CASE type question 1 (Benetton in the fast lane) Famous for its shocking advertisements Benetton started in 1955 as a small
business. Lucianno Benetton and his family started by selling colored sweaters
door to door in Treviso, Italy. Over time a regional network of family, friends and
agents set up a closely monitored set of distinctive retail outlets. Over a 15-year
period Benetton built up 300 affiliated but independently owned outlets in Italy
and a factory with new methods to dye and condition wool. Benetton was not
directly involved in the retail outlets, who received high quality products at low
costs.
Parts of the manufacturing savings are realized by outsourcing to neighbouring
subcontractors. Today Benetton has kept this loose network of independent
production subcontractors and distribution agents but has now built up to a global
network of over 7,000 retail stores. Of these, Benetton owns only about 50 flagship
stores and the great majorities are operated by independent entrepreneurs. Over 80
per cent of production still takes place in Italy and the company is still 72 per cent
owned by the Benetton family.
Benetton is one of those successful global companies that was partly successful
because its production and design concept was built on a strong home base. It then
expanded the marketing end of its business through closely monitored (but not
owned) independent stores. These were able to use the Benetton brand name and
distinctive colors and were supported by clever international advertising.
Benetton does not advertise its clothes directly. Rather its advertisements are for a
“lifestyle”. The “United Colors of Benetton” ads are designed for a homogeneous
global consumer interested in fast cars and a fast lifestyle. Benetton goes in for
cutting-edge advertising that grabs public attention. This creates an image of new-
age awareness, as Benetton advertising has featured Formula I cars, AIDS, high art
and “attitude”.
Questions
a. Why do you think Benetton join the international market?
b. Is Benetton a multinational enterprise? why?
c. What are the country-specific factors that have helped Benetton be a success?
d. What are Benetton’s firm-specific advantages?
e. In 1988 Benetton had 700 retail stores in the US but by 1995 it only had 150. Why do
you think could be the possible causes?