Benetton Case Study Essay Example For Students

Benetton Case Study Essay CASE STUDY: Building The Benetton System, Werner Ketelhoehn. Benetton, having been around since 1965 has had some massive changes and events to respond to and so I feel that a timeline of the events since the company was founded to be of significant use. 1960s; Development of Lucianos competitive advantage (discussed later). 1965 -Benetton was founded and the first factory was opened in Ponzano. 1966 -Widening of the existing company-subcontractor relationship. 1968 -First Italian store opened in Belluno. 1969 -First foreign shop opened in Paris. 1970s; The Benetton Group expansion to represent a family of brands which include 012, Sisley and Jeans West. 1970 -Hasten expansion by building upon the partnership system developed in Italy. 1972 -Revolutionary production system concerning garment dyeing (discussed later). 1975 -Benetton logo becomes a well known retail symbol and their product range is expanded to include the 30+ age group. 1980s; The growth strategy of Benetton was based around the acquisition of subcontractors and raw material suppliers. 1983 -Advertising and sponsorship campaign in preparation for the global launch. 1985 -Marketing of childrens stationary with the Benetton logo on the product. 1986 -Marketing of Benetton watches. 1988 -Franchisees can now select from a choice of 12 shop layouts. Benetton now have 5000 shops around the world and there are plans being made to make Rocky Mount (NC) the distribution facility for the US market. 1989 -Benetton have a total of 80 agents (internally known as Centurioni). One thing became apparent whilst reading through the case which is the number of things that Benetton do which are seen to be unique to themselves. Take first and foremost, right from the outset when Guiliana began to use her knitting talents producing bold, bright coloured sweaters that were revolutionary at that time. The quote I should refer you to here is the one from page 2 of the case; what Luciano and Guiliana have invented was a pullover for a season or a year, not a traditional pullover for life. Even before officially forming the company, Benetton was going against the norm of the industry and this has carried right through until present days where the United Colors of Benetton slogan has landed them in some rather warm water with accusations of tastelessness to name but one category. Further major areas that Benetton have appeared to reap the rewards in that are unique to Benetton, are firstly technological uptake, and secondly the partnership systems in place with the Centurioni and the shop owners. I shall return to these areas later under a separate heading as I believe that these innovations were of paramount importance to the success of the Benetton Empire. In the early 1960s, Luciano developed a significant competitive advantage by undertaking a number of slightly different ideas; selling only through specialised knitwear stores and selling his products at a 10% discount if the retailers paid cash on delivery. Furthermore, he sort to keep his costs to a minimum (because of the difficulties associated with borrowing) by establishing subcontractor agreements (revisited later) and up-taking employee suggestions, note the example on page three concerning the buying and converting of obsolete machines. The next item unique to the Benetton system is the discovery that, if a second Benetton store opened across the street from another, sales for both expanded. This, it was believed, was due to the existence of intra-Benetton competition, which was created by the groupings of stores in one location. Agents, as reward for their commitment and motivation were earning a tidy sum but were greatly encouraged to reinvest the profits for the benefit of Benetton and for the agents. The agents note themselves that the rise to the top where you physically own shops is a quick rise. On page four of the case I refer you to the quote fourth from bottom which says that basically from September to July an agent had gone from not owning a shop to having five shops of his own. Martin Luther King Jr And Malcolm X EssayDirections of Development at Benetton. The Italian market is now saturated and the Benetton empire is not content, they have no choice if they want to develop, they must go further afield onto the rest of Europe, the Americas and indeed the world. Benetton in order that they developed, chose to diversify into new markets and explore new areas in existing ones. With this strategy in mind Benetton undertook both related and unrelated diversification. The distinction between the two types of diversification above is simply that related diversification refers to development within the confines of their existing markets and unrelated is the opposite. Examples of such diversifications can be seen with firstly, the introduction of Nordica or Killerloop which arguably can be viewed as an expansion of their existing market. Although these markets could be seen as more specialist and sports orientated, I still believe that there is a great deal of overlap in this and the fashion market. As Luciano says on page 3 of the case We wanted to compete with department stores in sportswear. Looking at the diversification into areas such as merchant banking, this is far beyond their existing markets and so is an example of unrelated diversificat ion. Synergy is a common reason for related and unrelated diversification and is said to occur when two or more complementary activities, do so to the extent that their combined effect is greater than the sum of the two parts. Benetton claimed that there were synergies to be exploited from their diversification following the saturation of the Italian market. Benetton wanted to find new frontiers in old markets and to diversify into completely new markets. Benettons acquisition of supermarkets and hypermarkets meant that their synergies came from the fact that there were consumers who would purchase from all three. Everything that has been covered in the analysis from technological uptake to the more theoretical notions of Synergy has all contributed to the success of the Benetton Empire across the globe. Coming back to the unique idea in the initial stages of my analysis, I think in summary the whole Benetton system is the key factor of its success. The unique entrepreneurial system that is so different from the type in place at The Body Shop, with Anita Rod*censored*, created the drive and commitment of the non royalty paying entrepreneurs. Not the stereotypical franchise, a great deal of time and effort went into the selection process for the entrepreneurs one of the Benetton success factors. Bibliography: