Assignment Questions Case #6 COACH Inc.
1. What are the defining characteristics of the luxury goods industry in 2012? What is the industry all about today?
Today there are key defining characteristics of luxury goods industry such as pricing, quality, style, and brand reputation. The pricing of goods is based on economics, demand increases as income increases. Pricing is also determined by exclusivity, quantity availability, quality and location of the product. The quality of a product can help determine the price, but not always. Luxury goods have higher quality, which results in higher price from the workmanship, material, and labor to product good. Many luxury goods have a particular style that is unique to each brand. Sometimes other brands or companies will try to reproduce a similar item, but cannot compete with the original style and exact fit or design. This is why the reproduced products might not sell as well as the original one. Each brand has a reputation to an individual. It can come from experience, advertising, word of mouth or location. These factors will form your personal preference to whether you will purchase goods from that particular brand. It also creates a sense of status and how others will perceive you if you have certain luxury goods. For example, you seem to be wealthy if you own Louis Vuitton or Chanel handbag over an Anne Klein handbag.
2. What is competition like in the luxury goods industry in 2012? What competitive forces seem to have the greatest effect on industry attractiveness? What are the competitive weapons that rivals are using to try to outmaneuver one another in the marketplace? Is the pace of rivalry quickening and becoming more intense? Why or why not?
The competition in the luxury goods industry in 2012 is strong. The demand for luxury goods is increasing, especially in emerging markets such as China and India. Companies such as Coach, Michael Kors, and Dooney & Burke are competing with higher end luxury goods such as Louis Vuitton, Chanel, Gucci, Fendi, Tory Burch, etc. They are in competition because they are a lower price point but many women would prefer to have the higher end products to show their status. Another reason why they compete is because many brands now have more beyond handbags. When consumers like products from brands, they tend to become loyal consumers and it is hard to appeal and gain their loyalty if you are another brand. The competitive force that has the greatest effect on industry attractiveness is brand exposure. New entrants would have to compete against so many established brands. Many recognizable brands like Dolce & Gabbana, Chanel, Marc Jacobs, Fendi and Gucci have been around for many years, some even decades! It would be very difficult to gain exposure in order to attract customers. Not only is it difficult to gain exposure, but you have to gain customers too. High-end customers know what brands they like and have become loyal to them over the years. These loyal customers have to be persuaded by marketing tactics and buzz marketing. New entrants have to build their brand and status all the way from the beginning, which most brands have already. Some weapons used in the luxury goods industry to outmaneuver one another in the market place are customer service, celebrity sponsorship and setting trends. Customer service is a huge weapon that many companies overlook. Since there is so much competition, consumers are looking for an experience. This experience comes from the store design, product, but most importantly employees at the store. They expect to be greeted and taken care of as soon as they walk into the store. If the experience is successful, they will return to encounter the same experience. This is how customers become loyal to a brand. Another tactic is celebrity sponsorship. Consumers believe they can be like a celebrity if they have the same goods as them. Some sponsorships are Demi...
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