Global Fashion Industry - Dissertation Example

Executive Summary Fashion trends and ments that are currently a part of the economy are offering new options for different corporations. Coach is one of the leading fashion companies that are currently in the market, with a specialization in women’s handbags. The financial return and the continuous growth of the company are showing that they have built a specific niche within the fashion industry that is catering to consumers and current trends. For Coach to continue setting a rapid pace of growth within fashion is also the need to evaluate the value chain that is a part of the corporation. More importantly, Coach will need to continue to work on expansion, segmentation and marketing that will offer more areas of growth within the company. The result will be for this corporation to continue to work its way into luxury items within the fashion industry while setting new directions and trends for those interested in style. Introduction The global fashion industry is one that is experiencing several changes and fluctuations because of the current economy. The trends that are beginning to occur from consumers have led into new styles and options that many are looking for. The accessory hand bag company, Coach, is one that is moving into the specific trends and styles that are associated with the current popularity in fashion. The initiatives that have been taken have shown results in the fashion industry through not only trends and styles, but also with the growth and opportunity that is available. The analysis of Coach is one that presents several strengths and weaknesses that can be seen through the finances. From an analysis of the financial concepts, it can be seen that there are future opportunities for Coach, as well as several ways that the value chain can be altered with the distribution and marketing that is a part of the fashion industry. Macro Issues of the Global Fashion Industry There are two main consumer demands that are associated with the fashion industry and the current trends. The first is based on the luxury goods that many are looking for and which are associated with the industry. The items that are a part of the global fashion industry are in demand over those who are looking for expensive accessory items that make a stronger statement within fashion. Italian accessories, high end items and defined makes are all added into the looks that are associated with the high end customers. Those who are looking for high end statements are interested in high levels of quality and styling and will pay larger amounts for this. Typically, this customer is known to make an average of $300,000 or more in a year; however, many mid-income level individuals are also interested in these items. The second level of demand that is in the fashion industry is from the lower income levels that are interested in fashion items. Typically, these groups of consumers will move into the trade up and trade down trends that are a part of the items. Instead of focusing on the quality and styling that comes with brands, they will move into cheaper items that carry the same look and fashion. Retailers that are able to sell items that look close to the fashion trends and statements will be in higher demand for these individuals. However, some of the stores and retail areas are beginning to provide more variety for fashion with various levels of quality and fashion. For mid-stream income families, there is the ability to trade into higher end fashion lines within the same stores, while offering lower priced items to consumers who aren’t interested in the same quality in turn for different pricing. For the fashion industry to reach the levels of consumers effectively there is the need to create compatibility with different budgetary needs. The companies that are involved in the fashion industry have begun to create several lines of fashion, all which are compatible for different trends from consumers. The lines and brands of fashion are based on the quality first all which is defined by the budget minded consumer, as well as those that are interested in higher end fashion. The difference in brand lines is based on the quality and make, which determines the overall pricing. For consumers that want to spend a larger amount on luxury items, is the ability to get the finer makes and designs at a higher price. However, middle income families and those who are also considering budget, can look at alternative lines of the same brand that are available. While these have the same trends, fashion statements and looks, they are also not made with the same quality or precision as luxury items. For the fashion industry, this creates different opportunities with the trends that are available for different levels of consumers. While there are divisions in the economy of fashion conscious consumers by budget, there are also specific challenges that are linked to the demands by consumers. The current demands that are being placed by individuals combine the budgetary needs with new desires for luxury. Many of the consumers are looking at the newest fashion trends and statements and are interested in reinforcing the current styles and options. However, the budgetary considerations continue to dominate fashion because of the current economy and needs within a household. For those who are creating fashion and accessories, is the need to meet both demands of luxury and economic considerations to continue to have loyal customers. The fashion industry is faced with presenting luxury items to those who are interested in the current statements and trends that are a part of this industry. However, luxury is now being forced to meet the demands in prices that are being made by consumers in middle income streams. Another challenge that is being approached by the fashion industry is coming from the same demands of consumers that are within society. The need to have a budget for many also means that they will buy different brands outside of the main fashion companies. Many alternative fashion companies will take the styles of the main brands and will build counterfeit items that will grow in demand for consumers. If budget is priority for the consumers, then buying a spin- off from the main brand will seem like a better alternative than buying the main brand fashion or item. Fashion companies are challenged with finding ways to not only meet budget, but also to stop the demands of counterfeit items that are placed in the economy. Many are trying to find legal obligations to stop the selling of fashion goods outside of the main brand; however, controlling this is becoming more difficult through different regions of the world. For the fashion industry to continue to grow within the macro – economy, is also the need to begin approaching the several types of demands and opportunities that are a part of the current trends. The consumers that are within the market are first based on the demands for budget and further this through the demand for luxury items, quality and style. The fashion companies are faced with trying to find different approaches to meet both of these demands while continuing to produce the same quality and opportunity for consumers that will allow the right approach for growth and new demand. Financial Strengths and Weaknesses of Coach (900 words) The approach that Coach has taken to the fashion industry is one that has allowed them to dominate specific segments of the fashion market and the consumer demands. The financial strengths that are currently being seen by Coach are related to the continuous growth that is within the corporation. The store sales by the end of 2006 were known to increase by 31.9% within one year. The full – price stores that Coach had also grew by an average of 12.3% over one fiscal year. The two main markets that noted these financial areas of growth were Japan and the United States, as well as 108 stores located outside of Japan. The growth in finances was noted from mid – income level bags that held a specific fashion style to them that many of the high – end fashion designers were not able to match. The financial strengths that are a part of Coach are not only related to the growth and percentage rates that are in demand with the stores. Coach has two types of stores that they sell accessories at; full – price and discount stores. The growth and expansion has allowed Coach to go from 30 stores in the US to over 300 stores that sell a variety of pricings for the handbags. As the investments in these different stores have grown, so have the popularity of Coach and the concept of being a designer brand. The trend to have Coach accessories has now grown into different high end stores that also sell luxury items, which is allowing Coach to become more accessible and refined as a luxury brand that is accessible to all income levels. Another advantage that Coach has built through their strategy of expansion and growth is seen in the financial stock. From the year 2000 to 2006, there has been a substantial increase each year. In this six year time frame, the growth has increased by an average of 1,400%, specifically defined by the accessible luxury that is a part of the brand name (see appendix A). For investors, this substantial increase is leading to more investments, shares and profit from the revenue and corporation. Stockholders are able to look at the financial growth from the stock price and can expect continuous growth that is related to the company and the main strategy that is being used for fashion. For Coach, this becomes a major strength that can lead to more investments, growth and global incorporation of the accessories. The strengths of the finances for Coach continue with the different amounts of income, depreciation and other assets. For 2006, Coach had an average of 65,115 in depreciation, as opposed to the 2,111,501 in net income. The operating income for 2006 was at 764,604. The difference in net income, as opposed to loss shows a substantial difference. For Coach, there is the ability to make a larger amount of profit from the lower amounts of depreciation and operating income that are related to the fashion industry. The other area that counts as a loss is the advertising, administration and distribution. In 2006, Coach spent an average of 266,411. In 2005, this was at 219,233. Even though there was a substantial difference in profit, it can be seen that expenses, depreciation and other losses remain lower for the corporation. This provides new areas of expansion for the corporation without having to worry about extra loss. When looking at the financial data of Coach, it can be seen that the growth is also leading to some potential weaknesses with the corporation. The net sales of the corporation are divided by the direct to consumer and the indirect sales. The direct consumer finances for 2006 were at an average of $1,610,691 while indirect sales were at $500,810. The net sales from both of these between years led to continuous increase. For direct sales in 2004, it was at 1,002,737 and for 2005 it was at 1,307,425. Indirect sales were at 318,369 for 2004 and 402,998 for 2005. The increase between years shows a continuous rise in the percentage between years. The disadvantage in this comes from the operating income that it takes for sales. The direct sales cost an average of 717,326 in the year 2005 while indirect sales were at 313,689. The amount of loss from operations for direct sales, while showing more profit, also takes more to operate and sell (see Appendix B). The main weakness with Coach is based on the amount it takes to produce and sell products that have direct relations with customers. While this is more in demand, it also shows that it is more difficult to operate and sell. For those that are interested in budget first, is the inability for Coach to meet the complete demands as a brand product through direct sales. Future Expansion of Coach The financial data that is associated with Coach is one that is able to provide future expansion and areas of potential growth. Keeping the costs and depreciation to a minimum will allow the company to continue to grow and expand within retail stores. The two main areas of distribution is one of the advantages that the corporation has, both which can provide new areas for growth. Branching into different retail segments and being able to provide alternative opportunities for the accessories will provide the company with more accessible fashion items. Since the brand has a strong reputation in both the US and Japan, there are also several ways to branch into various markets. Growing at an international level and expanding the concept of luxury items at an affordable price can provide more opportunities to move into retail settings at an international level. The future expansion that Coach is considering is not only based on the retail segments that can continue to expand but is also inclusive of potential types of fashion accessories that are offered. Currently, the company specializes in women’s handbags and smaller accessory items that are able to make a fashion statement. However, there are potential areas of growth for different types of accessories from the brand name. The corporation is currently looking at opportunities for clothing items, such as sweaters, as well as other accessories that women and men use. Since the brand name has built a strong identity through offering luxury accessories that are affordable, there are now more options for expansion within the company. Coach Improving Distribution and Marketing of Value Chain There are several areas and possibilities that Coach can look into to reach more target markets and to improve the distribution of their accessories. The first area to look into is based on research and development of the fashion industry. Currently, there are two defined markets that are a part of Coach, both which are defined through budget and the demand for luxury. There is also a demographic division based on women who are interested in luxury looks for handbags. The research and development that would need to be involved in Coach would first need to be defined by potential target markets within the fashion industry, as well as alternative segments that can be included in the distribution of the various products. The areas of research and development by Coach would need to begin with the current developments that are a part of the company. The corporation would need to define the target markets that are in the stores and retail segments throughout the US and Japan. This would not only be based on the demand for the accessories that Coach sells, but would also include others who are shopping in the retail stores that include indirect sales. Coach could further this by looking at the segments and populations that are interested in specific types of handbags, such as popular culture that is interested in accessories and items that make a specific statement as well as segments that are interested in accessories for different situations. The research and development that Coach needs to include for further development would allow them to not only look potential according to budget and luxury items, but would also be inclusive of styles and segments based on different trends and fashion statements. The designs of products and processes are the second phase that would assist with the distribution and marketing of Coach. Currently, Coach is interested in expansion into other types of accessories and fashion items. More importantly, they are noting that the demand for luxury items that are affordable is one of the areas of highest demand for the population. To further this, Coach would need to look at designs of products that fit with the highest demands, as well as with different segments. Currently, the fashion statements that Coach has looked into are based on middle income women who are interested in luxury items at an affordable price. Products that expand this into different pricing segments and considerations would help with further development of the products. For the designs to work effectively for Coach, they would need to redefine the products that are sold, as well as the current trends from consumers. When looking at the macro – economic environment, it can be seen that the fashion industry has several levels of demands, all which are based on a combination of quality, style and budgetary considerations. While Coach currently meets these with the accessories offered, it can be expanded into different styles and types of fashion. For instance, when looking at quality and style, different branches and segments can be considered, some which are based on luxury items while others fit more popular demands. Expanding the product line with the current handbags and accessories that are offered would provide the corporation with higher amounts of demand as well as the ability to expand into different types of retail stores. The production that is used with Coach can also be altered to help with the expansion of products. The production of the accessories is one that doesn’t include a large amount of the budget and has a fast return with the income that is made. However, the weakness in production comes from the retail areas that are being used for direct and indirect sales. Coach would need to find a way to formulate better production areas based on the direct sales that are made. Balancing out production with direct sales would help to save more on the materials and sales while providing the corporation with better budgetary considerations. More importantly, there would be more possibilities for increasing the direct and indirect sales by altering the infrastructure and production that is used at this level. The marketing and sales that Coach currently has can also be looked into for better distribution. The strength of this corporation comes from the known brand name in the fashion industry. When most look at Coach, they look at the differentiation that is used. Specifically, most recognize the items as a high end luxury item that is within the market. However, it is different than others because of the lower pricing that is available to consumers and which provides more accessibility. The differentiation that is used is combined with the high quality of materials, such as leathers, with the continuous ability to meet the newest fashions and trends in every season. The brand name and the stability of being differentiated through quality, style and budget has helped Coach to build its name through the fashion industry. To further the marketing and sales of Coach, they will need to continue to combine their positioning in the market and their brand name with expansion. Most of the store areas are based on the distinct style and infrastructure that is used. Coach would be able to expand their brand name as well as the accessible luxury items by branching out with the marketing and sales areas that they are using. Direct marketing campaigns can be used to help Coach continue to expand with the specific needs that they have for the corporation. More importantly, the corporation can expand with continuing to look at different market segments that are interested in fashion and luxury at an affordable price. Adding this into the main marketing plan and moving into images that are able to directly affect the different segments will help Coach to continue to build the brand identity that is used for fashion and accessories. The distribution that is used with Coach is one of the main advantages that they have for marketing. Currently, they have direct factory stores that they can use, all which have specific architectures and designs to attract customers. The second area of distribution is through indirect sales, which comes from other department stores and retail areas that Coach is highlighted in. The indirect sales of Coach are not as high as the direct stores, specifically because other competitors and fashion items are seen. Since Coach uses differentiation of price and luxury items, this may also become a set – back. The fashion industry typically includes a division between high and low priced items, neither which Coach currently fits in. For indirect retail centers, this places Coach at a disadvantage. To change this, Coach would need to further their production line and opportunity within the indirect stores. However, continuing to push the market with the direct sales from factory stores can continue to serve as a main source of revenue while allowing the corporation to build its brand identity apart from others. Conclusion The changes and trends that are associated with the fashion industry are providing new opportunities for those interested in style. Coach, one of the leading manufacturers of women’s handbags, is one of the fashion corporations that are able to take advantage of the trends and changes that are occurring. The defined market and brand name has built a stable reputation for the corporation while providing substantial growth that is expanding at an international level. To continue this expansion, Coach will need to continue to define the economy of fashion and the demands of consumers while providing more opportunities through the value chain and market. The result of this will be the ability to offer more branches from the main brand identity while offering luxury fashion at an affordable price. References Gamble, John. (2007). “Coach Inc: Is Its Advantage in Luxury Handbags Sustainable?” University of Southern Alabama. Appendix A Appendix B Read More