Case Study on "Coach, Inc"

>Coach Incorporated is a producer and marketer of luxury leader goods, in particular handbags, business cases and other accessories. The company began in New York in 1941 and has since expanded around the world. Coach markets under its eponymous brand name and the Poppy brand. The company has earned a reputation as a top luxury brand, committed to high quality goods and excellent customer service (Coach.com, 2010). Coach's sales in fiscal 2010 were at $3.607 billion, up from $3.23 billion the year before. The company has remained profitable through the economic downturn, with a 2010 net income of $734 million compared with $623 million the year before. This is in part due to the company's ability to open new markets and due in part to the fact that the market for luxury goods is less elastic with respect to the state of the global economy than many other markets.

Coach is currently faced with the situation of developing a human resources strategy to take it through the next few years. Not only does this strategy need to address basic ongoing HR requirements, but it also needs to address a couple of specific strategic issues. The first is the ongoing recession, which may necessitate workforce reductions, although to this point that has not occurred with the company. The second is the desire of the company to continue to expand internationally. In this case, the focus of expansion in the coming years is with respect to the Indian market. This report will make the case for a new strategic human resources plan that will allow Coach to meet its strategic objectives over the coming years.

Background

The market for luxury goods in general has remained strong in the face of economic downturn. Unemployment and newfound poverty do not typically impact the Coach customer. Our target market generally has sufficient wealth to maintain consumption patterns even given a downturn. The economic outlook, however, remains poor. Economic growth in the developed world has stagnated. The recent UK budget and the likelihood of two years of legislative gridlock in the U.S. Congress will have contractionary effects on the economy as one specifically weakens the UK while the other will make it almost impossible for the U.S. To pull out the recession. Thus, growth in the global economy will be concentrated in areas outside of Western markets, in particular China, other Asian markets, Arab markets and India. This provides the strategic impetus to expand into these markets rather than focusing on the slow-growth Western markets.

The Indian luxury goods market is estimated at $3 billion for 2010, but growth is expected to be in the range of 25-30% until 2015 (Business Standard, 2010). This would make the market worth between $9.15 billion and $11.1 within five years. This growth is expected as a result of growth of India's middle and wealthy classes, a function of the country's improving economic prosperity. Indian consumers have only recently discovered luxury goods and have found this class of products to be aligned with their aspirations (Ibid).

Growth in the Indian economy is fuelling this burgeoning class of Indian luxury goods consumers. The Indian economy has averaged 7% growth per year since 1997, making it the fifth-largest economy in the world by purchasing power parity GDP at $3.57 trillion (CIA World Factbook, 2010). The wealthiest 10% of Indian households hold 31.1% of the country's wealth, a rate comparable with that of the United States (Ibid). Although India is a multilingual country, the de facto language of wealthy Indians is English, so there is no linguistic barrier for Coach. There are, however, some cultural barriers, and these are relatively unique such that our experiences do not adequately prepare us for Indian consumers, distribution channels, and government interaction. Thus, local competency will be required in order for Coach to properly penetrate the Indian market.

The Chinese market has even greater potential. With equally strong growth rates, the Chinese middle class is now burgeoning and many of them fit within the target market for Coach. As with India, however, there is a considerable learning curve with respect to the culture and government interactions. The company's experiences in Shanghai, Beijing and non-PRC Chinese cities (Taipei, Singapore, Hong Kong) has provided the company with a talent base that can help to lead the expansion into mainstream China.

This understanding of the external environment indicates that Coach will need to increase its HR capabilities with respect to the Indian market. Overall, the company will need to place increased emphasis in the coming years on the growth markets in the Middle East, India and Asia. The human resources strategy should reflect these needs by providing the company with the resources needed to meet these upcoming challenges.

Strategic HR Perspectives

There are three primary perspectives for human resources management. The first of these is the control-based model, which is based on the "way that management attempts to monitor and control employee role performance"; the resource-based model, based on "the nature of employee-employer exchange" and the set of employee attributes and behaviors; and an integrative model that combines these two approaches (Bratton, n.d.). The most appropriate perspective for Coach is the integrative perspective. In the luxury goods industry, employees are required to be creative, yet fit within company norms. There is a fairly limited scope of tasks at Coach, and the performance standards are high, which indicates the need for high levels of control within the organization. The company's customers are demanding, and expect high levels of quality and service, necessitating strict controls.

However, for the company to grow, it needs to foster leadership and creativity among its staff. In particular, entering new markets requires leaders who are able to manage the critical challenges involved in opening up new markets. The resource-based approach allows the company to build a staff that is able to meet the challenges associated with shifts in the global economic environment, including improving efficiency in developed markets and opening up new markets effectively. In addition, the company is faced with an intensely competitive external environment, in which dozens of major international luxury brands are competing to establish market share in India in order to capture the massive growth that is expected in that market over the coming decade.

Strategic HR Approach -- Resourcing, Learning and Development Elements

There are a number of policy implications of the integrated approach to strategic human resources management. The first is with respect to acquisition and development (Bratton, n.d.). This is focused on developing talent from within the company. While some of the company's upcoming HR needs will require the acquisition of some external talent, luxury brands tend to benefit strongly from internal consistency. Coach customers in India, for example, are likely to be familiar with the brand and therefore will have the same high expectations with respect to product and service as they would from a Coach location or product anywhere else in the world. This consistency develops not only from controls but from developing long-term employees that are intimately familiar with the company's workings and culture.

Thus, the HR strategy should focus on developing techniques to identify strong performers within the company and providing them with the training required to enhance their careers. A managerial skills inventory should be undertaken that uses a wide range of profiling techniques including psychological profiling, skills assessment and experience with the company to evaluate the leadership potential of the employees. The employees should be categorized not only… READ MORE