1) 1. What are the defining characteristics of the luxury goods industry? What is the industry like?
A luxury brand may have profound influence on an overall product strategy since its position may determine how the company is going to make its next step. A luxury brand like Coach epitomizes elegance and combines classic beauty with modern design. According to John E. Gamble, not only has Coach become one of the most respected and known brand names in the ladies’ handbags and leather accessories luxury brand industry, it is also one of the most best-selling luxury brand companies in the world, with net sales reaching 2.1 billion in 2006 (Gamble). When a company like Coach decides to set up a product strategy for the next season, the manager will need to take the brand’s established style into account, since their incoming products must fit with the existing brand. When a manager, such as Lew Frankfort, chairman and CEO of Coach, Inc., aims to build a luxury brand like Coach, he invests millions of dollars in setting up a series of business strategies, including advertising on television, organizing fashion shows, and gaining the approval of fashion designers. These actions are decided based on how a luxury brand is built; essentially, the brand will guide the future steps of the company to a certain degree. Coach, Inc. is different from other more expensive luxury brands, such as Hermes, Prada, Fendi, and Louis Vuitton in the sense that Coach focuses more on middle-income consumers who want to purchase their hand bags from a price range of $200 to $500. Coach is the alternative to these competing companies, matching their key luxury products on quality and styling, while beating them on price by 50% or more (Gamble).
2) 2. What is competition like in the luxury goods industry? What competitive forces seem to have the greatest effect on industry attractiveness?
The Luxury branding decision will influence an organization’s pricing decisions because its position is related to the product’s price. Take Coca Cola, for example. It is the most valuable brand in the world. The brand makers intend to compel everyone to drink Coca and provide a feeling of happiness. Thus, the price of the product will be cheap, since the brand is aimed at inducing the public’s joy. If the company sets the prices high, people may not be able to afford Coca Cola. Since the brand targets consumers of all backgrounds and income levels, it aims to market itself as a cheap beverage that tastes remarkable. This is how the brand is related to the pricing. Similarly, Coach, Inc. succeeds in maintaining a balance between affordable price and luxurious design. Coach is a less expensive luxury brand compared to its more expensive Italian and French counterparts. The type of brand will directly influence an organization’s distribution system, especially if it is a luxury brand, since the brand may tell people where the product is distributed. According to the website (americanessays.com) “Coca Cola has its own distribution channel including direct and indirect selling.” By using this strategy, Coca Cola is able to provide Coke all over the world. Coach, Inc. keyed into “accessible” luxury ladies’ handbags and leather accessories. The brand will influence a company’s promotion decision because of its nature. For a brand like Louis Vuitton, customers barely receive any discounts or find any promotions since it is a very well-known brand with French elegance. The company may not perform any promotions since it may hurt the brand. In contrast, a brand like Best Buy frequently holds promotions, usually every season or every month since this brand is meant to be economic. Thus, the company will execute promotions quite often. Coach, Inc. created its business model, which has different kinds of stores, including full-price stores, factory stores, wholesale department stores, and internet sales stores. Full-price stores sell the newest designer hand bags,...
References: 1) Case 5. John E. Gamble. Page 238-97
2) Marketing Management (J. Paul Peter/James H. Donnelly, JR.)
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