What problems led to the changes Benetton made in 2000? To what extent has the company merely added further complexity, compromising the purity of the original system without actually solving these problems? How might it have responded differently?

Question

What will be an ideal response?

Answer 1

These cost challenges appear to have driven the changes Benetton made after 2000. It seems clear that
the company has added further complexity in pursuit of the parallel aims of maintaining demand
responsiveness while achieving lower costs. Arguably these changes have compromised the original
system; the evidence whether they have addressed the problems it faced is surely whether sales and
profits have grown thereafter (see below). All in all, it seems a model that other could not and probably
would not wish to emulate.
It might have responded differently by retaining its traditional model, yet increasing the fashionability
and quality of its garments, accepting smaller revenues but higher profit margins. The problem
however, is that the distribution infrastructure contains massive fixed costs that have to be amortised
over high volumes to make economic sense. Benetton’s actual response to its post 2000 challenges can
be interpreted as fluid and experimental, allowing it to learn what works for it and adapt accordingly, if
necessary abandoning its vertical quasi-integrated strategy in due course.