Coach Inc
Coach Inc.: Is Its Advantage in Luxury Handbags Sustainable?
Executive Summary
Coach Inc.: Is Its Advantage in Luxury Handbags Sustainable?
Company History ▪ Founded in 1941 by Miles Cahn, a leather artisan, who began producing women’s handbags; simple in style and resilient to wear and tear. ▪ Even after 40 years of business, coach was able to grow at a steady rate by setting prices about 50% lower than most luxurious handbags, adding new models and establishing accounts with retailers such as Bloomingdale’s and Saks Fifth Avenue. ▪ After 44 years of family management, Coach was then sold to Sara Lee, a diversified food and consumer goods producer (acquisition strategy). ▪ Sara Lee left Coach’s strategy and operations intact but by 1990’s the company performance began to decline as consumer shifted preference to a more stylish French and Italian handbags such as Gucci, Prada, Louis Vuitton, etc. ▪ In 1996, there was a change in the management having Reed Krakoff as the new creative director, an ex Tommy Hilfiger designer. He believed that new products should be based on market research rather than on designer’s instincts about what would sell. ▪ Coach then conducted excessive research and held focus groups to ask customers about styling, comfort, and functionality preferences. They found that customers look for edgier styling, softer leathers, and leather-trimmed fabric handbags. These prototypes were tested in selected coach stores for 6 months before announcing the launch. This process allowed coach to launch a new collection every month instead of “2 per year” launch prior to Krakoff’s arrival, making it adopting an offensive strategy to improve its market standing or result in a competitive edge fairly quickly. ▪ The stores were redesigned to complement the contemporary new designs, the factory stores’ appearance were improved. ▪ The factory stores carry test models, discontinued models and special lines that
Executive Summary
Coach Inc.: Is Its Advantage in Luxury Handbags Sustainable?
Company History ▪ Founded in 1941 by Miles Cahn, a leather artisan, who began producing women’s handbags; simple in style and resilient to wear and tear. ▪ Even after 40 years of business, coach was able to grow at a steady rate by setting prices about 50% lower than most luxurious handbags, adding new models and establishing accounts with retailers such as Bloomingdale’s and Saks Fifth Avenue. ▪ After 44 years of family management, Coach was then sold to Sara Lee, a diversified food and consumer goods producer (acquisition strategy). ▪ Sara Lee left Coach’s strategy and operations intact but by 1990’s the company performance began to decline as consumer shifted preference to a more stylish French and Italian handbags such as Gucci, Prada, Louis Vuitton, etc. ▪ In 1996, there was a change in the management having Reed Krakoff as the new creative director, an ex Tommy Hilfiger designer. He believed that new products should be based on market research rather than on designer’s instincts about what would sell. ▪ Coach then conducted excessive research and held focus groups to ask customers about styling, comfort, and functionality preferences. They found that customers look for edgier styling, softer leathers, and leather-trimmed fabric handbags. These prototypes were tested in selected coach stores for 6 months before announcing the launch. This process allowed coach to launch a new collection every month instead of “2 per year” launch prior to Krakoff’s arrival, making it adopting an offensive strategy to improve its market standing or result in a competitive edge fairly quickly. ▪ The stores were redesigned to complement the contemporary new designs, the factory stores’ appearance were improved. ▪ The factory stores carry test models, discontinued models and special lines that