Success Measures And Strategic Analysis Of Hermes International

Financial Growth of Hermes International

Hermes is a luxury brand that is based in France and the quality of its products has improved the financial conditions of the company. The quality of the product has increased the financial performance of the company. In the financial year of 2016, the company has increased its sales in all the markets it is functioning. In this assignment, the measures of success for the company will be duly presented, along with the reasons. Moreover, the strategic analysis of the leadership quality, contribution, strategies used by the organization will also be duly evaluated here. Recommendations will be significantly presented based on the strategic analysis for increased sustainability of the company.

The company has achieved a sales record in the financial year 2016. The record sales of Hermes International was five billion euros, which was 7.5 per cent more than the last year. It was able to compete with different companies in the luxury market due to the improved product quality. There are other two leading companies operating in the luxury industry of France. Hermes International has achieved more sales revenue than those firms in the financial year 2016 (The Conversation, 2022). The turnover of the company in the year was more than ten billion euros. The net profit of the company has represented more than twenty-one per cent of its sales. The turnover of the company was nearly nine per cent of the total sales of the luxury industry of France. There are four major strengths of the company, which are identity, skills and creativity, artisans, along fact. These four particular factors have made the company an independent family company.

The financial growth of the company has increased in the market due to its performance, product quality, process, development, customer base and other factors. The financial growth of the company has increased from the year 2016. Hermes International is operating in different industries, which are determined as clothes and accessories, silk and textiles, watches, perfumes, lifestyle, jewellery, along with homewares (Hermes Paris, 2022). The French identity of the company is Hermes Paris, which is increasing its sales and growth in the global market. Most of the products of the company are being manufactured in France, which is one of the fundamental elements of the company that is increasing its sales and growth in the country.

Figure 1: Increased International Revenue of Hermes Paris

(Source: Statista, 2022)

It has been obtained from the figure that Hermes Paris has increased its revenue in the global arena from the year 2007. The increased revenue of the company from 2007 to 2020 has ben presented in this figure. The revenue was highest in 2019, which has improved the profitability of the organisation. Furthermore, more than sixty-one per cent of the total workforce of the company is located in France. The number of employees of the company has increased nearly seventeen thousand in the year 2020 and the revenue has reached nearly six and a half million euros. In the year 2020, the active share of Hermes Paris was more than ninety-one billion US dollars (FHI Annual Report, 2021). Furthermore, the stewardship assets of Hermes Paris till 31st December 2020 has reached nine hundred and thirty-eight billion euros. These have made Hermes Paris one of the largest organisations in the international arena.

Market Share of Hermes Paris

Figure 2: Market Share of Hermes Paris

(Source: Statista, 2022)

It has been identified from the above graph that Hermes Paris is functioning in different industries, which is allowing the organisation to increase its profitability. The market share of Hermes watches is three per cent of the total market. Perfumes have captured four per cent of the market share of Hermes Paris. Silk and textile have covered seven per cent of the total market share by Hermes Paris (Statista, 2022). The other products of the company and the sectors are operating in different markets in the international domain. Most of the market share of Hermes Paris is being captured by the leather and Textile Industry, which is determined as fifty per cent. The employees of the company prefer the work-life balance they are having in Hermes Paris (Indeed, 2022). The employees are able to meet their organizational goals due to the flexible timing of their work, which is increasing their productivity. The energy in completing the task is high among the employees, due to their work-life balance and flexibility regarding the operations.

Supply Performance

Figure 3: Number of Stores of Hermes Paris in the International Market

(Source: Statista, 2022)

It has been identified from the figure number 3 that the company has a large number of stores in the global domain. The availability of these stores are able to improve the supply of products and attract more buyers. The suppliers of the company are determined as the partners of Hermes Paris. It has more than fifty direct partners in the global domain that are larger in size. Furthermore, the relationship of the company with its suppliers is determined as more than twenty years as an average. The smaller suppliers of the company are working with the company for more than fifty years. In the year 2016, Hermes Paris has signed a contract with WWF France to improve its responsible management with the supply chains (Finance Hermes, 2020). The supply chains of Hermes Paris are determined as precious hides, wool and cashmere. The usage of water by the organisation has been reviewed by the Water Risk Filter tool in the year 2019 with the primary suppliers. The improvement of the supply chain is possible for the company, as it is functioning with specialised and independent experts for the betterment of its SCM in the international arena.

Different reasons have helped the company to become successful in the market. The performance and delivery, innovation, leadership, a strategy of pricing, methods of marketing and others. These have attracted a large population towards the company in the global arena and increased sales of the firm.

Hermes corporates have developed its partnership with Mondial Relay in France, which is one of the leading firms in e-commerce distribution parcels. More than thirty-five thousand e-commerce merchants have developed their partnerships with the company in France and Europe (Hermes. 2022). The company delivers the products, which are between 0 to 150 kg. It charges a low amount of money to the customers and provides an improved delivery, which is also able to increase the reputation of Hermes Paris in the global arena.

Number of Stores of Hermes Paris in the International Market

The company has properly maintained its brand image for the last six generations, which has protected the control of the family. It is determined as a family-owned company for the last five generations. It has won the Distinguished Family Business Award, which was given by the Lausanne’s International Institute for Management Development (IMD). The quality of the leaders has increased the sales of the company, along with its geographical expansion (Family Business Magazine, 2022). Family ownership and management have increased the value of Hermes Paris in the international arena. One of the family members is the CEO of the company, four members of the family’s fourth-generation are the top management. Furthermore, five members of the sixth generation are holding the positions of the executive.

Innovation evaluates the creativity of an organisation regarding its products. Moreover, the constantly renewed creative gesture is allowing the company to focus on innovation, which is improving its brand image in the global domain. The designers and artisans are focused on the innovation of new products, which is enabling the company to make changes in its products and services (Hermes, 2022). The artisans and designers have the idea of tools that are required to innovate new products. The identification of new skills and experiments is the primary aspect of the company, which is also improving the skills of designers.

Hermes Paris is using different marketing strategies to promote its products in the international arena. Pop up stores are being used by the company to promote its products (IIDE, 2022). It uses both traditional and digital marketing methods as the promotional strategies of its products in the global arena. The marketing strategy of the firm is able to increase sustainability in the market, as it can be defined as a comprehensive approach, which is providing advantages.

The products of Hermes Paris can be divided into several parts, which are leather goods and saddlery, men’s and women’s clothes, watches, fragrances, jewellery, home accessories, furniture sporting accessories, along with tableware. The brand strategy has enabled it in becoming consistent in all the industries it is functioning in (Martin Roll, 2020). The strategy, which is being followed by the company is determined as tightly merged around its products. The company focuses on six different values, such as creativity, quality, independence, the spirit of conquest, authenticity and craftsmanship.

The implementation of the AVC model is one of the essential framework for businesses to improve innovation. The AVC model is allowing Hermes Paris in improving the quality of its products and compete with other firms (Li et al., 2019). The AVC model for innovation is helping businesses to innovate their products, which is one of the vital aspects to compete with others and attract customers from the global arena. The store managers are able to choose their strategies and discounts for customers as per their choice. The designers are able to innovate new designs every year for the products, which is also increasing innovativeness of the products of Hermes International Paris.

Partnership of Hermes Paris with Mondial Relay

Figure 4: AVC Model

(Source: Created by Author)

The VRIN model is being used by businesses to achieve competitive advantages. The resource-based view evaluates the characteristics that are described as valuable, rare, inimitable, non-sustainable. Sustainability of Hermes Paris is increasing with the help of VRIN model. A resource need to enable a company to implement value-creating strategy to reduce the weaknesses (Florea et al., 2020). The value creating strategy requires the cost invested in the resource. Hermes Paris has increased its brand value in the international domain due to its improved brand value with the implementation of the VRIN model. The firm is able to make its resources rare in the market, which is possible after the adoption of VRIN framework. In addition, a valuable resource is being controlled by a company, which is increasing competitive advantages. Rare, value-creating and imitable resources are not sustainable. This framework is helping Hermes Paris to gain advantages in the market. 

Table 1: VRIN Table

(Source: Created by Author)

The store managers of the company have the responsibility to manage the collection and offers in different products in their stores. The managers of different stores are able to adopt new strategies to meet the demands of customers. The store managers of the company come to Paris twice a year for an event named “Podium” (Martin Roll, 2020). The store managers of Hermes Paris from different countries are being invited to this event, which is more than a thousand in number. All the products of the company are not available in all the stores of Hermes Paris.

The organization provides new designs to its designers every year. It increases the level of creativity of the products of Hermes Paris. The theme of the company for its designers in the year 2019 was “in the pursuit of dreams” (Martin Roll, 2020). The collaboration developed by Hermes Paris with the designers is determined as the creative pillar of the firm. The objective of this collaboration is to achieve benefits for both the organization and its designers.

“Patience” is one of the strongest principles that have been developed by Hermes Paris. It is one of the strategies that is helping the company to focus on producing the highest quality of products. The new employees and artisans of the firm are being selected in a careful manner. They have to go through an in-house training process for three days, which is called “Inside the Orange Box” (Martin Roll, 2020). The training process introduces the new staffs to the founders and the development history of the company. The development history of the products is also being introduced to the new individuals.

Hermes Paris has developed its brand without following an appropriate strategy. The region-specific collections of the company have made the stores authentic. The limited-edition products of the company have also developed authenticity of the products in the global domain. Furthermore, the strategy, which is determined as “limited edition” has reduced the distribution of products in the stores. The products are not being provided at discounts to the customers in different markets.

Factors Contributing to the Success of Hermes International

The contribution by the leaders of Hermes Paris has increased the product and service quality, which is attracting a large population from the global domain. The leaders are ensuring the employees provide required services through proper guidance and training. The leather workers of the company need to qualify to start their operations in the restoration department (Fast Company, 2022). The qualification to the restoration department requires years of training for a worker. It has been developed by the leaders of the company, which is increasing the performance of all the employees working in Hermes Paris. Moreover, repair services are also being provided by the company to its consumers after its establishment in the year1837. The leaders of the company have increased the brand image of Hermes Paris with the support and training they are providing to the employees.

The training to the employees has increased the growth of the brand from 2010 to 2019. The organisation has primarily tripled its revenue to nearly eight billion dollars with an operating margin of thirty-four per cent. The strategies developed by the leaders of the company has increased its profits, along with sales in the market (Fast Company, 2022). In Asia, the sales of Hermes Paris has increased by forty-seven per cent due to the improved quality of products and services to the consumers. The firm has three hundred and six stores in the international arena, which has employed more than sixteen thousand employees. Furthermore, it has fifty-one factories in the global arena, which are increasing the production capabilities.

The focus of the leaders on the improvement of the products has allowed in managing the brand image. The values of the customers have shifted due to the branding strategy adopted by the leaders of Hermes Paris. Furthermore, the production of sustainable products has attracted a large population towards the company. The preference of consumers towards sustainable products has helped the company in gaining advantages from the international arena (Fast Company, 2022). The decision of the management to focus on the preference and satisfaction of customers has increased the sales and growth of Hermes Paris in the global market. Another aspect that has attracted the customers towards the company, which is the reduction in the usage of plastic. Hermes Paris is operating in different industries, which is also increasing the number of plastic wastes in all the industries. The decision of the management to reduce the use of plastic has attracted a large population towards the company in the international arena.

The marketing strategy of Hermes Paris has increased the success of the company in the global domain. The products of the apparels and accessories strategy of the company are determined as men-ready to wear, Men Scarves, Mufflers, tie, Pocket Squares, Shoes, Belts, Accessories. On the other hand, Swimwear, belts, scarves, accessories for women are able to attract a large population in the international market (Team, 2022). Pieces of jewellery are the other effective products of the company, which has increased the growth of Hermes Paris. The pieces of jewellery include gold and diamonds, silver, enamel, leather, lacquered and horn pieces of jewellery. In addition, watches, fragrances, leather bags and luggage, small goods manufactured with leather, enamel jewellery and others. These are available in different stores, which are attracting customers from various markets. The other products, which are used in the home are also being provided by the company.

Work-Life Balance in Hermes Paris

The pricing strategy of the firm is determined as premium, which are allowing in influencing the purchasing habit of its buyers. Hermes Paris does not provide discounts on its luxury products. Discounts are being provided on specific products on occasion. On the other hand, the limited products are also being provided at a high price (Hannanu et al., 2020). The price of limited-edition products is maintained based on the competitors. The price of limited edition products depends on the other companies that are functioning in a similar market. 

Hermes Paris operates in the fashion industry of several countries, such as Japan, the USA, China, and regions like Europe, Asia, along with others. In addition, there are more than three hundred shops in which the firm is distributing its products (Liu, Lu & Qi, 2021). The operations of the company in different markets are helping in improving the brand image in the global domain. Online shopping options are also available for the customers. Seventy-eight per cent of the total turnover of the company is being generated through the fully owned shops of Hermes Paris.

It has both online and traditional strategies to promote the products in all the markets. It uses the “waiting list strategy”, which increases the value of products. This particular strategy is allowing the command to create increased demand, which is increasing the sales and profitability of the firm (Team, 2022). Print media is another way of marketing the products of Hermes Paris to attract customers from different markets. Websites are also attracting customers through advertisements towards the company in the global domain.

Focusing on Digital Methods of Promotion

Hermes Paris is one of the largest companies in the international arena, which is functioning in different industries. The company is focusing on both traditional and digital methods to promote its products. The digital methods are helping companies to increase their customer base at a reduced cost. Thus, it is recommended to Hermes Paris that it should focus on digital marketing methods for the promotion of its products. The digital methods are able to improve the marketing strategies for the company in the global arena. It is also being recommended to the company that it should focus on digital methods, as these are able to help in reducing the cost. The company could engage its buyers in a better manner with the implementation of these strategies and tools. These are also able to help the company and its employees to communicate with the purchasers, which is vital to identify their needs. It will help the firm to make adequate changes as per the requirement.

Hermes Paris is operating in different industries, and it provides only luxury products at a high cost. Discounts are also not being provided by the organization. It is one of the barriers of the company in several areas of developing countries. Thus, it is recommended to the company that it should collaborate with a few firms in developing countries. The collaboration will help the company to understand the market of rural areas in developing countries. It will help the company to operate in these areas as per the demand and needs of the customers. In addition, this will help the company to expand its business in more areas of the international market. The growth of the company will increase, along with the revenue and profitability.

Responsible Management of Supply Chains by Hermes Paris

The customer base of Hermes Paris is large in the global domain, which is increasing also due to the improved brand image. The company should focus on engaging its customers that are purchasing luxury products. Thus, it is recommended to the management of Hermes Paris that they should focus on different methods to engage their customers. The skills of employees in engaging the consumers will help the company to retain its buyers. Improvement in the communication with the customers will allow the employees to engage their purchasers. It will also help them in retaining their buyers. Additionally, the retention and engagement of buyers will allow the firm to reduce its expenditure in marketing due to the improved relationship.

Reference

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