Benetton's Diversifications
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Case Code: BSTR145 Case Length: 18 Pages Period: 1980-2004 Pub Date: 2005 Teaching Note: Available |
Price: Rs.500 Organization: Benetton's Industry: Diversified Countries: Italy Themes: Unrelated Diversification |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Benetton's Diversifications
Benetton Sportsystem
Since 1989, Edizione has managed several sports brands through its company, Benetton Sportsystem. This company managed an ensemble of labels such as Ektelon, Grafalloy, Kastle, Killer Loop, Nordica, Prince and Rollerblade. Many of these brands were market leaders and synonymous with the sport for which they produced equipment (Refer Table I). When Edizione bought the various sports equipment brands, it believed that there was a synergy to be derived. But with hindsight, it appears that things were more complicated. Mike Bizner (Bizner), Benetton Sportsystem's winter sports director at the time, later explained, "After buying at the height of the market, there was a tremendous pressure to create an 'umbrella' of sorts.'Finding the right synergy' between these brands became a big deal. However, there were multiple false starts in searching for those synergies. Like Fibre Tube skis." The perceived synergy between Prince and Kastle did not materialize and, in fact, dealt a major blow to Kastle's brand value...
Analysing Benetton's Diversifications
The Benetton group's diversification into various businesses brought them both admiration and criticism from the Italian business community and the Government. While Autogrill and Autostrade seemed successful diversifications, the same could not be said for Benetton Sportsystem and Telecom Italia. Initially, all the sports brands that were acquired were managed by Benetton sportsystem, which was held by Edizione. It was then, in 1997, sold to the Benetton Group, which was also held by Edizione. At the time, many financial experts expressed the opinion that the only reason the sale was made, was to reduce Edizione's debt. "The deal boils down to using Benetton Group cash to cover the debt upstairs", said a Milan-based investment banker. However, the Benetton family maintained that it was a fair deal. In addition, they believed that the Benetton Group's vast retailing experience in the clothing business would benefit Benetton Sportsystem...
Exhibits
Exhibit I: Financial Highlights for the Benetton Group
Exhibit II: 21 Investimenti's Main Holdings
Exhibit III: Press Release
Exhibit IV: Press Release
Exhibit V: Financial Highlights of Autostrade
Exhibit VI: The Financial Structuring of the Olivetti Takeover of Telecom Italia
Exhibit VII: The Financial Structuring of the Pirelli-Edizione Takeover of Telecom Italia
Exhibit VIII: Telecom Italia's Corporate Organisation as of 2001
Exhibit IX: Financial Highlights of Telecom Italia
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