Strategies - Essay Example

Business Strategies Business Strategies Introduction Coach Inc. was founded six decades ago but spontaneous growth in sales turnoverand profit was witnessed since 2000 courtesy of the various strategies applied across the accessible luxury market. The company deals with leather products such as ladies hand bags, footwear, watches, fragrance among other products. The aim of this paper is to research on the strategy has Coach used to grow its business; current challenges facedand how the company prepares to handle such challenges, examine the financial results of the company and calculate various ratios.

Essentially, we shall use the ratios to assess the company’s performance. In addition to that,we embark on the five generic strategies has Coach used to differentiate itself from her rivals. Finally, we will critically find out on whether this strategy work as it moves to becoming more of a global company. Discussion What strategy has Coach used to grow its business? The main Coach Inc strategy and used to grow its business, focused on matching her product quality and style with those of the rival competitors in the market before reducing the price by 50 percent.

This did give the company a competitive advantage over the rivals in the market by attracting not only the middle income based customers ready to spend on luxury products but also the rich signors spending heavily on handbags. Besides, another distinctive based strategy used by the company was the multichannel distribution model. The model allows indirect wholesale sales to the third party based retailers but also to consumers. Eventually, theconsumers enjoy constant supply of products at lower prices and within a short period.

The direct to consumer based sales accounts for over 87 percent of total 2011 sales turnover (Coach Leatherware Company, 2012). This resulted to an increase of sales revenues by 20 percent towards the end of 2011.The Company’s management has resorted to improve this strategy by focusing on global distribution and store sales productivity. What are the challenges Coach is facing? There are several challenges facing Coach Inc both internally and externally. Amid of the commendable performance and its strategy materializing, the company’s profit margin continued to grow slow and below the expected figure because of the slowing economic growth in 2007.

Moreover, its share price declined during the first six months of 2012 in New York Stock Exchange. This resulted to the management remain uncertain about the future of the company especially on sustaining the competitive edge over her rivals.Another serious challenge facing the company within the luxury market was counterfeiting. It was estimated that counterfeits leather products worth 300-600 billion dollars were sold across the globe (Coach Leatherware Company, 2012). The problem has persisted such that Global Congress on Combating Counterfeits warned that 9 percent of all products sold in global market were not genuine.

Amazingly, over two third of the counterfeit handbags, watches, shirts and footwear originates from Asian and china hence a challenge. How should it prepare to face these challenges? Explain. Coach Inc. has opted for several measures to combat such challenges and especially the counterfeit problem. First, the company offers easily recognizable and distinct leather products .The products are extremely easy to differentiate from the counterfeits courtesy of high value and quality. In addition to that, the company embraces product differentiation.

This is done through market research design process developed by the executive creative directors who conduct the research. Essentially, the research helps in defining the product trend, consumer desires and perception on products. Finally, the company has teamed up with other luxury brand manufacturers to combat the counterfeiters. As a result, they have come up with best practices aimed to measure and implement piracy enforcement. Examine the financial results of the company and calculate various ratios.

  Essentially, the financial performance of the company flourished well since fiscal 2007-2011.We can substantiate this statement from the consolidated statement of performance on Accessible Luxury Goods markets. The company’s financial results and stock based prices proved to be stellar as indicated by the quadrupled growth in turnover. The annual sales turnover increased from 555 million dollars in 1999 to more than 4.2 billion dollars in 2012 hence a clear reflection of success in identifications of opportunities and capitalization for growth.

This was translated back to the earnings where they increased within the same time frame from 16.7 million dollars to 880 million dollars in 2012(Coach Leatherware Company, 2012).However,the earning per share fell drastically in 2007 due to the global financial crisis before rebounding back in 2010. Calculation of various ratios Note: Amounts in thousands Ratio Formula 2011 2010 2009 2008 2007 1.Net sales Margin Ratio Net profit/Net sales*100% 880800/4158507*100 =21.1% 734940/3607636*100 =20.

37% 623369/3230468*100=19.29% 783039/3180757*100 =24.6% 636529/2612456*100 =24.4% 2.operating asset ratio Asset used to create revenue/total assets 1452388/2635116*100=55.1% 1302641/2467115*100=52.8% 0.00% 0.00% 0.00% 3.operating income ratio Operation income/total sales 1304924/4158507*100=31.4% 1150171/3607636*100=31.8% 971913/3230468*100=30.1% 1147129/3180757*100=36% 993397/2612456*100=38.02% Based on these ratios what is your assessment of the company’s performance? The Net sales Margin Ratio increased from 2007 to 2011 reflecting that sales performance of the company kept on improving annually.

However, it declined from 2008 to 2009 due to the financial crisis that hit world during this period. In cases where, sales performance increases, the net income will also increases and therefore we can conclude as financial analysts; that the company continues to perform well and grow (Coach Leatherware Company, 2012). Secondly, operating asset ratio increased over the five years meaning that the company performed well over the years. This can be testified through an increase in ratio from 50.

8% in 2010 to 55.1% in 2011. Lastly, operating income ratio increased over the five years meaning that the company performed well. Therefore, we can summarize the basic ratio assessment by revealing that the company performed well courtesy of the sales strategies implemented. Which ones of the five generic strategies has Coach used to differentiate itself?  Will this strategy work as it moves to becoming more of a global company? One of thefive generic strategies have Coach used to differentiate itself is the presence of the market research design process.

The process was developed by the executive creative director who believed that the Coach Inc Company can only perform immensely through the differentiated product line. The process involves quarterly defining of the product tends, consumer selection process and desires. This process is seen to ensure that the consumers help the company to develop the products at a high quality level. The research helps to voguish the image of the company and trigger customers to make regular purchase transactions.

Anexample of this generic strategy research was conducted in 2006, which revealed that an average consumer purchases four bags annually (Coach Leatherware Company, 2012). This was associated with monthly based product launches that consequently led to an increased consumer visits in the stores. The strategy aimed at understanding those customers who have not been attracted to Coach Products. The aim of the strategy will also put into consideration those customers planning to shop in rival competitors.

Conclusion The Coach Inc. based strategy has promoted immensely sales performance not only on luxury handbags but also in other products. The strategy entails matching own product quality with those of the rival competitors before reducing the prices to attract customers further. However, several challenges have been witnessed such as the counterfeit products. However, the challenges have been contained through product differentiation. References Coach Leatherware Company. (2012). Coach Leatherware: A Catalogue Of Classic Coach Bags, Belts, Wallets, Briefcases And Other Accessories Made Out Of Natural Leather And Solid Brass.

New York: The Company.