Case Study

Introduction

United colors of Benetton are not a new name in the fashion and apparel industry. The mission of the company is represented by the logo of the brand which suggests a united world and the apparel sold all over the world.

In order to expand the business and cover the global market the two ideas which are circulating between the management of the company are whether to invest in the latest technology and manufacture the goods from Italy with a lower production rate or to organize new markets of sale in other countries and generate a lower cost for the products and establish factories in the localities of key markets.

I will suggest that we should invest in other parts of the world and establish our factories in countries with lower operating and trading costs. Although both the suggestions have their own pros and cons and I will be discussing in details the pros and cons of the strategy I have suggested as the memo further proceeds.

Discussion

Recommended strategy

Investing in the latest technology of production is a wise idea and will keep the power of organization and management in our hands. This will bring the production cost to an ultimate low but the overall impact of this idea is not a drastic one and will not be very helpful in changing the business to a drastic high in terms of catching the global market.

However my personnel suggestion is to implement the idea of capturing the internationals market in such a manner where we will be establishing our industries in the desired zones where sales are high and those countries where production cost, operation cost and trading cost is very low.

The company has already taken part in experiments similar in this account where we have designed our production units in these countries where the targeted market is a greater one. The best example of this approach was India where export was banned and we manufactured our items in India and captured the market share of the Indian market. The market share of the Indian market was very low just 0.5% but the experiment of Spanish and French markets was a successful one where the market share was 10% and 8% respectively and united colors of Benetton had their production units established in those countries.

Now since the apparel market has totally shifted and many brands our fighting for global dominance the key controlling factors are low cost and quality products. It is no doubt that United colors of Benetton have a premium quality when it comes to the issue of quality control but to challenge the international competitors like GAP and B & H we need to further cut down our costs to capture the international markets.

If the profit margin is reduced this won't turn out to be a very feasible idea as the production cost is quite low but in order to cope with the operating cost in all parts of the world while maintaining the same approach if offering 4% of the overall ...