Inter organizational relations in the

business model of Benetton

Presented By
Mohit Mehta
Vaibhav Jindal
Dhrunav Patel
Abhishek Srivastava
Prerna Kapoor
Divyansh Narang


Starting of from the humble background
Started in Italy in 1965 by 4 siblings Giulana,
Luciana, Gilberto and Carlo
Luciano, the eldest, used to work in a mens
clothing store, Giuliana used to make brigt
colred sweaters
Sold Carlos bike to buy a sewing machine
Hired group of young woman to work under
Giulana
Implemented ideas different from the
Industry
Benetton sold only through specialised
knitwear stores as opposed to department
stores selling wide range of products
Benetton offered 10% discount if they paid in
cash on delivery of the product
Placed itself as supplier of medium-high
quality design at reasonable price

Organization Structure in initial phase
In 1968 company opened first independent
outlet in Belluno
Placed itself as a specialized store alternative
to the department store
By 1975 had 200 stores in Italy most of them
bearing the name of Benetton
Other names included Sisley, Tomato,
Merceria, 012
Benetton Going International
Opened first international store in 1969 in Paris
But till 1978, 98% of $80 million business came
from Italy
By 1983 had 31 shops in Japan and 27 shops in
the major cities of the US
Instead of opening Europe style shops 18 of the
27 stores in US shops were in department stores
Started manufacturing units in USA, France
Scotland and Spain primarily to bypass
protectionism

From family run business to a
professional organization
Aldo Palmeri, a highly regarded executive of bank
of Italy was hired as managing director
Recruited experienced managers from other large
companies to form a professional team
Senior functional managers had two reporting
relationships, a formal one to Aldo Palmeri and
an informal one to one of the members of
Benetton family
In 1986 company offered 15.6 million shares to
the public, Benettons employees agents and
clients

Benetton in 1987

Benetton was vertically de-integerated company
in Manucaturing and other three major activities
of Styling and design, logistics and Sales
Relied on external people and companies for
major activites
More than 80% of manufacturing was done
outside the company by 350 sub contractors
employing about 10,000 employees
Less than 20% was performed by 700-800 people
External sales organization consisted of 80 agents
looking after retailing system of 4000 shops


Benetton in 1987
Benetton was divided into three major divisions
wool, cotton and jeans
Benetton had seven plants in Italy which were
reduced to three in 1987, one for each division
Reason was companys philosophy of vertical de-
integration and external production as mode of
organization
All the divested plants acted as Benetton sub-
contractors

Benetton Organizational Structure
Benetton Organizational Structure
Wool division worked with 200 external
production plants, cotton and jeans division
worked with other 150 external production
units
Benetton owned a percentage of equity in
each of them
Most of them worked exclusively for benetton
Contd.
Benetton gave external contractors the exact amount
of the raw materials, technical support needed to
perform each single production unit
Benetton advised the sub contractors about the
required machinery to buy
Provided them the financial aid through its own leasing
and factoring companies
Every manager at benetton was at the same time
owner, president or director of a leading sub
contracting company
Allowed them to work real time solving little problems
and making production adjustments
Benetton Subcontractor Relationship
Some Problems In Benetton-
Subcontractors Relationship
Machinery suggested by Benetton had final
product orientation instead of product
orientation
Subcontractors normally 8 hours a day but they
had to adjust themselves as per the needs of
Benetton
Working exclusively for Benetton involved the risk
of revenue and the margins
Nearly 10% of sub contractors were released
every year


Selling
Three groups involved in the selling the
company, the agents and the shop owners
Real marketing manager was Luciano
Benetton
All commercial managers and agents were
hired by him
Managers were company employees incharge
of territories run by agents
All the area managers were Italians


Agents
Main responsibilities of agents
- To select the locations of the new shops
- To find and select potential investors for new shops
- To help new clients in starting new shops and train them
- to present the collection to shop managers and help them
in choosing goods
- to collect orders and transmit them to the headquarters
Most of the agents themselves owned a number of shops

Agents
Other Concerns
Promotion Strategy About 4% of Benettons
sales is spent on direct advertising, sponsor
sports events rugby, basketball teams,
formula 1
Theme Benetton All the colors in the
world , United Colors of Benetton
Information Systems Project to connect
stores in the major cities
Looking Forward to the Future
Reducing the subcontractor network
Increasing the production in US under US
subsidiary
Diversification of Benetton group



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