As part of its global expansion, Coach has evaluated the possibility of expanding its brand into South America. In order to choose the most suitable market for Coach in this continent, an analysis of the opportunities and risks of doing business in Argentina, Brazil and Venezuela was performed. All the advantages that Brazil offers determined that this country is a potential market for Coach in South America.
The factors considered in the analysis of expanding Coach's brand into Brazil were the following:
Brazil is the largest country in South America with a total population of 192 million people, with Sao Paolo the largest state in the country with 11 million. Brazil is one of the world's fastest growing major economies. With a stable currency, a growing consumption-oriented middle class and a Gross Domestic Product (GDP) expected to rise from 4% to 5% per year over next 10 years, Brazil has a large and fast growing consumer market. According to market research, the luxury target segment in Brazil is made up of 1 million people. Brazilians, mostly those in the upper income echelons, spend close to $2 billion a year on luxury goods. The state of Sao Paulo represents $1.5 billion of this (or 75% of gross sales). This state has the highest concentration of wealthy people in Brazil followed by Rio de Janeiro. Expenditure on luxury goods has increased 35% per year since 2000. Currently, the segments of the luxury industry with the highest development are fragrances/cosmetics, and automobiles. One of the most underdeveloped segments is the Brazilian luxury industry. One of the advantages of investing in the Brazilian market is that its law offers equal treatment to national and foreign investments. Due to visa restrictions and distances, over 50% of wealthy local consumers do not travel internationally, which is a great asset for the local luxury industry. Another attraction of the country is the successful bid to host the 2016 Olympic Games in Rio de Janeiro, which will provide a unique opportunity for the Brazilian authorities to attract investment into a wide range of sectors in the economy. In addition, besides the sporting events, this country has become much more important in the economic field for in 2010 its economy is likely to grow by 5%.
Coach mainly competes with European luxury brands such as Louis Vuitton, Chanel, Gucci and Prada, as well as private label retailers. Nowadays Sao Paolo presents increased opportunities for luxury businesses in Brazil; Louis Vuitton is the market leader in the fashion segment in this city with competition from Giorgio Armani, Dolce Gabbana, Versace, Christian Dior, Ferragamo and Gucci. Brands such as Coach, Prada, Bottega Veneta, and Chanel do not have a presence in the market, and this is a great opportunity