The Internationalization Strategy of the Firms
BENETTON
Famous for its shocking advertisements, Benetton was founded in 1955 by Luciano, Giuliana,
Gilberto, and Carlo Benetton. Its core business is fashion apparel: the Group has a strong Italian
character whose style, quality and passion are clearly seen in its brands, United Colors of
Benetton, Undercolors of Benetton, Sisley and Playlife. Initially the family sold coloured
sweaters door-to-door in Treviso, Italy. Over time, a regional network of family, friends, and
agents set up a closely monitored set of distinctive retail outlets. Over a 15-year period,
Benetton built up 300 affiliated but independently owned outlets in Italy and a factory with
new methods to dye and condition wool. The company was not directly involved in the retail
outlets, which received high-quality products at low costs. Part of the manufacturing savings
was realized by outsourcing to neighbouring subcontractors.
Benetton has kept this loose network of independent production subcontractors and
distribution agents but has now built up to a global network of more than 6,000 retail stores in
120 countries, generating an annual turnover of over 2 billion euro. Only a small fraction of
these are flagship stores owned by the group. The great majority of its retail stores are
operated by independent entrepreneurs. About 90 per cent of production still takes place in
Europe, mainly in Italy, and the company is still 69.35 per cent owned by the Benetton family.
Yet the wool it uses to produce its clothing line is now imported from foreign countries. The
parent company raises sheep in 900,000 hectares of land in Argentina.
Benetton is one of those successful global companies that succeeded partly because their
production and design concept was built on a strong home base. It expanded the marketing
end of its business through closely monitor (but not owned) independent stores, which were
able to use the Benetton brand name and distinctive colours and were supported by clever
international advertising.
Benetton does not advertise its clothes directly. Rather, its ads target a “lifestyle”. The “United
Colors of Benetton” ads are designed for a homogeneous global consumer interested in fast
cars and a fast lifestyle. Benetton goes in for cutting-edge advertising that grabs public
attention. This creates an image of new-age awareness, as the company’s advertising ads have
featured AIDS, capital punishment, inter-racial relations, high art, and “attitude”. The firm also
sponsors a top Formula 1 team as well as teams in rugby, basketball, and volleyball, all of which
contributes to the success of its brand name. Fabrica, Benetton’s Communication Research
Center just outside Treviso, is a mixture of philanthropy and advertising. The center sponsors
50 artists for a year and exhibits their work and publishes it in Colors, the company’s artfocused magazine.
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The Internationalization Strategy of the Firms
How well this plays out globally is uncertain. For example, Benetton had 700 retail stores in the
United States in 1988, but only 150 by 1995. Is this because Benetton has too European an
image to succeed in Middle America? How can an Italian family firm understand the American
lifestyle from its European bases? Indeed, 73 per cent of Benetton’s revenue originates in the
Euro area, with another 8 per cent derived from Asia and only 6 per cent from the Americas.
The remaining 13 per cent originates in other regions. The firm is now looking to expand into
emerging markets where potential for growth among the growing middle class is greatest.
Discussion points:
1. Make a SWOT analysis for Benetton entering the Romanian market and propose the
best internationalization strategy.
2. Choose other three emerging markets and, after applying the internationalization grid
(see, in the Annex, one example of Internationalization Grid), decide the best market for
Benetton internationalization. Justify your choice.
Sources: Adapted from: Benetton SpA: Industrial Fashion (A), Harvard Business School Case No. 9-685-614, Benetton (B),
Harvard Business School Case No. 9-685-020: INSEAD-CEDEP Case No. 01/97-4520, 1996; David Still it., Benetton: Italy’s Smart
Operator, Corporate Finance, June 1993; Benetton’s Network, Ivey Business Quarterly, 1997; Benetton, Annual Report, 2003;
Peter Crush, CSR: Diversity Takes Central Stage, PR Week, April 18, 2005; Benetton: Indigenes rechazan oferta, BBC.co.uk.,
November 10, 2005; and www.benetton.com.
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The Internationalization Strategy of the Firms
Anexă:
GRILĂ DE INTERNAŢIONALIZARE
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The Internationalization Strategy of the Firms
Annex:
INTERNATIONALIZATION GRID
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