THE BENETTON SUPPLY CHAIN – CASE STUDY
Retail operations – main objectives Benetton‟s core business is in the manufacturing, production and sale of casual and sportswear, which accounts for 95% of total revenues (Camuffo et al, 2001: 47). The company has a market presence in over 120 countries and has consistently generated revenues exceeding $2 billion throughout this decade (Industry profile, 2007: 15). It has 5,000 retail outlets around the world, the vast majority of which are run by independent managers as part of a franchise arrangement whereby the licensee‟s of those outlets sell products which carry the Benetton brand name (Skjott-Larsen et al 2007: 94). A key objective of Benetton HQ (based in Treviso, Italy) has always been to retain overall control on every aspect of product sales, thereby ensuring that the Benetton “total look” is adhered to. The company is renowned for having a distinctive philosophy which is espoused through controversial advertising techniques (Dapiran 1992:8). Its global network of sales agents each holds responsibility for their own geographic area. They work closely with franchise operators in the sale and distribution of its goods, as well as overseeing all aspects of merchandising (Camuffo et al 2001: 47). A global information system unites every link in the supply chain. Stiff competition has forced Benetton to radically change its retail strategy (Economist: 9 November 2004). To that end it has introduced over 100 „mega-stores‟ and, whilst the majority remain under the franchise system, the company has decided to take direct ownership and control of a few as it seeks to form a closer relationship with its clientele; the logic being that this will facilitate a deeper understanding of customer preferences (Camuffo et al 2001:50). One expert has stated that Benetton – a former market leader – is lagging behind its competitors, not through any defects in its supply chain, but more because it is “less good at seeing the opportunity”, inferring that the franchise system is to blame because it creates a barrier between company and customer. Zara, on the other hand, is proving to be far more successful because of it has adopted „agile‟ supply chain practices (Cane 2007:1). Diversifying into new product ranges such as the sportswear market, as well as an added emphasis on its lifestyle branding is a key pillar of the new approach. Its Fabrica, Killer Loop and Playlife brands are all geared towards
capturing a large slice of the youth market (FT: 9 May 2003). As the Managing Director explains, “we want the market to know that Benetton is about more than just colourful sweaters. It‟s a lifestyle concept” (HargraveSilk 2003:1). The Asian markets are vital to Benetton‟s future retail operations objectives, recording a 35% profit rise in Russia and 50% rise in India in 2007 (Women‟s Wear Daily: 14 November 2007). Although Europe remains Benetton‟s largest market it has recently refocused its attention towards building brand awareness in the emerging markets of Asia, the Middle East and the Far East (Evans 2004:1). One insider sums up the Benetton retail philosophy, when (s)he states that “we do not want to start with high prices to attract people later on with high discounts, but we want our customers to appreciate every time of the year that there is the right ratio between quality and price” (Evans 2004:1). Physical distribution operation –main objectives The company describes itself as „vertically de-integrated‟, meaning that its core functional activities such as design and global strategy are still centralized. Nonetheless it is willing to outsource those activities where it is unable to achieve in-house economies of scale. Its logistics operation has always been directly controlled, in large part owing to the integral part it plays to the companies overall success. Key to effectiveness is the rapid flow of market intelligence between customer and factory. This is achieved through...
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