Strategical Analysis on Levis Strauss & Co

Levis Strauss & Co is a privately owned American Denim clothing company, founded in 1853 by Levis Strauss. Its most spectacular growth occurred after 1946 and still remains as the market leader as shown in below figure. But in 2003, Levis had bell-bottomed to $4.2 Billion and in 2012 Levis have dropped off the list of top quin-tiles. Current executives stated that sticking into old fashion without adopting new fashion trends is the main reasoning for this decline.

Figure 1- Global market share of jean companies (Euromonitor International Fourtunre, 2016)

02. Models

2.1 PESTEL

Issa (2010) stated PESTEL is used to identify the macro-environmental factors that have an impact on the Company as below. This helps in the strategic planning and gaining the competitive edge over the other firms in denim industry. 

Table 1- PESTEL Analysis of Levis Strauss Company

(Author developed)

According to above model, it can be analyzed; Levis have no strict political barriers for international marketing as company is already operating business globally as the market leader. But Levis has failed in South Asian countries (India, China and etc.) due to legal barriers for advertising. As most of the Asian countries are culture based, if culture refuses wearing jeans, governments block the jean companies and refuse even advertisements. Though Levis is the market leader, it is decreasing market share by time. Levis only stick for the old fashion without going for innovations that align new trend. This is the main cause for the economical decline.

In social environment, Levis has contributed for many charity works as they have focus on things other than profits which enable to create a good brand name. Being facilitate with the new technology is another factor that enables company success. In Levis they have touched the new technologies and enable to boost the business processes. Company has gone for online marketing and it ensures to increase up the market share globally. It has a team of 30 technicians in Eureka Lab which enables to ease technical matters.  There is threat from Levis to the environment as it is using cotton, releasing carbon-dioxide and dyed water, which are needed to pay attention via using alternatives for cotton and having recycle plants.  

2.2 Porters’ Generic strategies

According to Tanwar (2013) generic strategy was introduced by Michael Porter in 1985 which help businesses to maintain and achieve competitive advantage.

2.2.1 Cost leadership strategy

Valipour (2012)stated, the ultimate goal of cost leadership strategy is to minimize the cost of delivering products and earn profit.  According to the case study, Levis have un-relevant costs those effects for the financial decline, which can be cut off. Chip Bergh is willing to cut off cost and pricing structure, 20% of non-retail and non-manufacturing employees and reduce global vendor base by half.

Table 2- Porters’ Generic strategies on Levis Stratus 

                                                                        (Author developed)

2.2.2 Differentiation strategy

Tanwar (2013) stated companies used to differentiate to obtain competitive advantage to be success. Dirisu (2013)stated, differentiation can be done in features, functionality, durability and support. CEO Bergh has put a “denim bar” in Levi stores to help consumers to figure what fit, style, and fabric will wash down well, which was not implementing by rivals.

By analyzing Levis Strauss Company , by comparing to the competitors’ company is heavily relaying on the old fashion classic pieces of clothing (button-fly jean, the white pocket tee, the trucker jacket), for differentiate, as there are customers who think old is gold. According to the current executives, “Levi designers sit in the company’s archives and look at old western shirts and jeans”. This entitles that Levis is not practicing R&D which enables to lose even the existing customer as company does not align with new trends.    

2.2.3 Focus Strategy

Bose (2012) stated, companies concentrate on niche markets and develop products by understanding customer needs. Levis is targeting on old fashion lovers. But company is losing market segments.  Levis brand president states, “older disaffected shoppers”, customers who left products after using as it is not aligned with new trends and “lost generation” customers who don’t know about the brand are two segments which Levis is missing.  Most of the younger generation will refuse this product as they like new trends rather than old fashion. As higher percentage of world population is taken by younger generation, this will be a great impact for sales.

2.3 SWOT Analysis

Galea (2015) stated, SWOT analysis is a strategic tool used to identify the internal factors (strengths and weaknesses) that have company control and external factors (opportunities and threats) that company has no control of. Pearson Education Limited (2014) stated, by analyzing SWOT, the company must get the advantages of the company strengths and opportunities minimize the weaknesses and ready to face for the threats.

As strengths, company is having a good experience in Denim industry by comparing to rivals as this is the oldest Denim Company. Since 1875, company has faced many challenges and obtained a wide knowledge about the market. As company focuses on charity activities such as giving donations and scholarship other than profits, company maintain a good image in society as a social responsible company.  This enables the company to have a good customer base and a good brand name.  Having a tactical CEO Chip Bergh is strength of Levis as he is practicing strategies to rebuild the company as it is in the past. 

Table 3- SWOT Analysis on Levis Stratus Company

(Author developed)

Having costs that can be reduce such as, non-retail and non-manufacturing employees wages and too much of global vendor base, is a main weakness. This is impacting on company profit. Through the interview handled by Bergh, it has been identified that most of the senior management was not aware on company heading. As the success of company is depending on the management decisions, the decisions of the Levis might be wrong.

Increase of wearing casuals even for offices is an opportunity for Levis to grab the customer base of 501s. With the globalization, the company will have access for cheap price raw materials from international market which will reduce the production cost. The techniques in apparel industry have been developed and this will enable the company to do production at lower cost.  Expanding of Western dresses all over the world, will be a great opportunity for Levis to expand the market share globally.

The main threat, highlighted is increasing competition from low end rivals such as Lee and Wrangler hence and product substitutions such as “Athleisure” a gym kit that can be wear as everyday attire. This will lead the company to lose the sales. Due to cultural and religious facts some countries (India and China) has not adopted for denims, which is a threat for the company.  

2.3 Conclusion and Recommendations

From the above analysis, it can be concluded that though the Levis is the market leader it is declining the market share, mainly as they are not aligning with new fashion trends and having un-relevant costs.

Table 4- Ansoff Matrix structure of Levis Stratus Company

(Author developed)

Levi has touched only market development and penetration. In market development, according to brand president saying, Levis is willing to focus on lost generation who are mostly younger generation. This will entitle Levis to enter in to new markets and obtain higher revenue. Levis must re-try to enter in to the Asian market by customizing the products according to cultural factors and must design products according to intended customer group ranging from the high spenders to the penny savers and reach markets of all sorts of economy.

In market penetration, though Levis has introduced Denim bar for promotions, author would like to recommend, as product is selling worldwide, to get maximum benefit of promotional cost, focus for TV commercials and online advertising as it can be done massively for worldwide customers at once. Levis can introduce loyalty schemes to increase the usage by existing customers.  

Product development is must in any type of organization. As Levis is currently in the decline area of the product life cycle as shown below, practicing R&D for new innovation with aligning to new trends is the only way to be sustained in the market as it is. Levis can get the customer ideas via online pages and at denim bar. This will enable to increase the market share and drag lost generation as well as disaffected shoppers. 

Figure 2- Product life cycle (Kotler and Armstrong, 2012)

In product diversification, Levis can go for corsetry and non-corsetry clothing items or enters in to a new industry which will enable company to increase the market share. Most of reputed companies are going for diversification because, company can sustain even one of a company got lost. 

References

Bose, T. K. (2012). Market Segmentation and Customer Focus Strategies and Their Contribution towards Effective Value Chain Management . International Journal of Marketing Studies , 113-117.

Dirisu, J. I. (2013). Product Differentiation: A tool of competitive advantage and optimal organizational performance. (A case study nof Unilever Nigeria PLC). European Scientific Journal , 258-262.

Galea, T. S.-B. (2015). SWOT Analysis. Strategic Management Journal , 112-118.

Issa, T. (2010). Sustainable Business Strategies and PESTEL Framework . GSTF International Journal on Computing , 73-78.

Kotler & Armstrong,. (2012). A Marketer's World. Retrieved August 12, 2017, from Word Press: https://atitus707.wordpress.com/product-life-cycle-stages-and-strategies/

Pearson Education Limited . (2014). Diagnosing strategic capabilities . In G. Johnson, Exploring Stratergy (p. 783). Harlow : Pearson Education.

Tanwar, R. (2013). Porter’s Generic Competitive Strategies. IOSR Journal of Business and Management , 11-17.

Valipour, H. (2012). The Effects of Cost Leadership Strategy and Product Differentiation Strategy on the Performance of Firms . Journal of Asian Business Strategy , 14-23 .