650 leading department stores
and specialty store doors internationally.
Technological
Resources
Trademark: High reputation of Michael Kors brand

internationally is a valuable asset with the COO Michael Kors as
the brand iconic and brand ambassador, the brand is hard to copy
or substitute.
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Resources
Criteria
Valuable
Rare
Costly to
imitate
Nonsubstitutable
Human
Resources
Reputation
Resources
Managerial Capabilities: Michael Kors is COO, Honorary

Chairman and director of the company. His knowledge, skills and
experience and in fashion business have helped the company
successfully built into a global luxury lifestyle brand. In additions,
the management team is also valuable to Michael Kors company
without any easy substitution.
Brand Name: Michael Kors was established in 1981 and brand
reputation of fashion leader with perfect balance of jet-set luxury
lifestyle (the combination of elegance and sport attitude)
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Capabilities
Capabilities
Distributions
Human
Resources
Marketing
Manufacturing
Criteria
Valuable
Rare
X
Costly to
imitate
X
Nonsubstitutable
X
Effective use of logistics management techniques & Channel of

Distribution but the numbers of distribution channels is less than its
competitors
The company is focused on training employees to be brand
ambassadors. Their employees have high satisfaction and high level
of respect for the company. Each employees put an emphasis on
pleasing the customer and finding the right products for him/her,
therefore, in-store experience is high class and reflects the luxury
positioning of the brand
Innovative merchandising:
Michael Kors is active communication to their customers, with
more than $32 millions of advertising budget in 2012 using for
promoting jet-set luxury style while using lots of celebrities
endorsement strategy. Also, using direct marketing to arouse the
brand awareness. The website of michaelkors.com is also another
marketing channel online, also quickly response to the customers
online order.
Production skills yielding reliable product: Michael Kors has a
great relationship with their third-party supplier companies who has
well known ability to produce high quality and reliable products.
However, when comparing Michael Kors products with other
brands e.g. LV, Gucci, or Coach, the quality of Michael Kors is not
the highest comparing to these competitors at the beginning.
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In summary, there are 2core competencies of Michael Kors:

1. Managerial Capabilities:Michael Kors is COO, Honorary Chairman and director of the
company. His knowledge, skills and experience and in fashion business have helped the
company successfully built into a global luxury lifestyle brand. In additions, the
management team is also valuable to Michael Kors Company without any easy
substitution.
2. Strong brand equity and image: matching rivals on high quality leather and innovative
styling with the good image of celebrities endorsement.
Michael Kors Strength
Michael Kors, COO, founder of Michael Kors Company who is the brand ambassador,
celebrities, and famous fashion designer who authenticate Michael Kors brand becomes
luxury and differentiate from other brands.
Celebrity Endorsement using in Michael Kors marketing strategy is very successful and
increasing Michael Kors brand awareness through using clothes and accessories on show
in the reality shows on TV.
Jet-Set Style has been fashionable for men and women at working ages: Michael Kors
associates himself and his brand with a jet set style that personifies an individual who
travels around the world in style. In a high economy, this standard is not only something that
the consumer desires, but is also attainable. The everyday business woman, for example, can
purchase clothes, shoes and accessories from the brand that give her a high class feeling.
MKs print ads as well as online promotion remain consistent with this ideal.
Michael Kors Weakness
Brand dilution: Since the Michael Kors brand is known for its high class jet set style, one
would not expect to find its products in bargain/discount stores such as Loehmanns Ross,
Marshalls or TJ Maxx. Unfortunately, MKs products can regularly be found here, which
in turn dilutes the brand. While this availability makes it more accessible to lower income
people, the standard that the brand sets is more upscale than these bargain basements.
Those who are paying full price may become skeptical and find another brand that is not
as easy to attain.
Michael as the face of the brand: Michael Kors himself personifies the brand image and
is a crucial part of the overall look. There is no successor to the brand as he does not have
children or relatives who would take over. The fact that he is so hands on and the brand
relies on him is strength now, but if anything were to happen to him, the future of MK
could be in jeopardy.
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Global impact: Michael Kors is still much more relevant in the United States than anywhere
else in the world. Michael himself is known as an American fashion icon, but wants to
expand his brand to gain much more importance throughout the world. To increase this
presence, more stores must be opened outside of the US and heavy marketing must be done
to make other countries aware of them.
The brands geographic presence is restricted and is lesser known globally.

1) New differentiated luxury product line within concept of jet-set style
2) Expand the market to Asia and Europe in both retail and wholesale in order to boost more
sales revenue from international market and sustain in long-term
3) Using more celebrities endorsement to strengthen the luxury brand positioning.
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All hallmarks of Kate Spade brand are crisp color, graphic prints and playful
sophistication. Kate Spade business world expands gradually. Their exuberant approach to the
everyday is evident in each category they enter, from handbags and clothing to jewelry, shoes,
stationary, eyewear, baby, fragrance, tabletop, bedding and gifts. Kate Spade has over 80 retail
shops across the USA and more than 100 shops internationally. Kate Spade shops are available
in every time zone and on every continent. Whether in San Francisco, Sao Paulo or Shanghai, the
customers will find Kate Spade New York on the arms and in the lives of stylish women
everywhere.
Kate Spade New York was established in 1993 by Kate Brosnahan Spade, at that time
was a former accessories editor at Ma Demoiselle, and designed the utilitarian bag. She had been
craving for years but couldnt find anywhere. Then she began a revolution in accessories with
simple silhouettes with clever details and crisp palettes soon established visual shorthand for the
brand thats recognizable the world over.
In 2007, Kate turned the reins over to the design powerhouse Liz Claiborne Inc. and now
it become Kate Spade Company (NYSE: KATE) and Deborah Lloyd took the position as a
president and chief creative officer with an aim to broaden the line while honoring Kates rich
history. Along with CEO Craig Leavitt, she quickly launched clothing and jewelry collections,
followed by the introduction of bedding, leg wear and fragrance
130 | P a g e
Best Selling Products
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b) What is each competitors direction? (Future Objectives) (Including strategic

direction and so forth)
Kate Spade aims to be the top 5 leader in luxury goods within the next 10 years by
initiating new colorfully trend and product that can satisfy consumers taste of colorful luxury at
that time. Not only bags, but Kate Spade also plans to expand its market to other product lines
that relating to consumers daily life. In addition, Kate Spade would like to expand into
international markets and increasingly offer more distribution channel such as using more online
stores channel and opening new retail stores at famous destination such as China and Japan
within the next few years.
c)
What each competitor believes about the industry? (Its assumptions)
In order to achieve their goal to be top 5 leaders in the luxury market, Kate Spade needs
to focus on improving their productivity and profitability. Also its own uniqueness in brandcentric must be maintain strategically. Once Kate Spade is growing while they are not stopping
in improvement their process, maintaining good cost structure, offering passion for sharing
colorful worlds and expanding their markets globally by using both online and offline channel,
eventually Kate Spade can achieve their future objective.
d)
What each competitor is doing and can do? (Current strategies)
Kate Spade brand offers fashion products (accessories, apparel and jewelry) for women
under the Kate Spade and Kate Spade Saturday trademarks and for men under the Jack Spade
trademark.
These products are sold primarily in the US through wholly-owned specialty retail and
outlet stores, select specialty retail and upscale department stores, our operations in Japan, Brazil
and the United Kingdom, through theKate Spade and Kate Spade Saturday and Jack Spade
E-commerce websites, as well as through a joint venture in China and through a network of
distributors in Asia and the Middle East.
Kate Spades product line includes handbags, small leather goods, fashion accessories,
jewelry and apparel. In addition, Kate Spade has existing licensing agreements for footwear,
optics, fragrances, tabletop products, legwear, electronics cases, bedding and stationery. Kate
Spade Saturday products include apparel, handbags, small leather goods, jewelry, fashion
accessories, footwear, optics, electronic cases, beauty, tabletop products and home decor items.
Jack Spade products include briefcases, travel bags, small leather goods and apparel.
132 | P a g e
Current Strategy: using differentiation strategy by uniqueness of brand image and using
heavily on-line and e-commerce strategy
Brand consistency. Kate Spade is clearly a brand with stylish products and a great
identity. Ensuring consistent communication its unique brand identity and image to their
customers to ensure the long term growth
Growth in existing market. Opening more new retail location in North America, Japan,
Brazil and United Kingdom
Adding new international points of distribution to support the expansion of
international market such as Asia and Middle East.
Increasing international sales with a focus in Asia. Prioritizing initiatives including
Asian fashion fit and creating special products to celebrate holidays like Chinese New
Year undefined.
Broading the array of products and enhancing customer service by increasing the
proportion of apparel sales by introducing more new and variety of this product line.
Continued investment in E-commerce growth Within Kate Spade website, customers
are able to search for information and order products online as well, this channel will help
boosting more sales revenue generating for the company. There is a details of website for
all products provided by mother company per below.
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e) What each competitors capabilities are? (Its strengths and weaknesses) (Including resources, capabilities and core
competencies)
Resources
Criteria
Valuable
Rare
Costly to
imitate
Nonsubstitutable
Tangible Resources
Financial
Resources
Financial Position: Kate Spade mainly finance by

shareholders. D/E ratio = -9.72 since there was a stock
buyback and there is $180 Million cash on hand ready for
new product lines or investment opportunities for
international expansion.
With a good reputation of Kate Spade, they have an ability to

borrow money from financial institutions as needed without
difficulties.
Physical
Resources
Technologica
l Resources
The competitors ability to funding more money from

financial institutions can be done easily without high cost to
imitate as well if they have good reputation with trusted
financial performance.
Channel of distribution:
There are more than 140 distribution channels in USA and
more than 175 locations internationally as the distribution
networks for Kate Spades.
Trademark: High reputation of Kate Spade brand is a
valuable asset and hard to copy or substitute as Kate Spade
has its own uniqueness of brand image. However, Kate Spade
brand image can be negatively impacts from the bad
performance of Juicy Couture, Lucky Brand, Adelington
Design Group, and Jack Spade which they are under the
management of the Fifth & Pacific Inc.
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Resources
Criteria
Valuable
Rare
Costly to
imitate
Nonsubstituta
ble
Managerial Capabilities: Craig Leavitt is the CEO and

creative director of Kate Spade. Within is vision, he leads the
design and initiative new product lines of Kate Spades to
match with the colorful trendy and escaping the ordinary
style.
Knowledge craftsmanSince the company is very young
comparing to long outstanding competitors, the knowledge of
craftsman of Kate Spade may have less skills, expertise and
know-how comparing to other luxury brands such as LV and
Gucci.
Kate Spade uses its unique idea using innovative marketing
by taking advantage from social network such as Facebook,
Youtube or Instagram and E-commerce sales. Kate Spade is
now become Queen of Digital Marketing. Their website
goes beyond shopping. Its designed in their brand
personality. Their photography always expresses their
colorful, witty, happiness.
Brand Name: Kate Spade has a very own uniqueness of
brand image which are trendy, colorful, witty and happiness
more than only on luxury and expensive aspects. Kate Spade
draws women into a world that is charming, clever,
optimistic, playful, chic, and passionate.
Human
Resources
Innovation
Resources
Reputation
Resources
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Capabilities
Capabilities
Distributions
Human
Resources
Marketing
Manufacturing
Criteria
Valuable
Rare
X
Costly to
imitate
X
Nonsubstitutable
X
Effective use of logistics management techniques & Channel of

Distribution.
Mostly using E-commerce as the new and effective channel of
products supplying.
Kate Spade using Li & Fung company as the outsourcing logistic
company to reduce their cost in supplying products to their retails
and wholesales.
Employees have a very good relationship with the company; also
the company has good system to manage their employees unless
in terms of skill of craftsmanship, the company might not be able
to compete with luxury company resources such as LV and Gucci.
Innovative merchandising:
Using digital marketing effectively to interactively communicate
with customers and conveying brand image to them as well. Most
of their customers are young working women/men, therefore
using Youtube, Facebook, Instagram is a fast and efficient way of
building a great relationship with their target customers. As a
result, Kate Spade is now become Queen of Digital Marketing
Production skills yielding reliable product: Kate Spade has
great ability to source quality materials from reliable suppliers
globally and normally they use agreement in terms of maintaining
a good relationship with suppliers to make sure that they can
remain high quality of fashionable products providing to the
customers at the affordable price. The quality of products might
not as premium as LV and Gucci but at the accessible market,
Kate Spade products quality still high in their customers
viewpoint.
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In summary, there are 2 core competencies of Kate Spade:

1. Brand image and reputation. Kate Spade has its very own uniqueness of brand image
which are trendy, colorful, witty and happiness more than only on luxury and expensive
aspects. Kate Spade draws women into a world that is charming, clever, optimistic, playful,
chic, and passionate which can satisfy the new identity of young working women.
2. Evolution of marketing and merchandising strategy
Kate Spade effectively use advantage of social network to communicate brand identity,
brand image which are far different than traditional luxury brands to frequently
communicate with their target customers. The words of mouth grow Kate Spade
reputation quickly among young working women people and successfully implementing
their E-commerce sales channel
Kate Spade Strength

1) Strong Brand Identity
2) Strong Marketing Strategy using social media, fashion shows, and E-commerce sales
consistently sending to customers to build more brand awareness and successfully increase
more sales by using E-commerce.
3) Breadth of product lines consistently with colorful concept.
Kate Spade Weakness
1) No real heritage and brand story. Less brand loyalty comparing to other brands with long
heritage and stories.
2) Negative sales growth and net profit
3) Association with lower performing brands through Fifth and pacific can hurt brand
image. If there is any bad news from Juicy Couture, Lucky Brand, Adelington Design Group,
the brand image of Kate Spade can be hurt.
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f)
What will our competitors response in the future?
1) Kate Spade will continue to focus on two axes of growth geographic expansion and product
category expansion. They will put more investment in retail and e-commerce in order to
accelerate the fulfillment of our lifestyle brand vision, expanding our product categories and
reaching customers in all facets of customers lives, better positioning Kate Spade to deliver
on Kate Spade New York's full potential. By growing internationally, Kate Spade will form
newly joint venture with Asian companies and use Asias partnership to establish a strategic
network of stores in key cities, enhance a robust organizational and marketing platform
across China, Hong Kong, Macau and Taiwan.
2) Kate Spades will also consider expanding their mens heritage and believing this category is
an important part of our growth story and a complement to their thriving women's business.
With this new approach to distribution, Jack Spade is now better positioned to grow as we
broaden our customer target.
3) A variety of business model are used including wholly-owned subsidiaries, distribution
agreements, joint ventures, and wholesaling. Each model will be selectively choose
appropriately to maximize profits and brand growth
4) Kate Spade has been very successful in E-commerce and digital marketing. The company
will enhance the service to cover new potential markets to use store-to-web and web-to-store
cross development market and strengthen customer service experience.
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g) Prepare BCG Growth-Share Matrix to show the competitive position of the company vs.
competitors for the present year
1) Calculate compound growth rate of year 2012: Using revenue in 2012/2011 1
Calculation method:
CAGR LV
CAGR Coach
CAGR Gucci
CAGR Kate Spade
CAGR Michael Kors
= 28042115/22643877 1
= 4158507/3607636 1
= 4086160/3465930 1
= 1518721/1623235 1
= 1302254/803339 1
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2) Calculate Relative Competitive Position using revenue in 2011.

LV uses Coach Revenue as a denominator, while Coach, Gucci, Kate Spade and Michael Kors
use LV as the comparative company.
Relative Competitive Position LV

Relative Competitive Position Coach
Relative Competitive Position Gucci
Relative Competitive Position Kate Spade
Relative Competitive Position Michael Kors
= 28042115/4158507
= 4158507/28042115
= 4086160/28042115
= 1518721/28042115
= 1302254/28042115
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3) Calculate Market Share using revenue in 2011
Market Share LV
Market Share Coach
Market Share Gucci
Market Share Kate Spade
Market Share Michael Kors
= 28042115/39109768
= 4158507/39109768
= 4086160/39109768
= 1518721/39109768
= 1302254/39109768
All data required for BCG Growth-Share Matrix
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According to BCG Growth-Share Matrix, we found that the position of LV has been
changed from in between Star and Cash Cow position during the year of 2007 - 2011 to be
outstanding in star position in 2011. This was leaded from the efficiency and effectiveness of
their strategy during last 5 years, resulting in the growth of revenue and stood at the more
competitive position comparing to other brands.
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While the position of Coach and other brands did not see any significantly changed
comparing the position as of 2011 to the position during 2007 2011. We see some slightly
increase in revenue growth rate of Coach, Gucci, and Michael Kors in 2011.
If considering only company within same strategic groups within accessible luxury
goods: Coach, Michael Kors and Kate Spades, we can see that Coach is positioning in star area
as if Coach is now very successful with high potential in future growth and generating more
profitability.
QUESTION MARK
STARS
Business Growth Rate

CASH COW
Relative Competitive Position
DOG
QUESTION MARK
STARS
Business Growth Rate

CASH COW
Relative competitive Position
DOG
143 | P a g e
h) Draw a table to compare future objectives, assumptions, current strategies, capabilities and future responses for each
competitor. Can you observe any opportunity and threat?
Company
Future
Objective
Opportunity
Using its own strong
haute couture and
high-end fashion
brand image to
enhance more valueadded innovation,
differentiation,
personalization and
strengthening
consumer's loyalty
strategy through the
exclusively strategy
Opportunity
Enhancing its
consistency in
heritage, exclusivity,
craftsmanship, made
in Italy brand image
to boost revenue and
profitability growth
Opportunity
Positive trend higher
purchasing power
and demand for
accessible luxury
products driving
more opportunity for
the brand to increase
brand awareness and
increasing more
market share in the
future
Opportunity
Michael Kors still
being brand iconic of
luxury and celebrities
endorsement
positively affect more
acceptance from new
target market and
increase brand
awareness through
more distribution
channels globally and
online media
Opportunity
New different trend
of colorful products
can satisfy
consumer's taste of
fashionable luxury at
that time and
differentiation in
communication
strategy through
social media.
Threat
The brand perfectness
lead to high customers
expectation in terms
of product quality, instore services, and
exclusivity of the
brands
Threat
No new innovation
and sparkle of
fashion design in
Gucci products
comparing to the
competitors affects
less brand desirability
Threat
Losing luxury brand
image and market
share due to Coach
will become more
mass and
commonplace for
customers.
Threat
Brand is very famous
in only USA but not
much well-known
internationally
Threat
No heritage and
history of the brand
leading Kate Spade
to quickly build more
brand awareness
144 | P a g e
Assumption
Opportunity
Emphasize on
innovation, creativity,
more sophistication,
personalization and
providing exceptional
products and services
in order to maintain
this competitive
advantage
Opportunity
Kering, as a
cohesive, integrated
and powerful
international group,
their entrepreneurial
spirit has driven
growth and
transformation in the
emerging market
Opportunity
Positive trend higher
purchasing power
and demand for
accessible luxury
products which has
high quality at
accessible price
driving more
opportunity for the
brand to increase
brand awareness and
increasing more
market share in the
future
Opportunity
Michael Kors can
drive the successful
of the brand since he
can satisfy
consumer's need. The
expansion of the
distribution channel
can increase more
brand awareness.
Opportunity
Using both online
and offline
distribution channel,
in addition to
increase new
innovated fashion
products and variety
by using Kate Spade
brand-centric to gain
more awareness from
new customers and
maintain existing
customers loyalty
Threat
Volatility of Europe
economics badly
influence the
performance and not
yet gain competitive
advantage in new
market expansion
Threat
The quick adaptation
whenever the fashion
trend changed to
timely satisfied new
innovated products
providing to
customers
Threat
Losing luxury brand
image and become
more ordinary
products for
customers. There are
too many distribution
channels for Coach
e.g. online and more
popular of factory
outlet in North
America. All reasons
are the treat for the
future growth
internationally
Threat
Few distribution
channels in both
retails stores and
wholesale
Threat
Brand lead to more
fashionable , trendy
and fast-changing
trend aspects
comparing to
realizing the brand
value
145 | P a g e
Current
Strategies
Opportunity
haute couture and
high-end fashion
brand image to
differentiation,
personalization and
strengthening
consumer's loyalty
exclusively strategy
Opportunity
Upscale
differentiation
strategy within brand
concept of
sophisticated, highclass, high-quality
and prestige attract
high purchasing
power from emerging
markets
Opportunity
Using market
research to
understand
consumer's behavior
and needs with broad
differentiation
strategy to increase
market share in
emerging market
Opportunity
Using differentiation
strategy in 2 main
business lines; luxury
and accessible luxury
products, also
celebrity
endorsement from
Michael Kors
celebrities friends
and emphasizing his
fashion iconic image
Opportunity
Creative and
innovative On-line
and E-commerce
sales helping
interactive
communication
channel with
customers. Using
trendy, playful
sophistication brand
image to interactively
increase brand
awareness through
on-line media.
Threat
Using the best leather
and raw materials
which require high
skilled craftsmanship,
time consuming,
complexity production
process and detailed,
resulting to high cost
of products
Threat
No new innovated
products line, getting
rid of some
accessible items and
increasing price
approx. 40%
affecting high
inventory in stock
needed to be clean up
through its wholesale
discount are
devaluing the brand
image and pushing
customers away to
the competitors
Threat
Losing luxury brand
image and market
share due to Coach
will become more
mass and
commonplace for
customers. Brand
dilution from too
many factory outlets
in North America.
Threat
Losing luxury brand
image at the
positioned of high
class jet-set style
when products are
sold in discounted
stores, effecting
whole brand image.
Threat
Products primarily
designed for young
women, cannot
fulfilled the
satisfaction of men
and aged people
group.
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Capabilities
Opportunity
Strong financial
performance and
investment budget
within LVMH
conglomerated
company. Products are
exclusively design
with high skilled
craftsmanship and
special customized
materials.
Effective and
innovative marketing
strategy linking the
brand value with
culture and art.
Opportunity
Experience designers
sharing synergies in
between Kering
leading luxury
fashion brands such
as Gucci,
BottegaVeneta, and
Yves Saint Laurent
and etc.
Strong brand heritage
and traditional
craftsmanship to
reflect Gucci's duality
(modern fashion and
heritage)
New digital tools
increasingly focused
content creation
strategy
Opportunity
Innovation and
improvement of new
technology is helping
to integrate its supply
chain more
effectively since
coach distribution
model is spread
internationally.
Consumer behavior
research is the
opportunity for
communication
strategy with coach
customers efficiently.
Opportunity
The reputation of
Michael Kors and
luxury brand image
are accumulated
quickly and gain high
acceptance from
customers without
any substitution and
hard to imitate.
Opportunity
High capabilities in
various mode of
distribution channels
both on-line and
offline.
Using digital
marketing in
communicating brand
image with customers
is effective and
getting response from
customer quickly.
Threat
Consumers have
limited access to LV
distribution channel
since products are
exclusively sell at
only LV own retail
stores or leading
department stores with
limited supply and no
discount promotion
Threat
Being its own
competitors among
other brand within
Kering group. There
is a risk of brand
dilution.
Threat
Factory outlet
devaluing luxury
brand image.
Counterfeiting
products.
Threat
Brand image of
Michael Kors brand
is attached with the
image of Mr. Michael
Kors. Once his image
is worsening, overall
MK brand image
would be affected.
Threat
Less consumer
loyalty. Brand is not
strong as the other
competitors. Loss in
profitability.
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Future
Response
Opportunity
haute couture and
high-end fashion
brand image to
differentiation,
personalization and
strengthening
consumer's loyalty
exclusively strategy in
emerging market
Opportunity
Enhancing its
consistency in
heritage, exclusivity,
craftsmanship, made
in Italy brand image
to boost revenue and
profitability growth
in emerging market
Using more
innovative on-line
channel to build
digital content
creation strategy
Opportunity
Stores expansion to
increase more market
share and brand
awareness in
emerging market
especially in China
since trend of the
luxury growth will
overflow to this
market gradually
Opportunity
Differentiation
luxury product line
and expand into other
product categories
within concept of jetset style
Expand market into
Asia and Europe
Using more
celebrities'
endorsement to
strengthen luxury
brand positioning
Opportunity
New different trend
of colorful products
can satisfy
consumer's taste of
fashionable luxury at
that time and
differentiation in
communication
strategy through
social media.
Threat
High expansion rate
will devalue brand
image since LV will
more common place
for everyone, no
longer exclusive for
some elite customers
group.
Recruiting and
maintaining talented
and skilled
craftsmanship human
asset
Threat
High expansion rate
will devalue brand
image since LV will
more common place
for everyone, no
longer exclusive for
some elite customers
group.
Recruiting and
maintaining talented
and skilled
craftsmanship human
asset
Threat
The policy of not
giving luxury gifts to
clients from the
government
Counterfeiting
products
Threat
Increase brand
awareness and
successful stories of
Michael Kors brand
into Asia and Europe
to gain acceptance by
competing to other
luxury competitors
Threat
High investment
budget for future
expansion can impact
loss in financial
performance
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Question 18: What does the market analysis reveal you about the industrys customers?
Can you identity any opportunity and threat?
Answer:
a) Target Market
The market for luxury goods can be divided into three main categories based on
accessibility, namely haute-couture, traditional luxury and accessible luxury.
Source:
Types of Luxury Products. Upmarkit.http://www.conceptofluxurybrands.com/concept-of-luxury-brands/luxuryproduct-types
Referring to the figure above (18.1), haute-couture is on the top end of the luxury goods
market in which exclusively customized luxury goods are targeted at the extremely wealthy
upper class consumers. Luxury goods in this market are of high rarity and sold at high price
points which make them relatively inaccessible to the general market.
Traditional luxury refers to the market which luxury goods are targeted at the upper
middle class consumers. Luxury goods in this category still have superior quality and
craftsmanship but are sold at slightly lower price points than the haute-couture which allow mass
production. Louis, Vuitton Prada, Burberryare some of the leading brands in this category.
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Accessible luxury is at the base of the luxury goods pyramid. They are less rare and
exclusive. The prices are generally set at a lower level than the more luxurious brands in order to
make them affordable to the middle class consumers.
Coach belongs to the accessible luxury category whose main target market is the middle
class consumers who desire a taste of luxury. According to Organization for Economic Cooperation and Development (OECD), the worlds middle class population is predicted to reach
3.2 billion by 2020, an almost 80% increase from 2009. The growth and distribution of the
global middle class as forecasted by OECD up to 2030 is shown in the table below (18.2). It is
predicted that the majority of growth will come from Asia Pacific, which will account for 66% of
the worlds middle class population by 2030. The expansion of the middle class population
would mean a larger market for Coach and the other accessible luxury brands. Geographically,
the Asia market, especially China and India would present the largest growth opportunities for
these brands. The graph below shows marked increase in share of global middle class
consumption in both China and India (18.2).
Source: OECD Development Centre Working Paper No. 285. The Emerging Middle Class in Developing Countries (18.2)
http://www.oecd.org/dev/44457738.pdf
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Source: OECD Development Centre Working Paper No. 285. The Emerging Middle Class in Developing Countries (18.2)
http://www.oecd.org/dev/44457738.pdf
Furthermore, baby boomers (49-67 years old) and Generation X (34-48 years old)
together account for 80% spending in the luxury market and 73% of the total luxury consumers
(18.3). In the short run, luxury brands should focus on these 2 segments. However, as the
population grows older, Generation Y (also known as Millennial) will become the new
significant segment that contributes to luxury spending.
Source:Lens on the
worldwide luxury consumer.
Jan 2014.
http://www.slideshare.net/Ik
usmer/lens-on-theworldwide-luxury-consumer
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b) Degree of Penetration
According to Bain & Company, the number of luxury consumers worldwide has grown
from 90 million in 1995 to 330 million at the end of 2013(18.3). Based on the world population
of 7,136 million in 2013 (18.5), the total market penetration was only a meager 4.6%. It was
estimated that a net total of 10 million consumers are added to the luxury market yearly to reach
an estimated 400 million luxury consumers worldwide by 2020, and an estimated 500 million
luxury consumers by 2030 (18.4). The growth forecast shows that the luxury market is still far
from saturation and possesses significant growth potential.
Source: Lens on the worldwide luxury consumer. Jan 2014. http://www.slideshare.net/Ikusmer/lens-on-the-worldwide-luxuryconsumer
Bain & Company also observed that the consumer base of the global luxury market has
been shifting from the historically homogenous affluent consumers to broader and more
heterogenous class of luxury shoppers (18.4), for example, the emergence of the accessible
luxury category has made luxury goods available to a larger proportion of the worlds middle
class population. The expected growth in the luxury consumer base can be explained by the
penetration into new market segments and the expansion of the total market size would be
favourable for the existing players.
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The Global Handbag and Accessories Market in 2010 (dollar amounts in billions USD)
Source:Source: J.P. Morgan Analyst Report and Coach reports. Exhibit 4 Coach Inc. in 2012: Its Strategy in the Accessible
Luxury Goods Market.
From the table above, Chinas share of the global handbag and accessories market was
only 11% which is much lower than the US (36%) and Europe (21%). It indicates that there is
still room for further penetration in China.
In addition, the gender mix estimates shows that the penetration of the mens market is
still much lower than the womens market in the US, Japan and Europe. A large part of the
mens market is still untapped which present growth opportunities for the luxury brands.
c) Customers Current Needs
Most consumers purchase luxury goods to make a statement of their high-end lifestyle
and to boost self-esteem since luxury goods in general carry high price and provide the user with
an enhanced perceived status through ownership. Since luxury goods are often associated with
self-expression, consumers would look for distinctive, well-recognized brands when purchasing
luxury goods. Differentiation, exclusivity, scarcity, high quality and product craftsmanship are
some of the major attributes desired by luxury goods consumers and together they help craft a
distinctive brand image.
Apart from branding, creative and trendy design is also a crucial factor that influences
luxury goods purchases. The fast changing fashion trends is causing constant changes in
consumers style preference and luxury goods consumers tend to stock up accessories of
different styling to complement their wardrobes. It provides growth opportunities for luxury
brands that are fast to catch up with the latest fashion trends.
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However, needs of the luxury consumers are not uniform around the globe. The figure
below (18.3) shows the major purchasing drivers of luxury goods and the preferences and
attitude of each nationality. For example, Chinese luxury consumers tend to place more emphasis
on brand and logo and foreign brands. Conversely, Japanese consumers are more focused on
production quality and durability while the brand origin is not a big concern.
Source: Lens on the worldwide luxury consumer. Jan 2014. http://www.slideshare.net/Ikusmer/lens-on-the-worldwide-luxuryconsumer
d) Customers Future Needs

E-commerce has become more prevalent and the Internet is reshaping many consumers
purchase behavior. An increasing number of digital-savvy consumers will be purchasing
consumer goods, including luxury goods, online due to the convenience it provides. McKinsey
forecasted that the global digital sales of womens luxury fashions to increase from 3% of the
total market in 2015 to 17% for a total market size of USD 12 billionin 2018 (18.6).
Traditionally, the purchase of luxury goods includes the prestigious shopping experience which
adds value to the products purchased. With online shopping, the physical shopping experience
becomes irrelevant. However, consumers would still be looking for the prestigious feeling that is
associated with the purchase. Therefore, luxurious brands shall design their online channels to
deliver personalized digital shopping experience to answer that need and enhance customer
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engagement (18.7). Besides, an increasing number of consumers will be researching for product
information online before the actual purchase (18.8). Given the increasing number of electrical
devices used by consumers, luxury brands should make their products available on multiple
online platforms (18.7).
Luxury consumers will be looking for innovation in product development as well.
Products that fuse traditional craftsmanship with modern technology will become more popular.
An increasing number of luxury brands have already started incorporating wearable technology
to their products. For example, Ralph Laurens Ricky bag enables wearers to charge their
smart phones while still embodies the appearance of a classic luxury leather handbag (18.7). It
proves that high-end fashion and technology are no longer mutually exclusive. Hence, luxury
brands that are capable of adopting new technologies to refine their products will gain
competitive advantage.
The millennial generation is a growing consumer force. One-size-fits-all products do not
appeal to this group of consumers. They demand more individualized products than their older
counterparts (18.9). Customized design would increase the attractiveness of the luxury goods
since it would add exclusivity and also a personal touch to the products. Currently most luxury
brands have only standardized products in store and the increasing need for customization would
be a threat to the industry if the seller do not adapt to the trend accordingly.
e) Distribution Channels
Distribution channels of luxury goods can be divided into direct-to-customer channels
and indirect channels. Direct-to-customer channels are directly managed by the luxury brands.
Examples include full price stores, factory outlets, Internet sales and catalog sales. Indirect
channels mainly involve wholesaling through department stores.
Luxury brands, especially accessible luxury brands, use factory stores to target valueoriented consumers and increase market exposure by offering discounted or discontinued bags.
While factory stores may help increase the sales revenue, it risks diluting the brand cachet since
the exclusivity is reduced. One cannot be unique and exclusive while being ubiquitous.
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As for the indirect channels, department stores were becoming less relevant in the US
retailing industry because average customer is spending less time in malls and shopping in fewer
stores during their visit to malls. Hence the sales revenue generated from the indirect channels
may dwindle, posing threat to the luxury brands.
On the other hand, online shopping is becoming more popular and thus the online
channel is set to become one of the major channels for the distribution of luxury goods.
f) Channel Markups
Different markup schemes are applied to various distribution channels. According to the
case, profit margins for the traditional luxury brands distributed through full price retails store
approximated 40-50%. As for the accessible or diffusion brands, the profit margin is about 20%
since the concept of factory or discount store limits the markup margin. If they are marked up too
high, it will lose the appeal to the value-oriented middle-income customers. Therefore, accessible
luxury brands like Coach would have to focus on the minimizing costs in order to protect their
profit margin.
g) Price Sensitivity
Price sensitivity for luxury goods is mainly driven by brand exclusivity, customer-centric
marketing and emotional sense of status and value conferred by the brand.
For haute-couture and traditional luxury brands, the price sensitivity is low since the
emotional and social benefits delivered are translate into high perceived value of the products.
The rarity and exclusivity further reduce the sensitivity towards price. Besides, the upper class
consumers are wealthy and hence price is not a big concern as long as their emotional and social
needs are fulfilled. Therefore, even if the luxury brands raise their price, it will not have
significant impact on the sales volume.
On the contrary, accessible luxury goods have relatively lower exclusivity. The target
market, i.e. middle-income consumers, has lower income as well. Hence, the price sensitivity is
higher than the other two luxury segments. It would be difficult to raise price as it could largely
affect the sales volume. On the other hand, while offering excessive discounts or lowering price
156 | P a g e
may help increase sales volume to compensate for the smaller margin, it may also dilute the
brand cachet and erode customers brand perception, as a result reducing the brand
attractiveness.
Price sensitivity for luxury goods can be further differentiated in terms of distribution
channels. Even for accessible luxury brands like Coach, the price sensitivity of the factory outlets
is higher than the full price stores due to the different positioning. Besides, online stores
normally have higher price sensitivity than physical retail stores since online shoppers can
compare prices across multiple brands easily.
h) Current Trends
i.
Global Trends
Source: 2013 Luxury goods worldwide market report. Bain & Company. Oct 2013.
http://www.slideshare.net/ukaszSzymula/2013-luxury-goods-worldwide-market?related=2
From the figure above (18.10), the worldwide personal luxury goods market has been
growing steadily for the last 2 decades despite slight declines during economic downturn. The
latest decline was caused by the subprime and financial crisis of 2007 to 2009. The market had
then recovered and experienced double-digit growth since 2010 but was slowing down again as
consumers in the major luxury markets such as the US, Europe and Japan are reducing
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discretionary spending due to the gloomy economic outlook. The Euro zone was still struggling
with debt crisis in 2011 and the US economy was only growing at a minimal rate.
China is the fastest growing nationality in the luxury goods market and is set to become
nearly one-third of the global luxury market by 2013 (18.10). Among the global luxury markets,
the growth in demand for luxury goods in China remains on top from 2009 to 2012. Even though
the growth rate has dropped over 15% between 2010 and 2012, the growth rate is expected to
remain above 10% from 2013 to 2015 (18.11).
Share of Luxury Goods Market by Consumer Nationality (1995-2013E billion Euro)
Source: 2013 Luxury goods worldwide market report. Bain &

Company. Oct 2013. http://www.slideshare.net/ukaszSzymula/2013luxury-goods-worldwide-market?related=2
Source: Challenging growth in

the luxury and cosmetics sector.
The luxury and cosmetics
financial factbook 2014 edition.
EY.
http://www.ey.com/Publication/v
wLUAssets/Luks_Tuketim_ve_K
ozmetik_Sektoru_Finansal_Dur
um_Raporu/$FILE/Luxury%20
&%20Cosmetics%20Factbook.p
df
158 | P a g e
The rising demand among Chinese consumers has also spilt over to other regions, such as
the US and Europe in the form of tourist spending which helps to alleviate the decrease in local
spending in those area. The graph below demonstrates that continual increase in spending of
Chinese tourists abroad (18.12). Bain & Companys report also shows that a large proportion of
the Chinese luxury consumer spending is made abroad (18.13). Deloitte reported that luxury
spending by travelers accounted for 37% of the market in 2013 (18.7). Capturing the sales at
tourist locations and during transit presents luxury brands with valuable opportunities.
Source: Luxury shopping the top 7 trends. Credit Suisse. Apr 2015.https://www.credit-suisse.com/th/en/news-andexpertise/economy/articles/news-and-expertise/2015/04/en/luxury-shopping-the-top-seven-trends.html
159 | P a g e
Source: Luxury goods worldwide market study. Bain & Company. Fall-Winter 2014.
http://www.bain.com/bainweb/PDFs/Bain_Worldwide_Luxury_Goods_Report_2014.pdf
Apart from China, India is another fast-growing emerging market for luxury goods since
the booming economy had created a new class of business maharajahs which are highly
affluent and globalized professionals. In 2012, the central government of India had finalized
policies that will allow 100% foreign direct investment in single-brand retailing and 51% in
multi-brand retailing (18.14). This had created opportunities for international luxury brands to
expand to the Indian market. However, there are still a number of issues including poor
infrastructure, pervasive corruption, red tape in business procedures, and skills shortage, which
make it challenging for luxury brands to penetrate the market effectively (18.14). Besides, the
Indian womens preference for traditional saris and garment items for formal occasions has
presented obstacles for the penetration of western women clothing into the local market.
ii.
Trends in Luxury Goods for Men and Women

The growth in men spending on fashion and luxury has outpaced that of womens in the
past few years. According to Bain & Companys study in 2014, mens bags and menswear are
expected to experience great momentum for growth (18.15). Boston Consulting Group noted that
the metrosexuals men who live in cities, high-earning, take care of themselves, buy the best
brands for apparel and wear luxury bags, is the growing segment for the mens luxury market
(18.16).
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Luxury Goods Market by Gender (1995-2013E billion Euro)
Source: 2013 Luxury goods worldwide market report. Bain & Company. Oct 2013.
http://www.slideshare.net/ukaszSzymula/2013-luxury-goods-worldwide-market?related=2
From the graph above (18.10), the luxury goods market in China has been dominated by
mens products previously. In recent years, there has been a significant increase in the proportion
of womens products due to the rising share of female wealth. On the contrary, the demand for
mens product had increased in the European market. Luxury brands can diversify their product
offerings to capture the changes in demand in various regions.
iii.
Growing Competition in the Accessible Luxury Market
An increasing number of traditional luxury brands have introduced diffusion lines to

compete in the accessible luxury market, for example, D&G by Dolce & Gabbana, Emporio
Armani by Giorgio Armani, Versus by Gianni Versace etc. As a result, competition in the
accessible luxury is becoming more intense which poses threat to existing players.
In addition, there has been a rising trend in selling second hand luxury goods in recent
years thanks to the online revolution (18.12). The second hand market provides an alternative
channel which makes traditional luxury goods accessible to the middle income consumers.
Hence consumers are given the choice of either purchasing brand new accessible luxury brands
or second hand traditional luxury brands at similar price points.
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Question 19: Carry out the internal environmental analysis to discover the strengths and weaknesses.
Answer:
a) Resources
Resources
Description
Tangible Resources
Financial
Coach has low D/E ratio of 0.63 in 2011 compared to its competitors (LVMH 1.00, MK 2.13 and
resource
Kade spade -9.72 in 2011).
Strength/
Weakness
Strength
The company has low debt compared to equity balance, so the company has ability to raise more
fund from debt / financial institution in order to expand the business.
Physical resource
- Coach has well-established retail network throughout US, Japan, and China.
According to the multi-channel international distribution model, Coach has different stores in
different locations to match with customers characters and needs. The Direct-to-Consumer
channel includes Coach-operated stores (Full-price stores and Factory stores), Internet and
Catalog sales. (10-KReportofCoachInc.,2011, p.2)
- Coach has quality off-shore manufacturers.
Since Coachs production was outsourcing and licensing to contract manufacturers,
management controls quality throughout the process with product development offices in
Hong Kong, China, South Korea, India and Vietnam. In addition, for licensing agreement,
Coach takes an active role in the design process and controls the marketing and distribution of
products under the Coach brand.(10-KReportofCoachInc.,2011, p.7)
- Coach has aesthetic attractive full-price stores for specific target consumers
Full-price stores were divided into three categories core locations, fashion locations, and
flagship stores. Under its tiered merchandising strategy, each store category contains different
products for different target consumers.
Strength
Strength
Strength
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Resources
Description
Tangible Resources
Technological
- Coachs trade-mark
resource
Coach owns all of the material trademark rights used in connection with the production,
marketing and distribution of all of its products, both in the U.S. and in other countries in
which the products are principally sold. Coach also owns and maintains worldwide
registrations for trademarks in all relevant classes of products in each of the countries in
which Coach products are sold. (10-KReportofCoachInc.,2011, p.9)
Human Resource - Managerial capabilities (Lew Frankfort Chairman & CEO, Reed Karkoff 1996 Creative
Director)
Strength/
Weakness
Strength
Strength
Lew Frankfort, 18-year-Coach-veteran, head of languishing handbag division of Sara Lee

become Chairman & CEO of Coach. Frankfort has superb managerial skill and increase the
companys annual sale from $555 million in 1999 to $4.2 billion in 2012. Also, hiring Reed
Krakoff is the best decision that he made to produce the products based on market research
rather than designers instincts to respond consumers needs.
Reputational
resource
- Coachs brand also has long history and reputation since 1941.
Strength
Coach has continue to create and maintain brand and reputation since 1941. The brand started
from ladies handbags crafted by Cahn and his family, they were in simple style and extremely
resilient to wear and tear. Coachs classic styling and sturdy construction proved popular with
discriminating consumers. Coach has reputation for high quality and high value product.
Coachs quality, styling and value mix was ranked higher than other expensive luxury brands
by affluent women in the US.
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b) Capabilities
Functional
Areas
Manufacturing
Capabilities
- Knowhow to produce classic styling and sturdy handbags
According to Coachs company history, Coach has reputation for classic styling and sturdy
handbags. Coach is expert in production process which has been performed, improved and
developed for almost 40 years.
- Coach has broad-based global manufacturing strategy to optimize the mix of costs, lead time
and construction capabilities.
All of Coachs production was outsourced to individual contract manufacturers with 85%
from China, and 15% from Vietnam and India. These independent manufacturers support a
broad mix of product types, materials and a seasonal inux of new, fashion oriented styles,
which allows the company to meet shifts in marketplace demand and changes in consumer
preferences. All product sources, including independent manufacturers and licensing partners,
must achieve and maintain Coachs high quality standards, which are an integral part of the
Coach identity.(10-KReportofCoachInc.,2011, p.7)
Marketing
- Communication with customers through direct marketing activities
Strength/
Weakness
Strength
Strength
Strength
Coachs marketing strategy is to deliver a consistent and relevant message each time the
consumer comes in contact with the Coach brand through our communications and visual
merchandising. Coach uses market research to assess consumer attitudes and trends. Monthly
product launch to capture customers who want the newest items and fashions. Coachs
aesthetic store design enhances the companys luxury image. Coachs wide range of direct
marketing activities includes email contacts and brochures targeted to promote sales to
consumers in their preferred shopping venue and building brand awareness in the same
time.(10-KReportofCoachInc.,2011, p.7)
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c) Core Competency
1) Outsourcing and licensing agreements with contract manufacturers (40 suppliers in 15
countries)
All of Coachs production was outsourced to individual contract manufacturers with 85%
from China, and 15% from Vietnam and India. These independent manufacturers support a broad
mix of product types, materials and a seasonal inux of new, fashion oriented styles, which
allows the company to meet shifts in marketplace demand and changes in consumer preferences.
All product sources, including independent manufacturers and licensing partners, must achieve
and maintain Coachs high quality standards, which are an integral part of the Coach identity.
This also help maintain a sizeable pricing advantage. In the same time, the quality can be
controlled throughout the process with product development offices in HK, China, S. Korea,
India and Vietnam. (10-KReportofCoachInc.,2011, p.7)
2) Brand positioning
Coach has continue to create and maintain brand and reputation since 1941. The brand
started from ladies handbags crafted by Cahn and his family, they were in simple style and
extremely resilient to wear and tear. Coachs classic styling and sturdy construction proved
popular with discriminating consumers. Coach has reputation for high quality and high value
product. Coachs quality, styling and value mix was ranked higher than other expensive luxury
brands by affluent women in the US.
3) Innovation and Consumer-Centric Focus
Coach uses market research to assess consumer attitudes and trends. Market research
conducted quarterly to define product trends, selections and customer desires. Monthly product
launch enhances the companys voguish image and gave consumers reason to make purchases on
a regular basis. (10-KReportofCoachInc.,2011, p.2)
4) Excellent customer service
Coach sought to make customer service experiences and additional differentiating by
refurbishing or replacing damaged handbags regardless of the age of the bag. The company
provides well-trained on customer service store employees to ensure all customers were attended
to satisfactorily.
Through Coachs Special Request Service, customers were allowed to order merchandise for
home delivery if the particular handbag or colour wasnt available during a visit to a Coach store.
Coach also differentiate by communicate with its customers by a wide range of direct marketing
activities which included email contacts, websites, catalogs and brochures.
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5) Multi-channel international distribution model

This model allows Coach to maintain a critical balance of the stores in different geographic
areas.The Direct-to-Consumer channel and internet channels provides the immediate, controlled
access to consumers through Coach-operated stores. The Indirect channel provides the access to
consumers via wholesale department stores.(10-KReportofCoachInc.,2011, p.2)
d) Distinctive Competency
1) Innovation and Consumer-Centric Focus

Coach listens to its consumer through rigorous consumer research and strong consumer
orientation. Coach works to anticipate the consumers changing needs by keeping the product
assortment fresh and relevant. Retail analyst stressed the importance of frequent product
introduction as huge driver of traffic and sales. The companys market research found its best
customers visited a Coach store once every two months and made a purchase every seven
months. So monthly product launch enhances the companys voguish image and gave consumers
reason to make purchases on a regular basis. (10-KReportofCoachInc.,2011, p.2)
2) Multi-channel international distribution model
According to the multi-channel international distribution model, Coach has different
stores in different locations to match with customers characters and needs. The Direct-toConsumer channel includes Coach-operated stores (Full-price stores and Factory stores),
Internet and Catalog sales. (10-KReportofCoachInc.,2011, p.2)
e) Company Analysis (Corporate value chain analysis)
Source: http://www.caylynbloom.com/classes/corporate-value-chain.html
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Primary activities
Strength/
Weakness
E1. Inbound Logistics Activity

- Coach has longstanding relationships with purveyors of ne leathers and
hardware to controlrigorous selection of raw materials. Although Coachs
products are manufactured by independent manufacturers, we maintain
control of the raw materials that are used in all of our products. Compliance
with quality control standards is monitored through on-site quality
inspections at all independent manufacturing facilities.(10KReportofCoachInc.,2011, p.8)
E2. Operation activity
Strength
- Outsourced production to contract manufacturers with vendors in China,

Vietnam and India and licensing agreements for accessories products.
Management controlled quality throughout the process with product
development offices in Hong Kong, China, South Korea, India and
Vietnam. This broad-based, global manufacturing strategy is designed to
optimize the mix of cost, lead times and construction capabilities and
increase production efficiency.(10-KReportofCoachInc.,2011, p.7)
E3. Outbound Logistics Activity
Strength
- Bar code scanning warehouse management system is used in Coachs

distribution and service facility in US, which allow them to more
accurately process and pack orders, track shipments, manage inventory and
generally provide excellent service. Coachs products are primarily shipped
to Coach retail stores and wholesale customers via express delivery
providers and common carriers, and direct to consumers via express
delivery providers. Coach also operates a distribution center, through a
third-party in China and Japan to support Asia market.(10KReportofCoachInc.,2011, p.8)
E4. Marketing and sales activity
Strength
- The Coach image is created internally and executed by the creative

marketing and visual merchandising. Coach also raise brand awareness and
build market share through direct marketing strategies which includes email,
brochures and Coach.com, global e-commerce site, and social network
initiative. Coach uses its extensive customer database and consumer
knowledge to target specic products and communicate to specic
consumers to efficiently stimulate sales across all distribution channels.(10KReportofCoachInc.,2011, p.7)
Strength
- Over expansion of factory store might dilute its brand image in the future
since factory store provides 10% - 50% discounts. Those price-cutting that
increase volume can damage the brand.
Weakness
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Primary activities
- According to the multi-channel international distribution model, Coach has
different stores in different locations to match with customers characters
and needs. The Direct-to-Consumer channel includes Coach-operated stores
(Full-price stores and Factory stores), Internet and Catalog sales. All channel
customers were equally brand loyal, but there was a distinct demographic
difference between the shopper segments.(10-KReportofCoachInc.,2011,
p.2)
E5. Services Activity
- Coach sought to make customer service experiences and additional
differentiating aspect of the brand. Coach provides maintenance services:
refurbish or replace damaged handbags, regardless of the age of the bag.
Through the companys Special request service, the company provide home
delivery service if the particular product is not available during the consumer
visit store.
Support activities
Strength/
Weakness
Strength
Strength
Strength/
Weakness
E6. Firm Infrastructure activity (Organization)

- The foundation of Coachs information systems is its Enterprise Resource
Planning (ERP) system. This fully integrated system supports all aspects
of nance and accounting, procurement, inventory control, sales and store
replenishment. The system functions as a central repository for all of
Coachs transactional information, resulting in increased efficiencies,
improved inventory control and a better understanding of consumer
demand.(10-KReportofCoachInc.,2011, p.8)
E7. Human resource management activity
Strength
- Coach provides store employees with regular customer service training

programs and scheduled additional personnel during peak shopping periods
to maintain high customer service level.
E8. Technology development activity
Strength
- Coach views its website as a key communications vehicle to promote stores

and build brand awareness. Internet sales (Coach.com), online store provides
a showcase environment where consumers can browse through a selected
offering of the latest styles and colors.(10-KReportofCoachInc.,2011, p.4)
Strength
- Coach conducted extensive consumer surveys and held focus groups to ask
customers about styling, comfort, and functionality preferences. The design
process allow Coach to launch new collections every month.
Support activities
Strength
Strength/
168 | P a g e
Weakness
E9. Procurement activity
- Coachs design and merchandising teams work in close collaboration with
all licensing partners to ensure that the licensed products are conceptualized
and designed to address the intended market opportunity and convey the
distinctive perspective and lifestyle associated with the Coach brand and to
achieve profitable sales.(10-KReportofCoachInc.,2011, p.3)
Strength
f) Financial analysis (last 2 years)

FISCAL 2011 COMPARED TO FISCAL 2010
The following table summarizes results of operations for scal 2011 compared to scal 2010:
Net Sales
The following table presents net sales by operating segment for scal 2011 compared to scal
2010:
Direct-to-Consumer Net sales increased 14.8% to $3.62 billion during fiscal 2011 from
$3.16 billion during fiscal 2010, driven by sales increases in our Company-operated stores in
North America and China. Net sales of fiscal 2010 included an additional week of sales, which
represented approximately $62 million.(10-KReportofCoachInc.,2011, p.24)
169 | P a g e
North American retail stores:
North American factory stores:
Coach China:
Number of stores
400
2011
200
2010
0
North
American
retail stores
North
American
factory
stores
China
2010
Japan
Singapore
and Taiwan
2011
In North America, net sales increased 14.4% driven by sales from new and expanded
stores and by a 10.6% increase in comparable store sales. During fiscal 2011, Coach opened
three net new retail stores and 22 new factory stores, and expanded six factory stores in North
America. In Japan, net sales increased 5.1% driven by an approximately $69.8 million, or 9.8%,
positive impact from foreign currency exchange. During fiscal 2011, Coach opened eight net
new locations and expanded three locations in Japan. Coach China results continued to be strong
with double-digit percentage growth incomparable store sales. During fiscal 2011, Coach opened
25 net new stores in Hong Kong and mainland China. (10-KReportofCoachInc.,2011, p.24)
170 | P a g e
Indirect Net sales increased 18.8% to $536.6 million from $451.8 million in fiscal
2010. The increase was driven primarily by an 18.4% increase in Coach International Wholesale
and U.S. Wholesale net revenue. The net sales increase was partially offset by an additional
week of sales in fiscal 2010, which represented approximately $8 million. Licensing revenue of
approximately $24.7 million and $19.2 million in fiscal 2011 and fiscal 2010, respectively, is
included in Indirect sales.(10-KReportofCoachInc.,2011, p.24)
Driver of profitability
COG/Sales
2011: 27.29%
2010: 27.00%
Return on sales
(Net profit/Sales)
2011: 31.38%
2010: 31.88%
ROIC
2011: 113%
2010: 102%
SG&A/Sales
2011: 41.33%
2010: 41.12%
Working capital/
Sales
Capital turnover
(Sales/Invested capital)
2011: 10.73%
2010: 10.17%
2011: 560%
2010: 497%
PPE/Sales
2011: 14%
2010: 15.20%
From the driver of profitability, the increase in ROIC from 102% in 2010 to 113% in
2011 came from the increase in in capital turnover from the decrease in fixed assets whereas the
return on sales is slightly decrease from the increase in cost of goods sold and selling
administrative costs.
171 | P a g e
1. Return on sales (Operating profit margin) ratio is used to evaluate the companys operational
efficiency, the slightly decrease came from the increase in two factors.
Increase in COG/Sales from 27.00% in 2010 to 27.29% in 2011 due to the expansion of
new stores and changes in the relative sales mix among distribution channels, changes in
the mix of products sold, foreign currency exchange rates and uctuations in material
costs.
Increase in SGA/Sales from 41.12% in 2010 to 41.33% in 2011 due the increase in
selling expenses from higher operating expenses in Coach China and North American
stores due to higher sales and new store openings. Additionally, selling expenses of Reed
Kraroff stores contributed to the dollar increase since the brand was not launched until
the beginning of fiscal2011. Also with the increase in marketing and design costs was
primarily due to new design expenditures and development costs for new merchandising
initiatives.
2. Capital turnover ratio shows the efficiency of using working capital to generate sales, the
increase came from the offset result of two factors.
Decrease in PPE/Sales from 15.20% in 2010 to 14% in 2011 even the company opened
new 63 stores in 2011, Coach can generated more revenue in each locations than 2010.
Slightly increase in Working capital/Sales for 0.56% from 2010 due to the Inventory
stock increased to support the increase in number of stores.
Cash flow analysis:
In conclusion, the company has more efficiency in operation and can generate higher
ROIC 11% compared to 2010. The cash flow also shows the same trend that cash generated from
operating activities can cover the cash paid in investing and financing activities which result to
the positive and increase in cash in 2011.
172 | P a g e
Question 20: Strategic factors analysis

Answer:
a.
Determine and summarize strategic factors for strategy formulation.
Summary of the Internal and External factors

External factors
Opportunity:
1. Growing demand for luxury goods of
target consumers in emerging market
2. Growing desire for luxury goods by
middle-income consumers
3. Mens luxury market is still
underserved
4. Low price-sensitivity towards luxury
products, high profit margin from
channel markup
5. Expansion in internet sales
Internal factors
Strength:
1. Consumer-centric focus to produce
products based on consumer research
2. Outsourcing and licensing agreements
with contract manufacturers maintain low cost structure and high
operating margin
3. Multi-channel international
distribution model
4. Excellent customer service (Service
differentiation)
5. Strong customer brand loyalty
6. Strong brand history and brand
positioning
Threat:
1. Economic growth still slow,
consumers cut back on discretionary
spending
Weakness:
1. Dilution of brand image from overexpansion of factory outlets
2. Higher competition in accessible

product market
2. Steep promotions at factory outlets

resulting in lower profit margin
3. Increase in counterfeit goods
3. International penetration still low
4. Department stores were becoming less

relevant
173 | P a g e
b. Perform External Factor Analysis Summary (EFAS) to see how well the companys
strategies effectively take advantage of existing opportunities and minimize the
potential adverse effects of external threats.
External Factors (EFAS)
Opportunities
O1: Increase demand in emerging countries
O2: Increase demand in middle income
O3: Mens luxury market expansion
O4: Low price-sensitivity, high profit margin
O5: Internet sales expansion
Threats
T1: Economic growth still slow, consumers cut back on
discretionary spending
T2: Higher competition in accessible product market
T3: Increase in counterfeit goods
T4: Department stores were becoming less relevant
Total Scores
Weight Rating
Weighted
Score
0.15
0.1
0.1
0.1
0.1
3
3
3
2
2
0.45
0.3
0.3
0.2
0.2
0.15
0.45
0.15
0.1
0.05
2
1
2
0.3
0.1
0.1
1.00
2.40
Comments:
O1: C-78, in 2012, Coach ranked eighth in luxury goods store locations in China with 52 stores.
O2: Coach increase number of factory stores in existing market and focus more on direct
marketing
O3: Compared with competitors
O4: Unobvious existing strategy
O5: Unobvious existing strategy
T1: Coach may has less impact because of low price strategy
T2: Monthly product launch
T3: No existing strategy
T4: Focus more on building market share through coach.com, global e-commerce sites
174 | P a g e
c. Perform Internal Factor Analysis Summary (IFAS) to see how well the company is
responding to current and expected factors in its internal environment.
Internal Factors (IFAS)
Weight Rating Weighted Score
Strengths
S1: Consumer-centric focus
S2: Outsourcing and licensing agreements
S3: Multi-channel distribution model
S4: Service differentiation
S5: Strong brand (loyalty, history and positioning)
0.2
0.15
0.15
0.05
0.1
4
3
4
2
3
0.8
0.45
0.60
0.1
0.3
Weaknesses
W1: Dilution of brand image
W2: Steep promotions at factory outlets
W3: Low international penetration
0.15
0.05
0.15
2
2
3
0.3
0.1
0.45
Total Scores
1.00
3.10
Comments:
S1: Quarterly research in consumer trend, monthly product launch
S2: Obvious strategy
S3: Multi-channel distribution model, especially on factory stores
S4: Perform on average
S5: Comparing to competitors, coach brand loyalty is higher
W1: Perform on average, coach still target to increase both factory and full price stores
W2: Unobvious existing strategy
W3: Coach has strategy to build market share and brand awareness in underpenetrated markets
d. Compare the position in IE Matrix and BCG Growth-Share Matrix. What would be
the strategic guideline for the company in formulating corporate strategy?
BCG Growth-Share Matrix:
When consider competitors including Louis Vuitton, Gucci, Michael Kors and Kate
Spades, we can see that Coach is positioning Question Marks area.
175 | P a g e
Relative Competitive Position
However, if consider only companies that have same strategic groups within accessible
luxury goods: Coach, Michael Kors and Kate Spades, we can see that Coach is positioning in star
area as if Coach is now very successful with high potential in future growth and generating more
profitability. From this BCG matrix, Coach is in between Star and Cash Cow business.
176 | P a g e
Internal-External (IE Matrix):

The EFAS total
weighted scores
The IFAS Total weighted scores

Strong (3.0-4.0)
Average (2.0-2.99)
Weak (1.0-1.99)
II
III
Medium (2.0-2.99)
IV
VI
Low (1.0-1.99)
VII
VIII
IX
High (3.0-4.0)
Coach score of EFAS = 2.40 and IFAS = 3.10 which classified in the Winners channel
meaning that Coach has high attractiveness.
From both IE matrix and BCG growth-share matrix, we strongly recommend Coach to
use intensive growth strategies at least in these three areas:
1. Market Penetration: Increase market share of existing market, especially China.
2. Product Development: Perform consumer research quarterly to develop new products
that meet consumer expectation, including men segment.
3. Market Development: Consider expanding business to India. Use local designer.
177 | P a g e
Question 21: Generating strategic alternatives by employing a TOWS Matrix.

Answer:
External \ Internal
Opportunities (O)
O1: Increase demand in emerging
countries
O2: Increase demand in middle
income in US
O3: Mens luxury market
expansion
O4: Low price-sensitivity, high
profit margin
O5: Internet sales expansion
Strengths (S)
S1: Consumer-centric focus
S2: Outsourcing and licensing agreements
S3: Multi-channel distribution model
S4: Service differentiation
S5: Strong brand (loyalty, history and positioning)
SO1: Research market trend in emerging countries

to develop new product serving unmet need (S1, S2,
S3, S4, O1)
SO2: Increase sale channel, both full price and
factory stores in Japan and US (S3, O2)
SO3: Research men products market trend, and
increase men product category (S1, S2, S5, O3)
SO4: Increase product outsource and licensing
agreement to increase higher profit margin (S2, O4)
SO5: Provide home delivery, refurbish, or replace
for damaged internet-ordered product (S3, S4, S5,
O5)
Threats (T)
T1: Economic growth still slow,
consumers cut back on
discretionary spending
T2: Higher competition in
accessible product market
T3: Increase in counterfeit goods
T4: Department stores were
becoming less relevant
Weaknesses (W)
W1: Dilution of brand image
W2: Steep promotions at factory outlets
W3: Low international penetration
ST1: Expansion of factory outlets to maintain sales

during economic downturn (S1, S3, S4, S5, T1)
ST2: Raise market share by developing strong
brand image through product differentiation and
excellent services (S1, S2, S3, S4, S5, T2)
ST3: Create license prove and serial no. tracking.
(S2, S4, S5, T3)
ST4: Expand internet sales and provide home
delivery (S3, S4, S5, T4)
WO1: Expand full-price stores while

carefully expand factory stores in
emerging countries (W1, W2, W3, O1)
WO2: Increase full-price stores while
carefully expand factory stores in Japan
and US (W1, W2, O2, O4)
WO3: Increase full-price stores while
carefully expand factory stores in mens
market (W1, W2, O3, O4)
WO4: Expand internationally via internet
sales (W1, W2, W3, O5)
WT1: Penetrate into countries with growth

potential (W1, W2, W3, T1)
WT2: Increase flagship store with
distinctive theme and distinctive product
design (W1, W2, T2)
178 | P a g e
Strategic Alternatives:
SO1: Research market trend in emerging countries to develop new product serving unmet
need (S1, S2, S3, S4, O1)
SO2 & WO2: Increase sales channel, by expanding full price stores and limit factory stores
in Japan and US (S3, W1, W2, O2, O4)
SO3: Research men products market trend, and increase men product category (S1, S2, S5,
O3)
SO4: Increase product outsource and licensing agreement to increase higher profit margin
(S2, O4)
SO5 & ST4: Expand internet sale and provide services such as home delivery, refurbish, or
replace for damaged internet-ordered product (S3, S4, S5, O5, T4)
WO1: Expand full-price stores while carefully expand factory stores in emerging countries
(W1, W2, W3, O1)
WO3: Increase full-price stores while carefully expand factory stores in mens market
(W1, W2, O3, O4)
WO4: Expand internationally via internet sales (W1, W2, W3, O5)
ST1: Expansion of factory outlets to maintain sales during economic downturn (S1, S3, S4,
S5, T1)
ST2: Raise market share by developing strong brand image through product differentiation
and excellent services (S1, S2, S3, S4, S5, T2)
ST3: Create license prove and serial no. tracking. (S2, S4, S5, T3)
WT1: Penetrate into countries with growth potential (W1, W2, W3, T1)
WT2: Increase flagship store with distinctive theme and distinctive product design (W1,
W2, T2)
179 | P a g e
Question 22: Recommend strategies and operation plans for company.

Answer:
a.
Short Term Strategies and operation plans

1. SO2 & WO2: Increase sales channel, by expanding full price stores and limit factory
stores in Japan and US (S3, W1, W2, O2, O4) Short term
2. SO5 & ST4: Expand internet sale and provide services such as home delivery, refurbish,
or replace for damaged internet-ordered product (S3, S4, S5, O5, T4) - Shortterm
3. ST3: Create license prove and serial no. tracking. (S2, S4, S5, T3) - Shortterm
No.
Strategies
1. Increase sale channel by

expanding full price stores and
limit factory stores in Japan and
US
2
Expand internet sales and

services
Create license prove and serial

no. tracking
Operation plan
Expand full price stores according to the market
research and expand factory stores with caution in
Japan and US so as not to dilute the brand image
Increase number of product sales on internet and

increase advertisement to promote internet
channel.
Increase services provided to internet sale
channels such as home delivery, refurbish, or
replace for damaged
Coordinate with local distributors to set up
delivery service for products ordered on the
companys website
Offer home delivery option if the particular
handbag or color was not available during a visit
to a Coach store
Create license authentication/ serial number on the
product and provide online authentication checking to
prove the genuine product
180 | P a g e
b. Medium Term Strategies and operation plans

1. SO1: Research market trend in emerging countries to develop new product serving unmet
need (S1, S2, S3, S4, O1) - Medium term
2. WO1: Expand full-price stores while carefully expand factory stores in emerging
countries (W1, W2, W3, O1) - Medium term
3. SO3: Research men products market trend, and increase men product category (S1, S2,
S5, O3) - Medium term
4. WO3: Increase full-price stores while carefully expand factory stores in mens market
(W1, W2, O3, O4) - Medium term
5. SO4: Increase product outsource and licensing agreement to increase higher profit margin
(S2, O4) - Medium term
6. WO3: Expand internationally via internet sales (W1, W2, W3, O5) - Medium term
No.
Strategies
Operation plan
Research, produce new

product for emerging
countries and expand
stores
Identify potential markets and establish local distributors in

South America, Europe and Asia
Conduct market research to refine product offering specially
tailored to the emerging markets
Expand number of full price stores and expand factory
stores with caution in China so as not to dilute the brand
image
Research, produce new

product for mens market
and expand stores
Identify potential markets, conduct market research and

develop men and dual-gender products offers to mens
market in US, Japan and China
Expand number of full price stores and expand factory
stores for mens market with caution in US, Japan and
China so as not to dilute the brand image
Increase product outsource Increase the outsourcing and licensing agreement to other
and licensing agreement
locations/ vendors/ manufacturers in order to diversify risk
of suppliers power
Increase the outsourcing and licensing agreement to other
countries that the company expand to such as emerging
market (China and India)
Optimize the mix of cost, lead times, and construction
capabilities together
- Companys procurement process (C-79)
Expand internationally via

internet sales
Increase number of product sales on internet internationally

and increase advertisement to promote internet channel.
Coordinate with local distributors to set up delivery service
for products ordered on the companys website
- Home delivery service
181 | P a g e
c. Long Term Strategies and operation plans

1. ST2: Raise market share by developing strong brand image through product
differentiation and excellent services (S1, S2, S3, S4, S5, T2) - Long term
No.
1
Strategies
Operation plan
Raise market share by developing strong

- Monthly collection, seasonal product
brand image through product differentiation launch (C-79)
and excellent services
- Refurbish or replace damaged handbags,
regardless of the age of the bag. + Customer
service training program (C-80)
182 | P a g e

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COACH INC.

Question 2: Companys business model.

Question 4: Functional Level Strategies

Marketing and sales

Human Resource management

Table4.3Global workforce ofCoach

Technology development comes up with market researchs result. Coach conducts

According to manufacturing part, all of Coachs production was outsourced to contract

Human Resources Management

ERP (Enterprise Resource

Innovative IT system with SAP,

Monitoring Global Working

Consumer-centric focused strategy

The highest quality material

Depends on only one sourcing

Inbound Logistics Strategy

inventory. They also have high quality same as Coachs standard.

source of produced physical products, and quality.

Outbound Logistics Strategy

products into and out of the manufacturing process.

Marketing and Sales Strategy (Product, Price, Place, Promotion)

channel for customers to receive the support from the company.

Firm Infrastructure (Information Technology, Accounting, Finance, Strategic Planning)

Human Resource Management Strategy (Recruiting, Selecting, Training, Developing,

Evaluating, Compensation and Retaining)

Technology Development Strategy

development process based on consumer research by cooperating with marketing department in

parts, and supplies needed to perform operations function.

- Differentiation strategy, product

Question 5: Business Level Strategies

What need to be satisfied?

What need to be satisfied?

Period 3: 1996-2000 Lew Frankfort and Reed Krakoff Broad differentiation

What need to be satisfy?

How would the company satisfy them?

Period 4: 2000-2011 expanding to global market - Broad differentiation

What need to be satisfy?

Cost control function. (Efficiency -Involve in its operation strategy area)

Question 6: Business Level Strategies

Period 2005-2006: Intensive Growth Market Development Strategy

b) Draw the web of Corporate level strategy to concluding the finding

Coach generated revenue by selling its product directly to consumers, indirectly to

Question 7: How is the effectiveness of the companys strategies?

BCG Growth-Share Matrix as of 2007-2011 (Considering major luxury competitors)

Unit: thousand dollar

Unit: thousand dollar

Unit: USD million

Unit: thousand dollar

Unit: USD million

Question 8: What issues does the company need to address?

2) The economic growth at slow rate after recovery.

Source: Coach Inc,2012

Source: World Bank Group

Source :CoachInc 2012

4) Potential Growth for mens products

Question 9: What problems is the company facing?

Source: Coach Inc 2012

(T) Global GDP growth rate was growth at slow rate.

Source: World Bank Group

Source: World bank

(O) Increasing Middle-Class Spending worldwide

Source: OECD, Kiplinger

Source: OECD, Kiplinger

(T) Global inflation rate increase