Critically evaluate the comparative transnational effectiveness of Benetton and Zara
Zara and Benetton are two of the most acknowledged clothing companies in the fast fashion industry. The different international business strategies they adopt result in different transnational effectiveness. To begin with, this essay will give a brief overview of the motivation, means and mentality of these two companies, and then compare how they sustain their competitive advantages through integration, responsiveness and flexibility. Next, it will highlight their evolving strategies and demonstrate the structures, worldwide learning and innovation models they adopt to support the strategies. Finally, ...view middle of the document...
Because Zara and Benetton competes in a fast fashion industry, they focus on producing some basics that can meet universal needs and sells aboard to achieve economies of scale.
Although Zara and Benetton carry the similar motivation to global expansion, they enter global market in different modes. Zara mainly uses wholly-owned subsidiary to achieve internationalization. By contrast, Benetton usually takes the form of
franchising and licensing. It is the first Italian fast fashion corporate that uses the quasi-franchising system to retailing (Crestanello and Tattara, 2009). Mentality refers to company’s strategy to go aboard. In general, Zara is evolving from global mentality to transnational mentality, while Benetton is witnessing the transformation from international mentality to global mentality.
Developing Transnational Strategies
Initially, ZARA and Benetton adopted Global Strategy and International Strategy respectively, for achieving the goals of global efficiency, flexibility and global learning.
Firstly, for achieving the global efficiency, both ZARA and Benetton take the advantage of national differences by centralizing the capital-intensive production, meanwhile, transferring partial labor-intensive activities in relatively low labor cost countries. For example, ZARA conducts about 64% of the production within the Spain radius area for protecting the production know-how, with 36% of the production of basic styles in Asia and Africa to reduce the production cost. Comparatively, Benetton mostly controls 80% of its production at home to enjoy the accession to superior domestic textile, with 20% of its basic products’ production in other regions (Decken, 2010). Additionally, the two companies pursue economies of scales in different ways. For example, ZARA triples other competitors’ annual sales by offering limited quantity but diversified choices to fashion-oriented customers to spread production costs. On the contrary, Benetton produces a considerable amount of garments dyeing with multiple colors but in limited styles, at the same time beats the competitors with the superior textile and dyeing quality, it enjoys higher margin from the standardized production with higher pricing (Fox, 2011).
Secondly, in terms of pursuing global flexibility, ZARA and Benetton adopt different entry modes to realize different levels of risk aversion. As mentioned above, ZARA expands mainly through wholly owned subsidiaries to guarantee tightly controlled and globally standardized operation. Benetton, by contrast, expands typically through franchising and licensing to avoid the macro risks of specific markets.
Thirdly, in regard to global learning, these two companies adopts different innovation models. ZARA aims to ‘discover’ and ‘reactively follow’ the fashion trends emerging globally, while Benetton proactively ‘create’ the fashion trends with exploring its own innovations. Details will be given later.
On balance, both ZARA and...