Coach Inc. : Is its Advantage in Luxury Handbags Sustainable ?
An overview of luxury goods industry
The luxury good indutry was expected to grow by 7% during 2006 due to an increasing income and wealth in developing countries especially in Asia and Eastern Europe as well as a change in buying habits of US consumers ; there is a growing group of US middle-income consumers in these luxury goods market which influenced by an effective advertising through television and internet. Another factor is an increasing in discount stores like Target and Walmart that enables the shoppers to save money on everyday items and spend the leftover savings on luxury goods.
Hence, Luxury goods manufacturers responds to this trend by launching diffusion lines which offer affordable or accessible luxury to these new emerging consumer groups.
Porter’s Five Forces Analysis
* Rivalry among competitors : strong – The luxury goods world market are highly competitive. There are many brand name products that have good reputations and strong brand royalty customers. These brands also launch diffusion line products that correspond to an emerging of the middle-income customers.
* Bargaining power of customers : moderate – Because of consumers in luxury goods industry is not very price sensitive, their bargaining power should be low because of the brand loyalty. However, there are also many other brands that the consumer can switch to within the same price range. Hence, Bargaining power of customers should be moderate.
* Bargaing power of suppliers : moderate – Material goods for these luxury products are available in many areas. Thus, companies have choices to outsources from many suppliers.
* Threats of subsitutes : strong – according to the article, more than $500 billion or 9 precent of all goods sold worldwide are counterfeit products.…...