Benetton Case 2012

1. Written Analysis and Communication
(WAC)
Assignment 3
(Benetton Group S.p.A., 2012)

2. Executive Summary
Benetton Group, a global fashion brand controlled by the Benetton Family via Edizione
Holdings, is one of the World’s leading apparel designers, manufacturers and marketers. The
group experienced a growth boom in 1980s and 1990s, which it could not sustain for long and
went into a phase of sluggish sales in 2000s. In this report the core strengths of the company
have been examined along with the factors that highlighted the brand in the past. Possible
ways to revitalize the company have been evaluated against the criteria like effect on long-
term growth, market share and brand image. The recommended solution is provided in the
end along with the necessary action plan.
Word Count: 111

3. Table of Contents
S. No. Contents Page Number
1 Situation Analysis 1-2
2 Problem Statement 2
3 Options 2
4 Criteria for Evaluation 2
5 Evaluation of Options 3-4
6 Recommendation 5
7 Action Plan 5
8 Contingency Plan 5
9 References 5

4. 1
Situation Analysis:
Benetton is a very successful clothing brand with mass following in Italy with expertise in the
field of knitwear. The case describes the strategic and competitive advantages of Benetton,
which have allowed it to maintain a foothold in the Italian market for a long time. However,
with increased competition their profits have considerably dropped in the recent years.
Benetton marketing strategy has been concentrated in capitalizing on social issues and degree
of CSR participation applied in their competitive and regulated markets.
Benetton Group was envisaged to develop social awareness and at the same time was used for
commercial profit and to gain publicity through unique and controversial issues. Benetton’s
unique advertising has always been its strength highlighting trends ahead of their time. The
company employed unusual, controversial advertising techniques and themes that used “shock
value” and the power of photography to grab viewers’ attention. Their “Sentenced to Death
Campaign” had put Benetton into a dreadful situation, making them realized the damage
shockvertising had caused them. As a result of repeated campaign, Benetton was subjected to
litigation and widespread protest. But the major setback has been the cancellation of its deal
with the US major retailers to open Benetton outlets in Sears’s stores across America.
Benetton image and uniqueness slowly faded out after they reverted back to classic method of
advertising, which made the company and its product lose identity. The economic effect
especially on marketing aspects for clothing industry is that it becomes hard to convince buyer
to buy a product since promotional activities no longer work. This led to the decline in their
sales and hence profitability.

5. 2
Benetton has had an uneven cash flow profile over past few years with significant acquisition
and disposal activity. Benetton generates relatively low returns on both equity and capital
employed (Ref Exhibit). Because of the strong financials, the Benetton family entered into the
areas of sports equipment, food outlets and catering, motorways construction and
management, telecom business etc. Some of these acquisitions proved profitable, while the
others lost money for the parent company. Some of the acquired companies were later sold.
The company is also facing fierce competition from brands like Zara, GAP and H&M (Ref Exhibit)
which are able to provide the products at much lower costs.
Problem Statement: Revitalizing the Benetton Brand and capturing the market share.
Options:
1. Rework on marketing strategy and expand its market in US.
2. Diversifying into other product lines.
3. Entering into new geographical markets with existing product line.
4. Competitive pricing strategy
Criteria for evaluation:
a) Effect on long term growth prospects of the company
b) Effect on market share and brand value

6. 3
Evaluation of options against criteria:
Option1: Rework on the marketing strategy and expand its market in US
Evaluation against Criterion a) Effect on long term growth prospects of the company:
Advantage: If Benetton focuses on product oriented and culture specific marketing strategy, it
can regain it’s lost ground. Demand for Italian designs is still high in global markets especially in
America. There is huge market in US, which is still untapped. If successful, high growth can be
achieved.
Disadvantage: Market in US is huge and meeting demand can be a concern. Also Benetton will
face fierce competition from established players in US. Advertisement budget requirement
would also be high. Consumers in US have fast changing tastes.
Evaluation against criterion b) Effect on market share and brand value:
If successful there can be huge improvement in market share and brand value of the company
in US.
Option2: Diversifying into other product lines:
Evaluation against Criterion a) Effect on long term growth prospects of the company:
Advantage: Low investment is required as market already available. Market already available
and brand image can be leveraged. Risks will be shared with manufacturing associates.
Benetton can capitalize on existing distribution channels. Growth potential seems high.
Disadvantage: Entering into new product line is like moving from core competencies of the
company. It will be a challenge for the company to face new competition.

7. 4
Evaluation against criterion b) Effect on market share and brand value:
It will be a boost to the existing brand image and a strong message to the society that the
company is open to bring changes in the product line.
Option 3: Entering into new geographical markets with existing product line
Evaluation against Criterion a) Effect on long term growth prospects of the company:
Advantage: This will bring new customers to the company and increase in market share thereby
helping in the growth of the company.
Disadvantage: Entering new markets will bring new competition and heavy investment. Success
is not guaranteed.
Evaluation against criterion b) Effect on market share and brand value:
New market will be added to the portfolio and brand value will be improved.
Option 4: Competitive Pricing Strategy
Evaluation against Criterion a) Effect on long term growth prospects of the company:
Advantage: If the products are placed competitively against the competitors, sales volume can
be improved thereby leading to growth of the company.
Evaluation against criterion b) Effect on market share and brand value:
Benetton is known for its brand and price uniqueness. Reducing price of the product may dent
the brand image and the company might loose some loyal customers.

8. 5
Recommendation:
Based on the evaluation, option1 is recommended.
Action Plan
Rework on its marketing strategy:
- To focus on small sectors of the market rather than focusing on the whole market.
- To promote globally accepted advertisements keeping in mind the different cultures and
perceptions.
- To continue using shock advertisements but reduce the extent of shock to create shock
without disrespecting.
- Entering into digital marketing i.e marketing through social media and starting online
shopping and home delivery service.
- To focus more on value than on price.
Contingency Plan: If option 1 does not seem feasible, option 2 is recommended.
References:
www.benetton.com
www.wikipedia.com
www.inditex.com/es
www.benettongroup.com/it/home.htm
Exhibits: Provided in the next page.

9. 6

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