United Colors of Benetton Company - Report Example

School: Topic: UNITED COLORS OF BENETTON COMPANY Lecturer: Executive Summary Benetton has for the past 5 years been faced with stiff global competition. This has partially affected the company’s corporate growth strategy which was planned to be based on the introduction of existing products in new markets. This situation has triggered the need for a new marketing plan that can ensure that the company can successfully compete in new markets and existing markets as well. The report has clearly outlined the goal increasing revenue from new market opportunities. In order for this goal to be achieved, there are both financial and nonfinancial objectives that must be pursued by the company. Core among the financial objectives is to increase annual profit by 5% in the next 5 years. The nonfinancial objective also looks at the need to improve customer loyalty. In line with the objectives, using focus differentiation market strategy is largely advised. This is because such a marketing strategy will ensure that the company will be able to identify a market segment among the service sector to use its new line of OffixWear, which are value added office wears. The success of the marketing strategy has been found to be dependent on vibrant segmentation and promotion that is backed by a comprehensive implementation marketing mix. Contents Executive Summary 1 Introduction 5 Objectives 6 Vision 6 Mission 6 Values 6 Goal 7 Marketing objectives 7 Time scale 8 Marketing Plan 9 Market structure and opportunities 9 Target market and segment 10 Strategic option 13 Marketing Mix 14 Segmentation 14 Promotion and Publicity 15 Implementation of marketing mix 15 Supporting documentation 17 References 17 List of Tables Table 1: Overview of marketing objectives 7 List of Figure Figure 1: Global employment in fashion industry 10 Introduction With over 5,000 stores across 120 countries, United Colours of Benetton can be described as a global fashion brand. Over the past five years however, the company’s market performance has not been impressive as it has recorded declining revenue since this period up to 4.5% less (Benetton, 2015a). Meanwhile, the main apparel retail industry at the global level has been recording significant growth in various parts of the world. For example 4.5% growth and 6.8% growth were recorded in America and Asia respectively. This trend in growth accounted for a total of $371.2 billion and $384.2 billion respectively in revenue (Apparel Retail Industry Profile: Asia-Pacific, 2014; and Apparel Retail Industry Profile: United States, 2014). The European market however has recorded in a decline of 0.5% (Apparel Retail Industry Profile: Europe, 2014). Regardless of the decline in Europe, Benetton was still expected to grow since its market focus is a global one. The problem faced by Benetton can be said to be the result of accumulation of issues and factors including poor understanding of the company’s micro environment such as customers, competitors, and supplier. What this means is that the company has faced to develop any effective strategy around these micro environmental variables. This situation therefore means that Benetton needs a new marketing strategy that will make it take better advantage of its micro environment. Indeed there are several dynamic demographic outcomes with the microenvironment that makes it possible to strategise to take advantage of a very large segment of the market. This report therefore looks at some of these variables and a strategy that can be developed to meet them. Objectives Vision That Benetton’s new line of office wears collection to be called ‘OffixWear’ will become the most preferred brand in everything office clothing. Mission To provide our cherished customers with quality office wear produced from high value fabric, manufactured under sustainable production methods and principles. Values The core value of the company is to ensure that there is a well balanced outcome with social, economic and environmental sustainability in our approach to production and marketing. This way, the company will not only be concerned with its gains from production and marketing but will also look to the welfare and wellbeing of all other stakeholders for growth including employees, customers, and government regulators. Goal The company’s overall goal for the next 5 years is to increase its revenue base by 15% through the introduction of a new brand of office wear known as OffixWear to relatively unharnessed market segments within the fashion industry. Marketing objectives This goal has been broken down into financial and non-financial objectives which are specific, measurable, achievable, relevant, and time-bound. This is to be done as Davido (2003) argued that SMART objectives act as guiding principles for what companies must do to achieve their goals. In the table below, the marketing objectives that will be pursued by Benetton Group in the next 5 years as a means of ensuring the achievement if it goal of increased revenue has been outlined. Table 1: Overview of marketing objectives Financial Nonfinancial Variable Objective Variable Objective Percentage of annual sales growth 15% Growth in sales outlets 20 new sales outlets across the global market Percentage of annual profit growth 5% Consumer awareness Increased consumer awareness through media publicity Net capital employed 3,010 (millions of Euro) Brand perception Improved brand perception through effective public relations work Free cash flow 90 (millions of Euro) Customer loyalty Enhanced customer loyalty arising from the use of different promotional campaigns and corporate social responsibility Net investment 150 (millions of Euro) The objectives are set with a new market segment in mind, which comprise professionals in the service sector. In later sections of the report, the rationale for selecting this segment will be given. The achievability of the objectives is in the fact that the target segment given is made up of several employees from different companies and institutions including those in education, health, media, and banking, most of who have need of office wears (Choo, 2013). Time scale Each of the objectives given is for a period of 5 years. The success or achievability of the objectives will therefore be measured at the end of five years. However, it is expected that at the end of each year the objectives will be evaluated to ensure that the projected values are recorded for each year. This way, the average values for the five year period will come up to the overall targets. Marketing Plan United Colour of Benetton Company, referred hereafter as Benetton Group is a global fashion brand based in Ponzano, Veneto in Italy. As global firm, the company operates worldwide and is faced with unique market based variables like all other global firms (Weaver, 2004). In this section, the market structure and market environment of the company are analysed. Market structure and opportunities The world fashion industry operates a perfect market structure. This means that competition is fair and freely open to all interested competitors (De Jong, 2001). There is therefore free market entry, which results in several competitors often clustered around the same market area (Gubbels & Koss, 2000). The opportunity however is that Benetton Group has the chance of also exploring new markets as part of its market expansion and corporate strategy (Dornbusch, Fischer & Samuelson, 2007). Interestingly, the figure below shows that from 1990 till date, the number of people employed in the global fashion industry has been declining. This is relevant as it shows an industry that is performing less than its capacity and thus has more room to operate vibrantly. Figure 1: Global employment in fashion industry Source: Fashion United (2015) Target market and segment Even though it has been said that Benetton Group specialises in men’s wear, women’s wear, and children’s wear, it is still important that the company gets a well defined market segment which will be the focus of its marketing strategy into the next five years. Based on this, professionals in the labour sector will be defined as the company’s most applicable and strategic target market. Within the larger target market of professionals, the service sector where executive and office wears are dominant will be selected as the segment. The rationale for selecting this target market and segment is because it comes with several demographic advantages including population, gender diversity, purchasing power, socioeconomic dynamism, and environmental awareness (Green, 2000). As far as purchasing power is concerned, they can afford the prices of the the value added office wears given that these are salaried workers. In terms of gender, the target comprises both males and females, which means there will not be limitation on sex of cloth line. What is more, the professional understand the essence of sustainable production, which is part of the organisations vision. The following statistics serve as a guide for selecting the services sector as the major target segment for Benetton. In Italy, adult employment rate is 56.6%, ranking 146th out of 165 (Nation Master, 2014). With national population of 59.83 million and adult percentage of 59.4%, it means there are an estimated 35,539,020 adults, out of which 25,048,914 are in the labour force. Nation Master (2014) further gives a breakdown of the labour force into the following categories. From the figure above, it would be noted that the services sector dominates the labour force with 65.1% of total employed adults, which represents 16,306,843 professionals. By using employees in the services sectors such as banking, health and education as the target segment, it means Benetton will be getting greater percentage of the working population to buy its new line of office wears. When Benetton looks at the larger European market, the advantage for targeting workers in the service sector with its OffixWear brand will even be more profitable. This is because the European Commission (2014) gives data to support the fact that the working population in the Union that are in the service sector make up 70.1% of employed persons. Of this, 39.6% are in trade, transportation, accommodation and food services, information and financial activities and real estate. 30.4% are also in public administration, education, human health, arts, entertainment and recreation (European Commission, 2014). Meanwhile all these are professions who use office wears on daily basis. This means that through massive advertisement of the OffixWear brand, it will be possible to attract several buyers from both business level and individual consumer level to be in office wears with the Benetton OffixWear label in it. Strategic option The selection of a strategic option will be based on the use of Bowman’s strategy clock, which has for long served as a theoretical framework for defining the marketing strategy of companies, depending on their proposed market positioning (Coyne & Subramaniam, 2013). Based on the Bowman’s strategy clock, the focused differentiation marketing strategy will be preferred in meeting the company’s goals and the needs of its target market and segment. This is because Doherty (2007) explained that the focused differentiation strategy it ideal when producing high perceived value and high price. For Benetton, its mission of offering high value fabric will be achieved as a result of the focused differentiation marketing strategy (Davis, Eisenhardt & Bingham, 2009). Even more, the goal of increasing revenue will also be achieved as a result of this strategy. The reason for these two assertions is that as part of focus differentiation, the company will be required to produce fabric considered to be generally of high value and quality for its segment (Davis, 2005). Whiles producing these high value and quality fabrics, customers would have to buy for the value by paying more in terms of prices than they would pay for other low quality fabric (Clegg, Hardy, Lawrence &Nord, 2013; Gleason & Wiggenhorn, 2007). The focus differentiation strategy is also considered very appropriate because it will mandate the company to do a lot of focusing as part of its strategic option. Meanwhile the working class and corporate world have been identified as target market and segments respectively to serve this purpose. Marketing Mix In order to be successful with the proposed marketing strategy, there are very specific programmes that must be followed. Two of these are segmentation, and publicity. Segmentation Segmentation refers to the process of identifying a group of consumers with specific needs for which the customer wants to serve with its marketing strategy (Coelho, 2011). In the current premise, two segmentation programmes will be rolled out. The first will be to focus on the search and identification of companies willing to order OffixWear in bulk for its employees. This first segment of companies will form a business to business (B2B) market niche. The second will focus on a business to customer (B2C) niche, which will look at places with the highest population of service workers. Ahead of this, market research that gives information on number of companies that may be used for this purpose, willingness of companies to use Benetton’s cloth lines, and the readiness for customers to pay for products based on the value must all be performed. Promotion and Publicity For the sake of the B2C niche, comprehensive advertisement will be needed to make ordinary office workers want to adorn Benetton’s brand of OffixWear. After the segment has been found through the segmentation programme, publicity and promotion will be very important in to make the ideas, offers and strategies of the company known to the target market (Minkov, 2007). To do this, a lot of emphasis shall be placed on promotion and publicity. These will be done by centring on massive advertisement that is undertaken with the use of advertising platforms including electronic, print, and new media. Given changes in modern trend of advertisement, much emphasis shall be placed on social media marketing as a means of making the company’s products attractive to its target audience. The promotion must involve popular personalities in the service sector who will endorse the use of Benetton’s new line of office wear. Implementation of marketing mix The product to be offered is high value corporate, executive and office wear. The value in the product is determined in the quality of fabric to be used in making the apparels, which will guarantee durability. Style and class will be another component of the product as a means of offering value. The question of place is very important in knowing where customers can have access to the products (Dosi, Pavitt & Soete, 2008; Deardorff, 2005). Here, reference can be made to two major types of places which are conventional and electronic. Conventionally, the company will be introducing 20 sales points in addition to the existing stores it has across the globe. There will also be emphasis on electronic commerce to ensure that customers everywhere can made orders in the most convenient, accessible and available means through the power of the internet. As far as promotion is concerned, the company will be focusing on activities that can attract customers to its brand instead of what is offered by other competitors (Ciborra, 2006). In this sense, a lot of emphasis will be placed on event sponsorship, advertisement, offering of corporate social responsibility, and customer loyalty programmes. The pricing model to be used will focus more on differentiation in payment options as against quantitative price of products. To this end, the company will be offering specialised payment plans and policies that make it possible for business to business (B2B) clients to make instalment payments when they place bulk orders. As far as business to customer (B2C) clients are concerned, they will be offered products at relatively lower prices when compared to average market prices. Supporting documentation Major supporting documents for the company’s marketing plan over the next 5 years will include past and present annual financial statement, competitor analysis from sources such as Yahoo Finance and Bloomberg. Data from financial and business newspapers and magazines are also preferable. 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