Many luxury good firms such as Faber Castle (writing instruments, art material), Role (watches), Gucci (bags, fashion), Versa (cloth, fashion), Hermes (bags, fashion) were family business for several generations. Why was family ownership historically dominating in the luxury industry? Family ownership has historically dominated the luxury industry for want of maintaining the organizational culture-?its adherence to certain values that are deemed too important to dilute with the introduction of outsiders-?and an associated desire to create the best possible product that the family can e proud of.
As is discussed in the case, the Hermes family had a rich tradition and heritage from which to draw upon for inspiration in product design (which correspondingly leads to a famous reputation which they have to maintain). The Hermes family, like many others, established an informal educational system for leadership akin to an apprenticeship, which served to filter out family members who combined business save,/Y with a disposition that would honor, sustain and develop the family legacy.
Perhaps because of this burden of legacy with which the family had to intend, it could never allow for the bringing in of outside management which has been viewed to a certain degree of skepticism as inauthentic-?much less allow for the introduction of outside capital to achieve greater economies of scale and fund expansion. (This is an issue the family had to deal with later in the ass and ass as it sought to reconcile growth with maintain the family values) 2. In the ass and ass many luxury brands went public including Donna Koran, Bulgaria, TAG Here, Polo Ralph Lauren, Gucci and Herms.
Identify reasons for family businesses to go public. Sing Hermes as a case, what are the long- term opportunities and roadblocks of going public are for the corporation and the family? At a fundamental level, the main reason for family businesses to go public IS gaining access to capital markets that would allow them to finance vertical integrations, talent acquisitions and expansion strategies into the global marketplace. Hermes case is certainly not the exception as it followed a growth strategy fueled by vertical integration and the incorporation of industry best management practices through ownership stakes (if not outright acquisitions).
Drawing on the lessons learned from Reclaimed helm of LIVE, the Herms family would be able to tighten its supply chain and improve the quality of its products, starting from the individually sourced materials to the finished good and finally to handover of the product leaving one of its boutique stores. Herrs can further refine its focus on product quality, all the while controlling the end-users experience in its own stores, and improve its margins by cutting out the middlemen in the value chain.
Going public is not without its challenges, however, as the introduction of there shareholders will pose a challenge to dilute what was once a strong- sense of shared family interest. The company is now beholden to other voices and will not be as free to act in the decision-making process as they once were. 3. More recently many luxury family firms have been bought into existing business groups such as LIVE and Kerning in France, Investor in Bahrain and Royal Copenhagen in Scandinavia. Why does the luxury group business model seem to be so powerful today?
The reasoning behind why the luxury group business model seems to be so rueful today is not very obvious at first glance given that the scope for economies of scale in a fashion house are very much limited to material acquisition and distribution (and there existed few brand synergies, as stated by LIVE Chairman Bernard Renault). Core to the promise of a successful luxury group is the preservation and development of its brands. Brand creation will convince consumers to subscribe in an elite and common experience with celebrities. As Renault puts it, the products “[fulfill] a fantasy.
It is so new and unique you want to buy it. You feel as if you must buy it, in fact, or else you won’t be in the moment. You will be left behind. ” By creating a captive market for its products, a luxury group like LIVE can leverage its marketing expertise to push complementary products from its different brands. In addition, the sheer scale of the conglomerate attracts the best talent that the market makes available. The opportunity to work with so many storied brands is an opportunity that many designers think twice about on passing up.
Because there’s been a consolidation of brands into luxury roofs leaving very few independent brands and labels, circumstances seem to dictate (rather tautologically) that the groups are powerful. Conversely for today’s family businesses, the advantages that luxury groups offer as a quick solution for financing, talent and branding are hard to resist. 4. Hermes family has now created a family trust. What is the rationale behind this trust?
