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The family entered into other business ventures assisted by loans from financial institutions. They eventually purchased the large well-known shoe manufacturer, Varese. In time, they allowed larger store units, depending on the sales as calculated pieces per square foot. The s saw a decline in the number of shops in the United States, but expansion into other global markets.
Benetton increased the number of stores in the Far East and boasted 50 stores in China alone. By Benetton's presence was felt in over countries, with 7, sales outlets for their main brands of United Colors of Benetton, Sisley, and The sales network included 80 branches and staff responsible for independent stores in specific geographic areas. In the largest store opened for business in London, England. The Benetton magazine, Colors, was introduced, using multicultural messages the company had featured in its ad campaigns of the s.
In addition to their clothing lines, Benetton diversified into a variety of other enterprises through Edizione Holding. Acquisitions included Rollerblade, Prince tennis rackets, Nordica ski boots, Kastle skis, and Asolo hiking boots. Benetton, along with partners, also acquired Euromercato, Italy's leading superstore chain and interests in GS-Autogrill markets and restaurants. Other product lines included watches, stationery, cosmetics, linens, eyewear, books, the Twingo Benetton car in collaboration with Renault , and a line of pagers through an agreement with Motorola.
By Benetton sponsored sports teams in volleyball, basketball, and rugby. In the s Benetton came under criticism for its use of controversial images in its advertising campaigns, including those depicting war, AIDS, racism, violence, and homelessness. While Benetton was pressured into removing offensive ads from billboards, the same ads were critically praised for their sociopolitical statements. A number of lawsuits were filed against Benetton by shopowners who claimed that the ads had caused a drop in sales, but these charges were difficult to prove.
A downturn in the European economy impacted sales during this period. The images used in the ad campaign have been included in museum collections around the world and continue to spark debate. Benetton, independently and in conjunction with other groups and organizations, contributed to many initiatives aimed at social problems.
Support for War Child, a charity that helps children in war zones around the world, has also been praised. Autographed Toscani posters were offered to visitors at a clothes show event in exchange for donations to War Child. Benetton's use of information technology facilitates the management of the global business from Ponzano Veneto.
Students from around the world study at Fabrica, Benetton's arts and communications research center near Treviso, learning communications in all its forms and using the new technologies that will take them, and Benetton, forward into the future. To integrate group logistics, Benetton also acquired Azimut S. To enhance global production and marketing, Benetton built a factory in Argentina to add to facilities built the year before in Brazil; acquired, incorporated, or sold marketing companies in various countries; opened stores in Warsaw, Moscow, and Cairo; listed on the New York and Toronto Stock Exchanges; planned to expand Benetton Cosmetics, which had operated in North America and Europe for the last three years, into the Japanese and South American markets; and entered into a joint venture with the Japanese trading company Marubeni, creating Benetton Shoes Corporation, to sell shoes in the United States and Canada.
Negotiations also were made with Toyobo on joint plans to enter both the Japanese and Brazilian markets, and with Seibu-Saison to convert its license to a production and marketing joint venture. These developments were representative of Benetton's strategy to first use licensees to gain wide exposure in new markets and then to convert the license into production and marketing joint ventures. Accordingly, growth also was accelerated by granting licenses to producers in noncompeting industries.
The Home Colors trademark was developed by acquiring an interest in Eliolona S. A new joint venture called United Optical was formed between H. Heinz and the Italian manufacturer Anser to produce spectacles. Furthermore, W. Corporation was incorporated in the United States as a joint venture with Avendero S. By exports rose to To finance this expansion, Benetton aimed to attract investors in the United States, Canada, Japan, and Europe by making a capital issue of 24 million shares.
Moreover, the trademark United Colors of Benetton was adopted. In the meantime, the Federal Trade Commission conducted a preliminary investigation to determine whether Benetton had violated federal statutes by failing to file as a franchiser but dropped the inquiry after Benetton asserted that contracts are negotiated by independent sales agents and that store owners pay no fees or royalties, even though they are required to follow stringent merchandising rules.
In the late s, Benetton gained additional competitive advantage by implementing global networking to connect sales and production.
A point-of-sale computerized program, which linked the shops to headquarters, was designed to handle order management, cost accounting, production control, and distribution support. Thus agents began booking 80 percent of each seasonal order six months in advance; the remaining orders were placed midseason and relayed to headquarters by computer. The point-of-sale program was replaced by late , and Benetton's decentralized operations were linked by a global electronic data interchange network, which also included freight forwarding and customs applications.
Thus in Benetton started to consolidate its stores in the United States as well as Europe, replacing the clusters of smaller stores with the megastore concept, which carried the full Benetton line.
In addition, Benetton turned its marketing and sales efforts once again to developing markets in the Near and Far East and to Eastern Europe, and halved its dividend to have more funds for expansion and acquisition.
In December, Benetton signed a joint manufacturing agreement with Alexanian in Egypt in light of plans to open 30 stores in that country, and in , 12 stores were opened in Poland. A joint venture agreement was signed for manufacturing facilities in Armenia, which was to produce apparel for the Soviet market under the United Colors of Benetton trademark; future expansion plans came to a halt, however, owing to lagging productivity at this plant.
To beat the worldwide recession and increase market share, in Benetton developed strategies to achieve the following goals: to improve operating margins, reducing prices by about 15 percent, increasing production volume, improving product mix, and taking advantage of the devaluation of the lira; to improve operating efficiency, reducing number of styles of its collection from 4, to 2,, and acquiring and integrating the operations of four key former subcontractors; and to improve cash flows, refinancing short- and medium-term debt.
The mix of items was improved by introducing sophisticated classic professional apparel through shops dedicated to these higher-margin product lines-- And for dress shirts, Di Varese for shoes, and Benetton Uomo and Benetton Donna for mature men and women--and by continuing to expand into the sporting goods market.
By mid, Benetton bought the remaining interest in Galli Filati and consolidated interests in four suppliers of woolen and cotton materials; now about 68 percent of the cost of production was represented by charges from subcontractors, compared with 87 percent in As a result, group sales rose 10 percent. By early , Benetton had continued to close stores in the United States and, for production and marketing reasons, ceased operations at the Rocky Mountain plant in North Carolina.
A technologically advanced factory opened at Castrette, Italy, which was designed to expand manufacturing capacity to 20 million pieces per year with about 15 people, using sophisticated robotic technology.
Goods were now exported in greater numbers from Italy, where Benetton benefited from the abolition of the wage indexation system and the devaluation of the lira following its withdrawal from the exchange rate mechanism of the European Monetary System.
At this point, Benetton had 32 factories, of which 27 were in Italy, and license agreements in 13 countries. In addition, Benetton decided to expand in developing countries, forming a joint venture with a major Indian manufacturer to produce linens and stationery, opening its 7,th store, in Cuba, and transforming Benetton Mexico from a sales subsidiary to a manufacturing operation for the North American market.
These developments, particularly the continued effort to rationalize production, resulted in Benetton's stock reaching a five-year high. Consolidated revenues increased in by about 10 percent compared with the previous year, and net income rose 39 percent since Benetton's global advertising campaign succeeded in generating a mix of praise and criticism and, ultimately, a fair amount of free publicity since about The ads, which were initially product-oriented campaigns on themes of multinational and multiracial harmony, eventually focused on institutional-oriented campaigns that featured documentaries on AIDS, sexuality, the environment, interracial relationships, and the war in Bosnia-Herzegovina.
Although many of the ads became the subject of controversy and were withdrawn or banned throughout the world, the United Colors of Benetton ad campaign, which hinged on racial diversity, won Benetton's art director Oliviero Toscani the UNESCO Grand Prix award. Despite the ad controversy, Benetton managed to maintain a sterling corporate image during Italian government kickback investigations conducted in that involved more than 5, of the country's political and business elite.
In fact, Luciano had gotten involved in national politics as part of a movement to overthrow the old system, and in was elected to the Italian Senate as a member of the Republican party. In , however, Luciano retreated from politics, believing that the Italian government had met its objective, to devote himself to the family business.
In early , Palmieri diversified Benetton by planning substantial acquisitions of either well-known brands or companies in the developing world. One such expansion was a joint venture agreement signed with Timex and Junghans Uhren to produce watches and alarm clocks. In addition, Palmieri planned to double turnover by To fund these ambitious plans, he placed 11 million shares in foreign markets.
This issue was expected to raise the float from 20 to 30 percent, with the remaining stock controlled by the Benetton family. In the mids, Benetton's efforts to crack the U. While the company's clothing continued to attract European consumers, American shoppers turned away from the brand and its all too controversial advertising campaigns.
The company's attempts to enter the Asian and Eastern European markets met with similar indifference on the part of consumers.
In the meantime, the s saw the rise of a new breed of trendy designer-retailers who soon were beating Benetton at its own game. With its apparel sales in a slump, Benetton also faced a crunch from its effort to crack the sporting goods market.
Since the late s, the Benetton family's Edizione holding had been building up a portfolio of sporting goods companies, starting with its purchase of Nordica in
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