Strategic Management Analysis Of Hermès International

Introduction to Hermès International

Hermès International S.A., or simply Hermès is one of the largest French luxury brands manufacturer and this has been ranked as the most valuable brand in different valuation (“Hermès – The official Hermès online store”, 2018). The company was established in the 1837 and this specialises mainly on leather, lifestyle accessories, jewellery and watches. The headquarter of the respective company is in Paris, France and the areas served by the company is worldwide. The founder of the respective company is Thierry Hermes. The revenue which has been earned by the company is €5,202.2 million and the number of employees working under Hermes and the operating income of the respective company is €1,696.5 million.

The report helps in the analysis of the Hermès brand and business leadership strategies which has helped in analysing the product offerings of the company. The offerings of the product increased between the year 1880 to 1900 and they introduced their products in the retail stores in the year 1900 as well. Furthermore, the case study helps in analysing the brand philosophy of Hermès wherein it has been described in a single statement that the company do not have the policy of image and they have the policy of product.

The brand strategy of Hermès has been defined and analysed in the entire case study in which it has been noticed that the new employees along with artisans are selected in a careful manner and this has been seen that Hermès brand do not look for the endorsements of the celebrities. The brand communication of Hermès brand is consistent with the different principles of heritage and this has helped the brand in strengthening themselves in an effective manner.

There are different challenges which has been faced by Hermès brand wherein it has been noticed that there was a takeover of the company. Furthermore, there were different customers who could not afford to buy the products of Hermès as this was ultra-luxury and it was not possible to b bought by all the customers as well.

The VRIO analysis is defined as the analytical framework which helps in evaluation of the success of the resources of the company along with gaining competitive advantage. It helps in determining the competitive potentiality of the different resources which are used in the organization in an effective manner.

Value of the resources- The company manages the designs, warehouses along with logistics and distribution strategies themselves. Performing these kind of activities, this has helped the company in making the resources more valuable in nature. This has made them flexible and faster than the different competitors in the market. Hermès follows the changes in the tastes and preferences of the consumers which is due to the flexibility and the speed which is required to be adopted by them.

Rareness- Hermès is being able to produce different kinds of new items along with delivering them to the stores in less than two weeks. However, it has been seen that the average is six months which is required for the luxury brands and this has been seen that resources are rare in nature.

Brand Philosophy of Hermès International

Imitability- In the business model of Hermès, this has been noticed that it takes more than few years in order to establish vertical kind of integration with proper supply chain model. Hermès needs to progress more in the different segments as the small changes are made by the company in an often manner with the organizational culture which Hermès possess.

Organization-  Hermès needs to take full competitive potential advantage of the different resources as this will improve the overall potentiality of the organization effectively. The autonomy of the different managers and the HR contribute towards the success of the firm as well which will improve the overall brand image of the company effectively.

Resources available to Hermès	Valuable	Rare	Costly to Imitate	Organized to Exploit the Resources
More than 3000 designers	It is valuable in nature	Yes	Yes	Yes, they help in managing the entire fast fashion retailing
More than 650 Stores around the entire world	Yes, and it is utilized in lowering the costs in an effective manner	Yes	Yes	Yes, as Hermès is the global brand and this helps in enhancing the bargaining power
Good brand image along with excellent value chain	Very Valuable	Yes	It is very costly in nature and sometimes it is imitable	Yes, as Hermès is expanding in different foreign countries and they are improving their brand image as well
Supply Chain is buyer driven	Yes	It is unique in nature when the large amount of scale is considered in Hermès	Yes	Yes, as this is the part of the entire system which supports the fast fashion retailing model of Zara
Manufacturing System is dispersed to meet the various needs of the individuals	Yes	It is unique in nature	Yes	Yes, as Hermès is customized in nature which helps in providing the different customers with proper goods and services in an effective manner

From the VRIO analysis of Hermès, it can be analysed that the different resources which are available to Hermès along with the competency has been able to contribute towards the competitive advantage of Hermès. For instance- it can be analysed that the company has provided the entire flexibility in agile supply chain management along with this helps them in penetrating the global market in an appropriate manner as well (Blut et al., 2015).

Hermès has arrived at a successful kind of business model that has helped them in enabling the firm in order to deliver the fast fashion of high quality at an affordable price which will help in managing the resources in an appropriate manner as well (Zhang et al., 2017).

Proper SWOT analysis is required to be performed in Hermès Company as this will help and assist in managing the different kinds of strengths, weaknesses along with opportunities and threats of the company which will be faced by them. Furthermore, the SWOT analysis will help in managing the brand image and this will improve the overall performance in an effective manner as well (Noyan & ?im?ek, 2014).

• It is the French based organization with the strong kind of brand image and due to the global presence (Lasserre, 2017)
• There are more than 11000 individuals who are employed in Hermès company
• Strong marketing and branding through different online advertisements
• Organization has worked with different designers in the entire world (Hamari, Hanner & Koivisto, 2017)

• There is intense competition which means limited market share growth for Hermès
• There is fake imitation of the brand that affects the entire business and this hurts the entire brand image of the company in a negative manner (Welford, 2016)

• Hermès can try to expand the market globally as this will help them in tapping the customers (Pearlson, Saunders & Galletta, 2016)
• Being the global brand, the economic instability and recession will affect the global operations
• The brand Hermès needs to focus on the advertising which will increase the brand recall

• There is intense competition means reduction of the market share of Hermès
• There is ease of substitution as there are different options available to the different customers (Rothaermel, 2015)
• There is imitation which is the biggest threat in the industry
• There is ease of the substitution as there are different options available to the different customers (Hill, Jones & Schilling 2014)

The TOWS matrix helps in analyzing the different internal and external factors which will help in managing the different kinds of activities in an effective manner. The four TOWS strategies are as follows:

• Strength/Opportunity- This helps in utilizing the strengths to exploit the weaknesses
• Weakness/Opportunity- This helps in indicating that there are different options which will help in overcoming the weakness and this will help in taking advantage of the opportunities as well (Izogo & Ogba, 2015).
• Strength/Threat- This will exploit the different strengths as to overcome the potential kind of weaknesses (Cameron et al., 2016)
• Weakness/Threat- This is the least appealing option wherein the weaknesses and threats are required to be reduced and this will not help in any kind of activities

Strength/Opportunity- The management team which is well known for the quality needs and this can be used as the opportunity in managing the different activities within the casino. In order to be successful kind of retailer in the market, Hermès needs to build their strengths and take the actual advantage of the different opportunities by utilizing R&D. It will help them in bringing more than 11000 products more than their competitors and the rate of growth will be increased to 25% each and every year (Hegner et al., 2017).

Strengths Threats (ST)- There are different threats wherein the biggest threat is the continuing appreciation against the other currencies in the world. In order to reduce the threats of the competition, Hermès needs to build factories in North Africa and in the emerging markets. The company must bring different designs of clothing in the market which will help Hermès in managing their growth effectively (Frynas & Mellahi, 2015).

Weaknesses and Threats (WTH)- The main weakness of Hermès is to be the entire part of Inditex group wherein there are more than 8 organizations and there is failure of one such companies as well. Hermès is at risk too wherein the appropriate strategy of the organization which has been applied by them is to overcome such weaknesses and develop them in strengths. The entire strategy is to reduce the competitive threat which helps in developing marketing strategy which is flexible in nature (Bromiley et al., 2015).

Challenges Faced by Hermès International

Weaknesses and Opportunities- The greatest threats of Hermès are raising the production costs in Portugal and Spain with introduction of Euro in the year 2002. The products become more expensive in nature and this is difficult to export (Ellickson, 2016). To overcome this Hermès has started to invest in a global manner and the new mergers are there in order to keep their prices down in comparison to the other competitors in the entire market. If Hermès enters in the market, there are different barriers this will help in reducing the barriers with local partners with local franchise (Chatzoglou et al., 2017).

The business model of Hermès is essential in nature as this will help in managing their business in an effective and appropriate manner. Furthermore, the different kinds of key partners along with key activities are need to be managed in an appropriate manner which will help in solving the different issues in an effective manner (Slack, 2015).

Key Partners The different factories in Spain Shopping Centers and malls Producers of Textile Magazines based on fashion	Key Activities Shipping Orders Customer Service E-Commerce	Value Proposition High quality kind of design clothing at low cost	Customer Relationships Onsite representatives along with phone and web	Customer Segments Fashionist College students Price conscious and young generation Mid Income Shopper
Key Resources Online Shops Logistics Cost of design	Channels Web distribution Shops
Cost Structure Materials – $500,000 Advertisements- $500,000 Logistics- $700,000 Cost of the design- $500,000	Revenue Streams In stores sales – $767000 Online Sales- $3875000

Hermès is competing with different top fashion organizations present in the entire world, however there are few characteristics of Hermès which helps them in being different from the other competitors in the market and stand out in the entire crowd as well (Eichorn, 2018). Firstly, Hermès try to take advantage of the current and foremost technological aspect as this helps in controlling the various aspects of the process of the design, distribution along with the production process as well (Gereffi & Fernandez-Stark, 2016).

Furthermore, it has been seen that Hermès is the part of the fast fashion system which helps in analysing that all the supply chain needs are kept in continuous communication as this will help in making sure that all the employees in the organization are aware of the occurrences happening in the organization (Choi et al., 2017). Lastly, Hermès has reviewed the entire operational kind of procedures various times as this helps in reassuring that the customers and the employees are stress-free and they are secured with the entire information process as well. The fast fashion system of the company helps them in managing their brand image in the entire competitive industry as well (Galliers & Leidner, 2014).

The main unique selling point of Hermès is that the company tries to offer the different customers with huge and wide range of the premium leather products along with perfumes, shoes and clothes which are available to the different customers in an effective and proper manner (Ferguson, Brown & Johnston, 2017).

Political Factors is the first framework in which it has been seen and managed that Hermès try to manage and expand the roots to different countries. The government of the country can change the policies and this affect on the operations of the company. There has been disruption in the supply chain of the company and this difficulty has been overcome by Hermès in managing such difficulties effectively (Dhar, 2015).

Economic factors include the different factors which includes fluctuation in the entire economy along with differences in the prices in various kind of countries as well. It has been noticed that Hermès has been able to focus mainly on the different kinds of dealings and this helped the company in managing such issues in an effective manner as well 9 Zhuang & Babin, 2015).

VRIO Analysis of Hermès International’s Resources

Social Factors include the various discounts along with the offers in which it has been seen that Hermès tries to provide promotional codes along with offering deal to the different customers which will help the company in managing the different demands of the customers in an effective manner as well (Mardanib et al., 2015).

Technological Factors include the launching of the applications for the feasibility of the different customers which helps them in supporting the logistic system in an appropriate manner. Furthermore, Hermès has included the new mobile application which has helped the company in managing the different kinds of opportunities and receive success in it as well (Ortega et al., 2015).

Legal Factors include that there is litigation in the changes in various countries in which it has been seen that the government of Russia and Mexico helps in incorporating different social policies along with the various copyright issues as well (Orel & Kara, 2014).

Environmental Factors include that there can be different changes in the fashion of the customers in the organization which is ineffective and this create ineffective impact on the company as well. Hermès needs to implement various policies and procedures which will help the company Hermès in managing such differences effectively (Lien, Cao & Zhou, 2017).

There are different kinds of opportunities and threats of the company that is required to be analyzed by the Hermès company in an effective manner. The economic factors along with the technological changes are the various strengths of the company which is required to be analysed by the company in an effective manner (Choudhury & Harrigan 2014). Furthermore, with the proper technological implementation, this can be analysed and measured that there are various policies and other applications that are required to be adopted by Hermès in managing the changes in an effective manner and without much difficulty as well (Kasiri et al, (2017).

However, on the other hand there are different other threats from the political factors along with legal and environmental changes which is required to be changed by Hermès in order to manage the different issues in an effective manner. Furthermore, this can be seen that the rapid fashion change in the different Asian countries are not being maintained properly by the company in an effective manner which will lead to huge difficulties for them in managing the same in an effective manner as well (Lien, Cao & Zhou, (2017).

Five Forces	High, Medium or Low	Remarks
Threat of new entrants	The effect is medium in nature	Setting up of the distribution channel is challenge and this can be problem for Hermès in managing the change effectively (Kasiri et al, 2017). Furthermore, the entry into the apparel retail industry does not require much capital and this affects the entire existing big players in the economy (Blut et al., 2015).
Bargaining Power of Customers	High	The negligible switching of the buyers Buyers in the market are price sensitive (Chang, Wong & Fang 2014)
Bargaining Power of the Suppliers	High	The switching cost of the retailers in the market is not high (Cameron et al., 2016) The suppliers need to maintain the quality which is required
Threat of the Substitutes	High	There are different other brands such as Zara The online buying behavior of customers has increased
Degree of the Rivalry	High	The price is common and equal in nature among the different competitors in the market There is low switching of the costs between the different competitors

The Hermès is the Spanish fast fashion retail brand which is based in Paris, France. The products which are being sold by the company includes the different kinds of high fashion clothing along with accessories manufacturer as well in the entire market (Cameron et al., 2016).

The segmentation of Hermès can be described with the principles of the demographic segmentation. The target customers which are targeted by Hermès are between the age group of 18-40 years of age and the fashion trends are usually on the top as well. The list of segmentation of Hermès include the following:

• Age between 18-40 years
• Mid-range income
• Interested in different trends of fashion

• Small sized customers
• Plus-sized shaped garments

There are different critical success factors of Hermès that includes that Hermès has tried in developing responsive supply chain which helps in enabling the new fashions wherein the trend emerges. Hermès has created a proper partner network of more than 350 small shops in different areas as this helps in handling the different sales and increase the profitability of the organization as well.

Therefore, it can be recommended that the blue ocean strategy helps in representing that there is simultaneous pursuit of the high product differentiation along with low cost as well. The blue ocean strategy can be adopted by the Hermès Company as this will help the company in managing the different threats and weaknesses and make them their strength and opportunity which will help the company in managing the differences effectively as well. Furthermore, the best way to attain the sustainable growth in the entire industry is to seek the new opportunities in the new apparel market. Hermès needs to develop a proper and accurate central distribution channel which will help in manging the differences in an effective manner.

Furthermore, the other recommendation which is provided to Hermès is to offer the specialised products to the customers in the entire market as this will increase their international preferences of the company and this will improve the overall position of the firm in an effective manner. Hermès needs to differentiate the different kinds of products in the range which is provided to the customers as this will help the company in becoming potential for the sustainable growth effectively as well.

Conclusion

Therefore, this can be concluded that the internal and external analysis of Hermès needs to be maintained in an effective manner which has helped them in managing the different weaknesses and threats in an effective manner. Furthermore, with the help of implementing the different strategies, this will help in managing such differences in an effective manner along with understanding the position of the company in an effective manner as well. Lastly, the different internal and porter’s five forces analysis has been done which helped the company in understanding the bargaining power of the buyers and suppliers in the market as this has been noticed that there is huge competition and the customers prefer the different products which will help in maintaining their competitive position in the entire competitive market to gain more profitability in the entire economy.

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