Harvard Case - Herend Porcelain Manufactory: Designing Strategy in a COVID-19 World
"Herend Porcelain Manufactory: Designing Strategy in a COVID-19 World" Harvard business case study is written by Elias Goletsas, Anass Karzazi, Pardeep Singh Attri, Yusaf Akbar. It deals with the challenges in the field of General Management. The case study is 10 page(s) long and it was first published on : May 3, 2022
At Fern Fort University, we recommend a multi-pronged strategy for Herend Porcelain Manufactory to navigate the post-COVID-19 world and achieve sustainable growth. This strategy involves a combination of digital transformation, product diversification, global expansion, and strengthening brand identity. These recommendations aim to leverage Herend's rich heritage and craftsmanship while embracing modern marketing techniques, technological advancements, and evolving consumer preferences.
2. Background
Herend Porcelain Manufactory, a Hungarian company with a 200-year history, faces challenges in the wake of the COVID-19 pandemic. The pandemic disrupted supply chains, impacted tourism, and forced a shift in consumer behavior. Herend's traditional reliance on luxury retail and tourism has been significantly affected, necessitating a strategic shift to adapt to the new normal.
The main protagonists of the case study are the current management team, led by the CEO, who are tasked with navigating the company through this challenging period. They face the pressure of preserving Herend's legacy, ensuring financial stability, and finding new avenues for growth.
3. Analysis of the Case Study
We can analyze Herend's situation using a SWOT analysis framework:
Strengths:
- Brand Heritage: Herend boasts a strong brand with a rich history and reputation for exceptional craftsmanship.
- Unique Products: Their hand-painted porcelain is highly sought after by collectors and luxury consumers.
- Skilled Workforce: Herend has a dedicated workforce with specialized skills in porcelain production.
- Strong International Presence: The company has established distribution networks in key markets.
Weaknesses:
- Dependence on Tourism: Herend's revenue is heavily reliant on tourist spending.
- Limited Online Presence: The company's digital marketing efforts are underdeveloped.
- High Production Costs: Traditional hand-painting techniques contribute to high production costs.
- Lack of Diversification: Herend's product line is primarily focused on high-end porcelain.
Opportunities:
- Growing Demand for Luxury Goods: The global luxury market is expected to grow in the coming years.
- Expanding Online Sales: E-commerce provides a new channel for reaching a wider customer base.
- Emerging Markets: New markets in Asia and other regions offer potential growth opportunities.
- Product Diversification: Expanding product lines to include new materials and styles can attract a broader audience.
Threats:
- Economic Uncertainty: Global economic conditions can impact consumer spending on luxury goods.
- Competition: Herend faces competition from other high-end porcelain manufacturers and luxury brands.
- Supply Chain Disruptions: Global supply chain disruptions can impact production and delivery.
- Changing Consumer Preferences: Younger generations may not be as interested in traditional porcelain.
4. Recommendations
To navigate these challenges and capitalize on opportunities, Herend should implement the following strategic initiatives:
1. Digital Transformation:
- Enhance Online Presence: Develop a robust e-commerce platform with a user-friendly interface, high-quality product photography, and secure payment options.
- Leverage Social Media: Create engaging content across various social media platforms to reach new audiences and build brand awareness.
- Implement Digital Marketing Strategies: Utilize targeted online advertising, search engine optimization (SEO), and content marketing to drive traffic to the website and increase sales.
- Embrace Digital Tools: Implement customer relationship management (CRM) systems to track customer interactions and personalize marketing efforts.
2. Product Diversification:
- Expand Product Lines: Introduce new product categories, such as home decor, tableware, and giftware, to appeal to a wider audience.
- Explore New Materials: Experiment with different materials, such as bone china or stoneware, to offer a wider range of price points and styles.
- Collaborate with Designers: Partner with contemporary designers to create limited-edition collections and attract younger consumers.
- Develop Sustainable Products: Explore sustainable materials and production processes to cater to environmentally conscious consumers.
3. Global Expansion:
- Target Emerging Markets: Focus on expanding into high-growth markets, such as China, India, and Southeast Asia, where demand for luxury goods is increasing.
- Establish Strategic Partnerships: Collaborate with local distributors and retailers to establish a strong presence in new markets.
- Adapt Products to Local Tastes: Consider adapting product designs and packaging to cater to specific cultural preferences.
- Explore Online Marketplaces: Utilize online marketplaces to reach consumers in different countries and regions.
4. Strengthening Brand Identity:
- Enhance Brand Storytelling: Develop compelling narratives that highlight Herend's history, craftsmanship, and cultural significance.
- Engage with Influencers: Partner with social media influencers and tastemakers to promote Herend's products and reach new audiences.
- Create Exclusive Experiences: Offer exclusive events, workshops, and behind-the-scenes tours to connect with customers and build brand loyalty.
- Develop Brand Ambassadors: Partner with celebrities or prominent individuals to promote Herend's brand image.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Herend's strengths, weaknesses, opportunities, and threats. They are also consistent with the company's mission to preserve its heritage while adapting to changing market dynamics.
- Core Competencies and Consistency with Mission: The recommendations leverage Herend's core competencies in craftsmanship and brand heritage while embracing innovation and digital transformation.
- External Customers and Internal Clients: The focus on digital marketing, product diversification, and global expansion aims to attract new customers and cater to evolving consumer preferences.
- Competitors: The recommendations aim to differentiate Herend from competitors by leveraging its unique brand identity and focusing on niche markets.
- Attractiveness: The recommendations are expected to generate positive returns on investment (ROI) through increased sales, improved brand awareness, and expanded market share.
6. Conclusion
By implementing these strategic initiatives, Herend Porcelain Manufactory can navigate the post-COVID-19 world, achieve sustainable growth, and ensure its long-term success. The company's rich heritage and exceptional craftsmanship, combined with a proactive approach to digital transformation, product diversification, and global expansion, will position it for continued success in the competitive luxury market.
7. Discussion
Other alternatives not selected include:
- Merging with another company: This could provide access to new markets and resources but could also compromise Herend's brand identity.
- Focusing solely on domestic market: This would limit growth potential and expose Herend to economic fluctuations in Hungary.
- Continuing with current strategy: This would likely lead to declining sales and market share in the long run.
The recommendations are based on the assumption that Herend's brand heritage and craftsmanship remain valuable to consumers. The risk associated with these recommendations is that they may not be successful in attracting new customers or expanding into new markets.
8. Next Steps
To implement these recommendations, Herend should:
- Develop a detailed action plan: Outline specific tasks, timelines, and budget allocations for each initiative.
- Establish a dedicated team: Assemble a cross-functional team to oversee the implementation of the strategy.
- Monitor progress and adjust as needed: Regularly evaluate the effectiveness of the initiatives and make adjustments as necessary.
By taking these steps, Herend can ensure that its strategic initiatives are implemented effectively and that the company is positioned for continued success in the years to come.
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Case Description
Herend Porcelain Manufactory Ltd. (Herend) was an almost 200-year-old porcelain manufactory located in western Hungary. The company had weathered multiple social and political changes, world wars, and hardships and had variably experienced prosperity, international recognition, and, on one occasion, bankruptcy. However, under the current chief executive officer, Herend had become a stable and profitable organization. Then, in March 2020, the COVID-19 pandemic created unprecedented challenges. Government-mandated lockdowns-an attempt to contain the spread of COVID-19-restricted consumers from shopping in person at Herend's shops and diminished the use of porcelain in hospitality and gastronomy where the porcelain sets would be used. The health safety of employees, production disruptions, and decline in orders were other concerns. How could Herend prepare for and survive this extraordinary challenge?
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