Case Study: United Colors of Benetton
1. Benetton’s business in Italy is reaching market maturity.
Benetton’s revenues (billings) from Italy had levelled out due to market saturation, increasing competition, growing amount of imported merchandise and a stagnant economy. It should be noted that majority of the Company’s revenue is generated from Italy. In fact, out of $78 million sales generated by the Company in 1978, 98% of which were from Italy. Time is of the essence, the Management should immediately address this problem otherwise Benetton’s future viability and success will be compromised.
2. Objectives to solve the problem ( one sentence each)
a. Benetton should undertake to maintain its current market position and/or secure its current market share in the Italian market through product and system wide innovations as well as aggressive marketing promotions.
b. Benetton had already established a good reputation in the European market; hence it should undertake to increase its market penetration and work on consolidating the said market.
c. Benetton should capitalize on the growing popularity of Italian Fashion by developing other markets like USA and Japan with ultimate goal of becoming the market leader on a global scale.
3. SWOT Analysis
Benetton dominated the Italian market and had established a good image and reputation in the European Market.
Benetton Group is a world leader in the design, manufacture and marketing of distinctive casual apparel. They are known for their good quality fabric and designs. Their clothes have international style that combines energy, colour and practicality. Branding and marketing campaigns have always generated to a lot of visibility.
Benetton, had over the years been an innovator in the production of knitted overwear products. For example, 10 years before the development of machinery for making hard and rough wool soft and pliable, Luciano Benetton had improved on a crude process that he had observed in Scotland for achieving this effect. In 1972, the Company began dyeing assembled garments rather than yarn. Benetton was the only major manufacturer of woollen garments that dyed them from gray stock. The garment-dyeing capability allowed more popular items in Benetton’s line to be immediately produced in response to request for changes in preseason orders from retail outlets. Benetton had put fashion on an industrial level while the rest of the Italian fashion is still on an artisan level. Benetton’s commitment to innovations will allow the company to immediately response to the fast changing environment and future shift in customer taste. Efficient/stable supply and effective distribution network
Benetton had relied heavily on subcontractors and groupers for supply and manufacturing operations. Despite the innovations that lead to establishment of the Company’s own factories, subcontractors and groupers still performed about 40% of the Company’s knitting of wool, 60% of the work of assembling garments, and 20% of the finishing operations. The Benetton’s subcontracting network had allowed the Company a flexible production capacity that absorbed most the fluctuations in demand.
Benetton’s distributions strategy involves a large network of independent franchisees and resellers who invest capital on their own retail stores. These Independent Retailers in turns buys merchandise exclusively from Benetton and sell directly to retail customers. Through this unique distribution network, Benetton was able to reach more markets at low cost.
Majority of merchandise are manufactured in Italy.
Benetton’s retailing strategy is anchored on good price-quality combination. Since all products of Benetton are manufactured in Italy the price of Benetton could not compete with an Italian competitor whose products are outsource from the Far East wherein labor cost is relatively cheaper than...
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