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United Colors of Benetton Case Study

Clark & Izzy
by

Clark Wenborn

on 22 October 2013

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Transcript of United Colors of Benetton Case Study

Agenda
Company Overview
Case Summary
Case Analysis
OLI Model
Main Issues
Recommendations
SWOT Analysis
Future Direction
Benetton: An Overview
Globally recognised fashion company
Founded in Treviso, Italy (1965)
Present in 120 countries
Yearly turnover exceeding €2 billion
Operate under four main brands
Possess a unique production and commercial network
Case Summary
Network organisation
Innovative operations management
Unique market strategy
Adapting to globalization pressures
Global Value Chain
Network organisation of Manufacutring
Network Organisation of Distribution
Global Standardization
Cost Pressures
Local Responsiveness
High
Low
High
Transnational
International
Localization
Global Standardization
SWOT
Weaknesses
Strengths
Weaknesses
Opportunities
Threats
Relatively high prices
Little room for flexibility
Controversial marketing
High asset cost
Slow adaptation
Early mover disadvantages
High levels of competition
Market factors
Economic factors
Technological changes
Social factors
Rise of EMFs
High cost pressure, low local responsiveness
Universal image
Increased profitability
Economies of scale
Reduced cost
Vertical Integration
Integrated entities in the supply chain share a common owner
Benetton = 80% supply chain control
Retailer
Wholesaler
Manufacturer
Supplier
Just in Time (JIT) Method
Demand pull
Dynamic
Greater degree of control
Stable supply of inputs
Reduced lead time
Consistent quality ensured
OLI Model
Ownership Advantages
Treviso HQ
Castrette production pole
Workshops in Asia/Eastern Europe
Innovative network organisation
Supply chain configuration
Economies of scale
Raw materials
Location Advantages
Internalization Advantages
Wholly owned subsidiaries
Core competency protection
Quality control
Globally recognized brand
Innovative operations management
Treviso HQ
Strong control of supply/distribution chains
Break away from vertical integration
Increase outsourcing
Reshaping of the retail network
Penetrate sports market
Case Issues
Globalization Pressures
Breakaway from vertical integration
Reshaping of retail network
Increased outsourcing
Synthesis of additional production poles
Recommendation
Finding the right balance
Keep in-house processes directly pertaining to product quality
Outsource further up the supply chain
Continue market entry through acquisitions
Activities kept in-house
Outsourced Processes
Diversification into Sportswear
1998 - merger with Benetton Sportsystem
Nordica, Killer Loop, Prince, Rollerblade
Creation of synergies
Exploitation of economies of learning
Highly saturated industry
Later mover disadvantages
Recommendation
Investment in R&D
Diversification
Link with EMFs
Shift core competencies to sports indusry
Implement TQM
Exploit late-comer advantages
Future Direction of Benetton
Movement towards a more geocentric ideology
Transformation of the global value chain
Increased local autonomy
Clark Wenborn
Isabelle Chamberlain

Network Manufacturing
Relationship based
Three tier model
1st Tier
2nd Tier
3rd Tier
Suppliers of raw materials/production plants
Contractors and subcontractors
Retail Outlets
Network Distribution
Products sold and distributed by agents
Franchise system
Advantages
Disadvantages
Flexible
Low cost/risk
Fast spread of brand
Lack of direct quality control
Lack of distribution control
Original Benetton
New Supply Chain
Co-Ordination
Tight co-ordination of Benetton plants
Employ the same production processes
Universal image adhered to
Key functions co-ordinated at Treviso HQ
Configuration
Locations where each activity in the value chain is performed
Concentrated in few locations
Configured in this manner to gain EOS and comparative advantage
Collaborative Customisation
Business conducts dialogue with customer
Purpose - identify precisely what the individual needs and accordingly customise the product
Examples:
Design focuses firms
"The perfect fitting pair of jeans"
Shoe industry
Question One
Distinguish between cosmetic and collaborative customization using examples
Cosmetic Customisation
Standard product presented, marketed differently to different consumers
Features may be advertised in different ways
Cost effective
Examples:
T-shirts with special prints
Hertz Gold Program
Apple iPhone
Question Two
Discuss the manufacturing technique that allows today’s manufacturing systems to address needs of scale/efficiency and customisation simultaneously?
Just in Time (JIT) Manufacturing
Demand pull - therefore efficient as no surplus of goods produced
Dynamic - quick response time
Greater degree of customisation due to "made-to-order" philosophy
Reduced lead time
Stable input supply
Consistent quality ensured
Cost effective - inventory space not needed
Examples:
Toyota - do not move raw materials onto the production floor until an order is received
Dell - customizable computers, force suppliers of each individual part to store it themselves until demanded
Full transcript