Topics: LVMH, Gucci, Luxury good / Pages: 3 (1012 words) / Published: Jan 13th, 2015

1. Many luxury good firms such as Faber Castell (writing instruments, art material), Rolex (watches), Gucci (bags, fashion), Versace (cloth, fashion), Hermès (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 be proud of. As is discussed in the case, the Hermès 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 Hermès 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 savvy 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 contend, 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 80s and 90s as it sought to reconcile growth with maintain the family values)

2. In the 80s and 90s many luxury brands went public including Donna Karan, Bulgari, TAG Heuer, Polo Ralph Lauren, Gucci and Hermès. Identify reasons for family businesses to go public. Using Hermès 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

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