Three laws of Competition

Seven years ago, talking about "Coach" gives an idea of durable leather handbag. However, Coach has transformed its handbag business to be lifestyle product provider. With new image, Coach keep increasing sales year by year to $719M in 2002FY from $548M in 2000FY, becoming one of the fastest-growth company according to Businessweek's ranking. The question might come up about what change that make "new" Coach so successful. This paper analyzes the success of Coach with the insight from Jeffery William's strategy theory.

Three laws of Competition: Coach on Renewal In 1941, six craftsmen started a family-run workshop in a loft in Manhattan, New York. These were not the top artists in the world of art and fashion; instead, they used the skills that passed down from parents and grandparents to handcraft a small set of leather goods. The first inspiration is to produce a high-quality leather handbag which is as durable as a baseball glove. They were able to sell some of these products and invest the money they made to expand the business, further dubbed Coach.

As success begot success, Coach grew its sales and won the reputation of making good leather good. During these six decades, Coach has been known for durability and quality craftsmanship of its handbags. [wp1] From the founding to 1985, the company's sales grew from zero to 19 million. The following 12 years, Coach's sales exploded like crazy, the sales grew from 19million to 540 million! It became the most well-recognized leather bag brand. This is truly a American success story. However, like every success story, a hitch came out.

Back to seven years ago, the change of retail environment and the invasion of foreign fashion giants made customers tired of Coach's outdated, thick leather bags- sturdy and conservative and with all the sex appeal of a catcher's mitt. The cachet of Coach was waning with high-fashion competitors gaining popularity. Financially, Coach was bought by Sara Lee, a food company in 1985. It operated as a division of the larger company until 19. 5% of it was spun off in October 2000. Sara Lee decided to divest the rest of its Coach ownership the following year, and the company fully became its own entity in April 2001.

The transition of Coach and the change of the industry could be well-explained by the three laws of competition, the convergence of the industry, the renewal of the company and how the company align its capability, markets and strategy. On convergence- The leather-good industry In "old" Coach, it was not even a fashion brand. To many customers, their durable Coach bags were everything but fashion. In the old good time, the product life cycle for leather-good industry is relatively long. Durability is the key to success. The number of variety is limited.

Between 1985 and 1997, right after Sara Lee bought this once family own company, the sales of Coach grew at a compounded annual rate of 32% from 19million to 540 million. But a silent revolution had changed the appeal industry during the 12 years. New designs and new brand surfaced, they offer consumers more options not merely ugly bags. The change was subtle to the industry, but changed the environment, especially for the new rising young purchase power. Clearly, customers' preference had been changed, with hot brand like Kate Spade and high-end brands – like Prada, Gucci – give leather bags a more stylish look and sense of fashion.

There was a fundamental shift for the leather bag industry, from all-leather goods being seen as the pinnacle of really nice handbags to all-fabric or mixed-material bags becoming more popular. The other change for this industry is the uprising of the purchasing power of women. As women enter the workplace, they're seeking for the luxury of small reward to compensate themselves. Luxury once was big tipper, now it is for coupon clipper as well. To sum up, the leather good industry was transforming itself and converged with fashion industry by broadening the product lines, enriching the selection and speeding up the product life cycle.