BENETTON IN THE FAST LANE

Q1: Is Benetton is a multinational enterprise?

YES, The United Colors of Benetton is a multinational enterprise.

Today the Benetton Group is present in 120 countries around the world. Its core business is clothing: a group with a strong Italian character whose style, design expertise and passion are clearly seen in the United Colors of Benetton and the more fashion-oriented ‘Sisley’ brands, and in sportswear brands ‘Playlife’ and ‘Killer Loop’. The Group produces over 110 million garments every year, over 90% in Europe.

Q2: What are the country-specific factors that have helped Benetton be a success ?

Country specific factors that helped Benetton great success are strengths or benefits specific to a country that results from is competitive environment, labor force, geographic location, government policies, industrial clusters etc.

Competitive Environment:

To produce many sweaters at reduced cost and financial risk, Benetton took advantage of an old Italian cottage industry. Benetton farmed out labor-intensive production--knitting and sewing--to small, family-owned companies (many owned in whole, or part, by Benetton management) throughout northeast Italy.

Labor Force:

Employing advanced technology allowed Benetton to manufacture in response to increased market demand both domestically and abroad with reduced financial risk. About 80 percent of production was farmed out to 450 subcontractors who employed about 20,000 workers in the Veneto Italy. The remaining 20 percent of value-added, capital-intensive production--quality control and cutting and dyeing--was performed in house.

Geographic Location:

Geographic location also performs a major role in a success of any company, Similarly Benetton success also relays on Geographic location in the they operates, since Benetton is an Italian company which can more easily understand customer taste, culture, and upcoming changes in fashion industry, so they have grab their target market very strongly not only in Italy but also the whole Europe, which has helped Benetton success.

Government Policies:

Government policies also influence on the company’s success if the government policies is in the favor of the company so the company do successful business in the country. Similarly Benetton is an Italian firm, and Italy is a member of European Union community so the government policies of other European counties are in the favor of the company, and that encourage the Benetton group for doing business in other countries of Europe, this is also one of the major country-specific factor for success of Benetton group.

Industrial Cluster:

A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. Benetton have got a lot of benefits with industrial cluster due to part of European community or European Union member country, and they make strategic alliance with their suppliers and customer domestically and internationally both that has made Benetton success reason.

Q3: What are Benetton’s firm-specific advantages?

Over a 15-year period Benetton build up 300 affiliated but independently owned outlets in Italy and a factory with new methods to dye and conditional wool.

Today Benetton kept this loose network of independent production subcontractors but has now built up to a global network of over 7000 retail stores. Over 80 percent of production still takes place in Italy and the company is still 72 percent owned by the Benetton family.

To compete in the casual clothing market, which is marked by its competitive and volatile nature, the company flourished by making "industrial fashion," fashionable apparel made and sold through flexible, cost-effective retailing and production systems.

One thing became apparent whilst reading through the case which is the number of things that Benetton do which are seen to be unique to themselves. Benetton now have 7000 shops around the world and there are plans being made to make Rocky Mount (NC) the distribution facility for the US market.

In the late 1980s, Benetton gained additional competitive advantage by implementing global networking to connect sales and production. A point-of-sale computerized program, which linked the shops to headquarters, was designed to handle order management, cost accounting, production control, and distribution support. Thus agents began booking 80 percent of each seasonal order six months in advance; the remaining orders were placed midseason and relayed to headquarters by computer. The point-of-sale program was replaced by late 1989, and Benetton's decentralized operations were linked by a global electronic data interchange network, which also included freight forwarding and customs applications.

Benetton is one of those successful global companies that was partly successful because of its production and design concepts was built on a strong home base.

They have also furthered their controversial image with the art director producing communications posters with images of a dying AIDS patient, high art, attitude, and Formula 1 car. Benetton does not advertise its cloth directly; rather its advertisements are for a “Lifestyle”. The “United Colors of Benetton” ads are design for a homogeneous global consumers interested in fast cars and fast lifestyle. Benetton goes in for cutting-edge, innovative advertising hat grabs public attention. This creates an image of new-age awareness.

Benetton claimed that there were synergies to be exploited from their diversification following the saturation of the Italian market. Not the stereotypical franchise, a great deal of time and effort went into the selection process for the entrepreneurs - one of the Benetton success factors.