benetton group case study

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As benetton group restructures yet again, andrea incontri exiting as creative director.

MILAN – After two years, Andrea Incontri and Benetton Group are parting ways, marking the latest change at the Italian company.

In a statement issued Friday evening Milan time, Benetton said the decision was made in mutual agreement as “part of the rearrangement of the organization that is taking place, aimed at defining the team of managers that will flank” newly appointed chief executive officer Claudio Sforza in this “new phase of rationalization and relaunch of the company.”

Benetton Group: Sharing bespoke recommendations with AI and cloud-based analytics

About Benetton

Benetton Group is one of the best-known fashion companies in the world, operating in key global markets with a network of 4,000 stores. With a continuing commitment to the environment, human dignity, and societal transformation, Benetton Group plans for the future and lives in the present.

Tell us your challenge. We're here to help.

Benetton group uses bigquery and discovery ai solutions to build a data-driven omnichannel experience that can understand customers' preferences in real time, personalize recommendations, and improve conversion rates., google cloud results.

Personalizes recommendations and responds in real time to customer behavior and choices with Recommendations AI
Increases conversion rate by 6 times when the customer interacts with the panels generated by Recommendations AI
Reduces friction in the sales funnel and boosts sales by 7%
Increases customer engagement and time spent on the website by almost 3 times

Higher conversion rate with Recommendations AI

Whether we're dressing to impress or decompress, what we wear is an expression of who we are. It's big business too, with the global fashion industry worth around $1.5 trillion in 2022. Founded in 1965, Benetton Group has stood out from the crowd with its sense of style, bold use of color, and inclusive messaging. Today, the Group is one of the largest names in fashion, with around 4,000 stores across the world.

During the COVID-19 pandemic, when stores were shut, Benetton Group successfully digitized its shopping experience and, with the help of Google Cloud , built a marketing data lake to better understand its customers and their preferences.

"We wanted to build a tool that uses artificial intelligence to gain a better understanding of our customers' desires, learn from their browsing habits and provide them with personalized recommendations. Google Cloud was the platform that could deliver what we needed."

By early 2022, after the launch of its new omnichannel experience, the Group wanted to build on the information it had started to acquire and break new ground. In particular, Benetton Group wanted to improve the recommendation tool for online customers. Once again, it turned to Google Cloud.

"We wanted to build a tool that uses artificial intelligence to gain a better understanding of our customers' needs, learn from their browsing habits and provide them with personalized recommendations," says Antonio Patrissi, Chief Digital Officer, Benetton Group. "Google Cloud was the only platform on the market that could deliver what we needed."

Harnessing the power of AI and cloud analytics

Benetton Group's existing content management solution had a built-in recommendation tool, but the company wanted something more sophisticated. With a cloud-based platform, Benetton Group was keen to use cutting-edge analytics and AI to capture detailed insights on shopping patterns, how stores performed in a multichannel environment, and how to localize recommendations for a global customer base.

Benetton Group began the project by adopting a multi-site approach and grouping different countries by language type. This helped to create customized recommendation models based on the specifics of each user.

"Recommendations AI is at the heart of real-time recommendations made to users on digital channels. It makes it possible to import both product information and customer behaviors on the data platform."

The Group took between 90 to 120 days of data for each country from Google Analytics and BigQuery and imported it into Recommendations AI . "Recommendations AI is at the heart of real-time recommendations made to users on digital channels," says Patrissi. "It makes it possible to import both product and customer information on the data platform."

Personalized recommendations, low-friction user experience

After running a successful proof of concept with one model trained in Recommendations AI, the Group rolled out its new solution within three months. Benetton Group trained its models to show recommendations in various context-specific sections of the web, such as "Frequently Bought Together" on the product detail pages or "Recommended for you" and "Others you may like" on the checkout page.

"With Google Cloud, we built a recommendation tool that helps us personalize the shopping experience for each customer," says Patrissi. "It dynamically adapts in real time, improving engagement and driving sales."

"With Google Cloud, we built a recommendation tool that helps us personalize the shopping experience for each customer. It dynamically adapts to their behavior, improving engagement and driving sales."

Benetton Group also embarked on an ambitious redesign of its user experience, leveraging the analysis of its customer preferences and integrating its new recommendation tool. "We wanted to focus customers on the recommendations panel, increase time on the site, and reduce friction in the sales funnel," explains Patrissi.

Targeting the home page, product detail pages, and shopping cart, Benetton Group A/B tested a range of new changes before finding the right design. Following the redesign, the company found that users who clicked on the recommendations panel had 6 times the conversion rate of users who didn't. Those sales were also higher by 7% on average than the sales that hadn't come through the recommendations panel. Customers who engaged with the panel also stayed on the site almost 3 times longer than those who didn't.

Having rolled out the redesigned user experience, including the release of Recommendations AI panels across its top five markets, Benetton Group is now working to extend it to the rest of its territories. The Group is also working to improve its recommendations tool by adding automation for even more responsive engagement with customers.

"We were always looking for a data-driven solution that would support the business in achieving real commercial value through data collection and analysis," says Patrissi. "Google Cloud has been the perfect choice."

Benetton Supply Chain: Differentiating the brand

With the development of Model-T in 1908, Henry Ford launched the concept of ‘Lean’ thinking. The lean strategy sought to make all processes more efficient – productivity shot up, costs came down. Eventually, many companies followed suit, and lean became the term du jour.

Thereby, lean supply chains gained momentum in the marketplace. Lean supply chain management is all about reducing costs and waste. This method is focused on an efficient, streamlined operation.

While all this was witnessed, customers became spoiled with decreasing prices, and demand for new products increased at a rapid pace. Rapid speeds of information dissemination were responsible for this.

With the increase in competition and customer satisfaction, an agile supply chain emerged. Agile supply chain management prioritizes adaptability. It’s for organizations that want to quickly adapt to changing situations and customize their offerings. Typically, an agile supply system waits to see what the market demand is before finishing with its production.

The most common products that qualify for agility are fashionable clothes and electronics. In short, the products that are sold for hedonic value than their functional value. Now, in today’s global marketplace, standardization is diminishing each passing day. Markets are transitioning from mass markets into highly fragmented niche markets.

However, lean supply chains are not completely dead. It still exists today for functional products used for our basic needs (mostly food). Let us compare Lean and Agile supply chain:

Attributes	Lean Supply Chain	Agile Supply chain
Primary Goal	Supply demand at lowest cost (Cost efficiencies, volumes of scale)	Respond quickly to demand (Adaptability)
Products	Functional (Standardization)	Innovative (Hedonic value)
Manufacturing strategy	Lower costs due to standardization	Maintain flexibility to meet unexpected demand
Demand	Predictable	Highly Volatile
Product Variety	Low	High
Customer preferences	Low Cost	More assortments
Profit Margin
Forecast Approach	Calculative (Predictable)	Consultative
Supplier selection strategy	Based on Costs and Quality	Based on speed, flexibility, and quality

Benetton: A group with an exemplary supply chain strategy

The Italian apparel brand Benetton adopted a unique strategy in addressing the lean vs. agile confusion. It decided that it would not use colored fabric to make garments – rather it would make all the garments in one natural color and then dye all of them in the color that was selling.

The innovation of the Benetton Supply chain was called “tinto in capo” i.e. dye upon the garment. With this, it became possible for Benetton to produce large volumes of garments to exploit economies of scale at the manufacturing level.

And yet respond quickly to the color that the customer wanted to wear by quickly dyeing the garments in the preferred color (and thus in line with the agile concept). Benetton adopted the combination of Lean and Agile supply chain- Leagile Supply chain.

In today’s glossary of the supply chain, it is called moving the “decoupling point” toward the point of sale. Decoupling point is where product differentiation happens, or in other words where products take their final shape. Beyond this decoupling point, no changes can be made to the product.

The garments were then dyed in various colors upon receiving information from the actual point of sale as to what was selling. Because of this, forecasting error was reduced to a minimum.

The Leagile strategy positions the decoupling point in such a way that it best suits the need for responding to a volatile demand of the marketplace.

In the fashion business, it is challenging to predict style and color. Benetton’s supply chain realized that it could reduce inventories and become more responsive by reversing the dyeing-knitting sequence in a single-color garment.

Hence, Benetton stocked un-dyed garments before the beginning of the selling season and dyed them (with knitting- dyeing sequence) after more information on customer preference was available after the start of the selling season.

The Supply Chain Apparel Industry In General:

Historically, the manufacturing of apparel was all done in one facility. Traditionally, companies would purchase a specific fabric for their products, and processes like dyeing, cutting, stitching, and packaging would all take place under a single roof.

By the end of the 1970s, this chain had almost fully broken down. Individual processes in the apparel industry were found to be more effective when only one facility handled them effectively.

As a result, each subcontractor in the network chain would then focus on their manufacturing phase and collaborate with the other groups to move the products through the entire process.

Knit Now, Dye Later : Benetton’s unique supply chain idea

The process of Benetton starts with in-house garment design using CAD technology. The sophisticated software allows designers to create designs using literally 250-colour palette screens .

The data representing these designs can then be transferred to computer-controlled garment cutters and knitting machines. The manufacture of clothing is the perfect blend of high technology and high labor.

Benetton Supply chain takes advantage of the economies of scale inherent in volume manufacture. Later, subcontracting labor-intensive operations sheds the high-cost elements to small family-owned businesses with lower cost structures.

The usage of subcontractors has also allowed Benetton’s supply chain to accelerate its rapid expansion rate without the need for massive capital and even labour force investment .

Benetton describes itself as “vertically de-integrated”. In this, the process which adds maximum value is centralized and rest is decentralized.

Use of EDI technology

The Benetton supply chain’s key to effectiveness is the rapid flow of market intelligence between customer and factory. This is accomplished by maximizing EDI technology’s benefits, which facilitates the direct flow of communication between the agent networks representing the 5000 retail outlets.

Benetton manufacturers delay the dyeing process up until a clear understanding is reached on market requirements. This is possible because of EDI transmission. This eliminates the build-up of wasteful inventories, thereby reducing costs, slashing cycle times, and maximizes efficiencies.

The primary goal of the Benetton supply chain has always been customer satisfaction and how each functional area can be integrated to deliver that satisfaction. The competitive advantage for Benetton lies in its ability to integrate the components of its value chain effectively.

It has successfully designed a customer-oriented manufacturing process, one which is flexible and responsive to customer demand. Benetton’s supply chain has been spot-on in handling in-house competencies and outsourcing.

Benetton has linked 180 raw material suppliers, 450 manufacturers, and 6,000 retailers to deliver 60 million garments a year to satisfied customers in 83 countries. To the consumer, the Benetton product may be a fashionable “look,” but the real Benetton product is nothing less than integrated logistics.

Hello, this is Tanmay Gawas. I am an Engineer turned Management student in Marketing from N.L. Dalmia institute. I am obsessed with writing and run a blog by the name Epiphany of Thoughts on WordPress. . My goal is to make an impact in people’s lives through my writings and knowledge.

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A capitalist CSR? The case study of the Benetton Group

The concept of corporate social responsibility (CSR) has acquired worldwide relevance since 1970s, namely thanks to the revolution brought by the civil society. However, some scholars claim that nowadays the concept of CSR has been emptied of its social value and it is instead used as a means to create more economic profit. Thus, this research paper is an attempt to investigate whether the theory of a capitalist CSR can be applied to the case study of the Italian Benetton Group. To do this, two main activities of the BG ("shockvertising" and dialogue with civil society) will be studied through discourse analysis.

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Benetton Group

Harvard Case Studies

Benetton Group Case Study Solution & Analysis

In most courses studied at Harvard Business schools, students are provided with a case study. Major HBR cases concerns on a whole industry, a whole organization or some part of organization; profitable or non-profitable organizations. Student’s role is to analyze the case and diagnose the situation, identify the problem and then give appropriate recommendations and steps to be taken.

To make a detailed case analysis, student should follow these steps:

STEP 1: Reading Up Harvard Case Study Method Guide:

Case study method guide is provided to students which determine the aspects of problem needed to be considered while analyzing a case study. It is very important to have a thorough reading and understanding of guidelines provided. However, poor guide reading will lead to misunderstanding of case and failure of analyses. It is recommended to read guidelines before and after reading the case to understand what is asked and how the questions are to be answered. Therefore, in-depth understanding f case guidelines is very important.

Harvard Case Study Solutions

STEP 2: Reading The Benetton Group Harvard Case Study:

To have a complete understanding of the case, one should focus on case reading. It is said that case should be read two times. Initially, fast reading without taking notes and underlines should be done. Initial reading is to get a rough idea of what information is provided for the analyses. Then, a very careful reading should be done at second time reading of the case. This time, highlighting the important point and mark the necessary information provided in the case. In addition, the quantitative data in case, and its relations with other quantitative or qualitative variables should be given more importance. Also, manipulating different data and combining with other information available will give a new insight. However, all of the information provided is not reliable and relevant.

When having a fast reading, following points should be noted:

Nature of organization
Nature if industry in which organization operates.
External environment that is effecting organization
Problems being faced by management
Identification of communication strategies.
Any relevant strategy that can be added.
Control and out-of-control situations.

When reading the case for second time, following points should be considered:

Decisions needed to be made and the responsible Person to make decision.
Objectives of the organization and key players in this case.
The compatibility of objectives. if not, their reconciliations and necessary redefinition.
Sources and constraints of organization from meeting its objectives.

After reading the case and guidelines thoroughly, reader should go forward and start the analyses of the case.

STEP 3: Doing The Case Analysis Of Benetton Group:

To make an appropriate case analyses, firstly, reader should mark the important problems that are happening in the organization. There may be multiple problems that can be faced by any organization. Secondly, after identifying problems in the company, identify the most concerned and important problem that needed to be focused.

Firstly, the introduction is written. After having a clear idea of what is defined in the case, we deliver it to the reader. It is better to start the introduction from any historical or social context. The challenging diagnosis for Benetton Group and the management of information is needed to be provided. However, introduction should not be longer than 6-7 lines in a paragraph. As the most important objective is to convey the most important message for to the reader.

After introduction, problem statement is defined. In the problem statement, the company’s most important problem and constraints to solve these problems should be define clearly. However, the problem should be concisely define in no more than a paragraph. After defining the problems and constraints, analysis of the case study is begin.

STEP 4: SWOT Analysis of the Benetton Group HBR Case Solution:

SWOT analysis helps the business to identify its strengths and weaknesses, as well as understanding of opportunity that can be availed and the threat that the company is facing. SWOT for Benetton Group is a powerful tool of analysis as it provide a thought to uncover and exploit the opportunities that can be used to increase and enhance company’s operations. In addition, it also identifies the weaknesses of the organization that will help to be eliminated and manage the threats that would catch the attention of the management.

This strategy helps the company to make any strategy that would differentiate the company from competitors, so that the organization can compete successfully in the industry. The strengths and weaknesses are obtained from internal organization. Whereas, the opportunities and threats are generally related from external environment of organization. Moreover, it is also called Internal-External Analysis.

In the strengths, management should identify the following points exists in the organization:

Advantages of the organization
Activities of the company better than competitors.
Unique resources and low cost resources company have.
Activities and resources market sees as the company’s strength.
Unique selling proposition of the company.

WEAKNESSES:

Improvement that could be done.
Activities that can be avoided for Benetton Group.
Activities that can be determined as your weakness in the market.
Factors that can reduce the sales.
Competitor’s activities that can be seen as your weakness.

OPPORTUNITIES:

Good opportunities that can be spotted.
Interesting trends of industry.
Change in technology and market strategies
Government policy changes that is related to the company’s field
Changes in social patterns and lifestyles.
Local events.

Following points can be identified as a threat to company:

Company’s facing obstacles.
Activities of competitors.
Product and services quality standards
Threat from changing technologies
Financial/cash flow problems
Weakness that threaten the business.

Following points should be considered when applying SWOT to the analysis:

Precise and verifiable phrases should be sued.
Prioritize the points under each head, so that management can identify which step has to be taken first.
Apply the analyses at proposed level. Clear yourself first that on what basis you have to apply SWOT matrix.
Make sure that points identified should carry itself with strategy formulation process.
Use particular terms (like USP, Core Competencies Analyses etc.) to get a comprehensive picture of analyses.

STEP 5: PESTEL/ PEST Analysis of Benetton Group Case Solution:

Pest analyses is a widely used tool to analyze the Political, Economic, Socio-cultural, Technological, Environmental and legal situations which can provide great and new opportunities to the company as well as these factors can also threat the company, to be dangerous in future.

Pest analysis is very important and informative. It is used for the purpose of identifying business opportunities and advance threat warning. Moreover, it also helps to the extent to which change is useful for the company and also guide the direction for the change. In addition, it also helps to avoid activities and actions that will be harmful for the company in future, including projects and strategies.

To analyze the business objective and its opportunities and threats, following steps should be followed:

Brainstorm and assumption the changes that should be made to organization. Answer the necessary questions that are related to specific needs of organization
Analyze the opportunities that would be happen due to the change.
Analyze the threats and issues that would be caused due to change.
Perform cost benefit analyses and take the appropriate action.

Pest analysis

PEST FACTORS:

Next political elections and changes that will happen in the country due to these elections
Strong and powerful political person, his point of view on business policies and their effect on the organization.
Strength of property rights and law rules. And its ratio with corruption and organized crimes. Changes in these situation and its effects.
Change in Legislation and taxation effects on the company
Trend of regulations and deregulations. Effects of change in business regulations
Timescale of legislative change.
Other political factors likely to change for Benetton Group.

ECONOMICAL:

Position and current economy trend i.e. growing, stagnant or declining.
Exchange rates fluctuations and its relation with company.
Change in Level of customer’s disposable income and its effect.
Fluctuation in unemployment rate and its effect on hiring of skilled employees
Access to credit and loans. And its effects on company
Effect of globalization on economic environment
Considerations on other economic factors

SOCIO-CULTURAL:

Change in population growth rate and age factors, and its impacts on organization.
Effect on organization due to Change in attitudes and generational shifts.
Standards of health, education and social mobility levels. Its changes and effects on company.
Employment patterns, job market trend and attitude towards work according to different age groups.

case study solutions

Social attitudes and social trends, change in socio culture an dits effects.
Religious believers and life styles and its effects on organization
Other socio culture factors and its impacts.

TECHNOLOGICAL:

Any new technology that company is using
Any new technology in market that could affect the work, organization or industry
Access of competitors to the new technologies and its impact on their product development/better services.
Research areas of government and education institutes in which the company can make any efforts
Changes in infra-structure and its effects on work flow
Existing technology that can facilitate the company
Other technological factors and their impacts on company and industry

These headings and analyses would help the company to consider these factors and make a “big picture” of company’s characteristics. This will help the manager to take the decision and drawing conclusion about the forces that would create a big impact on company and its resources.

STEP 6: Porter’s Five Forces/ Strategic Analysis Of The Benetton Group Case Study:

To analyze the structure of a company and its corporate strategy, Porter’s five forces model is used. In this model, five forces have been identified which play an important part in shaping the market and industry. These forces are used to measure competition intensity and profitability of an industry and market.

porter’s five forces model

These forces refers to micro environment and the company ability to serve its customers and make a profit. These five forces includes three forces from horizontal competition and two forces from vertical competition. The five forces are discussed below:

THREAT OF NEW ENTRANTS:
as the industry have high profits, many new entrants will try to enter into the market. However, the new entrants will eventually cause decrease in overall industry profits. Therefore, it is necessary to block the new entrants in the industry. following factors is describing the level of threat to new entrants:
Barriers to entry that includes copy rights and patents.
High capital requirement
Government restricted policies
Switching cost
Access to suppliers and distributions
Customer loyalty to established brands.
THREAT OF SUBSTITUTES:
this describes the threat to company. If the goods and services are not up to the standard, consumers can use substitutes and alternatives that do not need any extra effort and do not make a major difference. For example, using Aquafina in substitution of tap water, Pepsi in alternative of Coca Cola. The potential factors that made customer shift to substitutes are as follows:
Price performance of substitute
Switching costs of buyer
Products substitute available in the market
Reduction of quality
Close substitution are available
DEGREE OF INDUSTRY RIVALRY:
the lesser money and resources are required to enter into any industry, the higher there will be new competitors and be an effective competitor. It will also weaken the company’s position. Following are the potential factors that will influence the company’s competition:
Competitive advantage
Continuous innovation
Sustainable position in competitive advantage
Level of advertising
Competitive strategy
BARGAINING POWER OF BUYERS:
it deals with the ability of customers to take down the prices. It mainly consists the importance of a customer and the level of cost if a customer will switch from one product to another. The buyer power is high if there are too many alternatives available. And the buyer power is low if there are lesser options of alternatives and switching. Following factors will influence the buying power of customers:
Bargaining leverage
Switching cost of a buyer
Buyer price sensitivity
Competitive advantage of company’s product
BARGAINING POWER OF SUPPLIERS:
this refers to the supplier’s ability of increasing and decreasing prices. If there are few alternatives o supplier available, this will threat the company and it would have to purchase its raw material in supplier’s terms. However, if there are many suppliers alternative, suppliers have low bargaining power and company do not have to face high switching cost. The potential factors that effects bargaining power of suppliers are the following:
Input differentiation
Impact of cost on differentiation
Strength of distribution centers
Input substitute’s availability.

STEP 7: VRIO Analysis of Benetton Group:

Vrio analysis for Benetton Group case study identified the four main attributes which helps the organization to gain a competitive advantages. The author of this theory suggests that firm must be valuable, rare, imperfectly imitable and perfectly non sustainable. Therefore there must be some resources and capabilities in an organization that can facilitate the competitive advantage to company. The four components of VRIO analysis are described below: VALUABLE: the company must have some resources or strategies that can exploit opportunities and defend the company from major threats. If the company holds some value then answer is yes. Resources are also valuable if they provide customer satisfaction and increase customer value. This value may create by increasing differentiation in existing product or decrease its price. Is these conditions are not met, company may lead to competitive disadvantage. Therefore, it is necessary to continually review the Benetton Group company’s activities and resources values. RARE: the resources of the Benetton Group company that are not used by any other company are known as rare. Rare and valuable resources grant much competitive advantages to the firm. However, when more than one few companies uses the same resources and provide competitive parity are also known as rare resources. Even, the competitive parity is not desired position, but the company should not lose its valuable resources, even they are common. COSTLY TO IMITATE : the resources are costly to imitate, if other organizations cannot imitate it. However, imitation is done in two ways. One is duplicating that is direct imitation and the other one is substituting that is indirect imitation. Any firm who has valuable and rare resources, and these resources are costly to imitate, have achieved their competitive advantage. However, resources should also be perfectly non sustainable. The reasons that resource imitation is costly are historical conditions, casual ambiguity and social complexity. ORGANIZED TO CAPTURE VALUE : resources, itself, cannot provide advantages to organization until it is organized and exploit to do so. A firm (like Benetton Group) must organize its management systems, processes, policies and strategies to fully utilize the resource’s potential to be valuable, rare and costly to imitate.

STEP 8: Generating Alternatives For Benetton Group Case Solution:

After completing the analyses of the company, its opportunities and threats, it is important to generate a solution of the problem and the alternatives a company can apply in order to solve its problems. To generate the alternative of problem, following things must to be kept in mind:

Realistic solution should be identified that can be operated in the company, with all its constraints and opportunities.
as the problem and its solution cannot occur at the same time, it should be described as mutually exclusive
it is not possible for a company to not to take any action, therefore, the alternative of doing nothing is not viable.
Student should provide more than one decent solution. Providing two undesirable alternatives to make the other one attractive is not acceptable.

Once the alternatives have been generated, student should evaluate the options and select the appropriate and viable solution for the company.

STEP 9: Selection Of Alternatives For Benetton Group Case Solution:

It is very important to select the alternatives and then evaluate the best one as the company have limited choices and constraints. Therefore to select the best alternative, there are many factors that is needed to be kept in mind. The criteria’s on which business decisions are to be selected areas under:

Improve profitability
Increase sales, market shares, return on investments
Customer satisfaction
Brand image
Corporate mission, vision and strategy
Resources and capabilities

Alternatives should be measures that which alternative will perform better than other one and the valid reasons. In addition, alternatives should be related to the problem statements and issues described in the case study.

STEP 10: Evaluation Of Alternatives For Benetton Group Case Solution:

If the selected alternative is fulfilling the above criteria, the decision should be taken straightforwardly. Best alternative should be selected must be the best when evaluating it on the decision criteria. Another method used to evaluate the alternatives are the list of pros and cons of each alternative and one who has more pros than cons and can be workable under organizational constraints.

STEP 11: Recommendations For Benetton Group Case Study (Solution):

There should be only one recommendation to enhance the company’s operations and its growth or solving its problems. The decision that is being taken should be justified and viable for solving the problems.

Harvard Business School →
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May 2013 (Revised March 2014)
HBS Case Collection

Benetton Group S.p.A., 2012

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In times of globalisation, engineering progress and extremely aggressive competition as well as continuous growth of dynamic and complexity within business, strategic changes are crucial for organizational surviving. Consequently, organisations have to be permanently harmonized with their environments to react to external developments effectively and to form the business proactively so they are operated in timely.1 As an excellent example for global expansion by successful management of strategy changes, the Benetton Group is classified. Benetton is an Italian producer of high quality design clothing, which is active since the early 1960s. The company started as a family business and until today, the family of Benetton has the control over the firm. The company is not only famous for its high quality and sophisticated design, as it is known for its advertisement campaigns against racism, discrimination and ine-quality. In the 1980s, the Italian photographer Oliviero Toscani started to work for the Benet-ton Group as the designer for the marketing campaigns. Within several years, the advertise-ments of Benetton were not only about cloths, as the fight against racism and discrimination became almost more important than the clothing itself. The company did even change its name in order to express their fight against inequality in the world, into United Colors of Benetton.2 Major aim of this report is to clarify the essential importance of strategic change management on the basis the successful story of Benetton Group. The report contains several chapters that highlight the strategic changes of the company in the past and in the future, which gives infor-mation about the Benetton Group and shows the strengths and weaknesses of the company in comparison to the market. Thereby, chapter two contains information about the past and future strategic development of the company.

List of content

List of illustrations

1 Introduction

2 Strategic development of Benetton Group 2.1 Strategic profile of Benetton Group 2.2 Classification of Benetton Group´s strategic development

3 Strategic change of organizations 3.1 Strategic change 3.2 Strategic change of Benetton Group

4 Product-market choices of Benetton Group

5 SWOT - Analysis of Benetton Group

6 Conclusion

List of reference

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Pre-Class Preparation: Effective case study learning hinges on thorough preparation. Students are expected to read and analyze the case beforehand, identifying key issues, conducting research, and formulating potential solutions.
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Open-Ended Questions: Instead of spoon-feeding answers, instructors pose open-ended questions that stimulate critical thinking and analysis.
Cold Calling: The HBS method is known for its “cold calling” technique, where professors randomly call on students to respond, promoting active engagement and preparation.
Socratic Dialogue: Instructors often employ the Socratic method, asking probing questions to challenge assumptions, encourage deeper analysis, and draw out student reasoning.

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Develops Critical Thinking Skills: Grappling with complex business problems and analyzing diverse perspectives strengthens critical thinking abilities.
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Promotes Decision-Making Confidence: The case method fosters the ability to make well-reasoned decisions under uncertainty.
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Comprehensive Understanding of the Case

Summary of the Case : Provide a concise summary that outlines the key issues, stakeholders, and objectives. This sets the stage for deeper analysis.
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Qualitative Analysis : Evaluate qualitative factors such as organizational culture, leadership styles, and market conditions. This helps in understanding the non-quantifiable aspects that impact the business scenario.
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Strategic Alternatives

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Checklist for a Great Harvard Case Study Solution

Comprehensive Understanding

Clearly summarized the case
Identified the main problem and stakeholders
Understood the broader business context
Conducted qualitative analysis (organizational culture, market conditions, etc.)
Performed quantitative analysis (financial metrics, data analysis)
Completed a SWOT analysis
Generated multiple feasible alternatives
Evaluated alternatives based on relevant criteria
Supported evaluations with data and logical reasoning
Selected the most viable alternative with a strong justification
Developed a detailed and practical implementation plan
Created a contingency plan to manage potential risks
Reflected on the case study process
Identified key lessons learned
Discussed future implications for the industry and business practices

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Definition of SWOT Analysis

What is SWOT Analysis & Matrix? How you can use SWOT Analysis for Benetton Group

At EMBA PRO , we specialize at analyzing & providing comprehensive, corporate SWOT Analysis of Benetton Group case study. Benetton Group "referred as Benetton Embattled in this analysis " is a Harvard Business Review (HBR) case study used for MBA & EMBA programs . It is written by James L. Heskett and deals with topics in areas such as Strategy & Execution Manufacturing, Marketing, Sales SWOT Analysis stands for – Strengths, Weaknesses, Opportunities, and Threats that Benetton Embattled encounters both internally and in macro environment that it operates in. Strengths and Weaknesses are often restricted to company’s internal - resources, skills and limitations. Opportunities and Threats are factors that are analyzed in view of the prevalent market forces and other factors such as technological, economic , social, health & safety, legal & environmental, and political. According to global executive survey done by Harvard Business Review & Brightline Initiative – Only 20% of the strategic targets set by organizations are realized. Rest 80% of the strategic targets are not achieved because of incomprehensive planning, limited resource allocation, and poor execution. The successful organizations such as Benetton Embattled are the one who able to predict market trends better than others, provide resources to develop products and services to leverage those trends, able to counter competitors’ threats, and meet customers’ expected value proposition.

Case Description of Benetton Group Case Study

To maximize their effectiveness, color cases should be printed in color.The management of the Benetton Group includes senior executives advocating two different strategies: 1) expanding manufacturing to develop economies in order to grow Benetton's sales in those markets, and/or, 2)find ways to provide additional support to retailers, some of whom are operating in developed markets against sophisticated competitors and are increasingly embattled. Includes color exhibits.

Case Authors : James L. Heskett

Topic : strategy & execution, related areas : manufacturing, marketing, sales, case study solution & analysis of benetton group, pestel / pest / step analysis of benetton group case study, urgent - 12hr.

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What are the Four Elements of SWOT Analysis? How to use them for Benetton Group case study?

The four key elements of SWOT analysis are - Strengths, Weaknesses, Opportunities & Threats . Benetton Embattled can use strengths to create niche positioning in the market, can strive to reduce & remove weaknesses so that it can better compete with competitors, look out to leverage opportunities provided by industry structure, regulations and other development in external environment, and finally make provisions and develop strategies to mitigate threats that can undermine the business model of Benetton Embattled.

	Opportunities	Threats
	Using Benetton Embattled strengths to consolidate and expand the market position.	Benetton Embattled can use two approaches - building on present strengths, or analyze the trend and build processes to two pronged market penetration approach.
	Building strategies based on consumer oriented product development and marketing approach.	Benetton Embattled should just get out of these business areas and focus on strength and threats box , or on weakness and opportunities box.

For more detailed SWOT Matrix strategy please go through the detailed analysis of strengths, weaknesses, opportunities, and threats in next section.

What are Strengths in SWOT Analysis

Strengths - Benetton Group

Strengths are the Benetton Embattled capabilities and resources that it can leverage to build a sustainable competitive advantage in the marketplace. Strengths come from positive aspects of five key resources & capabilities - physical resources such as land, building, financial resources, human resources, past experiences and successes, and activities & processes .

- Robust Domestic Market that Benetton Embattled Operates in - The domestic market in which Benetton Embattled is operating is both a source of strength and roadblock to the growth and innovation of the company. Based on details provided in the Benetton Group case study – Benetton Embattled can easily grow in its domestic market without much innovation but will require further investment into research and development to enter international market. The temptation so far for the managers at Benetton Embattled is to focus on the domestic market only.

- Diverse Product Portfolio of Benetton Embattled – The products and brand portfolio of Benetton Embattled is enabling it to target various segments in the domestic market at the same time. This has enabled Benetton Embattled to build diverse revenue source and profit mix.

- Managing Regulations and Business Environment – Benetton Embattled operates in an environment where it faces numerous regulations and government diktats. In Manufacturing, Marketing, Sales areas, the firm needs to navigate environment by building strong relationship with lobby groups and political network.

- Superior product and services quality can help Benetton Embattled to further increase its market share as the current customer are extremely loyal to it. According to James L. Heskett in Benetton Group study – there are enough evidences that with such a high quality of products and services, Benetton Embattled can compete with other global players in international market.

- Strong Balance Sheet and Financial Statement of Benetton Embattled can help it to invest in new and diverse projects that can further diversify the revenue stream and increase Return on Sales (RoS) & other metrics.

- Successful Go To Market Track Record – Benetton Embattled has a highly successful track record of both launching new products in the domestic market but also catering to the various market based on the insights from local consumers. According to James L. Heskett , Benetton Embattled has tested various concepts in different markets and come up with successful Strategy & Execution solutions.

- Intellectual Property Rights – Benetton Embattled has garnered a wide array of patents and copyrights through innovation and buying those rights from the creators. This can help Benetton Embattled in thwarting the challenges of competitors in various industries Manufacturing, Marketing, Sales.

What are Weakness in SWOT Analysis

Weakness- Benetton Group

Weaknesses are the areas, capabilities or skills in which Benetton Embattled lacks. It limits the ability of the firm to build a sustainable competitive advantage. Weaknesses come from lack or absence of five key resources & capabilities - physical resources such as land, building, human resources, past experiences and successes, activities & processes, and financial resources .

- Project Management is too focused on internal delivery rather than considering all the interests of external stakeholders. This approach can lead to poor public relation and customer backlash.

- Implementation of Technology in Processes – Even though Benetton Embattled has integrated technology in the backend processes it has still not able to harness the power of technology in the front end processes.

- Inventory Management – Based on the details provided in the Benetton Group case study, we can conclude that Benetton Embattled is not efficiently managing the inventory and cash cycle. According to James L. Heskett , there is huge scope of improvement in inventory management.

- Customer Dissatisfaction – Even though the demand for products have not gone down but there is a simmering sense of dissatisfaction among the customers of Benetton Embattled . It is reflected on the reviews on various on-line platforms. Benetton Embattled should focus on areas where it can improve the customer purchase and post purchase experience.

- Organization Culture – It seems that organization culture of Benetton Embattled is still dominated by turf wars within various divisions, leading to managers keeping information close to their chests. According to James L. Heskett of Benetton Group case study, this can lead to serious road blocks in future growth as information in silos can result can lead to missed opportunities in market place.

- Track record on environment consideration is not very encouraging – Benetton Embattled track record on environmental issues is not very encouraging. According to James L. Heskett , this can lead to consumer backlash as customers are now considering environmental protections as integral to part of doing business.

What are Opportunities in SWOT Analysis

Opportunities- Benetton Group

Opportunities are macro environment factors and developments that Benetton Embattled can leverage either to consolidate existing market position or use them for further expansion. Opportunities can emerge from various factors such as - economic growth, technological innovations, increase in consumer disposable income, changes in consumer preferences, and political developments & policy changes .

- Changing Technology Landscape – Machine learning and Artificial Intelligence boom is transforming the technology landscape that Benetton Embattled operates in. According to James L. Heskett , Benetton Embattled can use these developments in improving efficiencies, lowering costs, and transforming processes.

- E-Commerce and Social Media Oriented Business Models – E-commerce business model can help Benetton Embattled to tie up with local suppliers and logistics provider in international market. Social media growth can help Benetton Embattled to reduce the cost of entering new market and reaching to customers at a significantly lower marketing budget. It can also lead to crowd sourcing various services and consumer oriented marketing based on the data and purchase behavior.

- Developments in Artificial Intelligence – Benetton Embattled can use developments in artificial intelligence to better predict consumer demand, cater to niche segments, and make better recommendation engines.

- Lucrative Opportunities in International Markets – Globalization has led to opportunities in the international market. Benetton Embattled is in prime position to tap on those opportunities and grow the market share. According to James L. Heskett , growth in international market can also help Benetton Embattled to diversify the risk as it will be less dependent on the domestic market for revenue.

- Reducing Cost of Market Entry and Marketing into International Markets – According to James L. Heskett, globalization along with boom in digital marketing and social media has considerably reduced the risks of market entry and marketing in international market.

- Growing Market Size and Evolving Preferences of Consumers – Over the last decade and half the market size has grown at brisk pace. The influx of new customers has also led to evolution of consumer preferences and tastes. This presents Benetton Embattled two big challenges – how to maintain loyal customers and how to cater to the new customers. Benetton Embattled has tried to diversify first using different brands and then by adding various features based on customer preferences.

What are Threats in SWOT Analysis

Threats- Benetton Group

Threats are macro environment factors and developments that can derail business model of Benetton Embattled. Threats can emerge from various factors such as - political developments & policy changes, technological innovations, increase in consumer disposable income, economic growth, and changes in consumer preferences .

- Credit Binge post 2008 Recession – Easy access to credit can be over any time, so Benetton Embattled should focus on reducing its dependence on debt to expand. The party has lasted for more than a decade and rollback from Fed can result in huge interest costs for Benetton Embattled.

- Increasing bargaining power of buyers – Over the years the bargaining power of customers of Benetton Embattled has increased significantly that is putting downward pressure on prices. The company can pursue horizontal integration to consolidate and bring efficiencies but I believe it will be a short term relief. According to James L. Heskett , Benetton Embattled needs fundamental changes to business model rather than cosmetic changes.

- Squeezing Middle Class in Developed and Developing World – The growing inequality is one of the biggest threat to not only globalization but also to capitalism. Benetton Embattled first hand witnessed the impact of it where it has seen lower demand of its products from middle class customers in US and EU market.

- Increasing costs component for working in developed market because of environmental regulations – Benetton Embattled has to deal with these costs as governments are trying to levy higher environmental taxes to promote cleaner options. For Benetton Embattled it may result into higher logistics costs and higher packaging costs.

- Culture of sticky prices in the industry – Benetton Embattled operates in an industry where there is a culture of sticky prices. According to James L. Heskett of Benetton Group case study, this can lead to inability on part of the organization to increase prices that its premium prices deserve.

- International Geo-Political Factors – Since the Trump election, geo-political factors have taken a turn for growing protectionism. Developments such as Brexit, Russian sanctions, foreign exchange crisis & inflation in Venezuela, lower oil prices etc are impacting international business environment. Benetton Embattled should closely focus on these events and make them integral to strategy making.

5C Marketing Analysis of Benetton Group

4p marketing analysis of benetton group, porter five forces analysis and solution of benetton group, porter value chain analysis and solution of benetton group, case memo & recommendation memo of benetton group, blue ocean analysis and solution of benetton group, marketing strategy and analysis benetton group, vrio /vrin analysis & solution of benetton group, pestel / step / pest analysis of benetton group, case study solution of benetton group, swot analysis and solution of benetton group, references & further readings.

James L. Heskett (2018) , "Benetton Group Harvard Business Review Case Study. Published by HBR Publications.

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Benetton Group's management consists of leaders came two different strategies: 1) the expansion of production in order to develop the economy in order to increase sales of Benetton in these markets, and / or 2) to find ways to provide additional support for retailers, some of which are valid for developed markets for complex competitors and increasing alertness. Includes color exhibits. To enhance their effectiveness, color cases should be printed in color. "Hide by James L. Heskett Source: Harvard Business School 24 pages. Publication Date: November 30, 1995. Prod. #: 396177-PDF-ENG

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Management & accountability

Benetton group: The evolution of a network to face global competition

Benetton's story has started in the 1950s from the "idea of color?. The family holding group has been established in 1965. Over the ongoing decade, the first factory and 1000 shops opened worldwide. Benetton has grown through a unique network organization which is flexible and innovative, as a worldwide famous business model with an exceptional competitive advantage. Furthermore, it established its worldwide reputation through a brilliant marketing and communication strategy. Entering in the new millennium, Benetton is one of the largest garments producers and retailers. Present in 120 countries, with 7000 employees, worldwide stores and manufacturing facilities, it raises a $2 billion turnover.

Conventional network
New network
Design of sport equipments
Operations management
Retail networks
Business environment evolutions and reasons for changing Benetton's approach
Product development and business strategic management
Supply and production management
Retail network

[...] It has managed it more by anticipation than by reaction with a well interpretation and adaptation to overcome the new competition's drivers. Emerging challenges such as globalization and N.I.C.T. lead to radical strategic changes. The increasing cross-country homogenisation of consumers' patterns, lifestyles, and market preferences has made emerge a “Global production demand”. The N.I.C.T. enabled a reduction of information costs, cut-down the geographical barriers and increased the communication for a “real-time” response to market. It also improved the product development and manufacturing processes, enhancing simultaneously the quality, efficiency, effectiveness, and achieving a faster time to market for aggressive market penetration. [...]

[...] Benetton group: The evolution of a network to face global competition Introduction Benetton's story has started in the 1950s from the “idea of color”. The family holding group has been established in 1965. Over the ongoing decade, the first factory and 1000 shops opened worldwide. Benetton has grown through a unique network organisation, flexible and innovative, to stand its successful worldwide famous business model as competitive advantage. Furthermore, it established its worldwide reputation through a brilliant marketing and communication strategy. [...]

[...] Benetton has built its successful development on a direct sales network of small independent retailers worldwide within a “franchise” approach. Then, it tried to readjust its strategy through a progressive vertically downstream integration along the “retail project” It aims to direct monitoring consumers in crucial markets to challenge its major competitors. With medium and large size shops centrally and directly controlled, it can be now closer to the customer and have a better control of its brand image. Hence, it collects market information, and ensures brand visibility. [...]

[...] United Colors of Benetton aims to be global, young, easy (to care/wear/look), and high quality. Implementing huge Megastores in big city, it ensures a better visibility. In term of design and product development process, the market requires to be close to the new trends and changes. To do so, Benetton established an efficient information system interconnecting headquarter with the integrated retail networks. Thus, it gets closer to the customer, and design and produce collections on basis of continuous updated information. [...]

[...] ▪ Operations Management Benetton reorganised the production process in order to: ✓ Cutting costs: manufacturing and logistics (transports and semi- finished good from different company's locations) ✓ Maintain and even enhance the know-how associated ✓ Synergy between casual and sportswear businesses The reorganisation took the form of production concentration in Trevigano plant on the Castrette model. Beside, the labor-intensive production was relocated to low-cost nation producers. The sportswear production control management was also concentrated at the Castrette pole seeking for synergies with the casual wear. ▪ Retail Networks: Previously, the distribution was managed by Benetton Sportsystem European Subsidiaries. Now on, it is incorporated to Benetton group for a commercial and marketing synergy. Thus, it increased the direct control and monitoring of the market, and enabled a closer relation with major customers (world distribution chains). [...]

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Publication date 29/09/2010
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Back to the Future: Benetton Transforms Its Global Network

Organizational Structure
Business Models
Supply Chains & Logistics

In the 1980s, while the provocative magazine and billboard advertisements of Italian clothing company Benetton caught the consumer’s eye, the company’s tremendous growth, outstanding financial performance and innovative strategies were captivating the press, scholars and practitioners around the world. (See “The Benetton Group.”) For many years, it was the archetypal example of the network organization — that is, an organization based on outsourcing, subcontracting and, more generally, on relationships developed between a large company and several small producers and distributors, or both. 1

The Benetton Group

The Benetton Group, a garment producer and retailer based in Italy, has approximately 5,500 shops in 120 countries, 7,000 employees, manufacturing facilities worldwide and annual revenue of more than $1.8 billion. It is controlled by Edizione Holding, the Benetton family’s holding company, which owns businesses not only in garment making but also in catering (Autogrill), telecommunications (Telecom Italia and Blu), services (Host Marriott Services) and highways (Autostrade). Benetton Group’s interests can be clustered into three distinct areas:

casual wear (garments, accessories and footwear), distributed under the United Colors of Benetton and Sisley brands and accounting for 74% of total revenue in 2000;
sportswear (the Playlife and Killer Loop brands of clothing, accessories and footwear) and sports equipment (ski boots, skis, in-line skates, skateboards, snowboards, scooters and tennis rackets, marketed under such brands as Nordica, Prince, Killer Loop and Rollerblade), accounting for 20% of total revenue in 2000; and
complementary activities (royalties, sales of raw materials, industrial and advertising services), accounting for 6% of total revenue in 2000.

Several factors contributed — and, to some extent, continue to contribute — to Benetton’s success. First is its innovative operations-management techniques, such as delayed dyeing. Benetton postpones garment dyeing for as long as possible so that decisions about colors can reflect market trends better (the tinto-in-capo strategy). Second is its network organization for manufacturing. A network of subcontractors (mainly small and midsize enterprises, many of which are owned, completely or partly, by former or current Benetton employees) supply Benetton’s factories. That structure has lowered Benetton’s manufacturing and labor costs, has reduced its risk (which shifts to its suppliers) and has given it unbeatable flexibility. Third is the network organization for distribution: Benetton sells and distributes its products through agents, each responsible for developing a given market area. Benetton does not own the stores; its agents set up a contract relationship (a licensing agreement similar to a franchise) with the owners, who then sell Benetton products. Benetton supports the retailers with services such as merchandising.

But Benetton is not resting on its laurels. It is not waiting for a financial crisis or a performance slump to transform itself. True, overall performance has remained excellent. (See “Benetton’s Financial Health.”) Benetton’s managers believe, however, that if the Treviso-based company is to remain competitive in the new global arena, it must have firsthand contact with the end customer, respond in real time to market changes and find new ways to ensure direct control over the supply chain. 2

Benetton’s Financial Health

View Exhibit

To that end, the company is retaining its network structure but is changing the nature of the network. Whereas its main competitors have stuck with outsourcing, Benetton is gambling on vertical integration and centralization. It is betting — perhaps counterintuitively — that it can remain flexible and achieve a high level of performance with a more complex network architecture in which it directly oversees key business processes throughout the supply chain. 3 Benetton also is diversifying into sports — another move not entirely in keeping with conventional wisdom, which suggests companies should focus on their core businesses. The company’s choice shows, however, that an enterprise can adapt its knowledge and competencies to a different, though closely related, industry. Finally, although it has embraced globalization, Benetton believes that sustainable value creation cannot be built merely by exploiting cost differentials between nations. It is committed to maintaining key functions at its base in industrialized northeastern Italy; even in its overseas locations, it has established production practices based on its Italian model. The aim is to achieve overseas profits not just from cheap labor, but from sound systems.

Slipping Into Something More Vertical: Transforming the Casual-Wear Business

Globalization is one of two phenomena changing the name of the game in the textile and apparel industry. With globalization comes increasing homogenization of consumers’ lifestyles and market preferences worldwide. Homogenization encourages companies to offer globally appealing products, with no major national customization. Brand equity and economies of scale in marketing become ever more important, leading to concentration of market share in the hands of large companies that can control markets through capillary retail structures. Globalization also affects manufacturing, causing companies to bring certain operations in-house (in order to maintain control over the supply chain and to take advantage of economies of scale) and to relocate production abroad to take advantage of cost differentials, particularly for labor.

The other phenomenon is the breathtaking development in information and communications technologies, which dramatically reduce information costs, facilitate communications, eliminate distance barriers and allow a real-time response to market change. 4 The new technologies enhance product development and manufacturing, making possible better quality, more efficiency and faster time to market.

In its core business, casual wear, Benetton has addressed such new developments by making big changes in its product design, in its supply and production network and in its retail network. In essence, Benetton has gone for increased direct control and vertical integration. In its retail network, that has meant becoming more like its competitors, but in its supply and production network, Benetton’s direction is original.

Product Design

An international company from the start, Benetton has tended to offer the same or a similar range of products in all the national markets it has entered. However, until recently, more than 20% of the styles in its ranges were customized in order to satisfy the specific demands of each country (smaller sizes for the Far East, for example, or specific colors for Middle East countries). The task of selecting the designs best suited to each clientele was left to the independent retail agents that lead and develop Benetton’s estimated 5,500-retail-outlets network. The result was a different image of Benetton in different geographical areas. Today, however, in order to communicate just one image all over the world, Benetton has decided to differentiate only 5% to 10% of the styles it offers in each collection.

Even the number of articles offered in the two basic collections (spring/summer and fall/winter) has been reduced as part of the brand-strengthening strategy. In addition, the company has adopted sophisticated marketing techniques, such as in-store testing, for a more thorough understanding of customers’ expectations and lifestyles. It also has increased the number of flash collections launched during each season. 5

As a result, the basic collections for the year 2001 were reduced, in terms of the number of articles offered, by as much as 35% to 40%. By increasing the number of flash collections and by reducing basic product variance, Benetton can do a better job of capturing customers’ last-minute needs and expectations and can avoid offering unappreciated and therefore useless variety.

In 2000, Benetton also streamlined its brands, eliminating labels aimed at babies, children and expectant mothers, including 012, Zerotondo, Corredino and Mamma of Benetton. All garments are now sold under the United Colors of Benetton and Sisley brands. The range is now divided on the basis of age, with different collections for children, men, women and expectant mothers.

Supply and Production

Most of Benetton’s competitors are international retailers with basically no in-house operations. (See “How Benetton and Its Competitors Configure Their Business Networks.”) For its part, Benetton used to outsource the labor-intensive phases of production, such as tailoring, finishing and ironing, to small and midsize enterprises (SMEs) located mainly in northeastern Italy, especially in Treviso county. However, the company always kept in-house any strategic activities and operations that required heavy investment (weaving, cutting, dyeing, quality controls at entry and on finished goods, quality control of intermediate phases and packing).

How Benetton and Its Competitors Configure Their Business Networks

In the mid-1990s, as volumes increased, that strategy led Benetton to set up a high-tech production pole at Castrette, not far from the headquarters at Ponzano, near Treviso. The production pole at Castrette is among the most advanced in the apparel industry. It covers an area of more than 1,184,040 square feet and is responsible for all Benetton’s garments and accessories, both in casual wear and sports clothing. Its overall production capacity is about 120 million items per year.

To take advantage of labor cost differentials, Benetton has established relations with new outside contractors, located abroad. (See “Benetton’s Foreign Production Poles.”)

Benetton’s Foreign Production Poles

Interestingly, Benetton has adopted its Castrette model in the countries where it has relocated, recreating, on a smaller scale, directly controlled production poles. Foreign poles are composed of a subsidiary (totally or partially owned and directly managed by Benetton) that coordinates the production activities of a group of SMEs, often set up and managed by ex-Benetton employees or Italian contractors. For example, Benetton Hungary coordinates the production activities of outside contractors in Hungary, Ukraine, the Czech Republic, Poland, Moldavia, Bulgaria and Romania. The production poles produce to order. The Castrette pole chooses what is to be made by each of the foreign production poles, which then, independently, decide how to allocate production tasks among their SMEs. To ensure high quality, the foreign production poles focus on one type of product and use skills already existing in the area. (T-shirts are made in Spain, for example, and jackets in eastern Europe.) Articles produced abroad return to Italy, where they are prepared for shipping to the final customers. 6

Recently, the Castrette pole has begun transferring to subsidiaries various activities that used to be kept in-house, such as quality controls at entry and on finished goods, cutting out and dyeing. The Castrette pole’s current operations include elaboration (composition and development) of the marker sheets for the computerized fabric-cutting system, which are then sent, using electronic support, to foreign production poles. It also focuses on cutting out prototypes and on quality control of intermediate phases. Through improved communications, Castrette and the foreign production poles can coordinate the timing of the phases so as to reduce production lead times to a minimum.

However, in the apparel industry, time compression does not depend so much on the tailoring phase as on the supply of raw materials. Therefore over the years, Benetton has gradually increased upstream vertical integration to consolidate its textile and thread suppliers. Today, Benetton’s main supplier of raw materials — which guarantees that it will provide 60% of the woven fabric, 90% of cotton knit fabric and 90% of carded and combed wool — is 85% controlled by Benetton itself. Both upstream vertical integration and partnership relationships with external suppliers have made it possible for Benetton to exercise quality control over textiles and thread sooner. The materials then can be sent directly to workshops and external producers without further controls, reducing transport costs and production lead times overall.

Nevertheless, Benetton has decided to maintain direct control of the logistics phase and has invested heavily in automating logistics processes in order to achieve total integration within the production cycle, from customer orders to packing and consignment. Today, the average time for consignment is seven days; 10 million garments can be sent out worldwide each month.

Reshaping the Retail Network

For many years, Benetton’s traditional approach of direct retailing entrusted to third parties was one of the organization’s most successful strategies. However, that strategy no longer seems able to sustain Benetton’s presence in the market. The company risks seeing its locations suffocated by the aggressive market-penetration strategies of its international competitors, whose retail outlets have a much larger average size. Ever adaptive, Benetton has wisely decided to align with its competitors. Its new retail strategy includes:

enlarging its retail outlets, where possible, to enable display of the whole range of Benetton (or Sisley) products, garments, shoes and accessories;
where such expansion is not possible, focusing each retail outlet on one market segment or product (only men’s products, for example, or only women’s products, or only knitwear or underwear);
opening large retail outlets (7,535 square feet to 21,528 square feet) on the main shopping streets and in the main shopping districts of big cities.

To implement the third element of its strategy, Benetton developed its Retail Project in November 1999. By the end of 2000, the company had set up more than 60 large retail outlets (megastores) throughout the world, and a further dozen have been opened so far in 2001. Benetton plans to have 100 mega-stores worldwide by the end of 2002. The aim is to develop a network of medium to large shops directly owned and managed by Benetton itself.

With the Retail Project, which entails complete downstream integration, Benetton is seeking to challenge its main competitors on their terms, focusing on large display areas, on continuous rotation of the displayed products and on selling garments with a high level of styling content. By opening and directly managing its own retail outlets, Benetton can get closer to final consumers, obtain more information about them and reinforce its image. Those are important advantages, because as fashion becomes more subject to lightning changes, quick response to the market is crucial. Moreover, through an information system that links the directly controlled outlets with headquarters, the company knows precisely what is selling and what is lingering on the shelves, and can design and produce collections on the basis of that continuously updated information.

Diversifying Into Sports

In 1998, Benetton merged with Benetton Sportsystem, a completely separate company also owned by the Benetton family. The merger has meant facing competition in an industry that is very different from the casual-wear industry. In casual wear, Benetton has a special relationship with its retailers, whereas in the sports business, Benetton must deal with a variety of different players: big distribution chains, small specialized shops and retail agents. None, apart from the agents, have an exclusive relationship with Benetton, which must compete with the other producers in each distribution channel. The distribution chains, in effect, dictate the rules of the game. Typically, all the competing sports brands are arranged in large display areas where they can be compared directly by customers. Further-more, the sports industry, although differentiated, is highly competitive, and the world market is already virtually saturated.

Benetton has tackled the challenges of the sports business in a number of ways. It sees the greatest and most easily realized synergies as coming from activities linked to sportswear. Moreover, because margins in sportswear are greater than those in sports equipment, Benetton hopes to expand its sportswear business by leveraging its sports-equipment brands. The company has been investing heavily in sportswear development, offering items in its Playlife and Killer Loop collections that are priced from premium levels to very economical in order to draw in a greater number of consumers. 7 It has concentrated management and control of sportswear production at Castrette so as to exploit as many synergies with the production of casual wear as possible.

In the sports-equipment business, Benetton is striving to consolidate the image and equity of its brands through three initiatives: investment in high-tech systems for designing sports equipment, reorganization of the production process and improvements to the retail network.

Over the past two years, Benetton has invested more than $5 million in systems for designing sports equipment. Corporate managers hope the investment will result in products that the consumer considers superior to those offered by Benetton’s competitors. If consumers want them, then the large distribution chains will be forced to carry them. Research-and-development activities, which were formerly spread out all over the world, are now concentrated in Venegazzù, in Treviso county. By concentrating the R&D activities of more than 100 people in an open space of about 7,535 square feet, the company also hopes to take advantage of information sharing and knowledge sharing — and the consequent cross-fertilization of ideas. Different corporate and national cultures also mingle. Who knows what may transpire when the U.S. mentality that created Prince Sports Group and Rollerblade meets up with the Italian mind-set that created Nordica? Furthermore, with everyone under one roof, the decision-making process should become more effective and the management of common services more efficient.

In reorganizing the production process, the two main guidelines have been to maintain and constantly expand the knowledge base, and to minimize manufacturing and transportation costs. In concrete terms, that has meant concentrating production of ski boots, skates, skis and accessories in the Trevignano plant (which is close to Treviso and similar in design to the Castrette production pole) and relocating all or part of production of some products to countries with low labor costs. Some Rollerblade components, for example, are now manufactured in Hungary and China.

With regard to improving the distribution network, Benetton has tried to develop special areas or “corners” dedicated to displaying and selling Benetton’s sports equipment within the large sports shops of the distribution chains, and it has constructed a new network of Playlife retail outlets (small, independently owned shops) on the model of the consolidated casual-wear business. Moreover, Benetton is attempting to develop partnership-based commercial relations with the big specialized distribution chains that are its direct customers. And management hopes that it will eventually be able to change production from a make-to-stock approach (the pattern usually imposed by the large distribution chains) to a make-to-order approach. 8

Innovating in the World of Communication

In 1994, Benetton’s interest in new media led it to set up a center for research and development in the field of communication. The center is called Fabrica — Latin for workshop — and is seen as an incubator and catalyst for the cultural inheritance of the company. Headed by an international scientific committee that ensures the validity of the projects, Fabrica has invested in creativity and brought together young people and experimental artists from all over the world. Among Fabrica’s successful projects are the film “Blackboards,” which won a special award at the Cannes Film Festival in 2000, and the film “Dayereh,” which won a Golden Lion at the Venice Film Festival in 2000.

More recently, Benetton has founded the company United Web. United Web’s short-term goal is to integrate Benetton’s brick-and-mortar businesses with the Internet, to reinforce contacts with customers, and to make the company’s products and style known to an increasing number of potential customers. United Web represents not only an additional distribution channel, but also an opportunity to transform the relationships among the players on the network. Benetton’s managers are currently working on e-procurement and online services for the distribution network, among other projects.

In addition, the Benetton Group has a Web site, Benetton.com, conceived not simply as a virtual shopping center, but rather as a portal through which Internet navigators can find more varied services, including such tantalizing treats as critics’ reviews of the latest recording by the singer Björk, holiday offers in Thailand, opportunities to listen to the latest CDs by Ricky Martin or Britney Spears, and a summary of the spiciest gossip about VIPs in the public eye. Benetton sees the Internet as a medium that is compatible with the company’s business philosophy and global image. Entering the e-business world is consistent with the company’s communication strategy and with its attempt to provide consumers with a comprehensive experience, a lifestyle.

Thoughts for the Future

For more than a decade, the network has been considered the most flexible organizational model, the one that ensures the highest degree of both differentiation and integration. 9 Network organizations have developed especially in labor-intensive, mature industries, such as textiles and apparel. Even in those industries, however, the acceleration of the industry “clockspeed” (to borrow from Charles H. Fine’s 1998 book of the same name) has sharpened competition and changed the power structure across the supply chain. Large retailers shape global production networks and are capable of operating on a global scale, offering high-quality products to sophisticated, multiethnic customers.

In that context, the Benetton case illustrates how a company can design and manage its supply chain innovatively. It seems that in some segments of the supply chain, only exclusive ownership of assets (such as brand equity, knowledge of consumers’ behavior, process innovation in fabric and garment design, and technology for logistics) can lead to improved performance. By bringing those assets in-house, fully integrating the production cycle and introducing new e-business tools, Benetton is transforming its organizational model into a New Economy business network. Today, designing the boundaries of innovative business networks requires more attention to ways of dividing up knowledge — not merely tasks — among producers, suppliers and retailers. That can have long-term effects not only on the performance and survival of companies, but also on the future of the industrial bases of whole nations.

Benetton’s choices represent a major break with its past, and, to some extent, a significant divergence from industry practice. Benetton’s old network model was flexible but had become, because of globalization, increasingly fragile. On the whole, the company’s transformation represents a possible trajectory for making other network organizations more robust. 10 Paradoxically, higher external flexibility is made possible by a more rigid organizational structure, tighter control of the supply chain and full exploitation of size effects. Benetton is betting on the idea that advantages from scale economies and quick response capabilities will compensate for risk and investment. Only time will tell us if the company is right.

About the Authors

Arnaldo Camuffo is professor of management at Ca’Foscari University of Venice. Pietro Romano is a lecturer on supply-chain management and Andrea Vinelli is professor of operations management at the University of Padova. Contact the authors at [email protected], [email protected] and [email protected].

1. The concept of network organization was pioneered by studies on industrial districts as alternatives to mass production. See, for instance, M. Piore and C. Sabel, “The Second Industrial Divide: Possibilities for Prosperity” (New York: Basic Books, 1984). As networks emerged, they became a fashionable topic in management literature, generating a wave of multidisciplinary studies and vigorous theoretical debate. For a detailed discussion of the network organization, see: N. Nohria and

R. Eccles, eds., “Networks and Organizations” (Boston: Harvard Business School Press, 1992); W.W. Powell and L. Smith-Doerr, “Network and Economic Life,” in “The Handbook of Economic Sociology,” eds. N.J. Smelser and R. Swedberg (Princeton, New Jersey: Princeton University Press, 1994), 368–402; and A. Grandori and G. Soda, “Inter-firms Networks: Antecedents, Mechanisms and Forms,” Organisation Studies 16 (March–April 1995): 183–214.

For different versions of the Benetton story, see S. Signorelli and J. Heskett, “Benetton,” Harvard Business School case no. 9-685-014 (Boston: Harvard Business School Publishing Corp., 1989); P. Dubini, “United Colors of Benetton,” in “Corporate Transformation,” ed. A. Sinatra (Norwell, Massachusetts: Kluwer Academic Publishers, 1991), 415–446; and B. Harrison, “Lean and Mean: The New Landscape of Corporate Power in the Age of Flexibility” (New York: Basic Books, 1994).

2. Our study is based on original fieldwork. We conducted research at Benetton headquarters from March 2000 to September 2000, adopting a quasi-ethnographic approach. We had two research assistants working full-time at Benetton for three months. The research was carried out in three stages. Phase 1 (March 2000 to May 2000): database construction and off-site research and data gathering. Phase 2 (May 2000 to September 2000): direct observation and interviews with managers (approximately 200 hours). Phase 3 (September–December 2000): data analysis and elaboration, case-study writing and discussion with Benetton managers.

3. Other industries that are trying a similar strategy include branded food products and eyewear. Luxottica is a particularly interesting case. Based in northeastern Italy, it is the world leader in eyewear (it recently bought Ray-Ban, LensCrafters, managed-vision-care company First American Health Concepts and Sunglass Hut). It is fully vertically integrated, it produces in-house and in Italy almost all of its product, and its U.S. distribution and sales flow through its own large retail network.

4. V. Ranadivé and S. McNealy, “The Power of Now: How Winning Companies Sense and Respond to Change Using Real-Time Technology” (New York: McGraw Hill, 1999).

5. Flash collections are introduced several times during each retailing season to update the articles offered to customers and to help the company respond better to fast-changing market trends. Benetton expects flash collections eventually to comprise 35% to 40% of its total products.

6. At the moment, the foreign contribution to Benetton’s production is limited to 30%, but it is expected to increase.

7. Playlife is Benetton’s general-purpose brand for sportswear collections; the Killer Loop brand targets a young, extrovert market.

8. Benetton has come close to the make-to-order ideal with its Blade Express Formula, which makes it unnecessary to produce on the basis of forecasts anymore and avoids the need for warehousing.

9. Two works that discuss that assumption are W.W. Powell, “Neither Market Nor Hierarchy: Network Forms of Organization,” in “Research in Organizational Behavior” (New York: JAI Press, 1990), 295–336; and M. Van Alstyne, “The State of Network Organization: A Survey in Three Frameworks,” Journal of Organizational Computing and Electronic Commerce 7 (spring and summer 1997): 83–151.

10. For more thoughts on the subject, see V. Perrone, “The Co-Evolution of Contexts and Forms: The N-Form,” in “Advances in Organizational Behaviour: A Festschrift To Honor Derek Pugh,” ed. P. Clark (Aldershot, United Kingdom: Ashgate, 1998).

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