Benetton faces declining global fashion spending and increased competition. To defend its market share against competitors like Inditex and H&M, Benetton could refocus on its core apparel business, reduce subcontractors and move some production to lower-cost areas. It could also integrate forward by owning strategic shops to improve customer relationships and flexibility. Additionally, Benetton could recapture its brand spirit through original marketing focused on colors and products, and expand its product line and brand portfolio through targeted new lines and socio-economic groups.

2. With the declining of global spendings for fashion in Europe and in the
context of an increasing competitive market in which Inditex and H&M
compete for leadership,
How can Benetton reorganize its activities to play its cards right?

3. Success based on high vertically integration from production to selling.
 Production
 90% of raw materials come from Italy, largest owner of sheeps = securization of raw
materials
 Technological break-through: establishment of a new innovative system to dye wool
 Full control, organization and coordination of production thanks to 900 subcontractors
that only work for Benetton (strong relationships) and 80% of production based in Italy
(cost saving, quality control and better monitoring)
 Logistics: innovation and flexibility (just-in-time system, automation of the distribution
centers, robotstore 2000-system, automatic packaging system)
 Value-Added-Data Network service: cost saving and geographical expansion
 Marketing
 Homogeneous unique shop designs + several shops in one location contributes to
bolster the brand image
 Non-traditional advertising: provocative themes in highly frequented areas
 Strong image differentiation : importance of colors, good quality, young people, up to
date, reasonable prices = “to put fashion on an industrial level” (Benetton)
 Sales
 Shop owners: informal contract based on trust (« just handshake »), no royalties = quick
spread of the brand, competition between shops with agents helping develop the
business
 Numerous shops and geographical expanding diversify the risk
 Effective analyze of the sales to determine fashion trends

4. BENETTON INDITEX H&M GAP
PRODUCTION
Raw matérials and 90% of r.m. came from 55% of external r.m.> Only design and raw Comes from
production plant Italy , 80 % production stocks materials comes from subcontractors all over
localization plants located in Italy but 50% (mainly limited series) subcontractors then . the world
recently Portugal + product in Spain 21 worldwide (Europe,
Hungary,high quality Asia and Africa)
standards
Organisation & Quasi-integrated with 900 All processes for limited 21 plants under the San Francisco Specialist
Coordination subcontractor for all skills series = completely unique control of decide what to sell,buying
but full control by control integrated Stockholm . Those 21 team responsible for
and coordinate the whole 20 plants specified by plants control 900 2500 to 3000 Sub
production and logistic product type only use at subcontractors (tend to contractors and all
process 60% of capacity > high reduce the numbers) production strategies and
flexibility + efficiency just need to pass quality
controls
Logistic Just in time + automatic Just in time + massive Massive stocks difficult to 9 month to produce all
distribution system uses of robotisation sell. production process ,3
Delivery in europe for less Massive transportation to different distributions
than 36 hours and 48 for reduce the costs centers
world wide + twice
shipment a week
SALES
Shops in 2006 5000 (stable) in which 3131(increasing) for 7 1345 (increasing) 3131 (stable)
150 owned flagships brands Sales = 7,78 Sales =15,94
stores Sales =8,2 Average surfaces 1800- Average surface=630m²
Sales =1,91 Average surface 1200m² 3200m² 5 countries and only GAP
Average size = 279m² 44 countries 20 countries is international but each
120 countries store adapted to the place
Partnerships ? No contracts, owner No contract, Contract based Factory stores help stores
bought a shop design + Company owned shops allianceship and company with the left over stock ,

5. BENETTON INDITEX H&M GAP
MARKETING
Advertisement Only stong committed No advertising Important Advertising International marketing
image campains campain ( TV , stars and 4% of sales without
(humanitarian and models ) stars
politics)
Target Young ? With its 7 brand = people Young Ladies (and men ) As sub brands shows it
from 13 to 45 with from baby to adult
purshasing power from
low to upper.
Brand Image Coloured and Good For Zara = lastest fashion Fashion at best price Want to create a strong
quality products for a must have for reasonable brand image .
reasonable price price
Launch of new products Pilot shop + information Research team + fashion Agent care for fashion Inspiration from big cities
system to detect fashion spies in the target trend and the offer of the and art galleries
trend+ informations on segment + informations competition , most of
sales about sales production design 18
month before being sold
DIVERSIFICATION Unrelated diversification ( Related diversification Focusing on clothing Focused on cloth
restaurant + supermarket) only in fashion clothes business
and related : in 2006 Play
life + killer loop)

6. Benetton has proved its success in the past thanks to its unique model distinguishing it from its
competitors. However, now, Benetton is facing a huge set of new fierce competitors, which
coerce it to a new degree of vertical integration. To be able to defend its market shares and
fight against new coming ( Mango) Benetton could:
 Refocus on core business
 Main activities: apparel and sold Playlife and Killer loop
 Main processes: subcontract auxiliary activities such as sheeps rearing+reduce the
number of subcontractors (concentration & simplification of control) + moving part of
production in low cost Area (saving+ quicker transportation for non european shops)
 More progressive forward vertical integration: owning strategic shops could improve
customer relationships, sales and flexibility by receiving directly the information,
responding quicker to the demand and increasing shops’ sizes. Under condition that those
costs remain lower than the costs of opportunism (no sufficient financial datas).
 Recapture the spirit: increase brand awareness with original marketing campaigns focused
on the traditional values of Benetton= Colors and showing products rather than launch
humanitarian or politics campains that make people react but don’t help Benetton to sell its
product
 Brand Portfolio targeting:
 Expanding the product line by, for instance, launching a line dedicated to pregnant
women or business men.
 Expanding the brand portfolio by targeting specific socio-economic groups; 25 to 45 and
middle class.