Benetton(A) Case

7/29/2019 Benetton(A) Case

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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

Benetton(A) Case

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