Since its inception, the core values of Hermes had been craftsmanship and quality that had made the company one of the most renowned luxury brands in the world.


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Principles and Practice of Management

CASE (20 Marks)
Since its inception, the core values of Hermes had been craftsmanship and quality that had made the company one of the most renowned luxury brands in the world. Hermes had a fierce commitment to the quality and refinement of its products. The company claimed that one artisan fabricated each item rejecting mass production, mechanization, and assembly lines. This tradition of hand stitching was known as the company’s lifeline, having been started by its founder Thierry. With the advent of automobiles, the company’s core business of stitching saddles began shrinking. During this time, the company had to think creatively without compromising on its core values. In the 1920s, Emile-Maurice traveled to meet Henry Ford in the US, where he came across the newly invented zipper that was being used on car canvas... While the Hermes family planned to carry on with its rich family heritage and keep its business independent, LVMH was secretly acquiring stake in Hermes. On October 23, 2010, Patrick Thomas was interrupted by a phone call when he was on a bike ride in Auvergne, a mountainous region in central France. ... Fearing a hostile takeover by LVMH and to protect Hermes’s family legacy, in December 2010, Thomas in association with 52 key shareholders of the Hermes family, decided to set up a holding company called H51 wherein 50.2 percent of the shares were pooled by Hermes family Though the Hermes family showed reluctance to sell its family-managed business and desire members...to keep its business independent, by December 2011, LVMH had increased its stake in Hermes to 22.3 percent. This prompted Hermes on July 10, 2012, to file a complaint against LVMH with the French prosecutors... In June 2013, the AMF, after a series of investigations, ruled that LVMH be fined €10 million over its stake in Hermes (Refer to Exhibit III for investigations made by the AMF). The penalty was imposed on LVMH for breaching disclosure rules during its stake building in Hermes. ... After Thomas retired in February 2014, Axel was brought in as the CEO of Hermes. Bringing in a family member was a bid to cement the Hermes family’s grip on the company and show outsiders that the family planned to keep its business independent.

Answer the following question.

Q1. Debate on the core value and culture of Harmesh family.

Q2. Explain how the LVMH’s takeover attempt was defeated.

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