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Stakeholders' perspective

With the rapid rise of the mass market, luxury goods that were initially superior have also embarked on a route of industrialization. The global luxury goods market has formed a monopoly by the three major luxury brand groups, but Herms can firmly control the brand. Herms insists on piling up details into products that look like works of art, which is why Herms holds value from consumers for years and is one of the representatives of the luxury goods industry.

Stakeholders refer to individuals or groups of organizations that have a specific interest relationship with the company. They may be internal (such as employees) or external (such as suppliers or customers). Under different roles, there will be different company expectations, and this report will introduce employees, customers, investors, and communities separately.

1. Key Stakeholders

Customers

As it is known, Herms' customers are people who are consuming their products such as handbags, jewelry, apparel, and many more. However, there is something more to what it means to be a Herms customer. Aside from offering customers luxury materials, Herms focuses on building long-term relationships with their customers. The company hosts an event called Podium, which takes place in Paris and gathers all sales representatives worldwide to showcase the individual items they will only offer in their supervised stores. These products are so unique that Herms' customers are willing to travel far to purchase the showcased items, making them

one of the few people who own an exclusive item. Even though their products are expensive, the consumers do not see it as a problem because of their trademark, handcrafted products (Kenji Explains). With that in mind, another way of Herms reaching out to their customers is by creating custom designs in their products. They allow customers to choose the material and color of the leather goods and customize it by marking them with their initials, creating a personalized touch. Lastly, Herms offers their customers a reconditioning of their leather goods. Other companies also offer to recondition their products. However, Herms allows product return to the factory in Paris, and it is fixed by the same person who made the bag (Herms Analysis in Business Marketing Essay). This act of service gives a feeling of importance to their customers, that they will only offer the very best of service to them, and that feeling is priceless.

Investors

Investors, also called shareholders, allocate their capital in a company and expect a return from their capital. Herms was established in 1837, and it continues to grow. Their strategy revolves around creativity, authenticity, independence, quality, craftsmanship, and the spirit of conquest. These values rely on the three pillars - freedom of creation, a high standard of savoir-faire, and the balance of the exclusive distribution network. These investors are satisfied with Herms because it maintains the group's profitability, high cash level, operating cash flows, targeted and qualitative investments, and the security of its assets. They also maintain the dividend awarded at 4.55 Euros from 2018 up to last year. These shareholders receive their payments on dividends ("Strategy").

Community

Pierre-Alexis and Axel Dumas, co-chairman of Herms, desire to build a better world through their company. They plan and participate in economic activities that give prosperity to the local communities, such as social, fiscal, environmental, and cultural. Countries impacted by climate change suffer droughts and cyclones. Because of these tragedies, Herms participated and signed up to a new 20-year commitment with Livelihoods Carbon Fund whose goal is to "rebuild the world home." Their contribution to the Livelihood Fund goes to agroforestry and mangrove replanting projects in Africa, Asia, and Latin America. As one of Livelihood Fund's contributing companies, Herms also receives high social value carbon credits that partly offset their emissions. Moreover, Herms found the best solution that favored green electricity for its consumption in France to reduce the consumption of water, energy, and waste production ("With the Livelihoods Carbon Fund, priority goes to proximity").

1. What interest these Stakeholders have in Herms

Customers

For Herms, the boutique emphasizes one-to-one exclusive service and communication process. Herms has always been an iconic brand in the luxury goods industry. The mysterious and advanced brand positioning also makes consumers feel a unique sense of honor. Herms does not regard celebrity endorsements as an imperative marketing strategy but actively stays away from it. They have always believed in craftsmanship. Before the craftsman can start combining any leather products in Herms products, the craftsman must undergo mandatory training for two years. Although this slows down the production time, it is the brand's philosophy to maintain scarcity and exclusivity.

Herms has always been an important supporter of the "limited edition" strategy, strictly restricting the sales of its products in its stores. Customers cannot expect to walk into the store and leave with Birkin bags. Instead, one must place an order and wait a few years before obtaining the product. In addition, Herms products never offer discounts, which makes the brand maintain a rare sense of dignity, which also enables consumers who own Herms products to have a sense of superiority different from others.

Investors

Many companies have been severely impacted since the start of Covid-19. Data show that Herms has apparent signs of growth in the stock market. The company has continued to grow as its turnover has increased year by year, especially in the Asia-Pacific region. From the perspective of Herms' stock market, the number of shares has been increasing since its listing. From an investor's point of view, this is a long-term project that is very suitable for investment.

Communities

Herms attaches great importance to sustainable management and environmental friendliness. Maintaining good relationships with customers is one of the reasons for his long-term business.

1. Effectiveness of Stakeholders

Customers

Irrespective of the industry an individual is working for or the kind of products the company is selling, it considers customers the most pivotal part of the business. Without the help of customers, there would not be an increase in the sales of the company. As a result, customers are recognized as one of the most important stakeholders to a company. Knowing the needs and desires of the customers is regarded as the most important job in business. Only when a business knows their customers' needs can they develop products and services which will help solve their customer problems more effectively. If products are not created based on customer's needs, they are more likely not to be sold. Positive customer relations are essential in the success of every business. These relationships create numerous benefits for the company, such as more potential leads and a higher customer retention rate. Companies that are better at managing customer retention are more likely to have a higher customer retention rate.

Herms has decided to introduce a new CRM system for marketing and sales to improve its internal workflows and external customer experience ("Herms Rolling Out New CRM System with Acando's Agile Project Management"). Herms is continuing to use customer feedback as a barometer of its success. The introduction of new product and service initiatives are designed to improve how Herms interacts with customers on all platforms. These form part of the company's 'Digital Futures' strategy, a 55 million Euro project prioritizing the customer

experience through investment in innovation and technology (Fedorenko).

Customer Experience

Customer experience is defined as the interaction and experience a customer encounters within the business. It is accomplished with the product being sold and positive interaction between the employees and the customers. Companies that prioritize customer experience by implementing various customer experience strategies are known to achieve higher customer satisfaction rates and increase revenue.

Herms continually strives to implement and guarantee high-quality social dialogue and freedom of expression for its employees. In addition to fixed salaries, individual and collective bonuses, and paid holidays, the group has introduced performance-related and profit-sharing schemes, depending on the country. A long-term initiative is the employee share ownership plans that have been allocated to all group employees worldwide ("Employees well-being"). The desire to recognize the commitment of employees, who are critical to the success and outreach of the House, led Executive Management to decide to set up a fifth free share allocation plan on July 1st, 2019. Under the 2019 collective plan, each eligible employee throughout the world thus received rights to free shares (Herms International).

Investors

Investors play a prominent role in the growth and success of a company. Investors are considered the company's primary stakeholders as they own shares and participate in the company's ownership. Investors have the freedom to determine who will control and carry out

the company's operations. Due to the significant control investors have on a company, they can supervise its profits and overall performance.

Herms has a wide variety of shareholders such as the Herms family, Nicolas Puech, Arnault Family, Fondation Nicolas Puech, The Vanguard Group, Inc, and Norges Bank Investment Management. Herms also believes that ethical behavior by companies is likely to involve some notion of fairness and reciprocity. It means working with boards, management teams, and other shareholders and stakeholders to bring about changes in either strategy, financial structure, operational or risk management, or governance that will, over time, lead to superior long-term performance by the company. ("How Herms Conquered the Luxury Industry")

Community

Community involvement is an effective way to promote brand awareness to increase the company's growth and to make a positive reputation within the community. Community involvement can serve as a valuable platform to promote the company's product and values within society. Companies can foster strong relationships with the community by interacting with their consumers daily. Community plays a critical role in the effectiveness of a company in various ways. If a business negatively impacts a large section of society, they may object or protest against the company through the local council. Moreover, individuals can promote businesses by buying products and services from the company.

Herms wants to be a responsible company actively involved in the life of local communities with which it builds and develops strong ties. Herms is committed to increasing its meaningful and generous actions in the regions where it is located. Since 2017, the group has strengthened its commitments toward local charitable initiatives. These actions strengthen the values of Herms and the employees' pride in belonging. The group's desire to make a positive contribution to a better world by supporting projects based on education, support in particular for craftsmanship, solidarity, protection of the environment, and cultural development (Herms International).

1. Ranking of Stakeholders
2. Customers

"Customer first" is a code that many companies believe in. Since companies are exchanging value with customers through products and services, it is imperative to understand customers. The organization's leader needs to analyze which technologies, products, and services the company needs to provide customers with the best experience, and customer feedback is the result.

1. Investors

Investors play a critical role in the growth and functioning of a company. Since investors own a part of the company, it is the responsibility of the business to meet their needs. Investors of a company have a strong voice in the company's direction and have the freedom to take necessary actions when the business operations are not meeting up to their standards. Investors can also vote on a company's significant decisions and serve as a critical source of financial

accountability, encouraging the company owners to make logical decisions. Thus, investors play a pivotal role in various aspects of a company by helping the business with its day-to-day operations.

1. Community

Community stakeholders refer to people who live in the area where the business is located. They may not all be customers, but they all equate with the company as they are concerned with the impact of the local environment, infrastructure, jobs, and prosperity. A community can protest and file petitions against an organization if they feel threatened by its conduct. Companies can be sustainable, build a broad social image, and demonstrate that they can effectively deliver benefits to society. Good relations with community stakeholders can benefit firms in many ways. They can improve the organization's decision-making as the organization will better understand the community's concerns and perspectives. Organizations can decide on how to design their projects to match the community's needs and desires. Good community relations can also help organizations attract people as both employees and customers, which reduces lawsuits as the company is respected within the community.

Expectancy theory

1. Motivational Practices of Herms

Expectancy theory proposes that an individual's behavior is motivated by anticipated results or consequences. The theory assumes that individuals will act in a certain way to put forth more or less effort because of what they desire. There are three aspects to the theory; the first is

expectancy, instrumentality, and valence. An individual's expectancy perception signifies whether the individual believes that a high level of effort will lead to outcomes of interest. If we take the example of an individual working at Herms, with this perception, he will question himself of the effort he puts forth with his overall performance in the job. Instrumentality is a person's perception that he considers his efforts will result in subsequent outcomes, such as rewards. With this perception, the individual questions if his job performance will result in rewards such as pay increases or recognition from managers or co-workers. Valence refers to an individual's concern for the value of the reward. For every individual, factors associated with their valence vary. The goals, sources of motivation, and importance of the reward are separate for each personality.

An employee's job performance is also a result of factors other than their expectancy from their effort. When their efforts do not result in high job performance, it may be because they lack the skills, knowledge, or abilities to perform their job successfully, or they feel low expectancy because of the work environment. In such situations, employers must make and implement ways where the employees feel motivated. Herms values its employees; its expectancy theory provides a process of cognitive variables that reflects individual differences in work motivation. The company has set many ways to keep its employees motivated in their job and with the company. Its compensation policy guarantees short-term items and benefits, such as salaries, individual and collective bonuses, paid holidays, and profit-sharing. The company also gives long-term items and benefits, such as employee shareholding plans granted to all group's employees worldwide (in all branches of the company) and post-employment benefits

(retirement benefits, supplementary pension schemes). Herms is committed to rewarding its employees' performance at corporate and individual levels. Additional employee benefits include healthcare benefits. Research done by the company revealed that employees from all of the worldwide branches wanted health benefits. Thus, Herms included in the health benefits, in 2019, a comprehensive maternity policy in place, which includes maintaining full basic pay for at least 16 weeks of maternity leave and covering 100% of maternity-related healthcare costs.

1. Effects of Herms' Motivational Practices on its Employees

Under expectancy theory, employees are motivated when they believe that their efforts will lead to high performance, leading to desired outcomes. Organizations use theories like such to design functional reward systems within the company to keep their employees interested. Herms' compensation policy is a motivational practice. It affects the employees positively as both the short-term benefits, such as salaries, paid holidays, profit-sharing, and long-term benefits, such as post-employment benefits (retirement benefits, supplementary pension schemes), provide employees with less stress. With no motivation, an employee can develop psychological issues such as depression and anxiety which may lead to many outcomes of stress that will affect an employee's life if it goes unnoticed. Stress also resulted in employees' negative job attitudes and decreased job performance concerning in-role performance and organizational citizenship behaviors. Research shows that unmotivated and stressed employees have lower organizational commitment than those who are happy in their job and organization. As Herms also provides health benefits, it aims to decrease physiological stress. Employees can get help for medical issues they may have other than psychological.