Benetton Case Study Essay, Research Paper

ORGANISATION DESIGN

CASE STUDY: & # 8220 ; Constructing The Benetton System & # 8221 ; , Werner Ketelhoehn.

Benetton, holding been around since 1965 has had some monolithic alterations and events to react to and so I feel that a timeline of the events since the company was founded to be of important usage.

1960 & # 8217 ; s ; Development of Lucianos competitory advantage ( discussed subsequently ) .

1965 & # 8211 ; Benetton was founded and the first mill was opened in Ponzano.

1966 & # 8211 ; Widening of the bing company-subcontractor relationship.

1968 & # 8211 ; First Italian shop opened in Belluno.

1969 & # 8211 ; First foreign store opened in Paris.

1970 & # 8217 ; s ; The Benetton Group enlargement to stand for a household of trade names which include 012, Sisley and Jeans West.

1970 & # 8211 ; Hasten enlargement by constructing upon the partnership system developed in Italy.

1972 & # 8211 ; Revolutionary production system refering garment dyeing ( discussed subsequently ) .

1975 & # 8211 ; & # 8216 ; Benetton & # 8217 ; logo becomes a good known retail symbol and their merchandise scope is expanded to include the 30+ age group.

1980 & # 8217 ; s ; The growing scheme of Benetton was based around the acquisition of subcontractors and natural stuff providers.

1983 & # 8211 ; Advertising and sponsorship run in readying for the planetary launch.

1985 & # 8211 ; Marketing of kids & # 8217 ; s stationary with the Benetton logo on the merchandise.

1986 & # 8211 ; Marketing of Benetton tickers.

1988 & # 8211 ; Franchisees can now choose from a pick of 12 store layouts. Benetton now have 5000 stores around the universe and there are programs being made to do Rocky Mount ( NC ) the distribution installation for the US market.

1989 & # 8211 ; Benetton have a sum of 80 agents ( internally known as Centurioni ) .

Benetton & # 8211 ; A Unique Approach.

One thing became evident whilst reading through the instance which is the figure of things that Benetton do which are seen to be alone to themselves.

Take first and foremost, right from the beginning when Guiliana began to utilize her knitting endowments bring forthing bold, bright coloured jumpers that were radical at that clip. The quotation mark I should mention you to here is the 1 from page 2 of the instance ; & # 8216 ; what Luciano and Guiliana have invented was a slipover for a season or a twelvemonth, non a traditional slipover for life & # 8217 ; . Even before officially organizing the company, Benetton was traveling against the norm of the industry and this has carried right through until present yearss where the & # 8216 ; United Colors of Benetton & # 8217 ; slogan has landed them in some instead warm H2O with accusals of flavorlessness to call but one class.

Further major countries that Benetton have appeared to harvest the wagess in that are alone to Benetton, are foremost technological consumption, and secondly the partnership systems in topographic point with the Centurioni and the store proprietors. I shall return to these countries subsequently under a separate header as I believe that these inventions were of paramount importance to the success of the Benetton Empire.

In the early 1960 & # 8217 ; s, Luciano developed a important competitory advantage by set abouting a figure of somewhat different thoughts ; selling merely through specialised knitwear shops and selling his merchandises at a 10 % price reduction if the retail merchants paid hard currency on bringing. Furthermore, he sort to maintain his costs to a lower limit ( because of the troubles associated with borrowing ) by set uping subcontractor understandings ( revisited subsequently ) and up-taking employee suggestions, note the illustration on page three refering the purchasing and converting of disused machines.

The following point alone to the Benetton system is the find that, if a 2nd Benetton shop opened across the street from another, gross revenues for both expanded. This, it was believed, was due to the being of intra-Benetton competition, which was created by the groupings of shops in one location.

Agents, as wages for their committedness and motive were gaining a tidy amount but were greatly encouraged to reinvest the net incomes for the benefit of Benetton and for the agents. The agents note themselves that the rise to the top where you physically ain stores is a speedy rise. On page four of the instance I refer you to the quote 4th from underside which says that fundamentally from September to July an agent had gone from non having a store to holding five stores of his ain.

Finally, I have already briefly discussed Benetton & # 8217 ; s radical, and possibly misunderstood, & # 8216 ; United Colors & # 8217 ; run. They have besides furthered their controversial image with the art manager bring forthing communications postings with images of a deceasing AIDS patient and a nun snoging a fine-looking priest. The & # 8216 ; Colors & # 8217 ; run went against the initial Benetton individuality of cultural diverseness, racial harmoniousness and universe peace. In making so the run had assorted success by utilizing the medium of Formula1 and print media. The success came in the signifier of increased promotion and visibleness but it was seen as damaging in Germany ( Benetton & # 8217 ; s 2nd largest market ) where finally the Benetton trade name was boycotted partially because of the controversial advertizements. Sport continues to play a cardinal function in Benetton with the sponsorship at Olympic Games, Italian rugger and skiing to call a smattering.

The angle I & # 8217 ; ve taken for the initial phase of the analysis has been one that has made Benetton out to be alone. In understanding with this I feel that this following quotation mark from a Benetton connected web-page is really disposed ;

& # 8220 ; fostering a healthy discourtesy for tradition has powered the relentless progress of Benetton. & # 8221 ;

Entrepreneurial Dynamism and the Benetton & # 8216 ; Hand

Shake’ .

Benetton & # 8217 ; s enterprisers are seen to be at the head of the Benetton concern as you would anticipate. These agents were basically separate entities as they were non straight employed by Benetton. This yielded some fine-looking wagess for them as it meant that the agents were responsible for their ain franchises and success or failure was ever down to them. Having said this, it doesn & # 8217 ; t seem like failure for an agent is an option with the elaborate phases Benetton went through to acquire the right people to be agents.

The agents arranged their ain finance but in return they didn & # 8217 ; Ts have to pay royalties. Luciano spent tonss of clip analyzing the assorted picks of agents and steadfastly believed that & # 8220 ; Choosing the right individual warrants consequences & # 8221 ; ( page 4 ) . The Benettons & # 8217 ; were such trusters of the agents function that it progressed through clip to include a overplus of extra undertakings.

By the Benetton & # 8216 ; Hand Shake & # 8217 ; I am mentioning to the assorted partnerships they have in topographic point. The major understanding to observe is the 1 between the agents and Benetton, with the undermentioned quotation mark summing up what I am seeking to demo, & # 8220 ; We are Benetton agents and we are at the disposal of the store. We work Saturdays and we work 12 hours a twenty-four hours & # 8221 ; ( page 4 ) .

Luciano besides devised subcontractor understandings. In return for their investment in fixed assets and a promise to work entirely for Benetton, he provided the subcontractors with a changeless watercourse of work. Pages five and six are full of illustrations of the development of subcontractor relationships, one of which is where the Benetton direction persuaded some of the misss & # 8217 ; female parents to organize groups and set up themselves as independent contractors.

The agents, subcontractors retail merchants and Benetton formed rather a formidable partnership throughout the 1960 & # 8217 ; s and onwards and go on to turn and thrive.

Technological Uptake at Benetton.

Benetton have remained competitory in Italy due to the monolithic development of engineering ensuing in a batch of the competition being forced to relocate abroad. Mentioning to the instance, the radical production system in topographic point at Benetton was merely one facet of the concern topic to technological progress. Colour became the most critical manner factor which led Luciano to follow a system that would fabricate complete garments in whitish wool leting them to dye them at a ulterior day of the month harmonizing to the market information. Though more expensive, it was besides more profitable.

Finally I will take a brief expression at the technological invention employed at the works in Castrette. An machine-controlled distribution Centre incorporating a system capable of spliting bringings into the finest of item such as single client is in topographic point. Automatic packaging and an automated distribution system have meant that efficiency and velocity of client service has improved combined with a decrease in the conveyance costs. A province of the art fabrication system adds value by making design, cutting and quality control. This is merely the tip of the iceberg but adequately reflects Benetton & # 8217 ; s stance on new engineering.

Directions of Development at Benetton.

The Italian market is now saturated and the Benetton imperium is non content, they have no pick if they want to develop, they must travel farther afield onto the remainder of Europe, the Americas and so the universe.

Benetton in order that they developed, chose to diversify into new markets and research new countries in bing 1s. With this scheme in head Benetton undertook both related and unrelated variegation. The differentiation between the two types of variegation above is merely that related variegation refers to development within the confines of their bing markets and unrelated is the opposite. Examples of such variegation & # 8217 ; s can be seen with foremost, the debut of Nordica or Killerloop which arguably can be viewed as an enlargement of their bing market. Although these markets could be seen as more specializer and athleticss orientated, I still believe that there is a great trade of convergence in this and the manner market. As Luciano says on page 3 of the instance & # 8221 ; We wanted to vie with section shops in athletic wear & # 8221 ; . Looking at the variegation into countries such as merchandiser banking, this is far beyond their bing markets and so is an illustration of unrelated variegation.

Synergy is a common ground for related and unrelated variegation and is said to happen when two or more complementary activities, do so to the extent that their combined consequence is greater than the amount of the two parts. Benetton claimed that there were synergisms to be exploited from their variegation following the impregnation of the Italian market. Benetton wanted to happen new frontiers in old markets and to diversify into wholly new markets. Benetton & # 8217 ; s acquisition of supermarkets and hypermarkets meant that their synergisms came from the fact that there were consumers who would buy from all three.

Everything that has been covered in the analysis from technological consumption to the more theoretical impressions of Synergy has wholly contributed to the success of the Benetton Empire across the Earth. Coming back to the alone thought in the initial phases of my analysis, I think in drumhead the whole Benetton system is the cardinal factor of its success. The alone entrepreneurial system that is so different from the type in topographic point at & # 8216 ; The Body Shop, with Anita Rod*censored* , created the thrust and committedness of the non royalty paying enterprisers. Not the stereotyped franchise, a great trade of clip and attempt went into the choice procedure for the enterpriser & # 8211 ; one of the Benetton success factors.