A cursory study of internationalizationstrategy followed by Benetton group. Sources - web resources

1. Internationalization Strategy
Pallav Vikash Chatterjee

2. Benetton
• Incorporated: 1965 as Maglificio di Ponzano Veneto
dei Fratelli Benetton, global luxury brand
• Owned by Benetton family – 67% stake through
Edizione Srl (holding company)
• Based in Treviso, Italy
• Total turnover of € 2.33 billion
• 150 million garments sold every year, 6949
employees, 6000 stores, 120 countries
Brands – Playlife, Sisley & United Colors of Benetton

3. Products
Core Business Area
Clothing
• Menswear
• Womenswear
• Childrenswear
• Underwear
Others
• Cosmetics
• Perfumes
• Toiletries
• Merchandise
• Watches

4. Brands

5. Internationalization Efforts
• Within 3 years of incorporation entered France (1968 – 1972)
• Expanded to pan-Europe (1980s)
• Expansion of sales network and production in target countries
• Successes in Japan, followed by entry in USA
• Entry in Asia-Pacific, with entry in China & India (1990s)
• Failure in USA – led to re-look at international strategy
Legal Issues
Currency with
Fluctuations Franchisee
model

6. External Considerations
• Need of greater political sensitivity in dealing with
governments of different countries
• Differences in franchisee laws, distribution environment
across countries
• Consumption of clothing, fashion accessories & sportswear –
function of disposable income levels – different macro factors
across countries.
• Different social conditions, influence brand presence.
• Competitive contexts

7. Global Competitive Context
Brand Global Presence
Benetton 120 Countries
Inditex 45
H&M 15
Mango 70
GAP 6
Espirit >40
Source – JP Morgan & OECD Retail Intelligence 2002- Verdict 2002 , OECD 2001 Morgan Stanley Research
Key reason to internationalize – Matured Italian market, business growth through
internationalization

8. Global Competitive Context
Comparative Positioning – Fast Fashion Brands

9. Sources of Global Competitive
Advantage – Fast Fashion (Apparels)

10. Internal Considerations
Strengths Weaknesses
• Casual wear business • Less profitable sports business
• 20% profits from casual wear • High cash flow required in sports
business business
• Efficient production process • Comparatively lower
• Innovative manufacturing – competitiveness in logistics with
example delayed dyeing pure retailers (those who don’t
• Company’s franchising network manufacture but source and
retail)
• Lack of clear target audience – its
neither into business wear nor
into sports wear.
• Lacks trendiness as desired by
youth

11. Global Revenues
Year 2010 2009 2008 2006 2007
Revenues 2,053 2,049 2,128 1,911 2,049
(million euro)
Net Income 102 122 155 125 145
(million euro)
Sales by Brand Sales by Region

12. Global Capacities
>40% production was based in Italy
Large Capex Production Processes – (In-house)
Small Capex Production Processes – Outsourced to
domestic small suppliers
Fabrica – Global Communication Design Centre
(Marketing)

13. Benetton Global Production Evolution
• Benetton has unique – in-house manufacturing process unlike other retail players in
fashion industry
• Production centres were distributed over a period of time to reduce lead times
and increase speed to market which was a weakness previously due to in-house
production
• Benetton engages in subcontracting for small capex manufacturing processes

14. Benetton Global Value Chain
Just In Time & Heavy usage of IT (EDC) to integrate
information to ensure responsiveness

15. SWOT Analysis
SWOT ANALYSIS
Price Long Term
Brand Positioning Major Competitors Growth Drivers Strengths Weaknesses Opportunities Threats
Regaining momentum & Lost momentum versus Simple actions may Management poor
UCB Mid Gap, Zara, Stefanel Market Share Powerful Global Brand competition give good results track record
Strong Design, Good Quality
Max&Co., Versus at affordable price than Almost unknown Significant investment
Sisley Mid High D&G, Canali Expanding Abroad designers abroad Regional expansion necessary
Expansion
opportunities
Distribution & Regional Designed for an attractive in Italy and then Volatility of teenagers
The Hip Site Mid Fornarina, H&M Expansion and important consumer Start up brand abroad purchases
Expected superior
Nike, Reebok,Sergio Distribution & Regional Good retail network and growth for lifestyle
Playlife Mid Tachhani,Napapijhri Expansion investments already done Unclear positioning brands Tough Competition
Expected superior
Distribution & Regional Strong international growth for lifestyle
Killer Loop Mid Reef, Quicksilver Expansion brand Lost heritage brands Tough Competition
Immediate Candidates of Internationalization

16. Core Competence
• Innovative operations management
• Network organization of manufacturing
• Network organization of distribution (agents)
– each agent responsible for development of a
given market area.
• Megastores – a unique franchising formula

17. Benetton Strategy
Spread of production – increase in global capacities
- Commissioning of production centres in India, China
- Commissioning of production centres in Eastern Europe
- Enhancing spread of production
- Sourcing from Asia , to reduce costs (44% sourcing of raw
materials, fabrics etc , currently)
- Using local production bases in large markets (India for
instance) for feeding domestic market , therefore increasing
responsiveness

18. Benetton Strategy
Unique Flexible Sales Channel
Region Specific Agents responsible for market
development & Direct Sales Channel

19. Benetton Strategy
Unique Marketing Strategy
- Image Advertising , identification with global social causes
- Communication targeted at Corporate level, global message
on causes – Racism, HIV, Food safety, Child Abuse etc.
- Main Brand communication focussed on creating uniqueness
no other brand has (as the company website says)

20. Benetton Strategy
Adapting to Diverse Geographies through innovation
- Product Innovation (unique global products, same design,
same apparel sold through similar store formats across globe)
- Process Innovation – delayed dyeing, postponement strategy
to reduce lead times and costs
- Organizational Innovation – Divisional structure, Unique
Agents model for managing retail franchise, Dual Supply Chain
structure, Quasi Franchising system for retailers (License
approach instead of Franchise – resulting lesser legal
complications, quicker operations and better control)

21. Benetton Innovations
Integrated Supply Chain – using smart tools RFID , Central Intelligence Centre
Parallel -Sourcing & Designing Processes to reduce lead times across geographies

22. Risks With Globalization
- Competitive Pressures (Owing to high competition in
apparels and fashion industry)
- Sales Network Buy-In, Due to high costs of incentives,
network costs have gone up
- Performance in Emerging Markets - India & China
- Diverse Changes in Customer Spending Habits –
Changes in business outlook, macro situations, etc
- Owned Expansion – High cost of assets due to in-house
production and Benetton owned stores
- Foreign Exchange & Interest Rate Fluctuations – More
rigid sourcing strategy due to fixed investments and less
of subcontracting, there is high risk on profitability