Back to the Future: Benetton Transforms Its Global Network
In the 1980s, while the provocative magazine and billboard advertisements of Italian clothing company Benetton caught the consumer’s eye, the company’s tremendous growth, outstanding financial performance and innovative strategies were captivating the press, scholars and practitioners around the world. (See “The Benetton Group.”) For many years, it was the archetypal example of the network organization — that is, an organization based on outsourcing, subcontracting and, more generally, on relationships developed between a large company and several small producers and distributors, or both.1
Several factors contributed — and, to some extent, continue to contribute — to Benetton’s success. First is its innovative operations-management techniques, such as delayed dyeing. Benetton postpones garment dyeing for as long as possible so that decisions about colors can reflect market trends better (the tinto-in-capo strategy). Second is its network organization for manufacturing. A network of subcontractors (mainly small and midsize enterprises, many of which are owned, completely or partly, by former or current Benetton employees) supply Benetton’s factories. That structure has lowered Benetton’s manufacturing and labor costs, has reduced its risk (which shifts to its suppliers) and has given it unbeatable flexibility. Third is the network organization for distribution: Benetton sells and distributes its products through agents, each responsible for developing a given market area.
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1. The concept of network organization was pioneered by studies on industrial districts as alternatives to mass production. See, for instance, M. Piore and C. Sabel, “The Second Industrial Divide: Possibilities for Prosperity” (New York: Basic Books, 1984). As networks emerged, they became a fashionable topic in management literature, generating a wave of multidisciplinary studies and vigorous theoretical debate. For a detailed discussion of the network organization, see: N. Nohria and
R. Eccles, eds., “Networks and Organizations” (Boston: Harvard Business School Press, 1992); W.W. Powell and L. Smith-Doerr, “Network and Economic Life,” in “The Handbook of Economic Sociology,” eds. N.J. Smelser and R. Swedberg (Princeton, New Jersey: Princeton University Press, 1994), 368–402; and A. Grandori and G. Soda, “Inter-firms Networks: Antecedents, Mechanisms and Forms,” Organisation Studies 16 (March–April 1995): 183–214.
