Kate Spade Case Study Answers PDF

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Case Study Analysis Kate Spade New York BMI703-NWW: International Strategic Management Professor: Rania Nafea

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Internal Analysis ● Resources: Kate Spade New York is a large company that generates hundreds of millions of dollars annually (Ascarza and Wilcox). The company has many resources at its disposal including the following: ● A large customer-base ● Good brand image ● Large amount of capital ● Physical stores places around the world including in countries such as the United Kingdom, Kuwait, and Brazil (Ascarza and Wilcox) ● Good marketing team ● Good research team ● Connections with luxury retailors such as Barneys, Neiman Marcus, Bergdorf Goodman, and Harvey Nichols (Ascarza and Wilcox) ● Social media presence on platforms such as Twitter, Facebook, and Instagram (Ascarza and Wilcox) ● Well trained retail employees (Ascarza and Wilcox) These resources above are a huge asset to Kate Spade New York.

● Capabilities: The resources of Kate Spade New York can be combined to create the company’s capabilities. One of the capabilities is that with a large amount of capital at the company’s disposal and with a great research team, Kate Spade New York was able to research and discover the profile of their core customer (Ascarza and Wilcox). In addition to this, the company was also able to research potential customers that they had yet to reach and whose patronage they could profit from (Ascarza 7). Another capability is the company’s ability to use their physical stores and great research team to be able to use the physical stores as a “testing ground for new merchandise” and to be able to see the reactions to new products before investing in them (Ascarza 2). Kate Spade New York also enjoys a fiercely loyal customer base due to their well-trained employees, good marketing team, and good research and design teams (Ascarza 3). In turn, the

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loyal customer base and the good marketing team provide the company with an excellent brand image and identity as the “accessible luxury” for the “interested and interesting” Kate Spade girl (Ascarza 2). A good research team and the huge amount of capital available to the company allowed Kate Spade New York to create a website and enter the world of e-commerce in 200, thus increasing their sales (Ascarza 2). Finally, well-trained employees and a good marketing team have allowed Kate Spade New York to provide their clientele with excellent customer service.

● Core Competencies: Kate Spade New York has two core competencies upon which it has built its brand. The first of these competencies is its brand image of being an “accessible luxury” for the “Kate Spade Girl” who is “quick, curious, playful, and strong; she is culturally curious, lives life to the fullest, takes chances, and stands out in the crowd; she’s both interested and interesting.” (Ascarza 3). The second core competency is its loyal customer base who continues to purchase the Kate Spade products and without which the brand could not be the successful multinational corporation it is today.

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SWOT Analysis ● Strengths: 1.Kate Spade personality: Starting with the owner herself, Kate Spade was a person fueled with hard work and optimism to which she constantly applied to her business. 2.Brand Loyalty: ● Due to its continuous dedication in maintaining customer satisfaction and brand loyalty, Kate Spade’s customer base continues to remain loyal. ● These women reveal that they have a strong connection to the KSNY brand, as it gives them an iconic status in their lives. They claim that Kate Spade handbags make them feel pulled together in a very “bold wonder woman” kind of way. ● The company's marketing team refined the brand’s positioning by developing a unique brand promise that says “Kate Spade inspires its customers to lead a more interesting life “ (Ascarza, Eva,et al) 3.Automation: The Launching of the Kate Spade website enabled nationwide sales that hit 175 million in 2012. ● This Automation of the website customers immediate demands.

enabled KNSY to succeed as far as meeting its

● The site introduced customers to new products, sales and promotions making it easier for those who don’t have access to brick and mortar stores but also for convenience.(Ascarza, Eva,et al) 4.Customer satisfaction: To appeal to their interested customers and secure their brand loyalty; Kate Spade maintains a highly responsive relationship with its customers. ● It takes advantage of different social media outlets to respond with either an explanation or response regarding any product information, question or complaint. ● Kate Spade store employees serve as “brand ambassadors,”. They act as listeners for the brand, consuming information on how sales are doing and employee performance in driving those sales . They then report back to headquarters with information on store performance, sales and consumers tastes and desires (Ascarza, Eva,et al)

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5.Product and store appeal; To appeal to its consumers, every Kate Spade store display, and sites were refreshed, with an addition of colourful decor and the incorporation of regular changes to window and merchandise visuals. 7.Highly skilled workforce: Kate Spade offers training and learning programs and invests in a vast amount of resources to train and develop employees resulting in a highly skilled and motivated workforce(Fern Fort University). 8.Successful Mergers and Acquisitions: In the past few years, Kate spade has managed to successfully secure a couple of technological firms that have helped it finetune its operations and thus build an effective and reliable supply chain management system(Fern Fort University). 9.Supplier Reliability: Kate Spade has managed to build a trustworthy supplier base that provides it with raw materials of good quality and in time. 10.Successful Product Invention: Kate Spade is constantly coming up with new product innovations. New ways to improve its brand, its look and its products whilst maintaining its brand image.

● Weaknesses: 1. Unfortunately, Kate Spade has an issue with product demand forecasting. In most cases it either over-produces or under-produces its products, leading to customer dissatisfaction. 2. The company does not spend enough time and money on research and development which makes it lag behind other top luxury-based competitors such as Prada, Gucci, Louis Vuitton. 3. Kate Spade has a high employee turnover. Yes, it offers training and learning programs but there is no continuous effort for revised improvement on performance and not as many employee retention incentives. 4. Kate spade has some gaps in its product range which reduces consumer choice and thus giving its competitors an upper hand in customer satisfaction.

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5. Fear and loss of branching out: even though Kate Spade is a leading brand in the fashion industry, it has failed to branch out into producing other highly demanded products that its competitors offer. For example, a men's line. Bigger competitors such as Prada, Gucci, Louis Vuitton and so on all have lines for men thus opening up their customer base. 6. Kate Spade’s Industry profitability ratio and its Net contribution percentage are both below the industry average.

● Opportunities: 1. Due to new or revised government rules, changes in technological standards and free trade agreement policies have enabled Kate Spade to leap into emerging markets. 2. Use of new technology will aid the company to come up with new product inventions and product variety whilst letting it practice different price differentiation strategies and maintain a loyal customer base. 3. Kate Spade could benefit from new trends in the fashion industry. It could aid the company to maximise its revenue and increase product diversification. 4. Shipping prices have lowered which helps to cut down on transportation costs giving Spade an opportunity to either spend on product research and development or market share enlargement for example more spending on advertisements. 5. Low inflation rate; low inflation rate brings about market stability whilst offering increased access to credit and lower interest rates to Kate Spade's consumers. 6. The company’s investment into an online platform. Currently, most consumers prefer shopping online. People don’t get the urge to go to Brick and mortar stores for the sake of convenience. Kate Spade could invest a vast amount of resources on the online platform to ensure they are tailoring their goods and services to the needs of the online shoppers.

● Threats: 1. There is an unfortunate mannerism of product and brand isolation in American industries. Reacting on that note, other global brands might reciprocate this thus reducing Kate Spade’s international sales. 2. New technological developments and product innovations by other brands could be a threat to Kate Spade. 3. Lack of new and improved product innovations; Most of Kate Spade’s product inventions are a response to competitors’ products, there is not a lot of original content. Also, supply is very irregular leading to unbalanced sales forecasts. 4. Kate Spade could face different lawsuits due to different changes in laws and product standards. For Example; there is an alarming concern for animal cruelty. Thus, luxury brands like Kate Spade could put themselves at risk of lawsuits by making leather products.

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5. Since it operates in various countries, the company faces several currency fluctuations, taxes and laws that sometimes negatively impact it and its market share. 6. Shortage of skilled workers in global markets could pose a threat on Kate Spade’s performance internationally. 7. Information overload; consumers are bombarded with online information everyday which can cause them to lose focus and interest on any online advertising Kate Spade offers. 8. Constant pressure to keep up with changing consumer tastes and preferences. 9. Political uncertainties could result in unexpected or unwanted changes that could cause a barrier in its business, hindering the company’s performance and making it incur unnecessary costs. 10. Supplier bargaining power has decreased whilst the number of suppliers in the industry has decreased. Thus, leading to an increase in Kate Spade’s costs of inputs(Williamson). 11. New Entrants into the market; The fashion industry is growing remarkably, meaning there is a continuous increase in competitors with new ideas in response to current trends(Williamson). 12. Increase in substitution; on top of new entrants to the market, there is an increase in substitution of Kate Spade products by these new entrants.

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Porter’s Five Forces Model According to the case, the industry which Kate Spade is competing in is called “affordable luxury” for fashion. Specifically, companies are focusing on providing high quality, welldesigned handbags at a reasonable price. (Ascarza 1) Here is the industry attractiveness analysis using Porter’s Five Forces model: 1.Threats of New Entrants : Low threats of new entrants. 1. Economies of Scale 2. Capital Requirement There are two factors for Kate Spade to have low threats of new entrants, which build high barriers for companies to enter the industry. First, in order to achieve a lower cost to compete in the “affordable luxury” industry, sales quantity is essential. Specifically, reaching the economies of scale will be helpful for the company to manage its cost. According to the data on Statista, Kate Spade is making 1.36billion-dollar net sales in 2019. (“Net Sales of Kate Spade Worldwide, 2019.”) With the huge amount of sales, the company is able to achieve the EOS. However, for companies trying to enter the market, it is difficult for them to achieve such a high sales amount. Second, the capital requirement for new entrants is high. According to the official website of Kate Spade, it has more than 170 stories internationally. Massive investment is required to set up and operate all the stores. Therefore, the barrier for new entrants is high. 2.Bargaining Power of Buyers: Strong bargaining power of the buyers (customers). 1. Focused target customer 2. Price sensitive customer First, although the brand is trying to use the strategy called “Brand Diffusion” to expand the target market, most of Kate Spade’s customers are described as “the Kate Spade New York girl.” (Ascarza 2) “In terms of demographics, they are professional women, age 25 to 44, with $100K+ in annual income, married, urban/suburban, and highly educated.” (4) Therefore, according to the case, Kate spade has a relatively focused and small customer base. As the company is decided to use focus strategy, the risk and threats of potential customers lost are high due to the high dependency on a certain group of customers.

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Second, Kate Spade is competing in the “affordable luxury” industry and trying to promote itself as a cost leader in it. Target customers of the company will be more sensitive to the price. In other words, potential customer loss will happen if they are not getting the price or discount they expect. (Murphy 2) Although Kate Spade stating that the customers are loyal to the brand, the bargaining power of buyers is strong due to the nature of focus business strategy and price-sensitive characteristics of its customers. 3.Bargaining Power of Suppliers: Weak bargaining power of supplier 1. Large number of suppliers 2. Standardization of production There are three main reasons for Kate Spade to have relatively low threats from the supplier. First, According to the data provided by CSI Market, Kate Spade currently has over 230 suppliers located in 17 different countries. In that case, it is easy for the company to shift its demand (production) among different suppliers. Second, as the production process is standardized, little modification or customization is required. Without the requirement of manufacturing process re-design, the switching cost for Kate Spade is low when the company decided to shift the production among suppliers. (Bush 1) Therefore, the bargaining power of Kate Spade’s supplier is weak. 4.Threats of Substitutes : Low threats of substitutes 1. Uniqueness of Design 2. Focus cost leadership According to the case study, there are two main reasons for Kate Spade, which is in the affordable luxury fashion industry, to have low threats of substitutes. First, the design of the products is relatively hard to copy. For instance, Kate Spade has its own designing team, which helps them to have unique designs for each product line. (“Kate Spade & Company SWOT Analysis Matrix”) Second, as the company is positioning itself as a focus cost leader with lower prices and higher quality, the profit margin is low. In that case, substitutes must bear the same level of low profit to compete in the industry. (Bush 1) According to our textbook, the threat of substitutes is low when it is hard for the competitor to provide the substitute at a lower price.

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5.Intensity of Rivalry among Competitors : High intensity of Rivalry among Competitors 1. Numerous or Equally balanced competitors 2. High exit Barriers Kate Spade is positioning itself as an affordable luxury. However, several companies, such as Coach, Michael Kors and Tory Burch are having the same or similar strategy. They are trying to provide a high-quality product at a reasonable price. In that case, the rivalry among them will be intense. Moreover, with 175 stores around the world and a large group of employees, it would be really expensive for Kate Spade to exit the market. The same situation is found for other companies. In that case, companies are stuck in the market and have no choice but to keep competing in the industry. Therefore, the rivalry among competitors is intense.

�Conclusion (Porter’s 5 Forces): Is the industry attractive? The industry(affordable luxury industry) is attractive for the firms which are currently in it. However, it is not very attractive for new entrants. According to the result of Porter’s Five Forces model, Kate Spade has a low threat of new entrants, weak bargaining power suppliers and low threats of substitutes. Although the strong bargaining power of the buyers is strong, and the intensity of rivalry among competitors is relatively intense, the industry is still attractive for current firms within it. However, it is really hard for newcomers to compete in it.

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PESTEL Analysis ● Political: Various Political factors affect Kate Spade New York when its expanding internationally in countries like United Kingdom, Dubai, Kuwait, Brazil, etc. Including: 1.Political Stability: Political stability plays an important role in how a business operates in a country. Continuous overthrow of governments or changing regulations frequently, can have an adverse affect on the economy and as well as business operations (“Political Factors Affecting Business”). For example, in the case of the United Kingdom withdrawing from the European Union and its current Prime Minister Theresa May resigning, it has given a rise for political instability in the UK (“Brexit deadlock to continue, political instability to increase”). 2. Trade Control and Regulations on Consumer Goods: Governments can actively place a heavy tariff on certain goods being imported in their countries or can restrict entry for others. Consumer goods like Kate Spade New York, have to be aware of such regulations as some of the countries may not have actual barriers of entry but high trade regulations that make business operations complex. 3.Anti-Trust Laws relating to Consumer Goods: Anti-Trust laws are made to keep the competition in a country healthy and to protect consumers from monopolistic pricing (Palmer). As mentioned in the case Study, Kate Spade New York is planning to build its brand to favor more average priced consumer base through brand diffusions or separate brands. It would have to be aware of such Antitrust laws in international markets, as many countries have such laws that heavily regulate business operations in textile and consumer goods industry.

● Economic: 1. Foreign Exchange Rate: One of the most important economic factors that affect businesses in international market is foreign exchange rates. Fluctuation in currency rates over the past decade due to economic instability in countries such as Brazil or Venezuela, has resulted in many companies facing huge losses. As stated in the case, Kate Spade New York plans to expand its operations further

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globally, thus it should be aware of such risks ( “Kate Spade PESTEL / PEST / STEP Analysis & Solution / MBA Resources”).

2.Disposable IncomeAn economy’s average disposable income directs the pricing and marketing strategies of a company in a specific country. With higher disposable income, consumers have an increased amount of consumption expenditure compared to economies with lower disposable income(“Kate Spade PESTEL / PEST / STEP Analysis & Solution / MBA Resources”). If Kate Spade New York wants to continuously expand as an “affordable luxury brand” (Ascarza and Wilcox ), it would need to assess economies where consumers are able to and willing to spend money on such products. 3. GDP And Overall Economic GrowthGDP and economic growth play a vital role in successful operations of businesses in the economy. Higher GDP growth results in higher demand among consumers due to stable financial growth in the country and higher disposable income (“Kate Spade PESTEL / PEST / STEP Analysis & Solution / MBA Resources”). Countries like the United States, Canada and various countries in Europe have had a significant economic growth resulting in higher consumption expenditure over the years. Thus, expanding in such markets benefits the businesses like Kate Spade New York and also, provides stability over earnings.

● Social: Societal values and culture can have a huge impact on how a business operates in the industry and how it can produce effective marketing strategies to have a greater impact on such audience. Following are the social factors that affect Kate Spade New York 1. Demographic Profile: As m...