THE INTERNATIONALIZATION STRATEGY OF THE FIRMS

BENETTON CASE STUDY

Famous for its shocking advertisements, Benetton was founded in 1955 by Luciano, Giuliana, Gilberto, and Carlo
Benetton. Initially the family sold colored 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 neighboring 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 5,000 retail stores. 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 colors 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 art-focused magazine.
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.

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, decide the best market
for Benetton internationalization. Justify your choice.

Website: www.benetton.com

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.