Free Business Case Study Assignment Essay Sample
Benetton is a clothing company based in Italy; it was started in March of 1965 by Luciano, Gilbberto, Giuliani and Carlos Benetton (IMCR). It was the fast company to establish itself in casual apparel with its markets spread all over the world. In the 1980s and 1990s Benetton was not a force to recon with it ruled the fashion industry with her unique style of dyeing the garment. This style was known as the postponement strategy. During the 1990s Benetton lost her hand in the market dominance as she could no longer favorably compete with other fashion companies like Zara, Gap and H&M not mentioning the changing fashion trends that even called a new design each week. This became worse when Benetton started producing two new collections a year as opposed to her competitors that produced new ranges severally with in a span of a year. In order to counteract the market pressure she resolved to revamp her chain of supply. Benetton adopted the “Dual supply chain”. This strategy was based on demand at the time and mainly applied to the markets in the European and Asian countries. This new strategy was keen on both push and pull demand factors. This strategy bore fruit when she managed to launch at list five new fashion trends within one season (Gupta, Perepu, 2008).
• Why did Benetton delocalize some of its production to lower-cost countries for reasons other than lower costs?
Benetton having faced a smack for applying its postponement strategy with the changing trends and demands among young fashion lovers not mentioning the cut-throat competition she faced from other companies and retailers.Sh e decided to embark on the Dual supply chain that looked at the demand factors and hence produced and marketed the products respectively. Due to the increase in the cost of production namely labor, raw materials and power the fashion industries have adopted the strategy of delocalization of production to the lower cost countries. A part from the cost aspect attached to this turn of events, the unexploited market in the low cost countries is yet another reason for the same. Clothing companies such as Benetton has embraced this strategy as a measure to expand her market while at the same time minimizing the high cost of production and scarcity of raw material in the developed countries. Through its companies in Ethiopia which was estimated to be worth about 20 million pounds and able to produce knitted cotton fabric estimated at around 3.6 million kilos yearly, and Hong Kong Benetton that was able to supply customer in Japan, the U.S, China and the Far East. Where else most of its planning, coordinating and design remained in Italy, where as production took place in the low cost countries of Asia and Europe (Benetton Annual report, 2006).
• In what sense is the new supply chain system “dual”?
ICMR says reports this about the Benetton’s ‘Dual Supply’ system. “The group’s new industrial set-up is based on a double supply chain: a better gauged and more efficient one, based on a logical sequence of activities for minimizing costs; and a more rapid one with better response capabilities. A balance between these twin tracks makes the system flexible and provides the required support for large expected growth in production…….” (Benetton Annual report, 2006).
This strategy was introduced by Cassano after he was imported CEO for the Benetton in 2004.It was a move aimed at responding swiftly to the customers demands. The new Benetton strategy is dual as it balances several activities such as; sales, production and product design. The new supply system was dual in that it was able to at numerous locations depending on the demand of the time. This system combined both demand, supply and timely at that (Benetton Annual report, 2006).
• How does the new system enable Benetton to balance time to market and cost?
Since the new system is dual in nature it has enabled Benetton to achieve both efficiency ,which is the production of high quality and quantity goods at a lower cost while at the same time checking on the time to ensure that the production is in time to quench the market demand thirst. This has been achieved through the sequential supply chain that is better calibrated and a far much more efficient system that has been set up on the principals of optimizing efficiency through a sequence of production activities. Integrated planning is yet another strategy under the “dual supply chain”. It encompasses rapid response to market demands and subsequatial optimization of the production process not forgetting the quick response to the customers fashion preferences in demands. Its capability to run the process parallel with production, sales and design in an efficient manner (Benetton Annual report, 2006).
This ability to balance between times, market has cost made Benetton reestablish her self as Stacy writes. “Replenishing its racks with new clothes as often as once a week is helping the Benetton brand get its groove back after years in the retail doldrums. Its success underscores how logistics can be as important as style in the increasingly cutthroat business of mass-market appeal” (Stacy Meichtry, 2007)
Since the new system was geared towards delocalize some of its production to lower-cost countries. It was thus able to tackle the problem of time as it now ensured that their stores are supplied with the stock they require after two to three weeks prior to placing an order on an internet linked system to the Benetton’s head quarters in Italy (Benetton Annual report, 2006).
This dual supply chain system enabled Benetton to balance time to market and cost, by enabling her produce continually and thus boosting the sales momentum through small weekly shipments to the retailers. Analysis of all data on sales from all her stores through the forecasting department. Another notable development was that of setting up the product development store that connected sales and operations units to ensure that they come up with “Nice prices” for their products and maintain frequent production with the changing fashion trends in the market (Benetton Annual report, 2006). By this she was able to know where and how the fashion trends were fairing in the market the acted accordingly.
• How should Benetton manage the tension between being creative and being fast?
It has been reported of late that the fashion industry globally is adapting to the trend of being fast verses being creative. Benetton chief designer Vincenzo Scognamiglio is quoted as having said this on the changing trends towards being fast “Time is my enemy. In the past it was easier to do the collections, because there was tranquility……Now the tranquility is gone. There is just the rush-you have to score that goal” (Stacy Meichtry, 2007)
Benetton should employ tactics used by her competitors such as the Instant fashion technique that looks at the fashion demands of the time and act accordingly.
• How can Benetton compete better against Zara? Please feel free to address any other issues that you, as a consultant, think important.
Business world India remarks this on Zera’s success."Zara was a fashion imitator. It focused its attention on understanding the fashion items that its customers wanted and then delivering them, rather than on promoting predicted season's trends via fashion shows and similar channels of influence, which the fashion industry traditionally used."(Zara)
For Benetton to be successful as Zara it should employ the tactic employed by Zara of using several designers to come up with a single product.
The time span of producing new items should also be reduced a great deal. It is reported that Zara produces up to around 11,000 new items annually as compared to here competitors Benetton inclissive.This is as a result of adopting their Zero advertisement policy that opts for expansion of its stores by opening more branches rather than advertising. Techniques such as instant fashion are also employed by Zera making it a force to reckon with in the fashion industry (Zara clothing).
In a nutshell fashion has been existence for so many Centuries now. With the success of Benetton is the fashion market as the producer of the “appeal”. With Zara and H&M as her competitor she needs to embrace the cut throat competition with the severerity it requires. If Benetton is to emerge as a competitor against Zara it should also adopt the money saving, quick response tactics employed by Zera.Such as the instant fashion, Opening up new stores with the money that would have been otherwise spent on advertising and the use of many designers who combine ideas and come up with a master piece.