Benetton Solution

8/2/2019 Benetton Solution

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Project Title: (Benetton A)

Subject Name: (Written Analysis and Communication)

Date: (14March, 2012)


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Executive Summary

Benetton, an Italian apparel company is by far the market leader in Europe. But as the saying goes that change

happens along with time, slowly Benettons product lines were reaching the saturation point. Along with

factors like stagnant economy, increasing local competition and imported merchandise lead a doubt in the

minds of the Benetton group which eventually lead them to have a relook at their strategy. Thus Luciano

Benetton, the chairman of the Benetton group was planning to expand his base to US. The attached report

analyses the possible market in the US and proposes a strategy for market penetration.


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Table of Contents:

1. Situational Analysis................................................................................................................04

2. Problem Statement.................................................................................................................04

3. Options....................................................................................................................................05

4. Criteria for Evaluation..........................................................................................................05

5. Evaluation of Options............................................................................................................05

6. Recommendations..................................................................................................................06

7. Action Plan.............................................................................................................................06

8. Contingency Plan...................................................................................................................06


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Situational Analysis

Benetton, over the years had been an innovator in the production of knitted overwear and had a much

decentralized process. Not only was their innovation evident in the production but also in every other process

ranging from marketing to logistics. They had their own unique strategy in the processes. But growth is never

continuous and eventually comes to an end. For a company which had been a market leader for more than a

decade is currently facing stiff completion from other firms which has emulated its strategies. Also the

stagnant economy is not helping the cause.

Thus it was planning to expand globally and penetrate to US and Japan markets. Although other countries in

Europe were new markets but for long term sustainability expanding globally could be the way. The Ansoff

Growth matrix is a tool that helps businesses decide their product and market growth strategy. Ansoffs

product/market growth matrix suggests that a business attempts to grow depend on whether it markets new

or existing products in new or existing markets. In this case Benetton attempts to penetrate into new markets

with its existing products and thus the strategy according to Ansoff matrix would be Market Development.

There are many possible ways of approaching this strategy, including:

New geographical markets; for example exporting the product to a new country

New product dimensions or packaging: for example

New distribution channels

Different pricing policies to attract different customers or create new market segments

But before entering into foreign territory, there are some factors that should be considered to check theviability. They are the political and legal, economic and cultural factors. And also

Must allocate the right resources Decide what to sell Decide where to sell Select the criteria for decision making Seek an acceptable equity share Acquire the right fit Design an exit strategy

Problem Statement

To develop a market development strategy for entry into US and Japan markets.


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Options

1. Benetton should setup a manufacturing facility at US and directly invest in the US markets2. Build a warehouse and keep inventory of finished products which would be shipped from Ponzano

factory

3. Use the supply on demand model to directly ship to their retail storesCriteria for Evaluation

1. Profit potential2. Degree of Uncertainty3. Availability of resources

Evaluation of Options

1. Benetton should setup a manufacturing facility at US and directly invest in the US markets1.1 Profit potential

The potential for profitability is huge as this is a untapped market with an economy boom and

a huge population. It could capitalize on the strong image of Italian design and thus catering to

this huge opportunity.

1.2 Degree of Uncertainty

There is a high degree of uncertainty as the Benetton group do not have adequate data about

the market and could result in a huge loss if not properly planned out the entry mode. Furtherthere would be completion from local players too and it was a unknown name here.

1.3 Availability of resources

Lack of proper data about US restricts any information regarding the availability of resources.

But the presence of other firms in the same sector to an extent confirms the availability of the

basic resources.

2. Build a warehouse and keep inventory of finished products which would be shipped from Ponzanofactory

1.1 Profit potential

In this case also the profit potential is high, again because of the largely unexplored market and

also large set up cost would be saved, which further could be used for other purposes.


The degree of uncertainty is again high but lower than option 1 as the huge set up cost is not

availed. This could help the Benetton group in slowly studying the US market and take the

appropriate steps according to its long term goal.



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Here the majority of the resources are shipped from Italy and thus it is not an issue, but the

shipping costs would be high.

3. Use the supply on demand model to directly ship to their retail stores1.1 Profit potential

Here the profit potential is the highest as there are no set up costs involved and only the

shipping costs are the major costs.


In this case the degree of uncertainty is reduced as the finished products are directly delivered

to the retail stores according to the demand.


There would be no concern regarding the resources as only the finished products are being

delivered directly to the retail stores. But in this case, they would be unable to study the

market and may fail to establish themselves in the US market.

Recommendation

Based on the above evaluation, we come to a conclusion that option 2 of building a warehouse and keeping

inventory of finished products which would be shipped from the Ponzano factory would be the best one.

Action Plan

Before exclusively investing in the US market, the Benetton group should build a warehouse, where they could

stock the finished products and supply accordingly. Simultaneously a board member of the group should try to

study the US market and identify the factors that would change the selling pattern. They should properly plan

their entry into their market either through franchising or through joint ventures. The marketing plan and the

product mix should be decided according to the local cultural and economical factors after an exhaustive

study. Accordingly a robust supply chain management should be implemented and proper inventory should be

maintained.

Contingency Plan

Suppose option 2 fails due to political factors or high competition, then they should resort to option 3

temporarily and again implement option 2 after a period of time.

Benetton Solution

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