Company Background
The company was equally managed by 3 brothers, i.e. Luciano, Gilbetro, and Carlo Benetton along
with their sister. It was a part of INVEP group and particularly deals in woollen sweaters, cotton T-
shirts and jeans.
Benetton was largest consumer of wool (9 million pounds in 1982). They started their business from
very small where the sister, Giuliana, use to sew sweaters and on her own she created sweaters that
were more colourful and fashionable as compared to local textile arcticians. Soon the violet pullover
made by her made its success in the market.
Benetton initially sold their product through departmental stores and by 1968, as the product line
expanded, they opened their first shop at Belluno. By 1975 they franchised around 200 shops
throughout Italy. Today it has over 6000 retail stores in 120 countries around the world and produces
150 million garments a year.
Manufacturing
The basic process for producing knitted over wear garments from wool and cotton involved: Spinning
or purchasing and dying yarn; Warehousing spun material in finished or unfinished form; Immersion
in Caustic Soda to produce a shiner material; Waxing to improve gliding properties; Removing
residual oil.
Once the garment was manufactured by machines, that produced parts in best shapes, the next stage
involved assembly, which involved joining the basic part of each garment. After this finishing
operations included making buttonholes, sewing buttons, ironing and final inspection.
Putting Fashion on an Industrial Level
Benetton has been known for innovation in the production of knitted over wear. They developed a
crude process of rudimentary machines with woollen arms that battered the raw knitwear in water and
this was 10 years before the development of machinery for making hard and rough wool-soft.
The most significant development in Benetton’s operations occurred in 1972, when the company
began dyeing assembled garments rather than yarn. This method or capacity allowed more popular
items in the company’s line to be produced in response to requests for changes in preseason orders
from agents serving retail outlets.
They kept same strategy all along to put fashion on an industrial level, whereas most of the Italian
fashion is still on an artisian level, as said by Luciano Benetton.
Marketing
The marketing strategy had been based on the development of fashionable but casual knitted garments
featuring bright colours which was in complete contrast with what was then available in European
stores.
Product Development
The company has no plans to vary the design philosophy behind its product line, as they felt youth and
free-spending customers will always be attracted to brilliant reds and variety of pastels.
The number of product line had, however, been expanded in recent years in order to retail under
different labels and store names. For example, “012 Benetton” line was for children wear; “Jeans
West” for Benetton knitwear and trousers targeted to youth; “My Market” for highly fashioned
trousers and knitwear; “Sisley” directed to sophisticated men, etc.
For each trade name, the appropriate style of furniture and equipment, colour of lighting, type of music
to attract the target audience.
Pricing
Median price of Benetton garments was $20. Price ranged from under $10 for a pair of socks to $120
for a high-fashioned denim jacket. There were different options but the common were that the price
was considered lower than those of competitors for the quality product.
Promotion
For promotional effort, Benetton relied on location and bright, inventing store appearance. Window
displays often were spare and allowed a clear view of the open shelves of colourful merchandise. In
addition they advertised on European Television and in the press and sponsored sports events.
Objectives of Analysis
To identify if Benetton is a multinational enterprise.
Point out the country specific factors that have boosted Benetton’s success.
To identify Benetton’s Firm specific advantage.
SWOT Analysis of Benetton.
How well do the retail operations, physical distribution operation and factory & suppliers
interconnecting sets of operations fit together?
Benetton: A Multinational Enterprise
If we understood the case it clearly states that Benetton is a multinational enterprise because its
activities involves a lot of countries. As described in the summary they have build up the network of
more than 6000 retail stores in 120 countries.
All their affiliates have a common strategy and can use the Benetton advertising from their
Communication Research Centre in Trevisco, “Fabrica”.
But if we have a close look, we can also argue that Benetton is in fact and International Enterprise
because all it does is export into other countries, and doesn’t actually have any working bases outside
of Italy.
Specific Factors that have boosted Benetton’s Success
Benetton is a Italian brand, so being a local brand that local residents will prefer the brand above any
other outside brands available in the market. Also, Italy is known for fashion so there is a stronger will
to buy these clothes.
Other than this Benetton’s CRC (Communication Research Centre) and all its other Headquarters are
based in Italy. Also, Argentina’s space (9000 Hectors) for the ship to be raised.
Benetton’s Firm specific advantage
From the beginning, Benetton’s marketing strategy had been based on the development of fashionable
but casual knitted garments featuring bright colours, in contrast with much of what was then available
in European stores. Also, the company was a family owned firm of which production and design
concept was build on a strong “home base”.
Benetton could potentially capitalize on the strong image of Italian design and the growing popularity
of Italian fashion in the United States. And its nontraditional (for the United States) approach to
retailing might enable it to find good store locations that competitors couldn’t utilize.
Starting at the retail level, stores carrying Benetton products were designed with limited storage space
for back-up stocks. Upon arrival at the store, merchandise usually was checked and placed directly on
the display shelves. This required that shipments to stores be planned and executed according to a
carefully prepared schedule.
Retail Operations, Physical Distribution Operation and Factory & Suppliers
For decades Benetton has consistently demonstrated that getting the right mix of the 3 supply chain
functions is critical if market success is to be achieved. Its franchise network has proved to be adept at
communicating critical market trend information via its EDI system to HQ who alerts the
manufacturing side to the real-time needs of the market. Use of sophisticated CAD/ CAM technology
has enabled Benetton to gain the upper hand on its competitors by being quick and flexible at this
point in the production process.
Benetton has successfully exploited I.T. advantages from an early stage. Its Geis global integrated
network has enabled agents to forward customer order details to the 500 sub-contractors based in the
Veneto heartland where the company manufacturing capability has historically been located. Within
daysthey are able to receive multiple orders from various country agents and rapidly set in motion the
manufacturing work by fully exploiting the vast network of sub-contracted labour. The system is also
connected to Benetton manufacturing plants worldwide.
Benetton is famous for using „postponement‟ tactics at the actual sequencing point of the production
process, whereby dying of the garments is not completed until the agent network have provided market
intelligence on what particular products are in demand in which locations. Tang points out the
advantages of postponement when declaring that it has “proven to be a cost-effective mass
customisation tool to handle regular fluctuations under normal circumstances”.
Camuffo has demonstrated that in recent years Benetton has successfully risen to a more challenging
market environment by opting for a strategy that involved increasing its overall ownership and control
of supply chain assets and only outsourcing those areas where the company was not in a position to
achieve economies of scale. He points to the paradox of tighter centralized control over the whole
supply chain, yet at the same time being able to achieve sufficient flexibility to rise to market
challenges. There can be no doubt that Benetton prefers quite rigid control over processes, despite the
tendency to opt for sub-contracting relationships with suppliers.
It remains to be seen whether or not Benetton can sustain its competitive edge, particularly in the
emerging markets of Asia, where much of its energy is now focused. The early signs are good;
however, it has been shown that competitors who are able to display more „agile‟ working practices
can edge out established brands in a very short space of time.
