Reinventing an icon: Benetton’s strategic shift through the 21st Century

Bright and joyful colors, together with groundbreaking market campaigns, have been two defining elements of the Benetton fashion brand since its foundation in 1965. Over the years, Benetton has become a symbol of quality and innovative fashion, quickly becoming an icon at a worldwide level, especially among younger customers. Its garments - particularly its signature jumpers and sweaters - have been the company’s pièce de résistance for decades and pioneered a new way of wearing clothes in years of a semi-global social revolution marked by profound cultural changes. The brand’s colourful and lively clothes embodied ideals of non-conformity and revolutionism that gained increasing relevance and public resonance during those years, proving how powerful branding can be. A key source of Benetton’s competitive advantage was the adoption of the tinto in capo strategy—dyeing garments after, rather than before, production (Benetton group, n.d.) stated the company’s initial competitive advantage in terms of product innovation and cost management, enabling the founders’ rise to the upper levels of Italian fashion. Beyond the revolutionary spirit of the company in its products, Benetton also transformed the retail experience by introducing stores without traditional counters, enabling customers to interact directly with the products. This approach represented a novel and forward-looking shopping experience and anticipated future developments in retail marketing strategies. Despite its early success, the company’s path has been marked by commercial and financial challenges, partly given by the rise of fast fashion and increasing competitive pressure; as a result, the company entered a period of crisis that required a profound reassessment of its business model. In response, the company had to reevaluate its business model, trying to give it a newer and more modern shade. The most notable changes occurred within the operations division, which is today focused on placing greater emphasis on commercial activities rather than on in-house production in order to better respond to evolving market demand. This strategic shift—from industrialization toward commercialization—began in the early 1990s and was completed in 2025, when all factories directly owned by the company were officially closed due to inefficiencies in cost and operations. The transition from local production to external manufacturing pools reflected the company’s need to optimize production costs by relocating manufacturing to lower-cost countries, initially in Eastern Europe with directly-owned production facilities, and later in Central Asia and the Mediterranean basin thanks to contracts with external firms. The objective of this thesis is to provide a historical analysis of the strategic transformations undertaken by Benetton and to examine their implications in terms of brand image, cost structure, and operational effectiveness. The central challenge faced by the company lies in balancing a strong and deeply rooted brand identity with the need for continuous innovation. In a business environment marked by constant change, remaining faithful to one’s heritage while adapting to new competitive conditions represents a particularly complex task. In a fast-paced industry such as fashion, responsiveness and differentiation from competitors are key determinants of success. Accordingly, this thesis aims to critically analyse the company’s performance in terms of change management and business model redesign, through the application of Coase’s neo-institutionalist framework, which emphasizes the role of transaction costs as a key explanatory factor of firms’ boundaries and organizational decisions.