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2. A FAMILY COMPANY History and timeline of diversification and Brand spirit building Founded in 1837, Herms, was a company of harness and saddler, today his principal activity is in piece of luggage and leather goods. Context Diversification Location Image- art - creation 1837 After 5 generations Thierry Herms comes to Paris to offer his mily expertise of saddlery makers. 1878 Charles-mile Herms first bag (model precursor of the Kelly) « Haut Courroies» 24 rue du Fbg-Saint-Honor 1880 24 ubourg St Honor: Opening the first mous POS. Ssupplier of the European Royal Families 1902 Hermes frre High international clients: Kings of Romania, of Spain, conquer international 70 80 ouvriers Emperors of Japan, Russia, Presidents of France, Perou, markets: Germany, Belgium, cosmopolite prestige Philippines, names in finance, in Industry, in politic. Poland, Russia (Nicolas II) 1914- First war Emile Maurice pieces of luggage and leather goods purshasse of the leither in style: the cousus 18 went to USA beginning of because anticipate the development of car industry USA and CAnada sellier the automobile industry development in USA and Canada Take over the big English saddlers installed in Paris 1918 The start of the spirit: Emile Hermes, Mr Vif Argent opens new horizon : the world in mouvment 1919- For new way of life: inedited accessories for travel, sport, car Metamorphose of the milial beginning of link with art 26 Exclusivity on design innovation=first patent and first firm in a store with a wide private collection, introduction in France the sliding ster: Hermes exclusivity corner window inspirate designers 1929- Economy slump Diversification an rebound on crisis: cult pieces until now, Close new York store Cult pieces 38 the Kelly and others : sac de dpches economies of Some years leater new stores: means : the cult leather agenda make with scrap. Way of life Cannes, Deauville and luggage design for : Elegance on liner travel ; Trend of Biarritz. yachting ; Car comfort Renew of use of precious and historical material: The cult Carr Herms made of the silk used for the jockeys blouse 1939- The Hermes Family is A humour spirit within difficult period: inspire square name 5 workshop dedicated to the visual identity is 45 refugee in Cannes Le Retour la terre, la gloire de la cuisine française. sewing (dress) building Occupation Ingenuity ce to shortage of colouring and rarity of silk: And Liberation rediscover linen, wool, raffia the leather stay orange, color adopted on boxes associate with the bolduc. + logo « duc attel» . Follows the evolution of the way of life : women close for bicycle : divided skirt, shoulder strap bag. 1950 Diversification of products: Robert Dumas and Jean-Ren Gurand (genders of Emile) 1950- Robert Dumas-Herms Diversification: The Herms Tie Shops window attract the R.Dumas the illustrator of 60 Jean-Ren Gurand An attractive place for celebrity : Grace Kelly, le Duc et la celebrity were meting with silk square, A.Beaumel (genders) Duchesse de Windsor, Ingrid Bergman, Jacky Kennedy Set in scene decorator of window 1978 a world-wide distribution network conducted by Jean-Louis Dumas (5th and 6th generation of Herms Family) 1993 Introduction on the Stock Market: but still 73% ownership by Herms Family. 2003 Crisis Plan investments: distribution and production capacity of International distribution the leather+ Innovation logistic network 2006 Patrick Thomas New CEO continuity of the strategy with a re introduction of design and creativity A unique mily companys project Organization chart &vril- Gordon-Choisy 100 exotic tannery Morio Maroquinerie de Sayat; Ganterie de Soficuir International 99,99 on which Tanneries des cuirs Saint-Junien; Gordon-Choisy; La Manucture de Seloncourt; La Maroquinerie Nontronnaise; Manucture dIndochine et de Madagascar de Haute maroquinerie; Maroquinerie de Belley; Maroquinerie Thierry 47,79 Maroquinerie des Ardennes; Nehel - Textile: Holding Textile Herms HTH Perrin &ortfolio management: long-term strategy from dog to star Kelly bag: 1.800 ref. 2000 Herms ask the pertinence of keeping a perfumes unit. 7 years later at the moment of the launching of the « Kelly Calche » perfume, this division is star in the portfolio. Opposite to the big competitor groups where the perfumer are usually solicited Hermes works with its own perfumer since 2004. And the success is building by following the values of Hermes: use thematic, follow the identity and past of the Brand, limited the number of launching to perpetuate the product range. Others is hiring a galaxy of stars born with the product innovation, diversification and customization This dynamic is boosted by the strategy who have reintroduce the marriage of creation and design with the tradition. And its support by a constant production investment allow high variety, constant product innovation and diversification until customization like special punctual order is star in the portfolio. New CEO Patrick Thomas vision in 2006 Boost the creativity in keeping the positioning of a prestige luxury Until 2006: 1% in pure innovation, 3% in creative process (lifting of the portfolio). - Boost the creativity of quot;the housequot;, in keeping the positioning of a prestige luxury - Intensify the presence in Asia (apart Japan) and in United States. - Support the growth of the demand by an increase of the production capacities - Contribute to the emergence of the follower milial managers 8
9. THE 4 Ps PRICE PRODUCT - Vertical integration from conception, - Core business: based on saddlery makers extended manucturing and distribution to the theme of Transportation &manner of create a bridge between creation in art and creation in art craft design » Hermes Art Director Fin 2007 quot;H Boxquot; of Hermes, an itinerant module within the World museums to present video Art + exhibits his commissions in a network of galleries Operation: linked innovation, design and know-how First Emile Herms Prize: 700 designers professional, student and self-taught compete to allow Hermes to discover new design talents. Preservation of the now-how capital, active formation Policies The notions of transmission, education and creation are the art of the Herms identity» 2008 Yamini Kumar, Hermes communication director - Exclusive partnership with two professional secondary school (since 1999) liked each with a specific workplace for developing the specific need of Hermes in know how in fine leather craft. - Workforce: a strong integration of know how, a reinforcement in production and sale 2000-2004: 1000 hiring with formation actions ; 2004: 5 871 (new 277) ; 1990-2006: 1050 new artcraft men (14 knowhow); 2006 : 6 825 (new 675) 2008 7 894 (new 439 on witch 263 in France); 2009 forecast: new 200 - Punctual collaboration with masters of the creation 2008 Le sac Yohji dHerms: sketch by Yohji and made by Hermes, a cross style of both 2008 one time supply Inglass: glass support for the Hermes Watch « La Montre Herms » 2009 leather worplace designing by the architect Patrick Berger, « Equerre dargent 2005 » and « Grand prix national darchitecture en 2000 » Operation design For the 60 years of the 2CV in the world salon of cars 2008:, the mythical car of the common people, the symbol of the democratisation was made by Herms a custom interior design on one unique model of 1969. Image strategy expressed in distribution: innovation art design history 2007 quartier rsidentiel de Soul, 3000m2 sont ddis au magasin et « lAtelier Herms » Lunion de la tradition et du design pour ancrer une forte identit dans un univers ultra moderne, une approche hyper luxueuse du concept store la française. En plus de la boutique et du sige social, runit un muse (exposition de Daniel Buren intitule quot;Filtres colorsquot; un travail sur la lumire naturelle et la transparence + des troncs, dans des vitrines crins, objets, photos et films retracent lhistoire du sellier : Le patrimoine ), un caf de lecture, une bibliothque (250 books on horse),. En chine sur le territoire des muses dart avec ses foulards « Une exposition dart permet de montrer les valeurs de notre marque mieux quune 10
11. campagne daffichage publicitaire» en ligne avec la stratgie douverture lart et la cration. Mars 1988 Exposition « The Tale of Silk » au Todays Art Museum de Pkin: un mix tonnant, parfois dtonnant, entre industrie du luxe et art contemporain, entre influences occidentales et traditions chinoises, entre histoire du luxe et avenir de lart avec des installations, danse, peinture, vido mlant artiste contemporain amricain et noms de la scne artistique chinoise Operation: sustainable design against aids 2008 quot;Life in a pocketquot; tie with a condom pocket to encourage people protect themselves Communication operation: sustainable « there is a trend in a charity for just golden his image with Herms its not a question of image. The Brand is positioning in back on profit of the actions. Give a festive dimension festive at this project, r from the discourse of mortification and culpability who are killing the dynamic of a charitable action. » 2008 Yamini Kumar, Hermes communication director « Fte de la Couleur » UNICEFpartnership for the 19th anniversary of the « Journe Internationale des Droits de lEnnt » by ONU: collect fund for school in poor countries. Animation: children have made drawing (within pictured by Bettina Rheims) and exposed in the Museum of lOrangerie . An operation is hiding another: from prestige to sustainable A communication operation based on authentic action who support brand prestigious and authentic values. This elegant discretion of the communication serve the brand value but we recommended to increase quietly democratically the communication 1 - to allow people in crisis time to see a way to access to the dream 2 - to educate people against counterfeiting 3 - to give an alternative solution to the e- bay system who encourage counterfeiting. 4 to make better know the sustainability of Hermes 2007, special creation of an only Kelly bag with a serigraphy of Grace Kelly in 1954 for the exhibition « Les Annes Grace Kelly » to Grimaldi Forum Jun 2008 the only Kelly bag with a serigraphy of Grace Kelly was sale in auction at the quot;Herms vintagequot; for 52 000 euros goes to help « Fight Aids Monaco » association to build a « Maison de Vie » in Provence (Princesse Stphanie de Monacos association) Hermes Vintage: bidding for an accessible dream Organized by Artcurial for 12 years. This is an inescapable appointment for collectors and Hermes lovers in the World. More accessible prices from the square of silk at 60 € to the bag at 4 000 € Cristies bidding : the vintage prestige Dec 2008 Pour sa vente aux enchres annuelle la prestigieuse maison Christies propose une collection de 23 sacs vintage Hermes e-commerce deployment strategy « I dont know why we shoul rush on what is moderne, is trendy We dont want to be demagogue and say anywhat on Internet. We have to keep part of the mystery Christian Blanckaert, VP Hermes Internationnal 2008 « Put ourself at the client side provide a ir service, plutôt rather than create a new source of business» Charles-Henri Leroy, Director of Client Relation Herms International, 2008 11
12. - a supplementatry service in the processus of the client purshases ; a stong care to the usability of the site and to the logistic, a special attention to the packaging and delivery (3 h in Paris), a custom offer (initials on leather agenda). - complementarity offline /online - local product line PRICE AND PLACE Management of the devise effect compensated by productivity and price rising : 6 % in United States and 8 % in Japan. But they dont want to go too r because the « Birkin » bag is selling 1 million of yens, (6.500 euros). VERTICAL INTEGRATION : Strategy of organic growth and innovation The organic growth is a long-term strategy essential to Hermes finance its investments Distribution channel development Strengthen the commercial presence on the overseas markets Innovation : Increase in Develop the the capacity of activities under producing represented in the Herms International Increase sales and portfolio of the Strategy answer the group increase of the Organic Growth demand As part of its strategy of welcome in the group Masters of know-how of exception to consolidate its expertise or secure supplying, perpetuation subcontractor, control the quality on vertical: Acquisition of emblematic brands, artistic know how, innovative technique or small long-term suppliers, raw material suppliers Invest mainly in the reinforcement of its distribution network and its production capacity 2008 : Investment 150 millions € en 2008, 70 millions € in network of direct distribution (focus is in China) and the other main part for capacity of leather goods production Operational strategy: optimisation of logistic 2003 investment IT solution for the logistic allows: 25 000 items perd ay and 1000 sendings Operational strategy combining logistic performance and preserving company values. 12
13. - Optimize the preparation of the ordered: multiply by 3 the storage capacity, reorganize flux - Manage the quality: reorganizing the logistic process 2003 Accelerate investments: +57,5 % and + 11 % of supplementary production capacity 2003 New logistic and quality control platform Infolog in Paris area to serve the entire world and prepare his international development 2003 extension of leather workplace 2003 building 2 leather workplaces (300 hiring in total) 2003 hiring/formation in leather within 2/3 years: 200 people 2003 acquisition of tanner 2003 interests reinforced in leather companies Quality, reactivity and flexibility of the production capacity « ce to the competition of emergent countries we have to increase the flexibility who allows us to switch quickly from a motif to one anoter, from a taffeta to a satin». Olivier Fournier, directeur gnral 2005 « This acquisitions have been made in the aim of perpetuate our suppliers and with a voluntary policies of commercial development. » Olivier Fournier, directeur gnral. 2006 owner 25% of high horlogy Vaucher Manucture 2006 acquisition textile photoengraver Marcel Gandit, subcontractor since end of 40s for HTH 2006 acquisition printing on silk square : studio Gandit de Bourgoin-Jallieu This acquisition will enable to meet robust demand for leathers goods products, particularly in crocodile skin. And will rich 73 millions deuros turnover on this erea 2007 Acquisition of Soficuir International in witch « Tanneries des Cuirs dIndochine et de Madagascar », already held a 49.6% supply and tanning precious leathers, primarily crocodile skin. 2007 fusion tanning of exotic leathers Soficuir and Gordon-Choisy (alwrady subsidiary) 2008 owner 45% of shion designer Jean-Paul Gaultier (35% since 2003) « These investments more affective than rational maintain the myth » 2007 acquisition Shoes: John Lobb 2007 acquisition Silversmith: Puiforcat 2007 acquisition Crystal: Saint-Louis 2007 acquisition Weaving: Perrin &y preventing irreparable damage to the beauty and biodiversity of the global commons; and by developing processes, techniques and materials that are consistent with the demands of sustainable development. Change Of Strategy To Combat Counterfeiting A well planned education campaign might be a more effective riposte to counterfeiters? 2007 - Hermes has sued online auction site eBay in the Tribunal. This marks a policy departure for the luxury group in its ongoing battle to snuff out counterfeiting. Up until know, Hermes policy has been to join suits brought by eBays disgruntled customers relating to counterfeit Hermes products. It also brings them in line with the policies of other luxury groups such as Tifnys and cosmetic giant LOreal both of whom have sued eBay directly. The problem is that many of the Birkin bags listed on eBay are indeed counterfeit but that not all eBay clients are aware of this ct. New Business Unit: Intrieur &I Research forecasts that revenues from luxury branded handsets will exceed $11 billion next year, increasing to more than $43 billion in 2013 août 2008 ABI research The luxury brands could rich multi-billion dollars in turnover on the mobile market and his accessories (clutch) in the logic of the consumption luxury as social distinction. (in 2008 Vuitton has launch a range of clutch and screen for iphone, Ralph Lauren launch software for it, Tag Heuer create completely a mobile Karl Lagerfeld conceived an iPod case once for Fendi, and an handcrafted custom trunk from Louis Vuitton (contained 20 iPods, one charger (what just one?), JBL iPod speakers and a subwoofer), to make from four to six months and run upwards of $10,000. 16
17. Even we can find leither clutch hermes for iphone, Hermes is not involved in this erea. A strong reason could be the lake of perfectly high quality (even Iphone are not), but for a certain part it enter perfectly in the tradition of voyage or mobility could be the word. But behind this there is the future development of the Internet of object, where there is more place for the quality control because its not an wearing of a technology but the technology inside the object. Opportunity of cosmestile: innovation cosmetic design Holding Textile Herms HTH: department « Care and Textile » growth of 21% at the end 2007 « Intelligent textile » of witch « cosmestile»: bioactive textile . Herms, Guerlain et Dior, Lolita Lempicka, Yves-Saint-Laurent Beaut, Lancaster, Paco Rabanne, Nina Ricci are working with the 130 companies of the Cosmetic Valley (turnover 2007: 2,5 Md€) This area where Hermes is already involved could be used to work on a way where design, sustainability and luxury could be imagine to build object with technology or used the intelligent textile STRENGHTS WEAKNESSES -Strong name value Replenishment of raw material High exposure to Japanese and American Market -Very strong internal cultural company Change rate sensivity -Large portfolio of products (less vulnerable to the demand of a certain OPPORTUNITIES type of products) Distribution network -Products are not seasonable Promotion possibilities New market: helicopter and design. -Well balanced distribution on a world- wide basis Not fully present on Asian market Internet -Control and quality of the distribution circuit (156 owned shops out of 300) -Suppliers: Long-term relationship and protection of some critical know how. Some include some participation THREATS of Herms Group to secure this (ex: Luxury market tougher and tougher Vaucher Manucture Fleurie, watches Holding of luxury group -Supply Chain: Iso 9001 and new SWOT New Luxury trend ( Internet ) implementation of processes in 2007. Analysis New demand from emerging countries 17
18. OUR STRATEGY Focus strategy: continuity and sustainability I - Production: A long-term strategy, based -Vertical integration by suppliers acquisitions (raw materials) in on the mastery of the know- order to avoid break in supply chain (leather) how and the control of the distributors network (applied II - Expansion of the distribution network despite the recession) Annual report A/Middle East: high P per capita, market trends (long relationship with horses) B/Emerging countries Boost the creativity in C/Internet: expand eCommerce: specific selection of products and keeping the positioning of a distribution. Introduction of second-hand sales on christies1
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