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 women’s and men’s bags, accessories, business cases, footwear,

jewelry, sun wear, travel bags, watches and fragrance. Coach’s 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 Coach’s 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. Coach’s 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:Employee’s: 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 AnalysisGeneral 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 (Porter’s 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. Coach’s 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 men’s, women’s, and children’s 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 ForcesThe macro environment is challenging, particularly in mature markets but the opportunities globally

should mitigate some of the risks. On the basis of Porter’s 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 AnalysisTangible ResourcesFinancial 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-in-shops, 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.

CapabilitiesInnovative 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 consumer’s 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 third-party, 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 Coach’s 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.

PerformanceCoach`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.

StrategyBusiness Level StrategyCoach 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

SalesFiscal Year Ended Jun-12 Jul-11 Jul-10Men’s & Women’s 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 Coach’s total revenues, but they provide Coach with additional controlled

exposure for their brand.

Table 2.0Coach's

Licensing Relationships as of June

30, 2012Category Licensing Introduction Territory License 

Partner Date  Expiration

Date

Footwear Jimlar Spring 1999 U.S. Spring '99Eyewear Luxottica Spring 2012 Worldwid

eSpring '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.) Coach’s 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 Coach’s total

net sales in fiscal 2012.

4.) Customer Service: One of Coach’s 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 wasn’t

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 economy’s 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 25–30%. 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 Coach’s wholesale customers. Its competitors may develop new

products that attract the customers. Therefore, the company’s 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

Weaknesses

Geographic Concentration Slightly Declining Operating

Margins Dependence on Independent

ManufacturersOpportunities

Expanding Presence in China, India Brazil

Joint Ventures Increase Online

Sales

-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.

-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.

Threats

Subdued Consumer Spending in the US

Intense Competition

Counterfeit Goods Brand Diffusion

-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.

-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

-Use its global presence to facilitate talks with governments to reduce counterfeit goods.

funds to increase attack on counterfeit producers.

SWOT fit with StrategyCoach`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) * Sales Brand Image

Cost Management Time

Reduce Factory Number of Stores

0 5 2 3 3

Increase Number of Stores in China

5 2 4 3 2

Increase Stores in India and Brazil

4 2 5 5 4

Increase Men`s Market Share

5 3 2 2 3

Raise Effort to stop Counterfeit

2 5 3 3 3

Increase Advertisement

3 5 2 2 0

Acquire Manufacturer

0 2 5 5 5

Proceed with European Expansion

2 3 3 4 4

Increase E-Commerce

5 2 2 2 2

* 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 Recommendations1. 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 Coach’s 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 anti-counterfeiting 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 Coach’s 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.

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