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Benetton: Strategic evaluation

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  1. Assessment of results
    1. Evaluation of profitability
    2. The current mission
    3. The objectives and policies of the company
  2. Evaluation of leadership and governance system
    1. Detailed analysis of competition
  3. Internal environmental audit and analysis of strategic factors
    1. SWOT Analysis
    2. BCG1 Matrix
    3. Doo Little Arthur matrix
    4. McKinsey Matrix
  4. Evaluation of Business Strategy
    1. Diversification policy
    2. Orientation toward service activities
    3. Autostrade, Autogrill and Stazioni Grandi, three dominant groups
    4. Telecommunications sector
  5. Recommendations
    1. Clothing
    2. The holding company
    3. Conclusion

Benetton is an internationally recognized empire. In this document we are going to discuss about different strategies of group development and the current status of Benetton and its holding company, Edizione.

Benetton and Edizione are groups in a perpetual pace of growth. It is difficult to determine a statement of strategy at this instant, since the group works on multiple projects while applying different strategies.

Nevertheless, we have a current data to establish realistic recommendations regarding the strategy to encourage the development of the group and retain its dominant position in the market.

Benetton group focuses on numerous objectives and which do not necessarily affect the same industry.

The recent investment of 67 million euros for a new logistics project clearly shows Benetton's desire to adapt. The fact is that since 2000, the company has experienced a lot of benefits in the textile business side with new stores and different clothing lines opening up. This implies that logistics should be efficient enough to meet the changing business needs and to recover all the losses and match with the level of existing competitors. Despite a large turnover of $1.77 billion, revenues were down till the beginning of 2005.

In 2005, Benetton's sales rose by 3.6% and the group wanted to boost its profit margins and improve results. One of the major priorities of the company is to sustain its consistent performance

Today, Benetton has become much more than just a textile company. The textile company represents only one third of the group's turnover, with $6.7 million, the rest of the turnover being made by the group's holding company, Edizione. The current objective of the group is different in the two main entities: the strategies of Benetton Group and the strategies of Edizione Holding.

United Colors of Benetton and Sisley must reaffirm their places in the world of textiles due to 1% drop in revenues. Although diversification in the sector has performed with the purchase of sports brands such as Rollerblade and Prince, this division will further strengthen the position of Benetton in all the 120 countries it is currently operating in.

This presence has been accompanied by the implementation of megastores, which is monitored directly by the group by setting up franchises and "small shops". Therefore the current mission of Benetton is to strengthen its position in the textile industry of this increasing fierce competition.

Likewise, the second division is represented by Edizione Holding and has promoted its group, excluding textiles. This is illustrated by the acquisition of companies such as Autogrill, Autostrade, Olimpia. Thus the mission of this second division is a continuation of the diversification of the business area of Benetton.

We will try to understand the directions undertaken in the 90s and evaluate the effectiveness of such an action on the credibility of the group. We will also analyze the internal and external strategic factors to formulate recommendations in various areas that have been studied.

We will answer the following question: is there any consistency in the overall strategy of Benetton and any consistency that could be improved?

Tags: Benetton, Diversification policy of Benetton, Marketing strategy of Benetton

[...] Faced with this diversification strategy of growth, the group faces a lack of unity in its activities and the risk of weakening of the corporate culture if the strategic business areas are too empowered. This lack of guidelines may harm development, because the goals are not clearly defined. The corporate governance has actually dictated the choice of a holding company. The group indicates that the various diversifications undertaken are consistent, and relate to "the consumer movement". But this message is not perceived differently by different stakeholders of the group. [...]

[...] An internal environmental audit and analysis of strategic factors To analyze the internal environment of the company, we will use different tools for a strategic analysis A. SWOT Analysis We'll take a SWOT analysis to highlight the characteristics of the market and the opportunities and threats that competition presents in the areas of activity in which the Benetton Group is present. Strengths Weaknesses International presence Too centralized distribution Strong European presence process Great variety of products Mostly of fashion Fashion at affordable prices No big choice size (usually 3 Good visibility sizes) Short production cycles No advertising Trend catcher Rapid reaction to change in demand Efficient distribution Excellent IT Quality products Low level of inventory Good financial performance Innovation Flexibility Opportunities Threats International expansion Copy of the business model of Developpement of online shopping Benetton Diversification Lower price competitors Targeting new consumer groups Fashion/tastes changing more and Demand for bigger sizes more quickly Local competitors Competition Consumer's ethical (human rights) and environmental concerns are growing The apparel industry tends to saturate and the competition is getting tougher and tougher B. [...]

[...] The area is actually very competitive, but Benetton has always been able to develop effective strategic policies of diversification. It is difficult to disengage the telecommunications sector, which today offers great opportunities (notably France). Furthermore, we note that developing countries offer significant development opportunities. Just last five years ago, there were cell phone users in Nigeria. Four years later, they were 16.8 million, and the Nigerian market of cell phones has become the second largest in Africa. The telecommunications market is becoming liberalized in developing countries. [...]

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