To: CEO and Board of Directors
From: Meshal Alameeri, Senior Manager
Re: Suggested Strategy for Benetton
Recently, there has been much debate within Benetton about the future direction of the company. This debate has centered on the question of whether to embrace a strategy to manage and own its stores while supporting licensees in developed markets; or to continue using the traditional Benetton strategy of developing a large network of licensees and partnering with them to develop a chain of small firms.
2) Potential Growth Strategies
The company needs to redefine itself in the same way the competition did, by owning, managing and supporting their stores and ...view middle of the document...
Therefore, if the company cannot adapt to the changing conditions in the marketplace, then it cannot expect to maintain the same level of success it has enjoyed for the past few decades.
A shift to the “Licensees Support” strategy means utilizing a more centralized approach rather than relying solely on licensee partners to launch and manage stores. Instead of shifting its focus to new markets in the interim, the company should support its struggling agents and retailers in developed markets.
3) Recommended Types of Support
The recommended types of support involve 1) increasing product knowledge for its agents and retailers to decrease the level of confusion; 2) implementing new technologies, such as inventory systems to solve the ordering problems; 3) standardizing its products to limit product returns from retailers; 4) helping retailers in investing and redesigning stores to help in improving the redesigning cycle; 5) training store salespeople to increase in store satisfaction, salespeople efficiency and productivity; and 6) increasing the transparency of profitability of its stores and products and selecting the best experienced agents in their markets.
Its agents system proved to be successful in the past and drove its growth. However, recently some of its agents, in highly competitive markets, are less incentivized because of their past success. In addition, as the company's success in the US suggests, its retailers faced unfair practices from some of its agents. Therefore, the recommendation is that the company reconsider its relationship and commission model with these agents. Agents should invest more in their communication tools with retailers and should be charged on sales volume, instead of shipment.
The pros of the company's new strategy are: 1) to maintain its traditional unique business model; 2) to rely less on foreign factories in order to maintain its product quality; 3) to decrease the risk of copying its products; 4) to preserve the valuable marketing appeal of “Made in Italy”; 5) to lower its exposure to currency risks; 6) to lower its exposure to any political risks in new markets; and 7) to protect its production process methods and practices.