Kering's Strategic Planning: Leveraging Shared HR Services

KERING STRATEGIC IMPLICATIONS FOR Utilizing a shared HR services platform MSA 698 Directed Administrative Portfolio Paper #1 MSA 603 Strategic Planning for Administrators Submitted by: Taraiya Dodd Instructor: Dr. Don Forrer Submission Date: May 31, 2020

Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 2 Abstract The strategic nature of any company is determined by the analytical direction executed by its management. To engage in successful operations, all companies undergo the strategic planning process. The process includes action steps as follows, 1. Select the corporate mission and major corporate goals. 2. Analyze the organization’s external competitive environment to identify opportunities and threats 3. Analyze the organization’s internal operating environment to identify the organizations strengths and weaknesses 4. Select strategies that build on the organization’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. Strategies should be consistent with the mission and major goals of the organization. 5. Implement the strategies (Hill, Schilling, and Jones, 2020, p. 13).

Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 3 Firms may go through new periods of the strategic planning process every year to reaffirm a strategy and structure already in place (Hill et al, 2020, p. 13). Operations in multiple regions utilizing shared Human Resources services has to be mastered in such a way that the company operates at the efficient rate. One example is Kering Americas Inc, who uses a shared services operation to handle its HR services faces this challenge continuously with having to find the best fit formula to provide its consumers the best experience while remain profitable. McDowell (2011) stated that shared services users are defined as doing any of the following “centralized the management and processing of a group of common business transactions under a single department or service, Implemented a common information system environment and standardized operational processes for the target services, operated fully as a shared service for at least one year (p. 119). Kering is a global luxury group, that was founded in 1963 by Francois Pinault. The headquarters is located in Paris, France manages multiple fashion brands referred to as “ Houses in Fashion”, leather goods, jewelry, and watches. The Brands consists of Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen, Brioni, Boucheron, Pommelato, Dodo, Qeelin, Ulysee, Nardin, Girard Perregaux, and Kering Eyewear”. The company has approximately 34,902 employees according to its key financial data on its finance page. Therefore, the need to achieve significant administrative efficiencies while reducing costs is important for the company(McDowell, 2011, P. 118). In order to achieve superior performance and maximize shareholder value, the correct strategy has to be formulated and implemented throughout the entire operations at the company. The mission of any firm should detail what that company does, the vision articulates the desired future state of the company as to what it would like to achieve (Hill, Schilling, and Jones, 2020).

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Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 4 At Kering, the vision of luxury enables every individual to express what makes him or her unique. The name Kering means “caring” and is a symbol of the company’s core values. The strategy Kering uses focuses on creativity through a bold vision of luxury, in greater detailed it is stated on its website as “ with a creative vision that focuses on authenticity and audacity, Kering sets trends, and bold crafts tomorrow’s luxury. A luxury that is creative, authentic, and sustainable, one that offers powerful and genuine creative content and allows people to assert their individuality” (Kering.com). A company is said to have a “competitive advantage” when its profitability and profit growth are greater than the average of other companies competing for the same set of customers. It has a “sustained competitive advantage when its strategies enable it to maintain above-average profitability and profit growth for a number of years (Hill, Schilling, and Jones, 2020, p. 7). In this paper I will use a SWOT analysis to examine the way Kering maneuvers in its internal environment and external environment while successfully streamlining a shared services strategy that would unify the benefits for all its luxury goods. Strengths Brand Reputation helps consolidate and expand market entry Assets/capabilities High Margins Strong supplier relationships Consistent financial performance Weaknesses Focuses too much on consumer- oriented product development and marketing approach Bad advertising causing issues of racism controversy High employee turnover rate

Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 5 Opportunities Lifestyle brand that focuses on fitness and wellness, makeup, and traveling Digital improvements bring new innovation Increased online Presence Kering’s Sustainability strategy Threats Increased cheap counterfeits Competitors Changes in economic system Selective retailing Having a strong brand name and awareness attracts new business partners and customers. Diverse products allows Kering to be able to target various consumer groups with its presence in the industry , Kering has a strong presence in the industry , Kering has a strong track record of launching new products, and tested various concepts in markets in markets using insights from local consumers in markets using insights from local consumers. As a result, the company creates/improves the marketing strategy. With Kering acquiring or aligning with many brands it can also be a weakness as it increases the liabilities in the operation. Having many locations within the brands employees come and go as they may venture use Kering because of its name as a stepping-stone. Thus, long-term employment may never be the actual goal of employees leading to challenging retention efforts. The challenge to remain differentiated is also a threat as the luxury as there is “ requirement to presser the positional nature of items and services over time is translated into the need to mobilize a plurality of heterogeneous resources and coordinate strongly diversified skills, through flexible forms of connection between the company and the various actors

Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 6 involved in the manufacturing and innovation process (Pavione, Pezzetti, and Dall’ava, 2016, p. 242). The opportunities for Kering seems viable and does not appear the company will have issues any time soon with getting new products out there due to its solid history. As a lifestyle brand, consumers demand for the latest trend and follow the brands as it navigates different channels of luxury. Growth of smaller brands is also an opportunity for Kering, as they know what tactics and business processes that would be necessary to help the smaller brands expand and become known. Threats are inevitable for any common, with external factors in the marcro-environment that can disrupt at any given time. This could involve changes in technology, supplier’s ability to provide raw materials at the lower costs, customer buying behavior changes, and other market trends. Current Strategy Strategic leadership as described by Hill, Schilling, and Jones (2016) is the “creating competitive advantage through effective management of the strategy making process (p.65). The strategy being employed at Kering focuses on creating through a “bold vision of luxury” (Kering.com). As with most luxury chains, there is continued initiative to align the strategic approach to sustainability and integrate them in the processes of governance and to reconsider their business models with capturing opportunities for growth that a sustainable process will proved. Specifically, the strategy displayed on its website is “ with a creative vision that focuses on authenticity, and audacity, Kering sets trends and boldly crafts tomorrows luxury. A luxury

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Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 7 that is creative, authentic, and sustainable, one that offers powerful and genuine creative content and allows people to assert their individuality. Human Resources can help the firm create more value in numerous ways. Through a shared operation, services are provided are not limited to the “data administration, employee life cycle management, payroll and benefits administration, and general HR administration” ( Donnelly, 2005, p.21). The concept consolidates processes within the group in order to reduce redundancies and delivers support processes (Schulz and Brenner, 2010, p. 217). Shared services alliance enables the Human Resources activity to be tracked, traced, logged and measurable (Donnelly, 2005, p. 22). If HR is functioning well, employee productivity rises (lower costs) and raises value to consumer as customer service improves (Hill et al, 2020, p. 94). Kering gives their employees a chance to grow and realize their maximum potential “Empowering imagination” inspiring professional development within the group and allows movement from one House to another, building on the strengths that extend beyond individual brands. Four factors of building a competitive advantage are superior efficiency, quality innovation, and customer responsiveness (Hill et al, 2020, P. 96). Kering’s strategy has been successful yet there is always the need track and measure quality to signal any issues that can affect the brand performance. A product has superior quality when its consumers believe its attributes provide them with higher utility than the attributes of products sold by rivals. For an example, the way Apple customers continue to upgrade to new released iPhone each year opposed to an android phone because they believe Apple simply makes the best phone. Kering focuses on expertise from the Group’s integrated business model , through pooling resources and streamlining certain strategic functions such as logistics, information systems, information systems, media buying which results in the best practices

Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 8 developed and shared across the group benefit all. Another element, the group carefully constructs a mix of mature and emerging brands, each with a variety of customers, products, and locations, thus another strength of its business model. Customers measure the quality of a product against two kinds of attributes: quality as excellence and quality as reliability. The product’s design, styling, its aesthetics appeal, features and functions, level of service associated with delivery of the product represents its quality of excellence (Hill et al, 2020, p. 97). Building excellence into the product offering will lead to customers paying more to own or consume it (Hill et all, 2020, p. 98). On the other hand, a product can be paid to be reliable when it consistently performs the function it was designed for performs it well and does not break down seldomly. Both excellence and reliability increase the value utility a consumer derives from a product, and this affects the price of a company can change and/or demand. Innovation of products and processes is perhaps the most important building block of competitive advantage. Uniqueness provides the ability of the company to differentiate itself from rivals and change a premium price for its product or reduce its unit costs far below those of competitors(Hill et al, p. 99). To this end, a company must be able to do a better job than competitors of identifying and satisfying customers’ needs promoting a superior, responsiveness to customers. Strategy Implementation Management use tools such as Six Sigma to increase the reliability of their products. This process derived from Total Quality Management, described by Hill et all (2020) increasing

Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 9 product reliability so that it consistently performs as it was designed to and rarely breaks down (Hill et al, 2020, P. 127).The key to the success is communication; Kering Management must collect marketing intelligence indicating which attributes are most important to the customers(Hill et al, 2020, P. 31). By doing this, the business level strategy can begin formulation and set as the competitive them for the company. Lowering costs relative to rivals and/or differentiating its products offering from those of rivals. A low-cost position enables a company to have a competitive advantage to make money at price points where its rivals are losing money. The best strategy for a company to pursue depends on the pressures that it must cope with, ex. Pressure for cost reductions, pressure for products where price is the main competitive, local responsiveness from changes in customer tasks, preferences, infrastructure, (Hill et all, 2020, p. 274). Implementation of collaborative strategy involves changes affecting the whole organization, ongoing projects, or shorter projects occurring at different points as the strategy is implemented. Conclusion In summation, the challenge of sustainable development is a common focus with multi- organizational partnerships. Using “joint determination of vision and long-term goals”, Kering monitors trends across its brands to protect is sustainability with re-innovative tactics to its business model (Clarke and Fuller, 2010, p. 86). It operates Human Resources within a shared services processing manner, to reduce cost, reduce error rates, improve service response times, and improved customer experience which all aids in having sustained business benefits. The shared services can be divided in transaction based services or transformation-based services, Boglind, Hallsten, and Thilander (2011) explains that transaction based services “deals with all

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Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 10 the processes and activities related to meeting the administrative requirements of employees”, whereas transformation based services deal with non-routine and non-administrative HR activities that are intended to implement strategy, create new culture or accomplish business goals (p. 570). Luxury brands such as Kering, view sustainability as a business imperative the same as excellence in quality, thus represents a long term source of luxury brand differentiation, a tool for attracting and retaining talents, generates efficiencies opportunities which can enhance the firm’s competitiveness in the global luxury marketplace (Pavione et al, 2016, p. 259). Companies pursuing an international strategy transfer the skills and products derived from distinctive competencies to foreign markets, while undertaking some limited local customization (Hill et al, 2020, p. 274). References

Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 11 Boglind, A., Hällstén, F., & Thilander, P. (2011). HR transformation and shared services. Personnel Review, 40 (5), 570-588. doi:http://dx.doi.org.cmich.idm.oclc.org/10.1108/00483481111154441 Clarke, A., & Fuller, M. (2010). Collaborative Strategic Management: Strategy Formulation and Implementation by Multi-Organizational Cross-Sector Social Partnerships. Journal of Business Ethics, 94(Supplement 1), 85-101. Donelly, M. (2005). Avaya's journey to global HR shared service. Strategic HR Review, 4 (2), 20- 23. Retrieved from http://cmich.idm.oclc.org/login?url=https://search-proquest- com.cmich.idm.oclc.org/docview/217172290?accountid=10181 McDowell, J. (2011). Shared services centers can drive significant savings. Healthcare Financial Management, 65 (6), 118-22, 124. Retrieved from http://cmich.idm.oclc.org/login? url=https://search-proquest-com.cmich.idm.oclc.org/docview/873636123?accountid=10181 Pavione, E., Pezzetti, R., & Dall'ava, M. (2016). Emerging Competitive Strategies in the Global Luxury Industry in the Perspective of Sustainable Development: The Case of Kering Group. Management Dynamics in the Knowledge Economy, 4(2), 241-261. Schulz, V., & Brenner, W. (2010). Characteristics of shared service centers. Transforming Government: People, Process and Policy, 4 (3), 210-219. doi:http://dx.doi.org.cmich.idm.oclc.org/10.1108/17506161011065190 https://www.kering.com/en/finance/about-kering/

Running Head: MSA 698 Directed Admin Portfolio Paper #1- MSA 603 Dodd 12 https://www.kering.com/en/talent/who-we-are/our-houses/

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