Complete a Value Chain analysis for the company with the objective of identifying valuable resources and capabilities. Identify any resource bundles and provide a brief explanation. Then use the 4 tests to determine competitive advantage and sustainability. (At least 700 words)

 

 

  

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Coach Inc. in 2012: Its Strategy in the "Accessible" Luxury Goods Market John E. Gamble Ronald W. Eastburn University of South Alabama University of South Alabama same-store sales productivity. The company's strategy oach Incs strategy that created the "acces- sible" luxury market in ladies handbags made focused on five key initiatives: it among the best-known luxury brands in North America and Asia and had allowed its sales to grow at an annual rate of 20 percent between 2000 and 2011, reaching $4.2 billion. During that period, the company's net income increased from $16.7 million to $880 million. In 2012, Coach Inc. designed and marketed women's and men's bags, leather accesso- ries, leather apparel items, business cases, footwear, jewelry, travel bags, watches, and fragrances. All of the company's leather products were manufactured by third-party suppliers in Asia, while Coach-branded footwear, eyewear, watches, and fragrances were made available through licensing agreements. Coachs strategy, which focused on matching key luxury rivals in quality and styling while beating them on price by 50 percent or more, yielded a competi- tive advantage in attracting not only middle-income consumers desiring a taste of luxury, but also affluent and wealthy consumers with the means to spend con- siderably more on a handbag. Another distinctive ele- ment of the company's strategy was its multichannel and its strategy seemed to have merit, the company's distribution model, which included indirect wholesale profit margins were still below the levels achieved sales to third-party retailers but focused primarily on prior to the onset of a slowing economy in 2007. In direct-to-consumer sales. In 2012, Coach operated 345 addition, its share price had experienced a sharp full-price 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 direct-to- consumer segment accounted for 87 percent of the company's 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 Ferragamo, Prada Giorgio Armani, Dalce & Gabbana, store locations and the Coach International group sup- and Versace. plying 211 department store locations in 20 countries. The company's two primary strategic priorities in 2012 were to increase global distribution and improve • Build market share in North America by opening approximately 15 new full-price retail stores and 25 factory outlets. • Build market share in Japan through the addition of 15 new locations. • Raise brand awareness and build share in under- penetrated markets, including Europe and South America and, most notably Asia, with 30 new loca- tions planned in the region. • Increase sales of products targeted toward men. Specifically, new store openings in North America and Japan would focus on men's products, while the new shops in China would offer dual-gender product lines. Raise brand awareness and build market share through coach.com, global e-commerce sites, and social networking initiatives. While the company's performance was commendable decline during the first six months of 2012. Going into fiscal 2013, it was undecided if the company's recent growth could be sustained and its competi- tive advantage would hold in the face of new acces- sible luxury lines launched by such aggressive and successful luxury brands as Michael Kors, Salvatore Copyright (c) 2012 by kohn E. Gamble and Ronald W. Eastburn. All rights reserved. CASE 7 Coach Inc. in 2012: Its Strategy in the "Accessible" Luxury Goods Market John E. Gamble Ronald W. Eastburn University of South Alabama University of South Alabama same-store sales productivity. The company's strategy oach Incs strategy that created the "acces- sible" luxury market in ladies handbags made focused on five key initiatives: it among the best-known luxury brands in North America and Asia and had allowed its sales to grow at an annual rate of 20 percent between 2000 and 2011, reaching $4.2 billion. During that period, the company's net income increased from $16.7 million to $880 million. In 2012, Coach Inc. designed and marketed women's and men's bags, leather accesso- ries, leather apparel items, business cases, footwear, jewelry, travel bags, watches, and fragrances. All of the company's leather products were manufactured by third-party suppliers in Asia, while Coach-branded footwear, eyewear, watches, and fragrances were made available through licensing agreements. Coachs strategy, which focused on matching key luxury rivals in quality and styling while beating them on price by 50 percent or more, yielded a competi- tive advantage in attracting not only middle-income consumers desiring a taste of luxury, but also affluent and wealthy consumers with the means to spend con- siderably more on a handbag. Another distinctive ele- ment of the company's strategy was its multichannel and its strategy seemed to have merit, the company's distribution model, which included indirect wholesale profit margins were still below the levels achieved sales to third-party retailers but focused primarily on prior to the onset of a slowing economy in 2007. In direct-to-consumer sales. In 2012, Coach operated 345 addition, its share price had experienced a sharp full-price 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 direct-to- consumer segment accounted for 87 percent of the company's 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 Ferragamo, Prada Giorgio Armani, Dalce & Gabbana, store locations and the Coach International group sup- and Versace. plying 211 department store locations in 20 countries. The company's two primary strategic priorities in 2012 were to increase global distribution and improve • Build market share in North America by opening approximately 15 new full-price retail stores and 25 factory outlets. • Build market share in Japan through the addition of 15 new locations. • Raise brand awareness and build share in under- penetrated markets, including Europe and South America and, most notably Asia, with 30 new loca- tions planned in the region. • Increase sales of products targeted toward men. Specifically, new store openings in North America and Japan would focus on men's products, while the new shops in China would offer dual-gender product lines. Raise brand awareness and build market share through coach.com, global e-commerce sites, and social networking initiatives. While the company's performance was commendable decline during the first six months of 2012. Going into fiscal 2013, it was undecided if the company's recent growth could be sustained and its competi- tive advantage would hold in the face of new acces- sible luxury lines launched by such aggressive and successful luxury brands as Michael Kors, Salvatore Copyright (c) 2012 by kohn E. Gamble and Ronald W. Eastburn. All rights reserved. CASE 7

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What is value chain analysis It is a process where a firm identifies their primary and support activities which further adds value to their final prod... View the full answer