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Man

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Module Leader: Roger Cook

Module Tutor: Susan King

Module Code: MS70069E

Student Number: 21202244

2014

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Table of Contents 1. INTRODUCTION ................................................................................................................................... 3

2. BENETTON GROUP SPA – THE MERCHANT OF VENICE ............................................................................... 5

3. INTERNATIONAL TRADE ......................................................................................................................... 6

4. BENETTON’S SUPPLY CHAIN .................................................................................................................. 8

4.1. BENETTON SUPPLY CHAIN AND ORGANISATIONAL INNOVATION .......................................................... 8

4.2. BENETTON SUPPLY CHAIN AND PRODUCTION FUNCTION .................................................................... 9

5. CONCLUSION .................................................................................................................................... 13

6. APPENDICES ..................................................................................................................................... 15

6.1. APPENDIX 1 .............................................................................................................................. 15

6.2. APPENDIX 2 .............................................................................................................................. 17

6.3. APPENDIX 3 .............................................................................................................................. 20

6.4. APPENDIX 4 .............................................................................................................................. 22

6.5. APPENDIX 5 .............................................................................................................................. 27

7. ACRONYMS....................................................................................................................................... 28

8. BIBLIOGRAPHY .................................................................................................................................. 29

3

1. INTRODUCTION

One of the most striking business trends that developed over the past four decades has been

the increase in business internationalisation. In essence, this strand of management emerged

to exhibit strategic thinking concerned with contemporary business issues galvanized, on one

hand, by competitive threats that constrain the strategic options for firms and, on the other

hand, by the search for new opportunities associated with globalisation. The former addresses

profound competitive challenges that have been driven by tight competition among companies

in domestic marketplace. In this respect, this has been brought about by a considerable decline

in the trade, investment barriers and the deregulation of national markets thereof facilitating

the process of business internationalisation transcending national borders. This, in turn,

created competitive threats to local business e so losing their market share to foreign

competitors. With regards to the latter, businesses strive to exploit lucrative opportunities

unfolded in emerging economies to increase their global market share or to capture first-

mover advantages. In addition, they can optimise the functionality of business operations by

lowering their overall cost structure through sourcing from locations with lower labour costs

and high performance capacity hence gaining economic and strategic advantages (Hill, 2011).

Thus, a rise of international business associated with a growth in international trade (imports

and exports) and a quantum leap in Foreign Direct Investment (FDI) are portrayed as a

response to the afore drivers of management to orientate their companies towards a global or

a transnational strategy. In effect, fostering strategies involving the configuration of

transnational networks of production, trade and finance could be considered the cornerstone

of the formation of the so-called Transnational Corporations (TNCs) (or Multinational

Corporations, MNCs).

One of the most notable archetypes of a TNC network is Benetton Group SpA, an Italian-based

fashion manufacturer and retailer. This report distils the rational and the degree of success of

its internationalisation and supply chain strategies. Benetton spans 120 countries with an

international retail network of over 6400 mono-brand stores that bear its name. In the same

vain, Benetton’s upstream organisational structure is manifested in subcontracting all the

labour intensive phases of production using a tiered structure of supplier networks and

contractors located near to its plants in Italy. However, in the early 1980s, the fierce

competition of emerging global rivals – Zara, H&M, and Gap –has induced radical changes into

4

the company’s operational strategy which embedded more strategic fit with regards to the

development of both its upstream – through a shift towards near-shore production in East

Europe and the Mediterranean rim since the 80s and Asia early this decade– and downstream

– by changing its market approach from relying primarily on franchising to rolling out owned

and directly operated 169 megastores worldwide hence gaining a closer relationship with its

clientele (Fernie& Sparks, 2004).

The synthesis and synergy of Benetton’s network model are built on the insights from

international trade, transnational analytical framework and supply chain management (Appendix

1). In the light of these perspectives, the following sections will illustrate Benetton’s international

business expansion and the development of its supply chain.

5

2. BENETTON GROUP SPA – THE MERCHANT OF VENICE

Benetton’s vision of fashion is rooted in the innovation of a unique organisational model in

production as well as an exceptional franchising system. This gives it a cutting edge to prosper and

expand its presence in 120 countries around the world (Table 1). Crafting a leading edge upon its

innovative facility to dye assembled apparel embeds a colour advantage that has articulated its

brand identity. That is, Benetton tied up the characteristic of its product differentiation to its main

brand that built around this theme as United Colors of Benetton which accounted for 82% of the

group’s revenue in 2009 (Palladino, 2010).

Benetton’s product range spans from casual knitwear and sportswear for men, women, and

children to upscale apparel. Benetton has penetrated all international markets with the same

products featuring brightly coloured clothing in wool, cotton and woven fabrics. In doing so,

Benetton relies on franchisees to exclusively sell its products, the majority of which are shipped

directly from its warehouse in Castrette, Italy. A global network of 84 independent agents takes

care of the distribution of merchandise and local coordination. Notwithstanding, these shops pay

no royal ties to Benetton, they are not granted an exclusivity of territory.

6

Additionally, Benetton accepts no stock return and imposes the retail price and while retailers

work with a limited mark-up, their turnover can be sizeable if sales volume is high (Crestanello &

Tattara, 2009). Furthermore, Benetton, in its endeavour to exert control on its brand identity and

attain a global image, adopted a marketing strategy to brand a total look that extends beyond

offering same products by creating same ambience through having the shops standardised

(Belussi, 1987).

3. INTERNATIONAL TRADE

Benetton’s founder, Luciano Benetton, established the company when he spotted untapped youth

market for high quality colourful knitted sweaters to be sold at affordable prices in the mid-1960s

(Rothacher, 2004; Werdigier, 2012). Benetton opened its first shop in 1966 in Belluno – in the

Italian Alps. Three years later, it opened a store in Paris marking the company’s pattern of

international expansion in which Benetton has engaged right from the beginning to accelerate

growth by pushing sales through a large constellation of outlets worldwide (Table 2). Its

Table 1:

(Adapted from Plunkett, 2013)

7

commercial strategy aims at guaranteeing retailers for its production1 and at reducing risk and

uncertainty associated with entry into new markets.

Over the next decade, its international strategy was underpinned by a gradual expansion with

stores opening in other cities in Europe2. Yet by the end of the 1970s saturation of the Italian

market, in terms that the company opened about 1000 shops over this period, induced rapid

growth abroad in which export share consolidated 40% of total output (Table 2) (Palladino, 2010).

Since the 80s, Benetton adopted a pioneer approach to new markets namely in the Americas (NY)

and in Asia (Japan), to build awareness of its brands and fill strategic positions to sustain its

competitive edge over major rivals (Appendix 2).

1 Its production strategy entails a make-to-order approach whereby almost its whole production is in response to orders from

its retailers. It does not produce for stock (Belussi, 1987) 2 Germany, United Kingdom, Holland and Belgium (Andreiadis et al, 2004)

Table 2:

(Belussi, 1987)

8

4. BENETTON’S SUPPLY CHAIN

Benetton has grown phenomenally since its establishment by the Benetton siblings3. The company

ascribes its success to its Supply Chain Management (SCM) and the velocity with which it is able to

process and deliver orders. Simchi-Levi et al (2000 cited in New & Westbrook, 2004) define SCM as

A set of approaches utilised to efficiently integrate suppliers, manufactures,

warehouses and stores, so that merchandise is produced and distributed at

the right quantities, to the right locations and at the right time, in order to

minimise system-wide costs while satisfying service level requirements.

Given the importance of supply chain, Benetton has incessantly developed its supply chain to be

able to compete effectively in one of the most volatile industries – Fast Fashion industry – which is

characterised by short product life cycle (Nawaz & Saleem, 2009).

Benetton’s strength in matching the supply with the demand at its ubiquitous trading outlets is

pinned on innovation-orientation in production functions – product differentiation, R&D

innovative solutions and manufacturing operation – and organisational coordination (Palladino,

2010) for effective, spatial proximity4 and timely product delivery to markets. From the very

beginning, Benetton has set the business milieu of the fashion industry in terms of networked

manufacturing systems as well as a global network of sales distributions long before strategic

alliance became fashionable (Dapiran, 1992) (Appendix 3).

4.1. BENETTON SUPPLY CHAIN AND ORGANISATIONAL INNOVATION

The objective of Benetton’s SCM is to provide operational flexibility for QR (Quick Response) to

better meet the customer’s latest tastes as competition in the fashion industry is time-based. In

doing so, Benetton has been relying heavily on subcontracting high volume and low variety

production processes while it retains its core competence production activities in-house. The

large network of small local subcontractors is facilitated by approximately 220 employee family-

owned contractors (New & Westbrook, 2004). Outsourcing operations, such as knitting and

assembling Benetton’s garments, embodies significant reduction in labour costs with saving

estimated to be around 40%, while labour productivity is about 10% higher than in-house

3 Luciano was the company chairmen until his son Alessandro took over to run the family business in 2011. Giuliana, Gilberto and

Carlo Benetton turned a small family business in the 60s into a transnational empire in less than 20 years. 4According to Dickens (2011), it is a means of reducing transaction costs, minimizing transportation costs or reducing some of the

uncertainties of customer–supplier relationships.

9

production activities (Belussi, 1987). The efficiency of this partnership’s synergy is manifested in

constituting specialisation to optimise each stage of the production supply chain. This structure

is characterised by outward processing model in which subcontractors are provided the raw

material delivered from Benetton’s central pole in Italy with a precise technical schedule

(Palladino, 2010).

Benetton’s innovation in business organisation is intensified in its system, according to

Chiodini5 statement “Benetton’s real product is the system” (cited in Foster, 1993). Hence,

Benetton is renowned for espousing a strategy that emphasises the synthesis of the network on

the supply side as well as the demand side –which delineates its retailing innovation through a

chain of global franchised outlets to gain wide exposure in new markets. For almost three

decades until late 90s, Benetton showed considerable entrepreneurial skills in reconciling the

organisational dichotomies of achieving flexibility added to the value chain through synergies

and, at the same time, exert tight central control on the entire value chain (Appendix 4).

4.2. BENETTON SUPPLY CHAIN AND PRODUCTION FUNCTION

Process Innovation:

In 1972, Luciano devised a major break-

through in the clothing industry which is a

dyeing postponement technique (Figure 1)

(Belussi, 1987). It involves delaying dyeing the

entire stock until a demand for particular

colours is evident from POS (Point of Sale).

This increased the efficiency and effectiveness

of the supply chain by lessening inventory and

enabling faster distribution to attain just-in-

time deliveries.

While Benetton reaped a cutting edge for this

advanced technique, it was far behind in adapting to the changing demands of its

customers.

5 He is director manager of Benlog, Benetton’s logistic division

Figure 1 -

(Palladino, 2010)

10

Figure 2 - Benetton Dual Supply Chain

(Benetton Group, 2011)

As a result, at the beginning of 2000, it revamped its supply chain by deploying a Dual

Supply Chain (DSC) model as outlined in Figure 2 (Appendix4).

By doing so, Benetton is considered a market-driven company for embracing a global QR

approach to meet the variable fashion demand of the customer.

Production and Logistics Operations:

It was at the beginning of the 80s that Benetton partake near- and offshore production

processing. This was accelerated as a result of pegging the lira in 1995 which made goods

produced in Italy predisposed to an increase in its costs rather than transfer this cost to

exported goods Benetton started to relocate production to low-cost locations and set up

affiliates in tune with high competences available in these countries. A great shift incurred

in 2004 in which Benetton outsourced production to China. Asian partners supply what is

called full package production; in essence, they exercise a great autonomy in all facets of

this type of production which is in contrast with production in other foreign poles (Table 3).

11 (Camuffo et al, 2001)

Benetton’s sequential tier of its DSC is characterised by make-to-order production. In 1986,

as growth accelerated, Benetton created a primary pole to manage production, logistics and

distribution. This consolidated central shipping centre has saved 20% on transportation

costs (Kong & Alan, 2007).The automated production pole at Castrette is organised in five

technical divisions, each specialised in producing one of the casual and sport clothing in

addition to the accessories production (Johnston et al, 2003). The flexibility and speed

characteristics of the manufacturing process are contributed to the use of CAD/CAM

technologies. Also, all purchased raw materials are stocked in Treviso’s fully robotized

warehouse whereby the average stock is 20 days. Castratte pole’s overall production

capacity in 2009 was about 150 million items (Palladino, 2010). Interestingly, its model has

been replicated abroad. Benetton has 32 factories, 22 in Italy and the rest abroad (Table 4).

Table 3:

Table 4 - Benetton’s foreign production poles

(Camuffo et al, 2001)

12

Figure 3 - Production & Logistic organisation

(Benetton Group, 2011)

Benetton restructured its operations in accord with the development in its production. It

highly invested in modelling and automation of its logistics in an effort to integrate the

production cycle to retain direct control over the entire supply chain. As such, Castrette’s

state-of-the-art logistics system is able to handle10.000.000 items/month with workforce of

only 28 (Ghezzi, 2009). The 300,000 incoming boxes to the warehouse from either

underground conveyor or 50 receipt bays have a RFID chip. Moreover, shipped boxes are

handled through WIDE facility (Foster, 1993). The 360 degree function of this distribution

system involves also invoicing and payment operations (Appendix 5).It is worth noting that

Benetton adopts hedging in order to manage currency exposure.

All products from its foreign poles are shipped to Castrette’s hub for final shipment

preparation and distribution to the outlets (Figure 3). However, almost all production in

India is sold in its internal market while the rest of the Asian production is imported to Italy.

13

(Ghezzi, 2009)

To reduce the number of delaying interfaces, Benetton has gradually increased upstream

vertical integration whereby, at the end of the 80s, it fully owned subsidiary Olimpias which

is its main raw material supplier. Thus, raw material could be supplied directly to regional

poles with no further delay to rationalise its operating cycle. Thereof, Benetton’s vertically

integrated supply chain streamlines its value chain through a DSC system. As a result,

Benetton operates as OEM (Original Equipment Manufacturer) that ties up a structure of

suppliers and retailers networks (Figure 4).

5. CONCLUSION

The radical shift in Benetton’s production strategy to follow the Asian route mid this decade,

stemming from global intense competition, has articulated Benetton’s new trend towards an

organisation of activities (such as design, marketing and others) rather than a construct of

production which coincided with increasing the number of owned stores to have direct interaction

with customers. To further enhance its competitiveness, Benetton is moving towards

decentralisation hence particular contractors can carry out some in-house quality control

activities.

Benetton’s strategic thinking has opted to leverage technical know- how at every transition stages.

Benetton’s agents, suppliers, subcontractors and affiliates have knitted a global integrated value

chain network, whereby ICT facilitates the flow of communication for daily influx orders from

outlets to design, production arrangements and later the distribution through major carriers and

in-house forwarder. This business configuration has attributed to having a constant flow of new

Figure 4 -

14

garments to stores and that is estimated to be 8 fashion collections on top of the two basic fashion

seasons.

Leveraging industry know-how and innovative operations that constitute its FSAs (Firm-Specific

Advantages) has led Benetton to use FDI to establish footholds in countries offering fiscal

incentives and low cost labour as part of its CSAs (Country Specific Advantages) (Appendix4),

hence boosting its competitive advantage.

15

6. APPENDICES

6.1. APPENDIX 1

In effect, the evolution of international trade can be tracked to two distinctive realms. The

former is the purely chronological world history of trade which trails over four millennia

ago. In this context, a coherent body of economy theory starts to emerge to provide a

compelling rationale for trade as an engine of economic growth. Advocated by the doctrine

known as mercantilism in the mid-16th Century, it was in a country’s best interests to export

more than it imported and, by doing so, it maintains a trade surplus resulted in inflow of

gold and silver (Hill, 2011).

One early response to the shortsightedness of the mercantilism’s assumption of a zero-sum

game was forged by the endeavour of Adam Smith. In his seminal book, The Wealth of

Nations (1776), he sets out the theory of absolute advantage6 . Building on Smith’s work,

David Ricardo codified the law of comparative advantage7 which rests at the heart of the

case for free trade (Mentzer, 2004).

In the 20th century, Ricardian’s model was refined by Eli Heckscher (1919 cited in Hill, 2011)

and Bertil Ohlin (1933 cited in Hill, 2011) whereby the notion of comparative advantages is

embodied in the countries’ factor endowments8. In conjunction with this, Benetton – one of

the largest retailers in the world (Table A) – was founded in Ponzano Veneto, in the Treviso

Province, Italy. Treviso has been an important textile area in Italy, and its largest producer of

garments (Fashion Italian Style, 2014). In the teeth of intensive competition, these Italian

producers have pursued a strategy of product differentiation (Dicken, 2011) that

incorporates the customer’s specific needs to maintain its position in the market and

stimulate sales growth (Kong & Alan, 2007). Inevitably, the strong global shift in the clothing

6 He proposed that a country would tend to specialise in international trade whereby they exported goods

over which they had an absolute cost of advantage while they imported goods over which they had an absolute disadvantages (Narotama University, 2011). 7Ricardian’s comparative advantage offers an explanation in terms of international differences in labour

Productivity (Hill, 2011). The underlying force of this model is the key economic concept of opportunity cost which Tayeb( 2000, cited in Mentzer, 2004) defines as “ the price of one good expressed in terms of the amount of the other good needed to forego in order to purchase it”. 8 It’s concerned with the availability of land, labour, raw materials and capital which a country is endowed with

(Mentzer, 2004).

16

(Andreiadis, 2004)

industries enhanced by the abolition of clothing quotas9 in early 2005 (Dicken, 2011) has

attributed to a drop in the Italian export from 50% in 1997 to 17% in 2007 (CIPS, 2014).

The latter is the process by which nations and individual firms within nations gradually

internationalise their business as part of the normal process of economic development.

Using indices of Hymer’s pioneer work in the 1960s and Dunning ‘eclectic (or OLI) paradigm’

(Table B), in this context the possession of some firm specific advantages – which are those

of economies of scale10, product differentiation or brand name, marketing skills and the like

– is a prerequisite for a firm to operate abroad (Dicken, 2011).

9 The Multi-Fibre Arrangement (MFA) regulated most world trade in textiles and clothing. Within it, individual

quotas were negotiated setting precise limits on the quantity of textiles and clothing that could be exported from one country to another (Dicken, 2011). 10

It reflects large size whereas Dicken (2011) argued that TNCs come in all sizes drawing from the phenomenon of new ventures starting out as transnational operations from the very beginning.

(Rugman & Collinson, 2012)

Table B -

17

6.2. APPENDIX 2

Benetton, the McDonald’s of Fashion as it has been called, expanded its sales abroad from

the very beginning through the creation of franchised outlets which was a milestone in the

retailing history adopted by Benetton as the first Italian firm (Aswathappa, 2010). These

shops forward their orders to their area sales agent who assists about 50 to 100 shops as

well as oversees all aspects of merchandising (Jacques, 2006). To better coordinate and

monitor these distant businesses, obtain more information about consumer preference, and

reinforce a quick response with regards to the changing fashion trends, Benetton employs a

Figure A: Benetton’s Time Line

(Adapted from Benetton Group, 2011)

18

team of area managers to facilitate its relationship with its distribution channels (Benetton

Group, 2011).

Benetton’s agents set up an agreement of relationship with these shops and link these

shops to the HQ in Treviso, Italy via an EDI (electronic data interchange) system – this

system is adapted to align with different language requirements (Donaldson & O’Toole,

2007) – which is critical for efficient replenishment (Palladino, 2010). Benetton’s agents, in

turn, are paid 4% of the sales turnover from shops in their territory. They are also

encouraged to invest and be store owners hence receiving profits from the shops they own.

Lending credence to the formation of EU (European Union) that enacted gradual elimination

of tariffs, quotas and other trade barriers among its members (Rugman & Collinson, 2012),

Benetton leveraged intra-regional exports and the rest of European countries became its

second biggest market to date – considered Benetton’s home market (Figure B).

Even though Benetton’s international expansion in Europe was a success, it was not the

same in the American market. The late 80s entailed a deadlock of its breakneck expansion,

thereof it consolidated its 800 shops to have 150 remained. This was due to targeting the

wrong segment (The Economist, 1994) as well as to encouraging more than one franchisee

to open their shops in the same street while it failed to supply them adequately. This made

these shops file suits against the company which caused the decline in the number of shops

in the world's most competitive retail market (Andreiadis et al, 2004).

Having strong bonds with Europe, Benetton opened stores in South America since the mid-

1980s. One of the most significant distribution agreements is the one made with Sears

(Palladino, 2010)

Figure B - Benetton’s Sales by Region

19

Mexico to sell Benetton’s products with a total of 250 points of sale in its department stores

and other new stores (Inbound Logistics, 2008).

While the like of Zara and H&M expanded their presence in the 1990s in Europe taking

advantage of EU regulation, Benetton penetrated the Asian market to sustain sales growth.

With 106 shops, Benetton entered the Indian market since 1990 through a joint venture

with the DCM Group (Crestanello & Tattara, 2009). Adjusting its marketing strategy in 2004,

Benetton embraced a 100% owned subsidiary. Parallel to this, it signed a partnership

agreement in 2007 with Tata Group Company to distribute Benetton’s fashion-oriented

brand, Sisley (Business Line, 2007). Today, India is deemed Benetton’s largest market after

Europe with turnover growing from $100m in 2009 to $200m in 2012 (The Economist Times,

2009; The India Expert, 2013). In the same vein to enter the Chinese market, Benetton went

into joint venture with Hemply International Company to sell its Italian apparel into 300

stores (The Economist, 1994; Crestanello & Tattara, 2009).

Dicken (2011) postulates a generalised sequence of development through which a

business’s international expansion is incurred to commercialise its products, the model per

se is a remarkable embodiment of Benetton’s business evolution (Figure C).

Figure C -

(Dicken, 2011)

20

6.3. APPENDIX 3

Benetton’s organisation flow is engineered in contest with the configuration of TNCs as

‘network within networks’ advocated by Dicken (2011) (Figure D).

The Headquarters in Treviso, Italy, retains tight control to the supply chain of key operations

such as some intermediate quality controls, inter alia controlling direct distribution of

products to its outlets globally (Palladino, 2010) as well as overall control of every aspect of

product sales. Benetton’s partners (agents, subcontractors, foreign production, suppliers,

carriers and forwarders partners) form the different networks depicted in Dicken’s analysis

of TNC formation of networks.

Figure D -

(Dicken, 2011)

21

Dicken (2011) posits that:

22

6.4. APPENDIX 4

The success of Benetton in Italy induced exports to neighbour countries which was met with

tremendous success. Figure E explicates Benetton’s business expansion strategy. In this

model, Dicken (2011) envisages a series of stages in which an incremental development

incurred. The use of exports is the initial entry mode to enter international markets. In

Benetton’s case, the early stages of export sales were supported by independent sales

representatives, while it was only in 2000 that Benetton established megastores worldwide

alongside its franchised outlets to directly capture customers’ preferences. It has taken a

new challenge by working on a project to shift its franchised retail system into direct sales

network through owned and operated outlets worldwide. This Retail Project implies fully

integrating its downstream operations.

Benetton sales channels comprise wholesale which accounts for 74% of Apparel sales

through franchised outlets, while Retail sales through owned stores accounts for 26% of

total sales (Figure F).

Figure E -

(Dicken, 2011)

23

(Benetton Group, 2011)

Foreign Production Poles

It was only in the 1982 that Benetton involved in FDI through production centres in France,

Scotland and Americas – the latter was closed down and was replaced with another plant in

Mexico. From the very beginning, Benetton capitalised on low-cost production in terms of

labour wages being relatively much lower compared with other West European countries.

Moreover, the weak Lira exchange rate spurred export with growth in sales. Hence, the

growth in sales volumes in many European countries urged for production abroad.

Furthermore, Benetton encountered challenge to reduce production costs as per the

country devaluated the Lira hence export prices increased. To avert this increase, Benetton

outsourced its production to East Europe to take advantage of the policies of EU, ECE

(Eastern and Central Europe) and the Mediterranean rim and benefit from geographical

proximity and fiscal incentives. Hence, it opened its production centres in countries like

Hungary, Rumania, Croatia and Tunisia.

Figure F - Distribution Channels over 6,500 stores in 120 countries

24

( Crest ( Crestanello &Tattara, 2009)

To sustain its position in the intense price competition, Benetton in 2004 established

production affiliates in low-cost locations in Asia. The low cost is drawn from having the

value of these countries’ currencies bound by the weak dollar. As a result, production in the

Italian centres declined from 38% in 2003 to 10.5% in 2007 (Figure G) (Palladino, 2010).

The production system, hence, is constructed into two approaches: Own industrial

production constitutes production in Italy, East Europe and Mediterranean rim. This

approach relies on subcontractors who have small to medium size enterprises, they only

outsource Benetton. The relationship with them is built on trust and collaboration.

However, they strictly follow Benetton’s production guidance and receive raw materials

with the exact quantity. In 2007, the number of the Italian subcontractors reduced and

further the volume of activities by the rest decreased, thus expanding their client’s portfolio

(Palladino, 2010).

The second approach is the commercial model which is based on production in China,

whereby great autonomy is guaranteed from raw materials to production operation.

Another form of Benetton’s FDI is its agricultural enterprise in Argentina which owns

900,000 hectares with 28,000 of sheep. In this light, they are guaranteed raw materials of

wool direct to their Olimpias centre in Italy, hence a complete control on its value chain is

achieved (Crestanello &Tattara, 2009).

G

25

( Crest (Kong & Alan 2007)

Supply Chain

In the light of Benetton’s complex operational structure, its supply chain went through a

lengthy development (Table C). The dual supply chain model incorporates a “Speculation

and Postponement” construct in which retailers need to anticipate 80% of the new seasonal

collection as much as 8 month in advance, while the 20% is designed through the season as

an efficient replenishment – the so called Evergreen collection (Cheng & Choi, 2010) to

reflect customers’ preference for special colours (Mentzer, 2004). These flash collections are

driven by the postponement pull-demand focused supply chain.

The re-design of the flash collections has contributed to the streamlining of its brands.

Benetton further enhanced its collections timetable by introducing more Evergreen

collections along the two regular seasonal collections which is named as Contemporary1

and Contemporary2. These Evergreen collections in this new organisation constitute a

collection named Trend with an order cycle of 20 days. Just in Time and Continuative items

are shipped on a 7-day order cycle (Figure H).

C - Timeline of supply chain developments highlights

26

( Crest ( Crestanello &Tattara, 2009)

Hence, Benetton is a good example illustrating Dickon (2011) Product Life Cycle (PLC) as

shown in the centre of Figure E.

H

27

6.5. APPENDIX 5

(Ghezzi, 2009)

28

7. ACRONYMS

CAD Computer-Aided Design

CAM Computer-aided manufacturing

EDI Electronic Data Interchange

POS Point of Sales

RFID Radio Frequency Identification

TNCs Transnational Corporations

WIDE Worldwide Integrated Distribution Enterprise

29

8. BIBLIOGRAPHY

Andreiadis, E., Iancu, A., Baciu, I. &Pilsu, M. (2004) United Colors of Benetton – Case Study

Aswathappa (2010) International Business 4E, Tata McGraw-Hill Education

Belussi, F. (1987) Benetton: A case-study of corporate strategy for innovation in traditional

sectors [Accessed on 20th May, 2014] https://www.academia.edu/980969/Benetton_a_case-

study_of_corporate_strategy_for_innovation_in_traditional_sectors

Benetton Group (2011) Value Chain [Accessed on 15thMay 2014]

http://www.benettongroup.com/value-chain/index.html

Business Line (2007) Trent, Benetton join hands for strategic partnership [Accessed on 20th May,

2014] http://www.thehindubusinessline.in/bline/2007/09/19/stories/2007091951220500.htm

Camuffo, A., Romano, P. &Vinelli, A. (2001) Back to the Future: Benetton Transforms Its Global

Network [Accessed on 25th May, 2014] http://sloanreview.mit.edu/article/back-to-the-future-

benetton-transforms-its-global-network/?use_credit=f9fd2624beefbc7808e4e405d73f57ab

CIPS (2014) Improving the competitiveness of Supply Chains, Advanced diploma in procurement

and supply - Case Study.

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