Ch. 5 - Developing a Global Vision

So, why does a company decide to go global? Well, simply put - to grow their business, to have access to cheaper labor and materials, and to capitalize on new market opportunities.

Growing the business:

Since it's inception in the 1940's Coach spent years building it's brand and business locally though out the United States. As the business grew it opened boutique stores and outlet stores in Denver and Seattle and opened stores in malls throughout New Jersey, Texas, and California. At the same time it introduced new bags in new shapes to target the new customer base. The new product lines were designed to target the women who lived in the South and West were warmer weather made lightweight handbags more desirable. The new line featured handbags in smaller sizes and in lighter spring colors. This new line quickly came to make up 15% of the company's overall sales.

In 1988 Coach began it's international push into global markets opening boutique stores in England, Tokyo and Japan. Coach executives noticed that a large number of it's customers from their New York stores were tourist and knew that international expansion was a must. After 4 years the number of company stores grew to 40 and sales reached $100 million.

In 2011 Coach began a new venture to capitalise on men's products in China. Coach's chairman and chief executive, Lew Frankfort told ft.com the company was eager to capitalise on men's untapped enthusiasm for its products in China, where they account for nearly half of all spending on handbags and accessories.

Expanding Coach's business into global markets have produced new designer lines and a new customer base which has proven lucrative for Coach.

Access to cheap labor and materials:

In China today, small towns have been known to build and staff whole, working factories almost overnight. When factories are up and running, female workers show up to work in them - accepting little pay to provide for their most basic needs like food and clothing. The Chinese government sees these factory towns as money makers but tend not to provide public services like schools, hospitals, or libraries to the people who live and work in them. Although the standards in which factories are run in China have improved in most recent years most people would not believe the continued deplorable working conditions. Most women working in these factories experience a decline in their standard of living and overall health due to the high intensity and adverse environment of these factories. In June 2011 a China-based factory that makes handbags for several accessory brands like Burberry, Michael Kors, and Coach had factory employees strike over complaints about low pay and aggressive and verbally abusive behaviour by factory management. Some employees were forced to work 60 hours per week often sleeping in corner spots in the middle of miscellaneous accessories ready to be assembled just to meet the high demand of output.

In the US, factories are monitored by both the government and independent labor rights organizations which ensure employees have amongst other rights, a decent living wage, safe working environment and bans on forced overtime.

No wonder why Coach and other luxury brands decide to outsource their manufacturing to China and other countries...they don't pay high wages, they make their workers work unfathomable hours and they get away with it because these people need the work and do it with very little resistance. It might make more sense to me as a consumer if the savings were trickled down the pike but that's not the case. Seems like Coach is making bigger profits on the backs of the most desperate Chinese workers. It angers me more to know that most products in the US are MADE IN CHINA, that said, you probably could NEVER go without buying a MADE IN CHINA item.

New Market Opportunities:

The Japanese have long been known for their love of designer bags and accessories - and it looks like Coach has taken advantage of this market. Coach is currently competing in the Global Market with Louis Vuitton and it looks like Coach is catching up. One of their strategies seems to be "pricing"; in China and Japan a small Coach bag starts at around $275 - Louis Vuitton bags average about $870. Coach seems to have won over shoppers with it's new styles and competitive pricing and it's now reaping the rewards with more than 20% of it's global revenue coming from Japan. As of 2011 Coach has 344 retail and 134 factory stores in North America, 174 stores in Japan and 55 in China.