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Luxury Handbags Case Study

2900 Words12 Pages

Coach Inc.: Is Its Advantage in Luxury Handbags Sustainable?

Competitive Strategy

COHORT A , GROUP 7

QUESTION 1
Characteristics of the luxury goods industry
Under this section, we deliberate on the common characteristics underpinning the luxury goods industry. These characteristics have been categorised into three subheadings. They are as follows; market segment & size, Market Players and Counterfeiting, which is a common characteristic of the market.
Market Segment & size
One characteristic according to the case was that the luxury industry targets a market segment of high income earners who do not compromise on style, uniqueness and quality. The case described high income earners as those with income levels ranging from $300,000 …show more content…

The case, for instance, states “the company’s procurement process (which selected only the highest quality leathers) and its sourcing agreements were additional contributors to the company’s reputation for high quality.” Without quality inputs and skilled production from Coach’s 40 suppliers in 15 countries, the company would have lost considerable money from its commitment to refurbish or replace damaged bags. This bargaining power of suppliers in this industry can be partially offset by a firm owning part of the retail …show more content…

Yet, there are strong entry barriers ranging from the large investment costs needed to secure the high quality inputs and technology needed for making goods in this market, the cost of branding, lack of expertise in quality management as well as relationships needed to distribute items produced. For these reasons, the threat of new entrants is significantly reduced in the luxury goods industry.

Availability of substitutes
The luxury goods industry has a variety of substitutes ranging from counterfeit luxury goods items to accessories available on the mass fashion market. These substitutes, however, are selected on their basis of attractiveness and price yet “knock off” products are selected in the case where those in their social circles do not readily identify them as counterfeit since prestige is what the luxury goods market thrives on. The availability of substitutes is thus a moderate force since reputation is a major reason for individuals purchasing luxury

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