Strategic Management: Analysis of Hermès International S.A.

This case study provides a detailed strategic management analysis of Hermès International, a leading French luxury brand. It includes both internal and external environmental analyses, utilizing frameworks such as VRIO, SWOT, TOWS, and PESTLE to identify key strengths, weaknesses, opportunities, and threats. Porter’s Five Forces analysis is applied to assess the competitive landscape, and the report concludes with recommendations based on the Blue Ocean Strategy to address challenges and capitalize on opportunities. The analysis covers the company's business model, competitive strategy, unique selling points, and market segments, offering a comprehensive view of Hermès' strategic positioning and potential for future growth. This document is available on Desklib, a platform offering a range of study tools and solved assignments for students.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
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Executive Summary
The report has helped in analyzing the different strategic management analysis of Hermès
International company based in Paris, France. Furthermore, the internal and external analysis
of the company has been done which has assisted in managing the different kinds of issues
along with opportunities which can be gained by the company appropriately. Furthermore, it
has been seen and managed that the Porter’s Five Forces Analysis has been done which
helped in analysis of the different kinds of issues and this helped in reducing such issues with
the implementation of the Blue Ocean Strategy.

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Table of Contents
1. Company Background............................................................................................................3
2. Introduction............................................................................................................................3
3. Micro Environment Analysis.................................................................................................4
VRIO Principle.......................................................................................................................4
SWOT Principle.....................................................................................................................6
TOWS Matrix.........................................................................................................................8
4.Business Strategy..................................................................................................................10
Business Models...................................................................................................................10
Competitive Strategy............................................................................................................11
Unique Selling Points...........................................................................................................11
5. Macro Environment Analysis..............................................................................................11
PESTLE Framework............................................................................................................11
Opportunity & Threats.........................................................................................................13
6. Industries Analysis...............................................................................................................13
Porter's Five Forces..............................................................................................................13
Industry Type.......................................................................................................................15
Market Segments..................................................................................................................15
Critical Success Factors.......................................................................................................15
7. Recommendations................................................................................................................16
Blue Ocean Strategy.............................................................................................................16
8. Conclusion............................................................................................................................16

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References................................................................................................................................18

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1. Company Background
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.
2. Introduction
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.

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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.
3. Micro Environment Analysis
VRIO Principle
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.
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

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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

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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

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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).
SWOT Principle
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 & Şimşek, 2014).
Strengths
 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)
Weaknesses
 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)

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Opportunities
 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
Threats
 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)

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TOWS Matrix
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

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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).