Case Study on "Report of Solution to IT Problems of Coach, Inc"

Quoted Instructions for "Report of Solution to IT Problems of Coach, Inc" Assignment:

Part 1: Scenario Outline

You have recently been appointed the Communications Systems Manager for a large company, named Coach Inc. Coach Inc. is an American luxury leather goods company primarily known for its quality ladies***** handbags.

Founded in 1941, as a family run workshop based in a Manhattan loft, Coach has grown dramatically since its inception and aspires to maintain its high standards for materials and craftsmanship. In 2008, facing the severe economic recession in its core US market, Coach decided to expand into Asia targeting China as its key market.

According to Ernst and Young:

- China bought $2 billion worth of upscale products in 2008, potentially rising to $11.5 billion by 2015.

- At the end of 2006, China boasted 345,000 US dollar millionaires, one third of whom were women.

Coach estimates that China can represent over 4% of its sales turnover by 2013 by expanding into one hundred cities. The company is also intending to obtain its own retail business in greater China by acquiring its current distributor, ImagineX, boosting its market presence. Coach expects to increase the number of stores there from 25 in 2008 to 80 by 2013, which will consist of flagship and stand-alone stores, as well as factory outlets.

Coach hopes to replicate its Japanese success in China (see table) by increasing its market share from just 3% in 2008 (compared to 30% for Louis Vuitton) to 10% by 2013.

Brand 2000 2008

Louis Vuitton 33% 27%

Coach 2% 12%

Prada 10% 10%

Gucci 10% 10%

Chief Executive Officer Lew Frankfort explained how Coach took market share from its European competitors in Japan: *****Many Japanese women told us they would rather spend 60,000 yen ($578) for a Coach bag and spend the other 60,000 yen that they would save by not buying a European luxury brand and use it to go to Thailand.*****

Coach especially appeals to women under 35. Older Japanese women prefer carrying European luxury brands as a status symbol. CEO Lew Frankfort states that Coach*****s competitive advantage over other luxury leather goods companies such as Louis Vuitton is that *****we offer a well-made and stylish product*****¦ at less than half the price point of our European competitors.*****

Coach handbags can retail for up to $1,100, although many in the range are much cheaper. To make the brand more price competitive than its European rival brands, Coach manufacturers in low-cost countries while sourcing its raw materials from high-quality mills and tanneries, resulting in Coach*****s production being a fraction of its European competitors***** costs, while retaining a premium image.

Coach*****s primary focus is on the female consumer because *****she tends to be brand-loyal, will go shopping whether the stock market declines or not and if she has a bad day at the office she may buy herself a Coach bag where as a man would have a double Scotch.*****

Describing the difference between the Chinese and U.S. consumer, Frankfort said: *****In China, there*****s a luxury consumer that represents perhaps .05% of the population ***** very small but with enormous purchasing power. That*****s not our primary target. Our target is the emerging middle class who have gone to University and are now getting 30 to 40% [salary] increases a year*****¦ These women are trading up and investing in plasma TVs and laptops computers and Coach Bags. They are looking for ways to broaden their life and Coach is one way*****¦ There are some consumers who are extremely wealthy, and hopefully our limited-edition product will attract them, but they are not our primary thrust.*****

The next opportunity is seen as India, though for the time being that market is on the back burner because of infrastructure problems.

Communication Issues:

Each division is itself geographically dispersed; with offices located in several cities across America. The company already has a dynamic web site on the internet advertising their aims and an impressive list of all products.

Communications is important to the company*****s business success, a point that was made clear at your appointment.

Although the technical, managerial, and planning expertise of the company is not in question, the profitability of the enterprise depends crucially on the quality of the communications within each division, between the company and their clients/customers, between the company and their material suppliers and between each division and senior management.

Senior project managers spend a great deal of their time in travelling across the US, visiting divisional headquarters and departmental sites for meetings with senior management and the various project teams for which they have responsibility. With the recent expansion into Asia, Coach Inc. is facing even more complicated communications issues. If they are to move to India in time, there will need to be a well supported line of communication amongst all branches across the world.

To support this range of communication needs, there are several systems and services in place already. The systems have been developed over a period of several years, using hardware platforms and network operating systems software from a variety of vendors, and running on a range of proprietary and open protocol standards.

In general, the systems have adequately supported existing business practices, but a number of problems have been experienced in the recent past involving, for example, the loss and corruption of data. In addition, current systems do not adequately support emerging trends in working practices, such as the creation of dispersed and virtual project teams, adequately catered for in terms of their telecommunications needs.

The company have made the decision that a significant investment in leading-edge telecommunications technology is likely to result in considerable savings. Existing telecommunications systems have been developed in a somewhat ad hoc fashion over several years. Some of the sub-systems are quite sophisticated, particularly those supporting the area of software design of their products. However, other component systems are variously sub-optimum and nearing obsolescence, or else cause problems by introducing unnecessary redundancy. The company as a whole supports four different and largely incompatible electronic mail systems, none of which offers seamless communication with those of other branches.

Senior management are now considering a strategic telecommunications plan, which, if fully implemented, should solve current problems related to communication difficulties. Communication in this sense involves real-time, person-to-person links, backed up with appropriate asynchronous links, together with access to appropriate information stores, such as remote databases.

The company*****s belief is that systems will probably need to be significantly enhanced to maintain efficient working practices and, ultimately, to support the company*****s expanding market position in China and Asia. This may well involve creating and implementing a new network design, possibly incorporating an organisational Intranet. One possibility that has been mentioned is the creation of a wide area virtual private network (VPN), embracing all office and remote sites within America and also its Asian and possible future Indian sites.

Part 1: Report

You are required to put together an individual report which would include strategic plans and solutions/recommendations on the basis of the evidence supplied in the case study.

Report should include:

1. An identification, prioritisation and rationale of the problems facing the organisation (main focus on telecommunication, wireless technologies, networks and other IT problems as well as problems that underlie the company structure, strategies and business processes). Your analysis should examine the major issues or problems currently facing the institution. (15 Marks)

2. Recommended solutions to identified problems, in relation to currently available IT-communication systems and services. Priority of the problems should be identified and a rationale for why these problems are considered to be of high priority. You should also recommend solutions to the identified problems ***** this must also include the description of the current technical environment and if any changes you propose to implement. (15 Marks)

Part 2: One Month Later

Issues:

While the company*****s turnover and profitability has increased with buoyant world markets, in particular Eastern China, the new CFO of Coach Inc. is concerned at the diverse and seemingly unstructured nature of the companies IS applications. Coach Inc. is intending to expand this coming year and begin trading on the New York Stock Exchange. In particular he is concerned that the company*****s poor systems will hinder it in its attempts to be listed on the New York stock exchange and the resulting may cause them to fail at complying with Sarbanes Oxley (SOX) compliance requirements.

As a starting point in his transformation of group wide business information systems, the CFO has asked you to carry out an analysis and review the company*****s existing Information Systems in the different business units ( incl. HR, Operations, Accounts etc.) and operating sites across the US and Asia. The information gathered arising from this exercise will form the basis for an initial high level assessment of the opportunities and challenges facing the company.

The CFO is keen to have a first *****cut***** of the review within six weeks and has suggested that the data on the different applications across the company be gathered using a standard 2 * A4 page form. This form will be sent to the company controllers and systems managers across the different sites and they will provide the necessary details.

Part 2: Report

1. Prepare a 2 * A4 page form (with appropriate completion notes), which would be suitable to gather detailed information on the nature scope, function and characteristics of the different information systems/applications across the company*****s different operating sites. (15 Marks)

2. What are the shortcomings of this approach to gathering data on the different systems and how would you overcome those shortcomings. (5 Marks)

Part 3: One Year Later

Issues:

Almost twelve months has passed since you presented your report/analysis of the different Information systems applications in use across the company. In the interim the CIO retained a company of IT consultants to carry out a similar review of the key functional areas; Operations, Production, Sales, Marketing and CRM, Accounts (incl. Payroll) and Human resources.

Their report has recommended that Coach Inc. invest €100m in a group wide ERP system from one of the large vendors. This would allow the group to consolidate all of its IS (excluding the cargo tracking and approximately ten other specialist applications) onto a so called single instance ERP platform. The CFO is very reluctant to invest such a large amount of scarce capital in IT and he is concerned about the long term competitive advantage and return on investment from the expenditure. The CIO and CKO in turn have argued that moving to the single instance ERP approach will significantly lower the total cost of ownership of the IT/IS in the long run and will provide a significant cost saving.

The CFO*****s preferred approach is to sign what he terms a Transformational Outsourcing Agreement with one of the major IT outsourcing companies. Under this Agreement a significant portion of the company*****s existing IT activities would be transferred to a third party provider and that provider would take responsibility for transforming the systems over the seven year life of the contract. The CFO has done a preliminary analysis to show that this option would be *****cash positive***** from day one and allow the company to focus its investment on core activities.

The board of Coach Inc. is due to consider the IS investment alternatives at a board meeting in two weeks time. The CFO has wondered in the past whether the company should now outsource its IT functions rather than continue with its own IS unit, and with this *****cash positive***** option, he has asked for your advice as whether to go ahead.

Report

1. What criteria would you use to evaluate and justify IT Investment in this company. (20 Marks)

2. Outline what possible vendors you may suggest Coach Inc. to invest with. Also, choose one particular vendor and outline one package/application which you suggest for their Operations, Production, Sales, Marketing and CRM, Accounts (incl. Payroll) and Human resources. (20 Marks)

3. What concerns may Coach Inc. have in outsourcing its IT unit? Outline the risks and benefits you may mention to the board of Management at it*****s next meeting.(10 Marks)