Internal Analysis – Coach, Inc

  1. RBV Analysis – Tangible and Intangible Resources

The resource based view analysis of the organisation provides the description and analysis of the tangible and intangible resources of the organisation (Hooley et al, 1997). The organisation’s tangible resources include financial, physical, organisational, and technological resources. On the other hand, intangible resources include human resources, creativity, and brands/reputation.

  • Tangible Resources

Tangible resources are resources that can be seen and touched. They include financial, physical, technological, and organisational resources. These resources can be felt and seen within the organisation. They are used with the help of intangible resources to produce goods and services and to acquire more resources. Coach, Inc has various tangible resources as listed below:

Financial Resources

These include monetary and non-monetary financial resources. They include income, sales revenue, profits, cash flows, debtors, and other types of revenue received by the company. The stock price of the company is $.01 per share. The sales revenue has also been increasing significantly from $3.23B in 2009 to $5.08B in 2013 (Coach Inc, 2014). Its gross income is also high, ranging from $2.33B in 2009 to 3.7B in 2013. The consolidated Net Income of the company was $623.37M in 2009, $1.04B in 2012 and $1.03B in 2014 (Coach Inc, 2014). This indicates that the company performs well financially. The following financial ratios also indicate the performance of the company financially. The company also has financial resources in terms of capital expenditure which are used to expand in new stores of North America and Asia, as well as development of new technologies to enhance further capabilities of the company.

Performance Measure 2009 2010 2011 2012 2013
Liquidity
Current Ratio 3.04 2.46 2.45 2.51 2.87
Cash Ratio 1.98 1.52 1.42 1.52 1.81
Asset Management
Raw Materials Turnover in Days
WIP Turnover in Days 12.17 11.02 11.06 12.16 12.58
Finished Goods Turnover in Days 135.02 129.19 126.24 130.33 136.38
A/R Turnover in Days 29.99 33.13 33.01 30.02 29.01
A/P Turnover in Days 47.79 39.09 36.05 38.55 44.29
Cash Conversion Cycle 99.39 101.12 101.25 103.94 104.67
Fixed Assets Turnover 6.11 6.32 7.35 7.77 7.58
Total Asset Turnover 1.34 1.43 1.63 1.66 1.53
Long Term Debt Paying Ability
LT Debt to Total Capitalization 0.01 0.02 0.01
Cash Flow Coverage Ratio 1.51 1.64 1.63 1.56 1.47
Profitability
Gross Margin 71.90 73.00 72.71 72.77 72.86
Operating Profit Margin 30.09 31.88 31.38 31.74 30.04
Net Profit Margin 19.30 20.37 21.18 21.81 20.38
ROA % 25.77 29.21 34.53 36.20 31.18
ROE % 38.82 45.91 56.50 57.63 47.00

The Financial Ratios table above indicates the financial performance of the company for a five year-period between 2009 and 2013. The Financial ratios indicate that the company is performing well financially. For instance, the current ratio of 2.87 indicates that the company is able to meet its debt obligations as they fall due. The return on equity (ROE) is really high – 47.00% in 2012 indicates that the company is able to get 0.47 returns on every unit of equity employed. The return on assets is also high. The asset rose from 2009 to 2012 and then declined. The high ROA of 31.18% indicates that the company is utilizing its assets efficiently. The Cash Conversion Cycle of 104.67 for 2013 means that the company takes 104.67 days to turn its inventory into cash.

Physical Resources

The physical resources of the company include stores, office equipments, company assets, and other physical structures and materials owned by the company. Coach Inc. has 500 physical stores located in North America with spacious structures (Coach, 2012). It also has 400 physical stores in Asia and 20 in Europe. The company also has several computers and other electronics used to record data and other information about the company.

Technological Resources

Coach Inc. uses some of its capital expenditure in development of technologies and corporate infrastructure. Coach, Inc also utilizes various technological platforms in marketing. For example, the company uses blogs and social networking websites such as Twitter and Facebook to enhance communication, marketing and advertising (Coach Inc, 2014). These technologies are important to the company because they allow the company to communicate with customers and inform new and potential customers about the company’s existing products and product features. Coach, Inc also utilizes technology to come up with online stores and communication channels. This technology increases the company’s sales, brand awareness and customer loyalty.

Communication is also enhanced through digital technologies including digital emails used to enhance digital marketing and communication with customers, employees and suppliers. Furthermore, protection technologies are used to protect the company’s employees and intellectual property rights from misuse or unauthorized use. Such technologies are also used to protect the company from cyber crimes which may be launched on the company’s website or any other computerized operation. Technologies such as e-commerce in 3 countries (Japan, Canada and USA) and global presence through 22 marketing websites also enables the company to increase its sales.

Organisational Resources

Organisational resources of a company include all assets that the company uses to enhance superior organisational performance and competitive advantage (Walters & Rainbird, 2007). Top in the organisational resources of the company are the company directors who formulate the mission and vision of the organisation. Although the directors are mainly considered as intangible human resources, they may also be considered as tangible resources because they can be felt in the company. The company is managed by a board of directors led by a Chief Executive Officer who is also the chairman of the board. The rest of the board consists of directors heading various departments. These hold the basic organisational resources of the company including money, books, etc.

  • Intangible Resources

Intangible resources refer to those resources that cannot be seen or felt but generate income for the company. Tangible resources include human resources, innovation and creativity, and reputation or brand image. Goodwill is also considered as intangible assets for the accounting purposes of the organisation.

Human Resources

The employees and directors of the company are the key human resources. Coach Inc. had employed more than 18,000 employees by the end of financial year 2011/2012 (Coach Inc, 2012). Among those employees, about 6,200 are full time employees while 8,000 are part time employees. These employees are talented and well-trained. They carry all the necessary skills needed to provide superior customer service in order to attract and retain customers. The human resources of Coach are headed by a director with relevant skills and experience in human resource management. The Global Human Resources Officer Sarah Dunn is concerned with all the human resources activities of the company globally. All human resources including employees and directors are remunerated with a good compensation for their services rendered to the company.

The executive officers of the company are also considered as human resources of the company. The chairman of the executive board Lew Frankfort has 30 years of experience as the head of the company’s management (Coach Inc, 2014). This experience combined with his leadership skills enhances effective management of the company. Victor Luis is the Chief Executive Officer of the company while Todd Kahn is the Global Corporate Affairs Officer. Jane Hamilton Nielsen is the Chief Finance Officer. Two of these chief executive officers are female while three are male. This shows that the human resources of the company are balanced in terms of gender without any bias or discrimination against gender. These directors work with the company’s employees to run various activities of the organisation in order to enhance performance and increase profitability in the long term.

Innovation and Creativity

Innovation is one of the most important resources of Coach, Inc. The company uses innovation to meet the needs of its customers. Coach focuses on the needs of its consumers. It conducts thorough research and develops appropriate consumer orientation in order to meet the needs of consumers. Through consumer-focused research, the company develops innovative services and products to suit the needs of its customers (Coach Inc, 2012). For instance, the company uses innovation to come up with new designs e.g. the Utility Bonnie Parka, a water resistant women jacket designed for women to use in a night out or for a long weekend out. This innovative design helps the company to meet the needs of women who like going out on a cold night or during the weekend. In order to remain innovative, the Coach anticipates the needs of customers and ensures that its products remain fresh and relevant. Innovation can be considered as of Coach’s culture which is intended to improve and accelerate new product offering to the customers.

Coach, Inc is also highly creative. It has developed a business initiative that drives brand creativity. For instance, the Utility Bonnie Parka is a new brand that has been designed creatively with Drawcords, snaps and utility pocket that cannot be matched or copied by any other brand in the market (Coach Inc, 2014). This level of creativity is essential for authenticity and customer satisfaction. To enhance its creativity, Coach has appointed an Executive Creative Director who conceptualizes and directs designs for all products of the company.

Reputation/image

Reputation is also an important resource for Coach, Inc. The image and reputation of the company is boosted by its unique brands and customer-focus approach. The image of Coach is enhanced through a constant contact between the consumers and Coach Brands. This is enhanced by effective communication and visual merchandising (Coach Inc, 2012). The image of the company is created internally and communicated by marketing and public relations teams which maintain a consistent global image. Coach has excelled in brands of women and men bags, footwear, jewelry and clothes. The brands are famous among many customers, and they have given the company a good reputation.

  • Organisational Capabilities

Organisational capabilities boost the culture, operations and performance of the company including the level of profits and revenue earned (Winistoerfer et al, 2000). The organisational capabilities of an organisation include specific knowledge, skills and abilities of employees and managers as well as the capacity to combine resources in order to achieve results. These capabilities are boosted by effective selection and hiring mechanisms, and training and development provided in the work environment. Organisational capabilities enhance superior customer service and production of high-quality products.

Specific Knowledge, skills and abilities

The employees of Coach have different knowledge, skills and abilities that are specific to their duties and responsibilities in the company. Members of the marketing, visual presentation and public relations team have good communication, presentation, negotiation and interpersonal skills which are intended to improve the company’s image and reputation (Coach Inc, 2014). The marketing team of the company has good communication skills used to communicate with customers effectively and drive sales across various distribution channels of the company. On the other hand, employees engaged in production have specific knowledge in fashion and design.

Coach also has sophisticated market research and consumer capability. This organisational capability is used by the company to enhance the assessment of consumer needs and attitudes. This enables the company to determine the possibility of success of a product before it is introduced in the market. Since fashion and design industry is a highly dynamic industry, market research capability is an essential element for the company to adapt to the changing needs of consumers and remain competitive in the market.

Coach is leading in terms of design capabilities in USA (Coach Inc, 2012). The company has the knowledge and skills to design modern luxury accessories which give the company a distinctive brand. It designs fine accessories and gifts across United States boosted by a strong multi-channel distribution strategy. Coach’s capabilities in internet marketing and e-commerce are also exemplary. With an attractive well designed website, the company is able to reach several customers online.

Capacity to Combine Resources

Coach, Inc incorporates various resources into an effective production, marketing, and distribution processes involving luxurious accessories and gifts for men and women (Coach Inc., 2012). The company combines its human resources, strong brand and business equity to transform its business from an international business to a global brand. Coach also uses its financial resources to support its expansion by investing in new physical and human resources. For instance, profits received through the business can be used to support the development of new products by purchasing materials and compensating designers who come up with the new products. In this case physical, human, and financial resources are combined to enhance new product development.

  1. Value Chain Analysis

Value chain includes primary and secondary activities needed to support the supply chain management of the company in order to deliver a valuable product or service (Walters & Rainbird, 2007). The primary activities that can be undertaken by a business include inbound logistics, operations, outbound logistics, marketing and sales, and service. The secondary activities include procurement, technology development, human resource management, and general administration. The table below represents a summary of the value chain of Coach Inc.

  Value Chain
 

 

 

 

 

 

 

 

 

 

Secondary Activities

General Administration

·         Coach Inc Company is managed by the Chairman of the board

·         Each department is administered by a department director

o   Finance Officer – administrating daily financial activities

o   Human Resource Officer – selecting, recruiting and training employees

o   Marketing Officer – advertising, generating sales, and publicity

·         Management of firm infrastructure e.g. electricity, equipment, assets, property and land

Human Resource Management

·         Employees with skills, knowledge and abilities, directors, human Resource Officer and assistant directors

·         Recruitment, selection and hiring

·         Remuneration process

·         Training and Development

Technology Development

·         Innovation

·         Market research

Procurement

·         Procurement documentation

·         Tendering

·         Procurement announcements

·         Procurement procedure

·         Procurement SITEMAP

 

 

 

 

 

Primary Activities

Inbound Logistics

·         Materials handling

·         Production schedules

·         Delivery

·         Store capacity and scheduling

·         Distribution schedules

Operations

·         Manufacturing

·         Assembly

·         Product quality

·         Customer visit

Outbound Logistics

·         Customer delivery

·         Customer picking

·         Order processing

·         Inventory management

Marketing and Sales

·         Product

·         Price

·         Place

·         Promotion

Services

·         Customer service

·         Problem solving

·         Customer call centre

·         Customer survey

·         Customer audit

 

  • Primary Activities

Primary activities involve those activities that are essential in the business, without which the business cannot survive (Moldaschl, 2004). These activities are practiced by Coach to enhance the value of its products and services. They include operations, inbound logistics, out-bound logistics, marketing, and services.

Inbound Logistics

Inbound logistics include logistics within the internal environment of the company which are helpful in enhancing value for the customers (Pita et al, 2004). Inbound logistics activities in Coach, Inc include materials handling, production schedules, store capacity and scheduling, and distribution schedules. Handling as an inbound activity occurs because the company handles materials before designing accessories and gifts, and also handles products in stock before they are sold to the customer. Production schedules are also drawn by the internal logistics team in order to avoid the overlap of production activities and to ensure that products are produced at the right time.

Operations

The main operations of Coach are to manufacture or design gifts and accessories and to attend to customers. The company sells manufactured products through its Coach Factory that is different from its retail stores. The products of Coach are manufactured by independent manufacturers but the company controls the supply chain process starting with design to manufacturing. The company then assembles the manufactured products in its distribution and as retail stores awaiting shipment and delivery. Coach also has some operations aimed at maintaining product quality. The company has high quality standards which should be achieved as part of the company’s culture. Onsite quality inspections are carried out daily to monitor the compliance of independent manufacturers to the quality standards of Coach.

Outbound Logistics

Outbound logistics are logistics aimed at external operations (Madhani, 2009). One of the outbound logistics is customer delivery. Goods are delivered to customers through shipments and in-store customer visit. Coach Inc also partners with companies that provide reliable delivery e.g. Amazon.com. The products of Coach are also shipped to its retail stores and directly to consumers through express delivery providers.

Marketing and Sales

Coach has an effective marketing and publicity team which advertises the company’s products and generates sales for the company. This marketing is focused on the 4P: product, price, place and promotion. Promotion is enhanced through advertising and publicity while place is enhanced through reliable distribution strategy (Priem & Butler, 2001). This distribution strategy has various distribution channels used to deliver products directly to consumers. In terms of product, the company offers unique products whose quality is assessed everyday to ensure that it is compliant with the company’s quality standards.

Services

The services of Coach Inc include customer services, problem solving services, customer call centre, and customer survey and audit. The company operates a call centre whereby customers call to ask questions, give complaints and suggestions, and make enquiries. Customer services include after-sales services, delivery services, courteous communication, good on-site relationship, welcoming customers, and treating them with respect (Coach, 2012). These services are offered with superior quality to enhance customer satisfaction since Coach has a good customer focus. Coach also surveys and audits its customers through market research to determine their needs and wants so that they can design products that match their specific needs.

  • Secondary Activities

Secondary activities are those activities that support the main primary activities of the company in order to enhance good value for the products and services of the company (Wang & Lo, 2003). They include general administration, human resource management, technology development and procurement.

General Administration

General administration involves the management, directing and coordination of the main business activities of the company; mainly undertaken by the middle and lower level management. One of the main general administration activities of Coach, Inc is management of firm infrastructure including payment of electricity bills, arranging office equipment and stores, etc. Financial administration activities include collection of payments from customers, coordination of invoice and journal entries, arranging of files etc. Human resources are also coordinated, selected, hired and trained (Coach, 2012).

Human Resource Management

Human Resource Management activities in Coach Inc include recruitment, selection, hiring, training and remuneration. The company focuses mainly on training employees in order to enhance their capabilities and ensure that they meet the needs of customers.

Technology development

Improvement in technology is a key activity in Coach, Inc. The company intensifies its technology development through daily technological techniques and activities. The designers and market researchers of the company conduct market research activities to determine the changing needs of customers in order to design accessories and gifts that meet their consumer needs (Coach Inc., 2012).

Procurement

Procurement in Coach Inc involves a specific procurement procedure. The company uses Management Information Systems to carry out its procurements. An integrated system is used to combine both accounting and procurement procedure so that the items procured are paid as they are being procured and the procured materials arrive on time. First, the procurement officers learn the procurement policies of the company, and then identify the most cost-efficient, competitive and high-quality products/materials that can improve the value of products and services targeted for the customers. Tendering is also a common procurement activity whereby the company announces offers tenders to companies which are willing and able to provide materials to the company.

 

References list

Coach, Inc. (2012). Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Washington: Securities Exchange Commission.

Coach, Inc. (2014). Company Profile. Accessed July 28, 2014 from             http://www.coach.com/online/handbags/genWCM-10551-10051-en-            /Coach_US/CompanyInformation/InvestorRelations/CompanyProfile

Hooley, G. J., Möller, K., & Broderick, A. J. (1997). Competitive positioning & the resource based view of the firm. Birmingham: Aston Business School Research Institute.

Ismail, A.I., Rose, R.C., Uli, J. and Abdullah, H. (2012). The Relationship between Organisational Resources, Capabilities, Systems and Competitive Advantage. Asian Academy of Management Journal, 17(1), 151–173.

Madhani, P. M. (2009). Resource based view: Concepts and practices. Hyderabad, India: Icfai University Press.

Moldaschl, M. (2004). Special issue: Beyond resource based view. Mering: Hampp.

Pita, D. A., Laric, M. V., Walters, D., & Rainbird, M. (2004). The value chain and marketing. Bradford: Emerald Group Pub.

Priem, R. L., & Butler, J. E. (2001). Tautology in the resource-based view and the implications of externally determined resource value: Further comment. Academy of Management      Review, 26, 57–66.

Walters, D., & Rainbird, M. (2004). The value chain. Bradford, England: Emerald Group Pub.

Walters, D., & Rainbird, M. (2007). Strategic operations management: A value chain approach. Hampshire: Palgrave Macmillan.

Wang, Y., & Lo, H. (2003). Customer-focused performance and the dynamic model for competence building and leveraging: A resource-based view. Journal of Management    Development, 22(6), 483–526.

Winistoerfer, J., Ebe, J., Wismer, U., Roscoe, D., Roling, T. J., Güldenzoph, J., Films for the Humanities (Firm), Blackbox AG. (2000). Optimization of the value chain: The concept of the value chain. Princeton, N.J: Films for the Humanities & Sciences.

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