Written Analysis and

Communication

(WAC)
Assignment 3
(Benetton Group S.p.A., 2012)

Executive Summary

Benetton Group, a global fashion brand controlled by the Benetton Family

via Edizione Holdings, is one of the Worlds 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

Table of Contents
S.

No.

Contents

Page Number
1

Situation Analysis
1-2

Problem Statement
2

Options

Criteria for Evaluation

2
5

Evaluation of Options
3-4

Recommendation
5

Action Plan
5

Contingency Plan
5

References

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. Benettons 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 Searss 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.

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.
2.
3.
4.

Rework on marketing strategy and expand its market in US.

Diversifying into other product lines.
Entering into new geographical markets with existing product line.
Competitive pricing strategy

Criteria for evaluation:

a) Effect on long term growth prospects of the company
b) Effect on market share and brand value

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 its 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:
3

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.

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
4

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.

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.