Class: Management Policy
Topic: Assessment of Coach
What are the dominant economic characteristics of the luxury goods market? Does it appear that the industry’s prospects for growth and attractive profits are good?
There are a couple of dominant economic characteristics when it comes to a luxury good. First off, any luxury good is going to have a very high elasticity within the market. The better the economy is doing will result in more sales in any luxury market. However, the opposite is also true. If an economy is tanking, luxury products such as coach will usually be hit hard as far as sales go. Another major characteristic is globalization. Globalization for a luxury goods market is key to success. Not only having their product available all over the world, but being able to obtain the finest goods to produce the highest quality product possible. The most important characteristic of an economic good in my opinion is socioeconomic significance. Buying any luxury good allows a person to show their public status to others. People in today’s world like to show off how much money they have or their purchasing power by buying very expensive items such as a $10,000 dollar purse.
If any luxury company is prospected to grow, it is a very good economic indicator for anyone. This means society as a whole has more disposable income in which case people are able to buy these ridiculously overpriced items. I believe majority of people purchase these goods for the public status symbol. Being able to brag about wealth, without actually saying anything. However, in the long run as long as luxury markets are reporting growth, it is almost always an indicator of better economic times for everyone.
How strong are the competitive forces confronting Coach and other accessible luxury market participants? Which one of the five competitive forces is the strongest? Explain your decision.
New competitive forces attempting to go toe to toe with a name like Coach is a nearly impossible task. The reason is branding, for new entrants into the market, it would be absurd for a consumer to pay (x) more amount of money for a brand that just came into the market. Coach is able to grow their profit margin just by putting there name on a purse it is now worth (x) amount more money to the consumer. Even if a new entrant were able to sell their products with the same margins as coach, they would need a huge start up capital just to cover the quality of supplies needed and the distribution channels in order to even compete. This for most people is too much of a financial risk and therefore the risk of a new entrant is very low.
Buyers know what they want when it comes to spending a large amount of money on a product. If a consumer wants a coach purse they will only buy a coach purse. The biggest competitive force for coach I believe is the counterfeit market. To the naked eye it looks like a coach purse. Since most people just buy luxury goods for the symbol of public status, this can be a very appealing alternative. A consumer can literally save thousands of dollars for a product that looks and feels like that of coaches, people will only know the difference if it is closely inspected. Since people generally only see the purse, they will think it’s a Coach, and the consumer will still withhold that “luxury” public status even though it’s a fake.
What key factors will determine a company’s success in the accessible luxury market in the next 3-5 years?
Key factors that will determine success of any luxury market are the following, brand image, growth in sales, a growing market, and consumers having a disposable income. Brand image is everything when it comes to a luxurious company. People put a certain value on your brand meaning the higher thought of the brand name is to the consumer, the higher value is placed on each product. An annual growth in sales is always a great indicator of future economic comfort. As…