The American customers are very well-informed consumers. Not only are the products that are offered nowadays a very high-quality but there are also very many options for the consumer. Due to the myriad of products to choose from, there is a lot of competition in clothing retail market. This makes it a particularly difficult market to break into because Benetton’s name is virtually unknown here in the states. The upscale clothing retailers in the U.S. market that would be in direct competition with Benetton would be the likes of DKNY, Perry Ellis, Calvin Klein, Hugo Boss, and Guess, which are all already well-established and recognized. Benetton will have to develop its own unique brand image for the United States market and show positive product characteristics such as high-quality fabrics, fashionable designs and colors, and convince the United States market something better than that which they have already been offered. Benetton's globalization attempt to spread its business into the United States market is challenged by the already leading market shareholders in existence in the U.S. They will need an adequate advertising budget inorder to position themselves in he mind of the U.S. comsumer.

Benetton’s factories and suppliers are all located in Europe. This is a problem because it will add time to their order turnaround, as well as add cost due to overseas shipping. as a willingness to invest in the building and maintaining of retail shops and factories overseas.

Legal and political regulations enforced by the government establish rules that a business must conform to. These rules affect each element in the company's marketing mix. Benetton will not want to risk forgoing any of these regulations or overlooking any of the rules because its repetition would be at stake. Not to mention the fact that the extreme amount of money that would be wasted on court cases would be another large setback to their expansion into the U.S. market.

The environmental forces that apply to Benetton's decision to go abroad with its sales (specifically to the U.S. market) are the social forces, objectives and resources, competitive forces, economic conditions, and the technological developments in political and legal considerations. Benetton will have to choose its target market and will also have to make decisions about the products they will offer, how to distribute these products, how they will price these products, and how they will promote these products to their target market.

One key issue Benetton has take into account, the sheer size and diversity of the American market. They will have to determine their target market and once that is done, they will have to out do the competing companies in that specific market. To out do them in terms of advertising and promotion of their product above their competitors products.

Another issue is that they are newcomers to the U.S. market. Because of this they will face challenges. The U.S. consumers do not know what the Benetton brand nor do they know the history and reputation of the company. Therefore is necessary for Benetton to establish a brand image and allow the consumer to recognize the company's goals and ideals and to formulate an opinion about the products. Of course it would be necessary for Benetton to produce a positive image about their company and products for the consumers to see. This will be done through advertising. The advertising budget will be a large one because there will have to be a good amount of advertising done in order for the American consumer to recognize the Benetton brand and image as well as remember and be able to recall a confident dealing about the Company and its own history. Benetton has come from being the dominant power in the Italian and European markets, to being a virtual unknown in another very competitive environment. For that reason alone, I believe that is necessary spend a large amount of money on advertising.

A large problem that Benetton would face would be shipping. If they are to sell products in the American market, they would have problems with response time to orders from American retailers for Benetton and associated companies that Benetton may or may not be using to distribute the product. However, if Benetton decides to build factories on American soil, I believe this would cut down the shipping time tremendously, therefore creating a much faster response time, and also a better brand image. It will create a better brand image because of the fact that if the customer wants a product, he will be able to recieve that product in reasonable amount of time as opposed to waiting for an overseas transportation unit to bring this product to him. The faster the product reaches the consumer, the more pleased the consumer will be with the product. Therefore believe that building factories on American soil will greatly improve Benetton chances to prosper in the American market.

As far as locations for retail outlets, I would have to say that Benetton will have to analyze its competitors and their retail locations, and place Benetton retailers accordingly. A Benetton retail outlet near a comparable, but already well-known brand's retail outlet would provide the consumer with an alternate, and possibly superior choice while at the same time producing an association for Benetton with that already well-known clothing producer. Whether that assosiation be for fashion-minded or quality-minded consumers, it would create an image. Also, it would construct the feeling that the two brands were 'in the same league'.

Strengths
Loyal domestic customer base
Established brand name overseas
American envy for European class

Weaknesses
Access to raw materials
Nature of materials used in garments
History of controversial advertising
Old, conservative management
Uninspiring website with limited options
Limited product line
Complex supply chain

Opportunities
Growth of the US economy
Increasing demand for high-end goods
E-commerce

Threats
Numerous and strong competitors
Bargaining of domestic and US suppliers
Barriers to market entry

How to Best Penetrate the US Market

Our target market
Our research and previous experience indicates that our target market in the US consists of affluent adolescents and younger adults (ages 18-35) drawn mainly from the urban areas. Our customer base is knowledgeable about product quality and is strongly motivated by brand name recognition. They expect shopping convenience in an exclusive environment, or through cutting-edge, fully interactive websites. Our target customer furthermore enjoys dressing exclusively with the extra flavor of individual uniqueness.

Low-cost expansion of market share
Reaching our target customer in a foreign market requires local expertise and heavy investments in advertising and promotion. A rapid expansion of market share, although desirable, may prove prohibitively expensive in the large US market. Consequently, a low cost expansion strategy through alternative means should be adopted in order to minimize risk for our stakeholders.

Partnership and new brand name
Our strategy for gaining market share in the US will be to form a joint venture with cK to facilitate the marketing and distribution of our products and to capitalize on brand name recognition. This joint venture will result in the creation of a new brand name: cKBenetton. cKBenetton will prove advantageous for both parties, as it will allow cK to expand into knitted clothing items and allow for Benetton to reach its target customers. cKBenetton will initially open up stores in the five largest US cities; New York City, Los Angeles, Chicago, Philadelphia and Austin, TX. As sales expand, we will continue to expand into the rest of the large cities in the US and in Canada.

CKBenetton will be operated as a standalone company with 25% of equity owned by Benetton, 25% by cK, and 50% by the public. Profits will initially exclusively be re-invested into expansion. Shareholders should however receive substantial profits through appreciation of the stock value.

Note: Benetton will have the option of repurchasing 51% of equity after 10 years of operations.

Expansion and redesign of US product line
With the expansion to the new and competitive US market we will have to diversify our basic philosophy behind the design of products. Our goal will be to retain the original garment’s multiplicity of bright colors and pastels of Benetton and extend this traditional concept to cK´s product line. Those products would include pastel sunglasses, bags, scarves, knitted gloves and hats, shoes as well as fragrances in pastel bottles. All of the items will be sold under the ckBenetton brand name. This will allow our retail stores to equip our customers with matching pastel garments and accessories all bearing ckBenetton name from head to toe.

Re-branding of the US product line
A re-branding strategy for the US market is essential for several reasons. First and foremost, it will enable Benetton to penetrate the immense US market much faster. Secondly, it will allow for risk limitation and risk diversification. Most importantly, however, it will make it possible for Benetton to alter the US product line as compared to overseas, without hurting the original brand identity. Assigning new American production locations, processes, and new raw materials to the ckBenetton-branded product line generate tremendous cost savings for shipping and production. The bottom line will be higher profit margins and increased returns to shareholders. As a bonus side effect, the success of the cKBenetton brand will draw increased attention to the original Benetton stores already in existence, allowing for a re-birth of the original brand.

Pricing strategy
CKBenetton garments and apparel will consistently follow a high price – high differentiation strategy. Our high prices will be consistent with our dedication to quality and the nature of our customer base. Our belief is that psychological value will be added to our products through the pursuit of this strategy.

Production strategy
Our re-branding strategy will allow us to use new raw materials for production. Materials will continue to consist of natural fiber but added will be synthetic fiber and materials such as silk. cKBenetton will use some of its capital raised through the issuing of equity to purchase production capacity in Mexico, Latin America and South America. In addition, cKBenetton will issue bonds collateralized by CK and Benetton to finance production facilities. This production strategy would carry four main advantages:

Cheaper production costs thanks to low labor costs and lower costs of material and shipping

Vertical integration of production allowing for better control of production resources

Large tax savings thanks to depreciation of plant and equipment

Free insurance of plant and equipment by the US government (Part of US govt’s incentives for investing in South America and Latin America).

Locations and store layouts
Store locations in the US will similarly draw heavily upon our current European strategy. In order to attract as large a portion as possible of our customer base, we will locate our stores in the heart of the most fashionable areas of US cities. Being a high profile brand, cKBenetton will not build any stores in malls, nor will it build any stores outside the central parts of urban areas.

Part of cKBenetton’s US strategy will be a new, bold store layout. The Average size of our floor surface will be substantially increased relative to the regular Benetton store, from 12x32 feet to 30x50 feet on two floors (see store layout on last page for details). This eightfold increase in floor surface will be justified by the limited number of exclusive locations that cKBenetton stores will have in the US.

The new store layout will blend garments with apparel and cosmetics in a natural fashion and will convey a unique cKBenetton atmosphere. The most fashionable items will be found on the first floor and at the back of the second floor. These items will all be in season and positioned in a way that blends the widened array of cKBenetton products. In the front of the second floor will be positioned items on sales.

The unique atmosphere of the cKBenetton store will be the result of a creative mix of interior decorating, music, lighting, and the cKBenetton Fish Tank – the most striking of our marketing innovations. Silver and light wood shelving units will blend with the cKBenetton pastel color garments into a harmonious shopping environment. Tranquil dance/trance music will combine with soft moving lights to form our basic atmosphere. The centerpiece of our basic store layout will be the cKBenetton Fish Tank. Two stories high, the lighted cKBenetton Fish Tank will display tropical fish (physical representations of our logo) and aquatic vegetation in abundance, representing cKBenetton’s dedication to life and diversity. In addition, the Fish Tank will be the focal point of the cKBenetton store atmosphere, blending with the lighting and the music.

E-commerce
Aside from its applications in inventory control and supply-chain management, E-commerce will be the second and most cost-effective way for cKBenetton to reach its target market. The cKBenetton website (http://www.ckb.com) will feature state-of-the-art animated graphics and a fully automated on-line ordering system. CKB.com will allow for users-adjusted content, tailor made for individual needs. Each user account will come with a fully interactive on-line fashion consulting service.

To reflect our dedication to the highest level of customer service, cKBenetton will have a policy of door-to-door delivery within 48 hours of any order placement – or award the customer the ordered goods free of charge (Outside the US, a maximum of 5 business days will be allowed for delivery anywhere in the world)

CKB.com will draw its customers mainly from its market of focus –the US. However, it will also serve as a probing tool for customer demand abroad. In the truly global vision of Benetton and cKBenetton, all potential customers worldwide should have access to any of our goods.

Advertising campaign
CKBenetton’s marketing strategy will be over a broad range of channels and progress over a five-year period where cKBenetton will establish itself as the premier luxury brand for the young and dynamic elite of the American part of the global village. The campaign will be unambiguous and convey the image of success displayed through cutting edge fashion in exotic urban milieus.

To make our campaign economically sustainable, cKBenetton will increase advertising gradually as sales increase. Our goal is to finance our advertising with 90% out of retained earnings.

In year 1, cKBenetton will advertise exclusively trough CKB.com and through posters in the vicinity of its first urban stores.

In year 2, cKBenetton will make its first appearance with ads in weekly fashion magazines. It will also debut its banner advertising on the Internet.

In year 3, magazine advertising will substantially increase. The first television commercials will be broadcasted.

cKBenetton will not advertise through newspapers or the radio. This policy will be rigorously enforced, as all cKBenetton products should be displayed in color and in a media allowing for high quality images.

Part of cKBenetton’s mission will be a heavy involvement in sponsorship marketing. In the US, cKBenetton will encourage top-notch design school by awarding scholarships to the most promising students. In addition, cKBenetton will contribute funds to fashion shows nationwide.

cKBenetton will furthermore aim at becoming a prominent sponsor of projects in the developing world. 3% of cKBenetton’s gross income will be allocated to food, medical and educational resources for developing regions in need.

How to Modify This Report

Historically, Benetton has sold its goods not only under the Benetton brand name but also under other names. We therefore find it realistic to form a joint venture with cK to form a new brand under which to sell our products. cKBenetton’s new production and product strategies depart from what our owners and managers traditionally have conceived. However, we believe that the financial feasibility and the low risk – high profit incentives behind our strategy will drive management at both Benetton and cK to adopt our proposal.

We believe that our marketing strategy is well timed with the emerging New Economy and the growing wealth of US consumers. Our strategy of high price – high differentiation, E-commerce, and exclusive stores reflects the increasing demand for high-end goods.

We strongly believe that our advertising strategy fits our target customers. As globalization draws the world together, the young and prosperous generations are increasingly seeing themselves as citizens of the world, therefore internalizing and associating themselves with abroad location. The “abroad” is part of our customers’ inner life and is a factor that differentiates the individual from the urban crowd. Our advertising strategy is therefore highly linked to the psychology of the individual target customer.

Figure 1 - cKBenetton store layout