Critical Analysis Of The Article “Benetton Transforms Its Global Network”

Three weak points

The article states that Benetton’s network model become gradually more fragile, since the globalization took place. Globalization has resulted in bringing up firms with a broad range of business sectors and firms that became more competitive. However, the rising number of competitors may potentially affect the market industry. Therefore, Benetton has to strive harder to survive in the market. Moreover, the merger of Benetton with the other Benetton family company has lead to difficulties in regulating the products, as the family company is part of a different type of industry. However, since the agents are more experienced with the regulation of the products, the agents will have more control on regulating the products. Hence, the Benetton Sportsystem will have less power compared to the small agents and retailers.

Last but not least, The firm is trying to establish a strong presence in the sports industry. However this can be difficult to achieve, as there are many established brands already. The authors also give their point of view by making the following comment: “Who knows what may transpire when the U. S. mentality that created Prince Sports Group and Rollerblade meets up with the Italian mind-set that created Nordica?”.

Moreover the article states that the sports brands are arranged in areas with a large display. In these areas customers are able to compare the sports brands. Additionally, the article also makes clear that the sports industry is very competitive.

Three strong points

First of all, the authors provide several factors with a strong argumentation, which have contributed to the success of Benetton. The article states that Benetton’s manufacturing processes is characterised by an in- house production in 32 production centers, vertical integration and outsourcing of production. The outsourcing of production made the achievement of labor cost differentials possible, as the firm was able to establish relationships with international contractors. Moreover outsourcing to a network of small and midsize enterprises controlled by Italian and foreign contractors has several benefits according to the article. For instance, the firm was able to maintain the control over their supply chain and achieve an advantage of economies of scale. In other words the network of subcontractors had reduced risks and the manufacturing and labour costs. Moreover, the firm has also been able to obtain flexibility in this process.

Furthermore, according to the article Benetton sells and distributes its products through agents. The agents hold the responsibility for their own market area. Additionally, Benetton supports the operators in the sale and distribution of its goods, which can be seen as a strong point. Apart firm the agents, the article also states that the firm has changed its marketing system, which has resulted into the different images of Benetton in their different geographical areas.

Nevertheless, the firm has obtained knowledge on what to sell, because of an information system that connects the directly controlled outlets with the headquarters. This allows the firm to design and produce collections through continuously updated information. For instance, the firm has merged with a sportswear company and aims to strengthen the image and value of its brands through investment in high-tech systems for designing sports equipment, reorganization of the production process and improvements to the retail network.