Introduction

Background in Brief:
Coach was first established in 1941, as a small family run leather goods
manufacturing business. Over time Coach became recognized as a premium brand
that provided superior quality leather goods in classic styles and in the 1980`s it
opened exclusive Coach retail stores. Coach was sold to Sara Lee in 1985 and
experienced rapid expansion. Coach`s product portfolio was expanded to include,
accessories, luggage and briefcases and many more exclusive Coach stores and
Boutiques were opened. By the late 1980`s there were 12 exclusive Coach retail stores
as well as approximately 50 boutiques selling Coach products within lager department
stores. While Coach initially grew it started to lag behind its competitors in terms of
trendiness and sales began to decline. In 1996 Krakoff joined Coach and he was
instrumental in positioning Coach as an 'accessible luxury brand`` for it was
understood that price was a source of competitive advantage for the brand in the
luxury market. In October 2000, Coach went public under the name of Coach Inc. By
2005 Coach`s revenues tripled and their share price increased more than 900 % since
their IPO in 2000.

The Organization Today:

Coach is one of the most recognized fine accessories brands in the U.S. and in targeted
international markets. Coach is a leading American marketer of fine accessories and
gifts for women and men. Their product offerings include womens and mens bags,
accessories, business cases, footwear, jewelry, sun wear, travel bags, watches and
fragrance. Coachs distribution strategy is multi-channel. Coach operates in two
segments: Direct-to-Consumer and Indirect. The Direct-to-Consumer segment includes

sales to consumers through Company-operated stores in North America, Japan, Hong

Kong, Macau, mainland China, Singapore, Taiwan and the Internet. The Indirect
segment includes sales to wholesale customers in over 20 countries, including the
United States; royalties are also earned on licensed products. As Coachs business
model is based on multi-channel international distribution the success of the
corporation does not depend exclusively on the performance of a single channel or
geographic area.

Mission, Goals & Stakeholders

Mission:
``Coach seeks to be the leading brand in terms of quality lifestyle accessories offering
classic, modern American styling Coach is focused on a specific type of style classic,
modern American, and wants to be the leader in that segment. Coach lists its core
beliefs as follows: The Brand is our Touchstone, Customer Satisfaction is
Paramount, Integrity is Our Way of Life, Innovation Drives Winning
Performance, and Our Success Depends on Collaboration. Coachs commitment
to its mission statement and beliefs are clearly working as Coach holds the number one
position within the U.S. premium handbag and accessories market and the number two
position within the Japanese imported luxury handbag and accessories market.

Goals and Objectives:

To offer premium lifestyle accessories and provide consumers with quality,

relevant and innovative products that are extremely well made, and sold at an
attractive price.

Drive growth and market share by expanding their distribution channels to reach
local consumers in emerging markets and leveraging the global opportunities.

Ensure that the Coach brand remains a premier, distinctive and easily
recognizable brand by delivering a consistent message to the consumer through

their communications and visual merchandising while protecting the brand

name from counterfeit products.

Anticipate consumer changing needs by being `consumer centric`` through the

use of extensive consumer research and surveys to innovate to create customer
and shareholder value.

Stakeholders:
Employees: Coach`s approximate 18,000 employees are extremely
important stakeholders for the company. They want to have a fair salary and
benefits for their hard work.
Investors: Shareholder`s would like to see a return on their investment. This
includes stock appreciation as well as an increase in the dividend.
Board of Directors and Management: are looking for Coach Inc. to
perform well so that their stock options are in the money and their jobs will
be safer.
Customers: are purchasing Coach products primarily for the brand
recognition and the perception of a status symbol. They also expect the
quality good of the product to be superb.
Competitors: are ultimately looking to increase their market share and
profits. They will be evaluating Coach`s strategy and looking for opportunities
to steal customers.

External Analysis
General Environment (Macro):
Economic: During the next several years the economy poses significant risk to the
luxury industry in the mature markets, however, emerging markets such as China,
India and Brazil are expected to experience strong growth in the luxury market as their
middle class develops. The U.S (Coach`s largest market) must address the Fiscal Cliff``
or another economic recession will occur. Furthermore there is currently no solution in
sight regarding the European debt crisis.
Socio-Cultural: Changing societal concerns, attitudes, and lifestyles represents both
opportunities and risks to the luxury accessory industry. The changing preferences by
middle class consumers towards luxury goods inevitably create new opportunities for
growth within mature markets. Companies that shift manufacturing jobs overseas for

lower wages have been criticized by consumers. Companies need to evaluate the
potential costs as well as benefits before manufacturing or dispersing their products
into a country or region.
Globalization: The primary reason for the increasing globalization is that firms within
the industry are attracted by the rising level of income and wealth and the advantage
of cheap labor within relatively new industrialized countries such as China, India, and
Brazil. While geographic diversity and globalization helps to reduce companies
exposure to risks in any one country, they`re subject to risks associated with all the
different international operations, including, changes in exchange rates, natural
disasters , and government controls.
Technological Development: Firms need to continuously invest in technology in
order to innovate products and minimize defects. Luxury products need not only to
deliver on quality to their customers, but also justify their premium prices over
counterfeit products. Luxury firms also need to invest in technologies, to prevent
counterfeiting such as holograms, smart cards, biometric markers and inks, which can
be used to protect and authenticate genuine products. Large global firms also require
sophisticated websites that need to consider language, cultural elements and product
lines.
Political/Legal: The political landscape within the U.S. for the next four years is
unclear leading to uncertainty for the luxury goods industry. If Governor Romney wins
the election he has stated that he will label China a currency manipulator which could
result in tariffs and a stressed relationship. The legal fight against trademark
infringement, trademark counterfeiting and patent infringement, and trade mark
dilution is significant for the luxury accessory industry. Companies spend millions of

dollars trying to enforce intellectual property rights around the world by working
cooperatively with other companies within the industry, and government agencies and
law enforcement agencies.
Demographic: The luxury market is defined as individuals with annual income above
USD $30,000. It is estimated to grow by more than 600 million individuals from 2010 to
2025 as global economic realignment continues to pick up speed. China is expected to
contribute 30% of the growth, with 200 million more consumers entering the luxury
market by 2025.

Industry Environment (Porters 5)

Threats of New Entrants (Low-Medium): The luxury goods retail industry is

experiencing continually changing market trends and consumer preferences. It is

relatively easy for new companies to enter into the luxury apparel industry,
however most companies lack staying power because they are undercapitalized.
New Entrants generally lack marketing muscle to give their products the exposure
required to build brand loyalty among consumers. Brand names have become
increasingly important to consumers.
Bargaining Power of Buyers: (Low-Medium): There are many different luxury
accessory designers for consumers to pick among therefore, brand name and
recognition is important. Coach has an advantage in terms of pricing in a number of
geographic areas for it has Factory discount stores that are complementary to its high
end stores. These cater to price conscious customers who do not need the very latest
styles. Coachs customers have low bargaining power because Coach offers so many
different products at different prices to a very large, expanding customer base and it is
in their` best interest to keep prices high to retain their brand image.

Bargaining Power of Suppliers (Low-Medium): Given the large quantities of

goods Coach buys, the suppliers really want to have contract with them, therefore
Coach has the bargaining power to negotiate prices. Also Coach`s main material is
leather, therefore Coach has the option to of purchasing it from many different places.
Threat of Substitute Products (Medium-High): There are two types of substitute
products that could pose a threat to the company: alternative brands and counterfeits.
Brand name/image and product quality are what drives sales in the
Apparel/Accessories industry which is why currently Coach and other firms within the
industry spends so much on advertizing and maintaining high quality standards. Coach
works cooperatively with its competitors to minimize the amount of counterfeit
products in the market place by prosecuting companies.
Rivalry among Competing Firms (Medium): The luxury handbag and accessories
industry is highly competitive but not through price competition. They all have slightly
different products and compete for the upper class to upper-middle class. All the
companies need to distinguish their brand and product. They also need to spot new
trends and adapt quickly to the changing preferences. Branding is incredibly important
in this industry as in mature markets consumers tend to choose brands they know and
in rapidly growing developing markets consumers want to own symbols of success.

Competitor Analysis
1.) Polo Ralph Lauren Corp. (RL): Polo Ralph Lauren Corporation, together with its
subsidiaries has a market cap of $14.5 billion while Coach has a market cap of $16.2
billion. RL engages in the design, marketing, and distribution of lifestyle products. The
company offers mens, womens, and childrens clothing; and accessories comprising
footwear, eyewear, watches, jewelry, hats, and belts, as well as leather goods,

including handbags, luggage and products for homes. Price wise, it is at the lower end
of the luxury market whereas Louis Vuitton and Gucci are at the upper end.
2.) LVMH MOET HENNESSY-UNSP ADR (LVMUY:OTC US): LVMH Moet Hennessy
Louis Vuitton SA is a France-based luxury goods company with a market capitalization
of $83.1 billion, five times the size of Coach. The Company owns a portfolio of luxury
brands and its business activities are divided into five business groups: Wines and
Spirits, Perfumes and Cosmetics, Watches and Jewelry, Fashion and Leather Goods, and
Selective Retailing. The competition with Coach comes primarily in the fashion and
leather goods business but higher cost luxury firms like Gucci and Louis Vuitton do not
want to compete on price in the luxury goods industry for fear of damage to their
brand.
3.) GUCCI GROUP NV-NY REG SHRS (GUCG:OTC US) Through the Gucci, Yves
Saint Laurent and Sergio Rossi brands it designs, produces and distributes high-quality
personal luxury goods, including: handbags, luggage, small leather goods, shoes,
timepieces, jewelry, ties and scarves, eyewear and perfume. The company has a
market capitalization of $13.4 billion and directly operates stores in major markets
throughout the world and wholesales products through franchise stores, duty free
boutiques and leading department and specialty stores.

Analysis of Interaction of External Forces

The macro environment is challenging, particularly in mature markets but the
opportunities globally should mitigate some of the risks. On the basis of Porters Five
Forces it is clear that Coach`s industry is attractive because of the high barriers to
entry. The competition is there but Coach has its own loyal followers dedicated to their
brand name. The threat of new entrants is low for reasons previously discussed. The

threat of substitutability is also low which keeps the luxury industry extremely
profitable as well.

Internal Analysis
Tangible Resources
Financial Resources: The firm`s borrowing capacity and ability to generate funds
internally is impressive. They recently replaced their previous line of credit on June 18,
2012 with a new $400 million one with JP Morgan Chase Bank which will allow them to
fund any further expansion. This access to funds as well as its positive cash flows from
operating activities of $1.2 billion is expected to be used to fund expansion into
emerging markets.
Physical resources: As of June 30, 2012, Coach occupied 354 retail and 169 factory
leased stores located in North America, 180 Coach-operated department store shop-inshops, retail stores and factory stores in Japan, 96 Coach-operated department store
shop-in-shops, retail stores and factory stores in Hong Kong, Macau and mainland
China, and 34 Coach-operated department store shop-in-shops, retail stores and
factory stores in Taiwan and Singapore. Coach really utilizes new technologies such as
their global web presence, with 17 informational websites in 18 countries.
Trademarks and Patents: Coach owns the entire 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. ``Major
trademarks include Coach, Coach and Lozenge Design, Coach and Tag Design,
Signature C Design, Coach Op Art Design and The Heritage Logo (Coach Leatherware
Est. 1941)``

Intangible Resources
Managerial Capabilities: The dramatic growth of Coach is a testament to the
strength of management talent at Coach. Coach`s management team has enormous
experience in the industry, massive talent and demonstrated ability to continue to
innovate and stay relevant.
Capacity to Innovate: Coach`s ability to innovate can be attributed to Reed Krakoff
(Executive Creative Director) who has been with the company since 1996. Coach has
revitalized its image to attract a younger demographic. Coach is consumer-centric, and
pays attention to its consumers needs and wants through consumer research.
Reputation Resource, Perceived Quality: Since inception Coach has focused on creating
quality products and it provides a lifetime warrantee for every Coach handbag.
Coach`s commitment to quality and customer service creates important brand loyalty.

Capabilities
Innovative Merchandising: Coach`s ability for innovative product designs
merchandising is one of Coach`s capabilities. Coach listens to its consumer through
comprehensive consumer research to anticipate the consumers changing needs,
keeping the product assortment fresh and relevant.
(Marketing) Effective Promotion of Brand: Coach has been highly successful in
promoting its brand of affordable luxury. Their after-sale service has engineered
significant customer loyalty to the brand.
(Distribution) Effective use logistics management techniques: Coach
maintains three primary distribution centers: a distribution center in Jacksonville,
Florida, owned and operated by Coach, an Asia distribution center in Shanghai,

owned and operated by a third-party, and a distribution center, through a thirdparty, in Japan. The warehousing of Coach Merchandise, store replenishment and
the processing of direct-to-customer orders is handled by these centers. The
foundation of Coachs information systems is its Enterprise Resource Planning (ERP)
system which supports all aspects of finance and accounting, procurement, inventory
control, sales and store replenishment.

Core Competencies
Brand Image: Coach`s distinctive brand image and easily recognizable luxury
products provide customers with a feeling of success. Coach`s customers have an
emotional connection with the brand because of its long history and unmatched
customer service, and quality. To keep their image relevant they spend a total of
$245.2 million on advertising, marketing, and design costs, and specifically $89.2
million related to marketing and consumer communications.
Distribution Channels: Coach`s implementation of a 'multi-channel international
distribution model' leverages its distribution channels which include retail stores,
factory stores, department stores, direct mail catalogs, on-line store, and e-commerce
websites. Through these different channels Coach is able to effectively appeal to
multiple segments that are often overlooked by their competitors who are afraid of
brand dilution.
Management: Coach`s CEO, Lee Frankfort has been recognized from 2005-2008 as
one of 30 "Most Respected CEO's" globally. Creative Director Reed Krakoff was
formally recognized when he was awarded Accessories Designer of the Year from the
Council of Fashion Designers of America in 2001 and 2004. It is clear Coach has a

superb management team that has created a vision and successfully implanted
strategies to achieve that vision.

Performance
Coach`s performance has been impressive given the economic uncertainty in the
world. Net cash provided by operating activities was $1.04 Billion for fiscal 2012
compared to $880.8 million for 2011 fiscal year end resulting in EPS increasing from
$2.92 in 2011 to $3.53 in 2012. An increase in number of stores globally open from 750
in 2011 to 833 in 2012 contributed to their higher operating income. Their gross
margin increased slightly to 72.8% from 72.7% year over year. Despite these positive
numbers their share price has fallen approximately 10% over the last three months.

Strategy
Business Level Strategy
Coach uses product differentiation as their business level strategy positioning itself as
an ``accessible luxury brand``, within the luxury market of specialty retailing. It can
defend against new entrants since they have to surpass proven products; they also
mitigate buyers power through the tiered pricing structure for its products. When
products are well differentiated customers are less prices sensitive. A well
differentiated product line reduces chance of customers trying other products and
switching to a different brand.

Corporate Level Strategy

At the corporate level Coach employs a related-constrained diversification strategy. As
illustrated in table 1.0 Coach`s experiences moderate levels of diversification with 65%
of its net sales attributed to men`s and women`s handbags. Coach exhibits moderate

forward integration as the company focuses on design, distribution, after-sale services

and management, however, it outsources manufacturing. Their use of e-commerce
allows virtual integration which creates market power and an avenue for closer
relationship with customers. This relationship-building with customers is imperative for
Coach to maintain its luxury brand image.

Table

1.0
Coach's Product Offerings by % of Net
Sales
JunFiscal Year Ended
12 Jul-11 Jul-10
Mens & Womens
Handbags
65%
66%
65%
Accessories
28%
27%
26%
All other products
7%
7%
9%
Total
100
100
100

International Strategy
Coach uses a transnational strategy to get above average returns for a sustained
period of time. Coach also benefits from economies of scale and scope and an
increased market for their product offerings. By employing a transnational strategy
Coach is able to achieve efficiencies while also being flexible enough to cater to local
requirements. Coach uses a host of global entry methods including, exporting,
licensing, strategic alliances, and acquisitions.
Licensing: Coach also licenses certain products with partners outlined in Table 2.0. In
these relationships, Coach takes an active role in the design process and controls the
marketing and distribution of products under the Coach brand. Royalties from licensed
products currently comprise less than 1% of Coachs total revenues, but they provide
Coach with additional controlled exposure for their brand.

Table 2.0
Coach's Licensing Relationships as of June 30, 2012
Category
Licensing
Introduction
Territory
License
Expiration
Partner
Date
Date
Footwear
Jimlar
Spring 1999
U.S.
Spring '99
Eyewear
Luxottica
Spring 2012
Worldwide
Spring '12
Watches
Movado
Spring 1998
Worldwide
Spring '98
Fragrance
Estee Lauder
Spring 2010
Worldwide
Spring '10
Acquisitions: During fiscal 2009, the Company acquired its domestic retail businesses
in Hong Kong, Macau and mainland China from its former distributor and in 2011,
Coach acquired 100% of its domestic retail business in Singapore from the former
distributor, and on January 1, 2012, acquired 100% of its domestic retail business in
Taiwan from the former distributor. These acquisitions provide the Company with a
greater degree of control over the brand in these markets and enable Coach to raise
brand awareness and grow market share with regional consumers. As part of its
international strategy Coach has also announced that they will be buying the remaining
50% of their Japanese joint venture for $225 million.

Cooperative Strategies
Over the years Coach has taken advantage of cooperative strategic alliances with
companies to help enter markets and overcome uncertainties. Coach currently enjoys
the benefits of a vertical complementary strategic alliance with its manufacturers
within many different countries. This business level cooperative strategy helps Coach
benefit by taking advantage of its manufacturers core competency of manufacturing
quality products at an inexpensive price. Joint venture`s have reduced Coach`s risk of
entering markets and instantly give it a large distribution channel.

Synthesis
Strengths
1.) Strong Brand Image of "Affordable Luxury" Product Portfolio: Coach offers
a wide range of merchandise through its stores, and reaches a larger demographic
compared to many of Coach's higher-priced competitors. Coach is the leading
American manufacturer and retailer of leather goods, accessories and apparel for men
and women in the U.S and the second highest-selling luxury handbag retailer in Japan.
2.) Coachs Performance Remained Strong despite Weak Economy: During a
difficult economic environment Coach, has managed to increase sales at a time when
its counterparts are struggling to keep consumers buying their products. Their success
has come in part from the tiered pricing strategy system and their distribution network
including the factory discount stores.
3.) Global Presence Through its Comprehensive Distribution Channels: Coach
operates through its two business segments: direct-to-customer and in-direct. The
company's direct-to-consumers segment provides with immediate, controlled access to
consumers through Coach owned retail and factory stores in North America and Japan
as well as their e-commerce site www.coach.com and Coach Catalogs. The direct to
consumer segment represented approximately 89% of Coachs total net sales in fiscal
2012.
4.) Customer Service: One of Coachs greatest strengths is excellent customer
service. In an effort to show value-added benefits, Coach refurbishes damaged
handbags and provides Special Request service to allow consumers to custom order
a product if a particular handbag or color wasnt available during a visit to a Coach
store. This excellent distribution and consumer service cost $68.9 million (1.4 % of net
sales) in 2012.

5.) Strong Financial Position: With nominal long term debt, the long term debt to
equity ratio is 0.05 and given the quick ratio 1.6 it suggests that Coach should have no
liquidity issues. They recently replaced their previous line of credit on June 18, 2012
with a new $400 million one with JP Morgan Chase Bank which will allow them to fund
any further expansion.

Weaknesses
1.) Dependence on Independent Manufacturers for Procuring Merchandise:
Coach sources all its merchandise from independent manufacturers or vendors. This
makes Coach vulnerable to the risk of lower product quality. Coach is also exposed to
the risk of delays in shipments, foreign governmental regulations, and political unrest
in the manufacturer's country. Disruption in any of the mentioned factors could
interrupt timely product supply at Coach.
2.) Declining Operating Margins: Coach is experiencing slowly declining margins
on its products. This is primarily due to the economys impact on luxury brand
purchases which has caused sales at its factory stores to increase as more consumers
seek bargains. Coach has been relying on sales at its lower price points and though
net sales have remained steady the margins have shrunk from 36.1% in fiscal year
2008 to 31.7% in fiscal year 2012.
3.) Geographic Concentration: Coach currently relies on the U.S. and Japan for
85.6% of its sales. This reliance on the U.S. and Japan for the majority of its sales
makes it vulnerable to geographic risks associated with each country.

Opportunities
1.) Expanding presence in China, India Brazil: The Chinese luxury market has
been growing at annual rates ranging from 2530%. China will soon become the
world`s largest purchaser of consumer luxury products. Emerging economies like
China, India, and Brazil with their developing middle class provide opportunities for
long term growth to counterbalance a smaller growth rate in America and Europe.
2.) Joint Ventures: With international partners in Europe Coach has already
partnered or entered into joint ventures with European companies but more joint
ventures in different countries would not only diversify the company's business risk but
also add a wider customer base. Given its tiered pricing model Coach is well positioned
to win market share from its rivals in Europe. Joint Ventures could also be used to enter
the manufacturing industry, gaining greater control of the quality of goods produced
and lead times.
3.) Increase in Online Sales will Enable Higher Revenues: Coach sells its
products online through its brand-dedicated website www.coach.com and also on
macys.com, dillards.com and nordstrom.com which are the company's wholesale
customers. The company's website acts as a key communications vehicle for the brand
to promote traffic in Coach retail stores and department store locations building brand
awareness as it displays the Coach brand to a larger customer base across different
countries and thus drives sales.

Threats
1.) Subdued Consumer Spending in the US: The slow recovery from the 2008
economic downtown and the risk of another economic downturn has affected
consumer spending as household have increased their savings rates. A further

deterioration in consumer spending along with high unemployment can be detrimental

for the organization given the concentration of sales in the U.S. market.
2.) Intense Competition: Coach faces intense competition in the product lines and
markets it operates. The company competes with European and American luxury
brands and private label retailers, including some of Coachs wholesale customers. Its
competitors may develop new products that attract the customers. Therefore, the
companys ability to compete depends on the strength of its brand, and its trademarks
and design patents.
3.) Counterfeit goods could damage reputation: Counterfeit merchandising and
trademark trespassing are threats to the integrity of the Coach brand. They can
confuse consumers, leading to dissatisfaction, damage the company`s reputation and
reduce sales. Coach has launched a comprehensive anti-counterfeiting litigation
campaign, known as Operation Turnlock.
4.) Brand diffusion: Manufacturing fine luxury goods are launching diffusion lines to
exploit middle-income consumers. For example, Dolce & Gabanna launching D&G, a
sub brand sold at modest price points. This poses a serious threat to Coach as its
tiered pricing strategy systems has been one of its significant strengths.

Coach`s SWOT Matrix:

Strengths
Strong Brand Image(Affordable
Luxury)
Strong Despite Weak Economy
Global Presence, Distribution
Channels
Customer Service
Strong Financial Position
Opportunities

Expanding
Presence in
China, India
Brazil
Joint Ventures
Increase Online
Sales

Threats

Subdued
Consumer
Spending in
the US
Intense
Competition
Counterfeit
Goods
Brand Diffusion

-Coach should use its strong financial

position to expand into emerging
markets.
-Should leverage its strong brand image
and customer service to increase online
sales.
-Use its global presence and distribution
channels to create joint ventures with
European companies and manufacturing
companies.
-By using its customer service and
affordable luxury and tiered pricing it
should reduce threat of reduced
consumer spending in the U.S.
-By using its financial position it can
focus on advertising and increasing the
number of retail stores to decrease the
likelihood of brand diffusion.
-Use strong brand image to reduce
intense competition.
-Use its global presence to facilitate
talks with governments to reduce
counterfeit goods.

Weaknesses
Geographic
Concentration
Slightly Declining
Operating Margins
Dependence on
Independent
Manufacturers
-Reduce geographic concentration
and take advantage of emerging
markets.
-Focus on reducing overhead by
using online and therefore
increasing online sales.
- Reduce dependence on
independent manufacturers by
using joint ventures.

-By reducing its geographic

concentration in the U.S.,
consumer spending in the U.S. will
be less of a threat.
-By gaining total control over
manufacturing processes Coach
will reduce the risk of
manufacturers not producing
quality goods.
-Increase prices slightly to offset
declining margins while using
those funds to increase attack on
counterfeit producers.

SWOT fit with Strategy

Coach`s strategy emphasizes product differentiation, to take advantage of a niche
market of affordable luxury with their tiered pricing system. They have used
cooperative strategies such as joint ventures or equity partnerships extensively to
enter new markets. They also outsource their manufacturing to independent
manufacturers to capitalize on the manufacturers core competency. Therefore,

Coach`s current strategy is consistent with the SWOT matrix with the exception of
becoming more vertically integrated by entering the manufacturing part of the
value chain.

Alternatives:

Proceed with expansion into Europe`s Luxury goods market using the
offensive strategy of its tiered price system to win market share from the
other companies and position Coach for the eventual European recovery.

Reduce number of Factory Stores to prevent brand dilution- reduction in

margin.

Continue the assault on China`s Luxury goods market for it will soon be the
largest market for luxury goods in the world.

Increase presence in India and Brazil to take advantage of the growth of their
middle class.

Increasing presence within the Luxury Men`s Accessories industry as there is

enormous potential to increase sales.

Acquire manufacturers to have greater control of production and reduce risk

with respect to product quality.

Increase advertising and brand promotion for the Coach name and its
prestige is at the core to their success.

Raise awareness of counterfeit products so consumers can recognize the

difference between the counterfeit products and the real products.

Increase E-Commerce sales through new creative advertising online

Criteria for Evaluation:

1. Potential Increase to Sales
2. Effect on brand image

3. Cost of investment required

4. Management attention required
5. Length of time required

Evaluation: Matrix of Criteria to Alternatives

Ranks (0-5) *
Reduce Factory
Number of
Stores
Increase
Number of
Stores in China
Increase Stores
in India and
Brazil
Increase Men`s
Market Share
Raise Effort to
stop Counterfeit
Increase
Advertisement
Acquire
Manufacturer
Proceed with
European
Expansion
Increase ECommerce

Sales

Cost

Brand
Image
5

Time

Manageme
nt
3

* Ranking is from 0-5, where zero is no effect and five is the greatest effect/
use of resource

Short Term Recommendations

1. Increase brand awareness
2. Ensure quality of goods is maintained
3. Identify opportunities within Europe, Asia, and South America and rank them
as to profitability

4. Address the problem of counterfeit producers

5. Evaluate declining operating margins and seek long term solutions

Long Term Recommendations

1. Expand presence in emerging markets such as China, India and Brazil and
other South American countries with joint ventures.
2. Analyze results from joint ventures in emerging markets and determine if
acquiring other half gain a greater share of profits.
3. Exploit opportunity for expansion in mature markets and saturate were
appropriate.
4. Focus on men`s opportunities for the brand.

Implementation
Action plan and Description
1. Increase brand awareness through advertising.
2. Communicate with independent manufacturers immediately with respect to
quality controls.
3. Use unique position of affordable luxury to continue the assault on
competitors within Europe, Asia, and South America.
4. Establish task force to tackle the problem of counterfeit goods.
5. Leverage the Coach Brand globally to reinforce the Coach message of affordable
luxury.
6. Look for joint ventures in order to expand into emerging markets.
7. Identify further men`s luxury product markets coach can enter.
8. Identify reasons for declining margins over the last few years.
9. Saturate mature markets of Japan and U.S. to grow current large position.

Rationale for Action Plan

1. Increase brand awareness through advertising, for Coach`s brand recognition is
its greatest strength.

2. Communicate with independent manufacturers immediately and establish a plan

moving forward to evaluate their quality controls. Not being completely vertically
integrated can be risky, however, Coach can leverage the fact that the suppliers
have less power than Coach. Coach should conduct inspections of independent
manufacturers to ensure quality of products. The rigorous selection of raw materials
has been a major factor behind Coachs brand image of superior quality. It would be too
costly and is outside of Coach`s core competencies for Coach to enter the
manufacturing part of the value chain.
3. Create team to effectively evaluate the different opportunities within Asia,
Europe, and South America and focus resources so that Coach can leverage their
brand globally
4. Establish Strategic Network with competitors to tackle to the problem of counterfeit
goods. Since all of Coach`s competitors are impacted severely by counterfeit goods
they will all be on board. This will be similar to Operation Turnlock a national anticounterfeiting program targeting companies and individuals involved in the distribution
or sale of counterfeit product in the U.S., however, this committee will be international.
5. Leverage the Coach brand globally after identifying the best global opportunities
available to Coach. By Leveraging Coach`s brand and building market share in
markets in which Coach is under-penetrated, most notably in Asia, Coach can increase,
its rate of growth.
6. International expansion is facilitated by forming a partnership with a local firm.
The advantages to this initial step include shared risk and ability to develop
relationships with local department stores, governments, and especially,
consumers. Once Coachs name begins to gain recognition, Coach should expand to

have wholly-owned subsidiary in the form of exclusive specialty shops. Although a

partnership does provide valuable knowledge necessary for success with lower risk,
an individually owned shop will yield the highest profits in the long-run.
7. Identify new men`s luxury product markets Coach can enter by increasing its
men`s product portfolio and dual gender stores. Coach should develop an
advertising strategy specifically tailored to men, for example television
advertisements on sports networks. Men`s luxury product market is extensive and
Coach has failed to capture any significant sales.
8. The issue of declining margins has been masked by Coach`s continued growth in
sales but it is an important weakness. Competition with respect to price will continue to
grow therefore it is essential the Coach use its buying power to put pressure on
suppliers to cut costs.
9. To solidify their dominant position, within the mature markets of Japan and U.S.
Coach should increase their retail outlets in comparison to their factory stores. This
will help Coach retain the image of being a luxury brand.

New Structure and Control Systems Needed

Marketing and Sales Department needs a separate strategic unit for the
internet. This specialized unit requires unique skills that will allow Coach to
leverage its brand over the Internet. This is an important yet underestimated
market.

New excusive stock options with short as well as long maturity dates should be
given to avoid potential agency problems to executives running new
departments.

Creation of Strategic Network: Formal agreement is needed with competitors to

form special inter-firm network to tackle counterfeiting together. This network
will create value for each of the firms that they otherwise would not have been
able to achieve individually.

A new addition to its international retail organization will be needed within

Europe, run by a senior executive. Similar to the three major Asian hubs in
Japan, Mainland China and Other Asia Markets. This will be used in place to
capitalize on growth within the region.

Criteria to Evaluate Success of Implementation

1. Increase current market share of men`s accessories to 10% of net sales
within three years.
2. Increase International sales 100% within three years.
3. Increase online sales by 50% within 3 years.
4. Decrease counterfeiting worldwide by 20% within next five years.
5. Raise the operating margin.