Benetton Discussion : LUSENET : MOT Group Three : One Thread

1) What are the important elements of Benetton's marketing, logistics, manufacturing and financial strategies? Identify the presence or absence of interdependencies among these functional strategies.

2) How does Benetton gain competitive advantage over its European competitors?

3) Is being a Benetton retailer a worthwhile business? Explain.

-- Anonymous, November 16, 1999


Benetton Case:

1. Marketing:

  • 19-25 yr old target market
  • Youthful, sporty appeal
  • Bright colors
  • Retailers only sold Benetton
  • High advertising and promotion budget
  • Use of agents in territories to encourage B. outlets
  • Establishing lead stores prior to expanding
  • Many local stores under different names
  • Pricing lower than competition
  • Price quality combination with high fashion content w/bright colors
  • Layout of stores - open shelves
  • Several opportunities for retailers to order / Flash collection / Reassortment
  • Logistics:

  • Limited storage space for back-up stock
  • Manufacturing short delivery time items to order
  • Part ownership in everything
  • In-depth knowledge of seasonal issues
  • Planning process based on 5-10% of initial orders
  • Receive orders prior to manufacturing
  • Inventory and sales tracking system very advanced for the early 80's
  • Country specific packaging
  • Feedback of sales information
  • Warehouse would save 20% in transportation costs
  • Inventory turnover high considering large variety
  • 5% cost of transportation
  • Freight is included to any location
  • Manufacturing:

  • Efficient use of plant capacity
  • Increased capacity through outsourcing
  • Dyed garment after assembly - instead of dying the yarn
  • Advances in drying technology and softness techniques
  • Financial

  • Allowed 30/60/90 day terms for retailers
  • Payment of subcontractor after production
  • Large investments in manufacturing and logistics operations
  • Stores were much smaller than competition with twice the revenue
  • Interdependencies:

  • Manufacturing and logistics: Allowed for plant flexibility
  • No connection with financial side and shipping side: Same shipping cost
  • Marketing and manufacturing: Allowed for quick turnaround of quick selling colors
  • Finance and marketing: reinvest of money for promotional activities (sports teams, race car)
  • Finance, marketing, and manufacturing: Allowed for lower pricing than competition
  • 2. Competitive advantage

  • Backward and forward integrated: Raw material control through ownership of retail stores
  • Advanced centralized distribution center
  • Stores are selling only Benetton
  • Raw material price leverage
  • Differed differentiation
  • Heavy use of promotion: many sponsorships
  • Lower production costs: 85% of competitors
  • Strong brand recognition
  • Lower selling price
  • Efficiency of stores vs. competitors
  • 3. Benetton retailer a worthwhile business

  • Good business: Retailer in typical Benetton store has profit of 19% before tax
  • Retailer is given favorable payment terms
  • Benetton only wants young energetic people: We question what happens in long run
  • Owner would make $57900 before tax plus 4% of annual sales (if owner/agent)
  • If given a choice, we would rather be a retailer of Benetton's vs. competitor
  • Negative: Volatility of fashion industry

  • -- Anonymous, November 17, 1999

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