Back in the 1960s, the garment industry was still a significant part of the European economy and Benetton was one of the first companies to reinvent its production chain under post-Fordist flexible specialisation. Treviso became the home of a parallel governance structure based on contractual relationships between Benetton and its army of small family businesses subcontractors. Its United Colors of Benetton brand is not only a motto but the driving principle of Benetton’s success in the Treviso region.
Treviso is a small town of 82,535 inhabitants situated in northeast Italy and it is part of a wider region with the same name and 892,359 inhabitants. The region acts as a large metropolitan area developed around the cities of Venice and Treviso, comprising of a large number of small cities and small industrial areas. The area represents an important growth region for Italy and in the past was one of the main drivers of the successful Italian fashion design and the home of Benetton Group, one of the world’s largest garment producers.
A pioneer of corporate restructuring
Growing evidence suggests that in contemporary markets, large integrated enterprises are neither responsive enough nor necessarily more efficient than cooperative networks of enterprises, specialising in different aspects of manufacturing and service provision (Bishop and Kay, 1993; Domberger, 1998). While today this approach is widely popular for all industry sectors, in 1970s, Benetton was one of the first companies to reinvent the profit production system by outsourcing much of its least skilled functions to subcontractors (Kakabadse and Kakabadse, 2000) which concentrate entirely on production tasks while Benetton kept and developed its “core” functions that defined its uniqueness as a brand: strategic functions of total control, production cycle coordination, marketing and manufacturing phases that required the most complex technological know-how (Belussi, 1989). All in all, services that have the capacity to convert textile, clothing, and related products into fashion items. The most important innovation that drove the development and efficiency of this networked production and distribution system was the implementation of an advanced ITC framework (Zottola, 1990) that linked sub-contracted production with franchised retailing.
While the production network has been in a constant restructuring over the past 10 years, shifting from the local Veneto region to a wider European and Asian production network (Crestanello and Tattara, 2009), all “core” functions of Benetton are still located in the region. These consist of the main Benetton HQ, the Villa Minelli, a 17th century country residence acquired by Benetton in 1969 and restored over a period of 15 years, a series of modern factories with a distinctive industrial architecture designed by the Scarpas and still used for complex manufacturing tasks and short run products and, most importantly, the company’s visionary Fabrica, a creative think tank established in 1992 and designed by Tadao Ando (Zargani, n.d.).
Fabrica acts as an in-house marketing hub which combines state-of-the-art research in new forms of communication and as a corporate university learning environment (Zargani, n.d.) where young artists from all over the world work under the guidance of established masters in various interdisciplinary design studios.
The same as with the diffused geography of the production network, Benetton’s core functions are not concentrated under the typology of a traditional corporate campus but rather as geographically fragmented networks of sites around the Veneto suburban region, camouflaged as traditional Italian villas.
United Colours of Treviso
Benetton’s corporate philosophy, which promotes a culture of dialogue and partnership through direct interaction with customers, business partners and the general public, is deeply rooted in the traditions of the Veneto region.
From the beginning, Benetton’s innovative business model heavily relied on an intricate network of small family-run regional subcontractors that functioned through a mix of vertical production control mechanisms but also based on informal social ties. At its height, this collaboration structure comprised of 580 regional SMEs with 10-40 employees each (Crestanello and Tattara, 2009). Although it is now slowly diminishing due to the recent restructuring of the production system, the social engagement that it gave birth to still plays an important role in the company’s regional corporate citizenship strategy and its worldwide identity (Crestanello and Tattara, 2009).
As early as the 1980s, Benetton attracted widespread attention by adopting a strong socio-cultural flavour in its corporate identity strategy (Belussi, 1989) with the work of photographer Oliviero Toscani that brought serious social and political problems to the attention of the wider public. Initially through the promotion of multi-ethnicity which became part of the company’s catchy logo “United Colors of Benetton” and later through more controversial themes like environmental protection, AIDS, homosexuality and war. All of these messages were deliberately used by Benetton to promote a very distinct and open political agenda for the fashion industry (Crestanello and Tattara, 2009).
At a local level, in 1987, Benetton established the Benetton Foundation as a local promoter of socio-cultural diversity in the physical environment (Benetton Foundation, 2016) with the mission to support regional heritage and cultural landscapes research. The foundation plays an important part of REKULA, an EU project analysing economic, social, cultural and territorial development with the aim of redesigning and rehabilitating cultural landscapes (REKULA, 2006) that have undergone significant change or disturbance. In particular, the project seeks to devise planning tools (communications solutions, regulatory bodies and landscape development models) as well as other technical solutions for managing these vulnerable areas over the long term.
This vision, of promoting and protecting local cultural landscapes is very well exemplified in the company’s strategy of acquiring historic buildings and finding creative ways of using them (Hoeger and Blindels, 2007) either as locations for in-house services but also as community assets. The Foundation, the Ponzano Children’s Centre, and the Palaverde arena in Treviso, a multifunctional sports complex, are both used as a means to enhance the company’s visibility but also as promoters of social values at a local level.
A celebration of diversity
The company markets its products under several brands: United Colors of Benetton (77% of sales), the flagship brand mainly for men and children, Sisley (18%), the fashion-oriented brand for women, The Hip Side for trendy, and Play Life and Killer Loop (5%) for leisurewear (Crestanello and Tattara, 2009).
As mentioned before, Benetton’s branding strategy and the way the company defines its products strongly relies on awareness regarding socio-cultural diversity, multi-ethnicity and worldwide issues regarding the environment, AIDS, homosexuality and war. This approach paints a very open image for its brands which is depicted through its playful and colourful “United Colors of Benetton” ads and its bright and playful shop designs.
Benetton was the first firm in the fashion industry to introduce a franchised retailing system (Belussi, 1989) which also imposes a standardised shop design in line with the core company values and its marketing strategies. In a Benetton shop, it is the colours, the window displays and the open shelves that strike you most, as they are designed to do by the famous architects Afra and Tobia Scarpa. While these shop designs establish a clear connection between the company values and the products sold in them, it is Benetton’s own concept stores that go a step forward in designing an all-encompassing experience environment around their products. In the beginning, the company-owned concept stores were used as a market research tool (Zottola, 1990) to better understand consumer trends in an unregulated franchising system but now they play a more central role in the way the company tries to reinvent itself on the competitive global market.
The new “On Canvas” line of Benetton-run concept stores kicked off in April 2014 in the fashion centre of Italy, Milan but are now part of the international expansion of Benetton and the Treviso region. As described by the company media report (Benetton Group, 2014), the shops “embrace an open, welcoming and flexible ambiance that places the customer at the centre and provides an authentic and endearing experience in design and technology”. The main innovations of these shopping environments are the reduction of shelving which transforms the space into a showroom and the use of mobile technology to order any of the items on display.
Benetton’s political agenda
The fashion market is an environment dominated by the demand of consumers rather than by standardised items. Fashion changes rapidly and requires the need for a flexible short-run “just-in-time” production which goes under the name of “fast fashion” (Crestanello and Tatara, 2009).
Benetton is one the largest European garment producers with its core business consisting of designing, producing and selling garments for men, women and children and is considered a pioneer of the modern approach to product development based on “flexible specialisation” (Stannard, 1999). This implies a shift from the monolithic company which gathers under the same roof production, distribution, marketing and retailing of their products towards a “hollow corporation” where only core functions like product design, management, marketing and quality control are kept in-house and the rest are sub-contracted to a network of small and flexible production firms.In this system, the growth of the firm does not happen through internal development (Penrose, 1959) but through the development of a network of contract-controlled firms. Thus, the group becomes a flexible system based on a propulsive “core” and an “adaptive” periphery (Belussi, 1989). Through this approach, the firm appears to become a “mobile” system of both economic transactions and organisational links which can rapidly modify its organisational borders through a “recentralisation” or a “decentralisation” of the production process (Belussi, 1989).
Despite its flexible approach, Benetton’s system is also highly vertically integrated (Crestanello and Tattara, 2009). The company has managed to develop a network of market and non-market relationships within a “quasi” disintegrated system (Belussi, 1989) combining the efficiency of market discipline with the security of hierarchical structures. This pattern of reorganisation seems to be close to the idea of a firm as a “governance structure” (Williamson, 2002) which reduces the overall level of uncertainty, the degree of risk and the costs.
In spatial terms, this governance network creates industrial districts (Belussi, 1996) composed of dense physical concentrations of interdependent small and medium-sized enterprises (SMEs), where a lead firm, in this case, Benetton, provides organisational structure and higher value through know-how and services. Benetton’s success has been inextricably linked with the development of Treviso industrial district (Dunford, 2006) where until recently the company’s largest network of sub-contracted production has been situated (over 200 sub-contractors).
Considering the particular nature of the system, we cannot talk about a traditional regional governance structure based on public-private cooperation but rather of a diffused private governance network consisting of: firms which are under the direct financial control of the Benetton family (through various financial Companies), affiliated firms belonging to either former employees or actual Benetton managers or clerks, independent firms, and homeworkers (Belussi, 1989).
Benetton’s other colours
On top of this, starting from the 1980s, Benetton has diversified into new ventures using the profit from clothing through the development of Edizione Holdings that is also used by the family in order to control its 70% share of the Benetton Group clothing company. Edizione’s portfolio consists of Atlantia (formerly Autostrade), the company managing the Italian motorway system, Autogrill, a network of motorway supermarkets and restaurants, agricultural production, Telecom Italia – mobile telecommunications, airport management services, banking, real estate and utilities (Edizione, 2016).
Although it appears to be random, there is a clear link between Benetton’s core business as a manager of a sub-contract garment production network based on efficiency and cost reduction and Edizione’s expansion into management of public infrastructure, services and utilities (Cunningham, 1999). This expansion also illustrates the particular relationship between Benetton and the Italian state, which was especially in the mid-90s keen on privatising its unprofitable companies (The Economist, 2004) for bargain prices rather than use private-public partnerships in order to maintain control. Both its sub-contracted production network based on small family-owned businesses and the retreat of the state from managing infrastructure and utilities provide Benetton with a unique regional control position that is particular for the case studies we chose to analyse in this report.
Benetton also acts as a mediator reconciling the local and the global. Its strong relationship with local communities and businesses in the Veneto region, its numerous investments in local industries (infrastructure, services, agriculture, health foods and multimedia) have also enriched the specialised production base of the region creating a concentrated network of knowledge and production which acts as an economic and cultural support system for the region and strengthens its ability to operate at a global scale (Hoeger and Blindels, 2007).
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