Benetton Study Case Structure And Content 3l2u16

BENETTON

Famous for its shocking ments, Benetton was founded in 1965 by Luciano, Giuliana, Gilberto, and Carlo Benetton. Its core business is fashion apparel: the Group has a strong Italian character whose style, quality and ion are clearly seen in its brands, United Colors of Benetton, Undercolors of Benetton, Sisley and Playlife. Initially the family sold coloured sweaters door-to-door in Treviso, Italy. Over time, a regional network of family, friends, and agents set up a closely monitored set of distinctive retail outlets. Over a 15year period, Benetton built up 300 d but independently owned outlets in Italy and a factory with new methods to dye and condition wool. The company was not directly involved in the retail outlets, which received high-quality products at low costs. Part of the manufacturing savings was realized by outsourcing to neighbouring subcontractors. Benetton has kept this loose network of independent production subcontractors and distribution agents but has now built up to a global network of more than 6,000 retail stores in 120 countries, generating an annual turnover of over 2 billion euro. Only a small fraction of these are flagship stores owned by the group. The great majority of its retail stores are operated by independent entrepreneurs. About 90 per cent of production still takes place in Europe, mainly in Italy, and the company is still 69.35 per cent owned by the Benetton family. Yet the wool it uses to produce its clothing line is now imported from foreign countries. The parent company raises sheep in 900,000 hectares of land in Argentina. Benetton is one of those successful global companies that succeeded partly because their production and design concept was built on a strong home base. It expanded the marketing end of its business through closely monitored (but not owned) independent stores, which were able to use the Benetton brand name and distinctive colours and were ed by clever international advertising. Benetton chooses a single, universal message that is valid for all consumers: wherever they may live, whatever the colour of their skin and whichever language they may speak1. Benetton does not its clothes directly. Rather, its ads target a “lifestyle”. The “United Colors of Benetton” ads are designed for a homogeneous global consumer interested in fast cars and a fast lifestyle. Benetton goes in for cutting-edge advertising that grabs public attention. This creates an image of new-age awareness, as the company’s advertising ads have featured AIDS, capital punishment, inter-racial relations, high art, and “attitude”. The firm also sponsors a top Formula 1 team as well as teams in rugby, basketball, and volleyball, all of which contributes to the success of its brand name. Fabrica, Benetton’s Communication Research Center just outside Treviso, is a mixture of philanthropy and advertising. The centre sponsors 50 artists for a year and exhibits their work and publishes it in Colors, the company’s artfocused magazine. How well this plays out globally is uncertain. For example, Benetton had 700 retail stores in the United States in 1988, but only 150 by 1995. Is this because Benetton has too European an image to succeed in Middle America? How can an Italian family firm understand the American lifestyle from its European bases? Indeed, 73 per cent of Benetton’s revenue originates in the Euro area, with another 8 per cent derived from Asia and only 6 per cent from the Americas. The remaining 13 per cent originates in other regions. The firm is now looking to expand into emerging markets where potential for growth among the growing middle class is greatest. 1

http://www.benettongroup.com/group/profile/glance

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Discussion points: 1. Choose three emerging markets and, after applying the internationalization grid (see, in the Annex 1, one theoretical example of Internationalization Grid), decide the best market for Benetton internationalization. Justify your choice. 2. Make a SWOT analysis (see the Annex 2) for Benetton entering the above selected market and propose the best strategy.

Retrieved from: Rugman, Alan M., Collinson, S., 2006. International Business, 4th Edition. Financial Times: Prentice Hall Sources: Adapted from: Benetton SpA: Industrial Fashion (A), Harvard Business School Case No. 9-685-614, Benetton (B), Harvard Business School Case No. 9-685-020: INSEAD-CEDEP Case No. 01/97-4520, 1996; David Still it., Benetton: Italy’s Smart Operator, Corporate Finance, June 1993; Benetton’s Network, Ivey Business Quarterly, 1997; Benetton, Annual Report, 2003; Peter Crush, CSR: Diversity Takes Central Stage, PR Week, April 18, 2005; Benetton: Indigenes rechazan oferta, BBC.co.uk., November 10, 2005; and www.benetton.com.

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Annex 1: INTERNATIONALIZATION GRID

The variables for analysing and comparing the 5 countries in the above presented theoretical example are divided into three main categories: I. Environment main factors, II. Factors regarding the profitability of the operation, and III. Factors regarding the risk of the operation. The variables from the first category are just graded with Acceptable (A) or Unacceptable (U) mark, and if one country is considered to be unacceptable for one environment main factor, then it is automatically removed. Regarding the factors from the second and the third categories, these are weighted according to their relative importance and are graded – using the pre-established intervals – for each country; the difference resides in the grading method. The most favourable result is achieved when the profitability of the operation is the highest and the risk is the lowest. Taking into the aggregated results for this example, the most suitable country for the business internationalization is the second one, because it has the highest profitability of the operation (18) and the lowest associated risk (3). Important note! For the Internationalization Grid that you are going to propose and apply for the Benetton Case, you may also use other variables (that you consider to be more relevant) for the three categories.

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Annex 2: SWOT ANALYSIS

The SWOT analysis: The name of this method comes from the abbreviation of the four investigated elements: strong points of the company (Strengths), weak points of the company (Weaknesses), opportunities from the external environment (Opportunities) and threats of the external environment (Threats). The SWOT analysis is designed to put into balance the strong and weak points of the company versus the opportunities and threats from the external environment, respectively the area or country considered for internationalization, in order to identify the most suitable strategy. After conducting this analysis, an efficient strategy should valorise the strengths of the company, take advantage of the opportunities of the external environment, avoid the weaknesses of the company and neutralize the threats of the external environment. The SWOT analysis could be graphically represented as in the above matrix. According to this matrix, four types of strategies could be identified and used, according to the specific context of the company: - Maxi-Maxi – maximizing the strengths of the company and also maximizing the opportunities in the external environment; - Maxi-Mini – maximizing the strengths of the company and minimizing the threats in the external environment; - Mini-Maxi – minimizing the weaknesses of the company and maximizing the opportunities in the external environment; - Mini-Mini – minimizing the weaknesses of the company and also minimizing the threats in the external environment.

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