Project Title: (Benetton A)

Subject Name: (Written Analysis and Communication)

Date: (14March, 2012)

Executive Summary
Benetton, an Italian apparel company is by far the market leader in Europe. But as the saying goes that change happens along with time, slowly Benettons product lines were reaching the saturation point. Along with factors like stagnant economy, increasing local competition and imported merchandise lead a doubt in the minds of the Benetton group which eventually lead them to have a relook at their strategy. Thus Luciano Benetton, the chairman of the Benetton group was planning to expand his base to US. The attached report analyses the possible market in the US and proposes a strategy for market penetration.

Table of Contents:
1. Situational Analysis................................................................................................................04 2. Problem Statement.................................................................................................................04 3. Options....................................................................................................................................05 4. Criteria for Evaluation..........................................................................................................05 5. Evaluation of Options............................................................................................................05 6. Recommendations..................................................................................................................06 7. Action Plan.............................................................................................................................06 8. Contingency Plan...................................................................................................................06

Situational Analysis
Benetton, over the years had been an innovator in the production of knitted overwear and had a much decentralized process. Not only was their innovation evident in the production but also in every other process ranging from marketing to logistics. They had their own unique strategy in the processes. But growth is never continuous and eventually comes to an end. For a company which had been a market leader for more than a decade is currently facing stiff completion from other firms which has emulated its strategies. Also the stagnant economy is not helping the cause. Thus it was planning to expand globally and penetrate to US and Japan markets. Although other countries in Europe were new markets but for long term sustainability expanding globally could be the way. The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy. Ansoffs product/market growth matrix suggests that a business attempts to grow depend on whether it markets new or existing products in new or existing markets. In this case Benetton attempts to penetrate into new markets with its existing products and thus the strategy according to Ansoff matrix would be Market Development. There are many possible ways of approaching this strategy, including: New geographical markets; for example exporting the product to a new country New product dimensions or packaging: for example New distribution channels Different pricing policies to attract different customers or create new market segments But before entering into foreign territory, there are some factors that should be considered to check the viability. They are the political and legal, economic and cultural factors. And also Must allocate the right resources Decide what to sell Decide where to sell Select the criteria for decision making Seek an acceptable equity share Acquire the right fit Design an exit strategy

Problem Statement
To develop a market development strategy for entry into US and Japan markets.

Options
1. Benetton should setup a manufacturing facility at US and directly invest in the US markets 2. Build a warehouse and keep inventory of finished products which would be shipped from Ponzano factory 3. Use the supply on demand model to directly ship to their retail stores

Criteria for Evaluation

1. Profit potential 2. Degree of Uncertainty 3. Availability of resources

Evaluation of Options
1. Benetton should setup a manufacturing facility at US and directly invest in the US markets 1.1 Profit potential The potential for profitability is huge as this is a untapped market with an economy boom and a huge population. It could capitalize on the strong image of Italian design and thus catering to this huge opportunity. 1.2 Degree of Uncertainty There is a high degree of uncertainty as the Benetton group do not have adequate data about the market and could result in a huge loss if not properly planned out the entry mode. Further there would be completion from local players too and it was a unknown name here. 1.3 Availability of resources Lack of proper data about US restricts any information regarding the availability of resources. But the presence of other firms in the same sector to an extent confirms the availability of the basic resources. 2. Build a warehouse and keep inventory of finished products which would be shipped from Ponzano factory 1.1 Profit potential In this case also the profit potential is high, again because of the largely unexplored market and also large set up cost would be saved, which further could be used for other purposes. 1.2 Degree of Uncertainty The degree of uncertainty is again high but lower than option 1 as the huge set up cost is not availed. This could help the Benetton group in slowly studying the US market and take the appropriate steps according to its long term goal. 1.3 Availability of resources 5

Here the majority of the resources are shipped from Italy and thus it is not an issue, but the shipping costs would be high. 3. Use the supply on demand model to directly ship to their retail stores 1.1 Profit potential Here the profit potential is the highest as there are no set up costs involved and only the shipping costs are the major costs. 1.2 Degree of Uncertainty In this case the degree of uncertainty is reduced as the finished products are directly delivered to the retail stores according to the demand. 1.3 Availability of resources There would be no concern regarding the resources as only the finished products are being delivered directly to the retail stores. But in this case, they would be unable to study the market and may fail to establish themselves in the US market.

Recommendation
Based on the above evaluation, we come to a conclusion that option 2 of building a warehouse and keeping inventory of finished products which would be shipped from the Ponzano factory would be the best one.

Action Plan
Before exclusively investing in the US market, the Benetton group should build a warehouse, where they could stock the finished products and supply accordingly. Simultaneously a board member of the group should try to study the US market and identify the factors that would change the selling pattern. They should properly plan their entry into their market either through franchising or through joint ventures. The marketing plan and the product mix should be decided according to the local cultural and economical factors after an exhaustive study. Accordingly a robust supply chain management should be implemented and proper inventory should be maintained.

Contingency Plan
Suppose option 2 fails due to political factors or high competition, then they should resort to option 3 temporarily and again implement option 2 after a period of time.