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BENETTON(A)BY Prof. Sergio Signorelli & James L. Heskett
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CONTENTS
SITUATION ANALYSIS
PROBLEM STATEMENT
OPTIONS CRITERIA FOR EVALUATION
EVALUATION OF OPTIONS
RECOMMENDATION
ACTION PLAN
CONTINGENCY PLAN
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World leader in knitwear
Increasing competition in Italy and Europe fromfirms emulating elements of its strategy
Saturation point in Italian markets
Stagnant economy
Reducing profits and accumulating inventories
Immense opportunities for the company to expandin European Market
High competition coupled with unknown brandname in U.S. markets
SITUATION ANALYSIS
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PROBLEM STATEMENT
How to deal with current market saturation and
increasing competition
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OPTIONS
Enter the US markets now
Concentrate on consolidation of European
markets now and enter the U.S. market later Enter the Japanese Market
Diversify Product lines in Italy
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CRITERIA FOR EVALUATION
COST
COMPETITION
MARKETING CHALLENGE GLOBAL ECONOMIC CONDITIONS
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EVALUATION OF OPTIONS
1) ENTER NOWCOST:
Huge initial investment- $70000 for each small shop
Higher labor cost(50%)
Cost of promotion ($2 MILLION) Cost of distribution-$10 million to set up a new plant, loss
of inventory savings to set up new warehouse, increasedtransportation cost if direct distribution
MARKETING CHALLENGE: Setting up a distribution channel
Media planning and allocation
Increasing popularity of Italian Brands in U.S.
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COMPETITION:
Stronger competition from existing players like Levi Strauss Stronger media presence of competitors($100 million on
advertising)
No brand presence of Benetton
American preference for easy-to-care garments, butBenetton- CORE COMPETENCE- natural fibers
Greater scope in U.S due to large size of market
GLOBAL ECONOMIC CONDITIONS: Recession
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2) CONSOLIDATE IN EUROPE NOW ANDENTER U.S. MARKET LATER
COST: Setup costs lower- can leverage on existing network
Lower labor costs
Higher inventory savings
Lower promotional costs as Benetton name already known Cost of conducting preliminary research of the US market
simultaneously
MARKETING CHALLENGE:
Easier
Product- better command on European fashion
Price- lower cost- lower price
Place- easy to set up a distribution channel, leverage on existingnetwork
Promotion- Benetton brand presence in Europe
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COMPETITION:
Potential to exploit market of European countries
Also important to consolidate in core Italian market
Intense competition in U.S.
GLOBAL ECONOMIC CONDITION:
Less risky to enter stagnant European market than recessionaffected U.S. Market
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3)ENTER JAPANESE MARKET
COST:
Low labor Cost in Asian marketLess Technology Cost
Set-up cost
COMPETITION:
More competition from local brands-prefer silk clothesMARKETING CHALLENGE:
Setup distribution Channel
Language Barrier
Brand Promotion difficultNo similarity between Japanese and European fashion
Aging Country-less youth
GLOBAL ECONOMIC CONDITIONS:
Asian countries less hit by recession
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4) DIVERSIFY PRODUCT LINES IN ITALYCOST:
Innovation cost
Promotion CostMARKETING CHALLENGE:
More advertising and promotion required
Can leverage on existing network
COMPETITION:High competition from existing brands of the product lines
being introduced
Not our core competency
GLOBAL ECONOMIC CONDITIONS:
Stagnant economy
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RECOMMENDATION
After assessing all the options, it is recommended that
Benetton:
should identify other potential European markets like
France and Belgium where it can expand its base
should not enter American markets at present and
should look at entering these markets at a later and
more appropriate stage
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ACTION PLAN
Identify potential European markets where we can sell
our products and hence expand our base.
Culture-specific product offering and store formats
Excess inventory of Italian market can be distributed
in other European countries without incurring massive
costs.
Gather information about American markets throughproper market research for future purposes.
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CONTINGENCY PLAN
In case of an unwelcome and unexpected event, we
would reanalyze our action plan and would diversify
our product lines in Italy