Strategic Management and Sustainability in Luxury Companies - Literature review Example

Strategic Management and Sustainability in Luxury Companies Sustainability has been one of the most prevalent discussion swithin the contemporary society, traversing across virtually every economic sphere and discipline. The issue of sustainability is considered to be an integral element of strategic management, meaning that its importance to different sectors cannot be overlooked. Companies in the modern environment are deemed sustainable if their performance in financial, social and environmental elements are mutually reinforcing. The luxury industry is not exempt from the widespread adoption of sustainability. Carcano’s article titled “Strategic Management and Sustainability in Luxury Companies: The IWC Case” provides insight into sustainability in the said industry with particular interest in International Watch Co. (IWC). The latter is a luxury Swiss watch producer located in Schaffhausen, Switzerland. The principal assertion that can be derived from the article is that, luxury companies can adopt well-formulated and implemented sustainability strategies in order to bolster brand value, while enhancing competitiveness. Luxury makes up one of the most ambiguous concepts in business, since it varies on the basis of regional, economic or cultural settings. Just like Carcano (2013) suggests, therefore, the genuine aspects of authentic luxury depend on an establishment’s search for innovation, refinement, exceptional craftsmanship, and overall excellence in every production component. The author goes on to examine why sustainable luxury is a crucial consideration not only in the contemporary society, but also in the luxury industry. Although not mentioned, one of the primary justifications for adoption of sustainability in the luxury sector lies in the fact that, this concept is relatively new and makes it possible to look at operation aspects from a novel perspective. Incorporation of sustainability in luxury would, consequently, aid in development of a new operation paradigm that better resonates with customers, both current and prospective. According to Carcano (2013) luxury has constantly been perceived as an important social determinant. This, however, is increasingly changing, as people cease to focus excessively on extravagance and exclusiveness. Instead, contemporary luxury good customers are seeking channels to express their inherent values and societal commitment. By highlighting this trend, the author effectively shows why sustainable luxury is crucial to any luxury company that aspires to enhance and bolster its brand image in modern society. The assertion also shows why sustainable luxury seems like a reversion of the old concept of luxury, where thought transcended the actual purchase, given the exceptional craft production, material beauty in a broad sense, and perhaps most importantly, the environmental and social implications of the luxury purchase. Carcano (2013) validates this shift in luxury considerations and trend by pointing out that, members of the public shy away from corporations which focus solely on profit maximization in the short-term. The public is progressively looking for corporations that strive to establish and maintain long-term benefits for stakeholders by playing a significant role in societal sustainability. The author correctly emphasizes that this is especially the case within the luxury market. This is because customers in this marketplace seek to purchase commodities based more on their symbolic value than their practicality. It is also imperative to take note of the fact that there is growing environmental awareness among customers, hence the propensity to care the effect of purchasing choices on the environment. In an industry where social commitments have conventionally focused on efforts of philanthropy, luxury is undoubtedly one of the sectors most poised for infusion of sustainability as a constitutional element of strategic management. This is a notion Carcano (2013) adequately supports, by indicating that the luxury sector has immense appreciation and knowledge of premium materials, production and sourcing ideas. The industry also operates at a relatively small scale compared to other industries. These attributes put the luxury sector at a suitable position to gain leadership in the race towards sustainable operation. In addition to providing feasible explanations for why luxury companies should embrace sustainability, the article shows actual measures and guidelines to which the corporations can adhere, in order to effectively integrate the sustainable or shared value approach to in diverse operation strategies. A principal consideration put forth by Carcano (2013) is the design and implementation of competitive corporate strategies. The other recommendation revolves around enhancing a company’s ability to effectively communicate the intended symbolic meaning to a broad customer base comprising of current and potential customers, as well as, all other stakeholders. These strategies, Carcano (2013) indicates, would pave way for the respective luxury business to take competitors’ symbolic capital shares, effectively gaining a competitive edge. For higher specificity, the author explores actual sustainability considerations in detail. He is keen to note that, luxury corporations must be primarily concerned about society’s common good, and allot resources to the same cause. A proposed strategy of achieving this is through affiliation to relevant regulatory organizations like the Responsible Jewelry Council (RJC) for luxury jewelry companies or, at a universal level, the United Nations Global Compact (UNGC). Alternatively, luxury corporations can establish dynamic partnerships with associations, local authorities, and business groups committed to sustainability. These are feasible suggestions, since such regulatory bodies have rules which a luxury company is required to comply with. Additionally, such establishments would undoubtedly put checks and balances in place, to ensure that a company does not exceedingly deviate from environmental or socio-cultural interests of a given society. Given the fact that most luxury business are characterized by different supply and value chains, whose impact on society also varies, working together would mean formulating strategies capable of identifying the common challenges and implementing comprehensive mitigation measures. This idea further reinforces Carcano’s (2013) proposal of group affiliation, since it is the only way that luxury companies can identify and resolve collective problems impeding effective sustainability. Another sustainability consideration proposed by Carcano (2013) involves strategic employee management. Through strategic human resource management, the author insists that a luxury company should effectively manage employees’ diversity, labour rights, health and safety, training, as well as, the compensation and benefits package. This suggestion is founded upon the widespread knowledge that human capital makes up one of the primary drivers of creating brand value within a luxury marketplace. Carcano (2013) is right to place emphasis on the need to train employees and enhance their skills. This is because the luxury industry largely relies on the excellent expertise of craftsmen to produce high quality products that represent intrinsic values of luxury good buyers. The author also notes that the element of governance cannot be overlooked in a luxury corporation seeking to embrace sustainability. This is a valid idea, since leaders’ values and ethics form a firm foundation for sustainability strategy formulation and enhancement. Sustainable leadership, as described in the article, constitutes policy and procedure disclosure, governing board diversity and autonomy, and building a culture characterized by ethics compliance, coupled with principled leadership. In addition to recommending approaches to sustainability, Carcano’s (2013) article shows their applicability in practical situations, by exploring strategies used in IWC. For example, the company strives to distinguish itself from other luxury watch manufacturers by capitalizing on exceptional craftsmanship, unique product aesthetics and advanced technical innovation. In addition, the renowned luxury corporation has strong partnerships with diverse stakeholders, which allows it to properly convey symbolic value to society. The company also supports several charitable organizations, as part of its corporate social responsibility (CSR) and shared value strategy. For example, the Charles Darwin Foundation (CDF) for Galapagos Islands is one of the beneficiaries of IWC’s CSR contributions. The company also upholds environmental responsibility, through diverse protection approaches. For example, IWC uses renewable energy in the course of production, thus reducing the need for fossil fuel usage. The article clearly shows that luxury companies must revise their business models, in order to attain sustainability and make the concept an integral component of strategic management. Evidently, such success would require utilization of an approach that not only focuses on profits or the monetary concerns, but also the people and surrounding environments. Social and ecological performance considerations would pave way for a positive brand image and improved financial performance in the long-run. The article would, however, have delved further into the specifics necessary for successfully integration of sustainability into a luxury company’s operations. For example, it would be important to learn that alignment of all stakeholders’ interest, ranging from owners and employees, to value chain partners would foster sustainability. Specific employee empowerment strategies like provision of favorable incentives and high-quality training also play a significant role in promoting sustainability. The article posits that charity work makes a large component of IWC’s sustainability approach. However, rather than focusing on works of charity, a luxury company should strive to ensure that sustainability is a core culture, mission and strategy component. This would translate to creation of an eco-driven business model, as opposed to one drive by management’s ego. The latter would simply be a form of publicity ploy to lure customers. Other sustainability aspects have not been examined. For example, it is important for luxury companies to realize that sustainability constitutes a continuous learning process that encompasses attributes such as knowledge sharing, generosity, humility and kindness. This means that the corporations should make concerted efforts to share best practices, while establishing positive externalities that can be used as sustainability models by other establishments. With progressive and consistent improvement of sustainability credentials, luxury companies will wield the ability to bolster customer loyalty, while increasingly expanding the customer base. Overall, Carcano’s (2013) is enlightening and provides crucial information on the subject of sustainability within the luxury sector. The benefits of sustainability, such as improved cost efficacy, enhancement of customer loyalty, and improved financial performance in the long-term can also be discerned from the article. It is, therefore, highly advisable for different players in the luxury industry to incorporate sustainable approaches to business, in their respective strategic management procedures. These establishments must also not undermine the importance of working together with committed regulatory organizations or teams. Such measures would go a long way towards creating and maintaining a culture of sustainability in the long-term to the luxury corporation’s advantage. Reference Carcano, L. (2013). Strategic Management and Sustainability in Luxury Companies: The IWC Case. Journal of Corporate Citizenship, 52, 36-54. Read More