Coach Porter Five Forces Analysis
Five Forces analysis of Coach covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
The threat of new entrants for Coach New York is relatively more minor as they are a market leader and have a significant market share. The Coach, a New York company, specializes in luxury leather items such as bags and shoes. The Whole market is a brand image based one, and for any new entrant to develop, a similar brand image would be an extremely difficult task. The barriers to entry in this segment are pretty high, the technology and the knowledge base required are very high, and for any new entrant to compete with giants like Coach is an extremely difficult task. We also need to understand the enormous capital required in this segment; with the part being highly competitive and saturated, any new entrant will need to overcome such problems is very difficult. We can say that for a company like Coach, which has such a dominant position in the market, the threat of new entrants is very low.
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This concludes the threat of new entrants in the Coach Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Coach:
The company Coach has targeted the premium accessories market, which is based on the customer’s perspective and perceived value of the brand. Anything that can bring a premium sense of belonging to the customers can be a valid substitute.
This substitute can be anything a premium car, a premium bottle of perfume, or a box of premium chocolates. Hence, we need to ensure that we have a differentiating factor that these brands do not provide. The threat of substitutes is very evident as the products are used as a status symbol, rather than the regular use of a similar product. Hence, we need to ensure that the brand image is not diluted; the products will always be valuable as long as the brand has retained its value in the eyes of the customers. Hence, we can safely conclude that the threat of substitutes for the company, Coach is relatively high, but it is the same for all its competition as well.
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Bargaining Power of Customers:
In the Coach Porter Five Forces Analysis the bargaining power of the customers can be explained as:
As the fundamental value of the product in this segment comes from the perceived value of the customers the brand as compared to the actual value of the product. If the customers have any bargaining power, that would eventually reduce the brand image and reduce the joy customers gain from purchasing the product. Therefore, having any bargaining power, the customers would have both the brand and their own joy. The company ensures the customers do not have any kind of bargaining power to make sure they appear premium. With the company being a multinational conglomerate and having a premium image, they do not give their customers any leeway or any bargaining power in order to ensure that the perceived value of the brand remains premium, and the product of this company still holds the value of the company.
Hence, by default, the bargaining for the customers in this segment is relatively low, which is also the case for the brand Coach New York.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Coach:
The bargaining power of suppliers in this segment is low to moderate, as the whole segment is based upon the perceived value of the product in the eyes of the customer. It is very vital that the company like Coach use high quality raw material in order to produce its product. To ensure the quality of the raw material is kept constant and does not vary, the company gets into contracts with all the suppliers to ensure that the supply is not disrupted and the production of the product is not hampered. This is extremely important because of the quality of the raw material stage the quality of the end product would also eventually decrease, this would eventually result in the reduction of the brand value in the eyes of the customers which the company does not want. Hence, in order to ensure that the brand value of Coach does not deteriorate the brand ensures the bargaining power of suppliers is quite low, but as the raw material, major part of the production and the quality of the product the supplier still holds some power hence the overall of bargaining power of suppliers in this segment is moderate.
Competitive Rivalry:
The impact of key competitors in the Coach Porter Five Forces Analysis is as follows:
The competitive rivalry in this segment is quite high all the brands compete to gain a higher position in the eyes of the customers because even though the production cost of the products for all the brands is somewhat similar the final value of the product is determined by how high the brand is in the eyes of the customers. Some of the key competitors of Coach are Gucci, Armani, Hugo Boss etc. The brands utilize several kinds of marketing strategies to ensure that their perceived value in the eyes of the customers is high. With the market being extremely saturated and several brands competing for the same box in the pocket of the customers the competitive rivalry is quite high, although the customer loyalty for a brand like Coach is moderate still as the switching costs are quite low many brands try to reach newer clients in order to gain more market share.
Hence, because of the extremely saturated market and several players the market is quite dense and we can assure the competitive rivalry in this segment is quite high.
To conclude, the above Coach Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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