Strategic Management. Levis Case Analysis

Term Paper, 2019

51 Pages



Executive's summary

1. Introduction
1.1. The Vision
1.2. The Values
1.3. The Mission
1.4. The Products
1.5. Customers
1.6. Current Strategy

2. SWOT analysis
2.1 Strengths
2.2 Weakness
2.3 Opportunities
2.4 Threats

3. Internal Factors Evaluation (IFE)

4. Value Chain Analysis of Levi Strauss
4.1 Primary Activities
4.1.1 Inbound Logistics
4.1.2 Operations
4.1.3 Outbound Logistics
4.1.4 Marketing and Sales
4.1.5 Services
4.2 Secondary Activities
4.2.1 Firm infrastructure
4.2.2 Human resource management
4.2.3 Technology development
4.2.4 Procurement

5. VRIO Analysis
5.1 Value
5.2 Rarity
5.3 Instability
5.4 Organization

6.1 Political
6.3 Social
6.4 Technological
6.5 Environmental
6.6 Legal
6.7 Health and safety laws

7. External Factors Evaluation Matrix (EFE)

8. Porters five view
8.1 The threat of new entrants: HIGH
8.2 Threat of substitution: HIGH
8.3 The bargaining power of customers: HIGH
8.4 The bargaining power of suppliers: MEDIUM
8.5 Industry rivalry: HIGH

9. Competitive Profile Matrix (CPM)

10. SWOT Matrix

11. The Strategic Position and Action Evaluation (SPACE) Matrix

12. BCG Matrix

13. Internal External Matrix:

14. Grand Strategy Matrix:

15. Quantitative Strategic Planning Matrix (QSPM)

16. QSPM suggests that product development has a stronger potential than market development by

17. Financial Analysis
17.1.1 ROE
17.1.2 ROA
17.1.3 ROI
17.1.4 Earnings per Share
17.1.5 Levis Operating Margins
17.2 Efficiency ratio
17.2.1 Assets turnover
17.2.2 Inventory turnover
17.3.1 Current Assets
17.3.2 Current liabilities
17.3.3 Current ratios

18. Recommendation and implementation

19. References

Executive's summary

In 1995, women's jeans were a $2 billion fashion category in the US and growing fast. Levi- Strauss was the market leader, but its traditional dominant position was under heavy attack. Standard Levi's women's jeans, sold in 51 size combinations (waist and inseam), had been the industry leading product for decades, but "fashion" was now taking over the category. Market research showed that only 24 percent of women were "fully satisfied" with their purchase of standard jeans at about $50 per pair. "Fashion" in jeans meant more styles, more colors, and better fit. All of these combined to create a level of product line complexity that was a nightmare for manufacturing-oriented, "push-based" companies like Strauss. By 1995, Strauss operated 19 Original Levi's retail stores across the country (2,000 to 3,000 square foot mall stores) to put them in closer touch with the ultimate customers. However, this channel was a very small part of their overall $6 Billion sales, which were still primarily to distributors and/or independent retailers.

Shows Levi's financial footprint. Strauss was as aggressive as most apparel manufacturers and retailers in investing in process improvements and information technology to improve manufacturing and delivery cycle times and "pull-based" responsiveness to actual buying patterns. However, the overall supply chain from product design to retail sales was still complex, expensive and slow. In spite of substantial improvements in recent years, (including extensive use of "EDI", there was still an eight-month lag, on average, between ordering cotton fabric and selling the final pair of jeans. The industry average lag was still well over twelve months in 1995.The; financial footprint for one pair of women's jeans sold through the normal wholesale channel compared to one pair sold through an Original Levi's Store summarized in.

Although the retail channel was less profitable for Strauss, it seen as an "investment" in understanding end-use customers better. As an experiment in an alternative value chain concept, Strauss introduced "Personal Pair" ™ kiosks in 4 of its Original Levi's Stores in thefall of 1994

1. Introduction

Levi Strauss & Co., the world's largest brand-name apparel manufacturer, gave the world blue jeans and grew enormously rich on this piece of U.S. culture. Indeed, around the world the name of the company's founder has grown to be synonymous with the pants he invented: Levi's. Levi Strauss markets apparel in more than 60 countries and it has 53 production facilities and 32 customer service centers in 49 countries. The company operates wholly owned businesses in most European countries, in South Africa, Australia, Japan, Hong Kong, India, The Philippines, Malaysia, New Zealand, South Korea, Taiwan, Brazil and Argentina, and operates through joint ventures and licensing agreements in a host of other countries. Besides its well- known Levi's, brand products, the company markets clothing and accessories under the brand names Dockers, Britannia, and Slates.

The company traces its origin to Levi Strauss (1829-1902), a Bavarian immigrant who arrived in San Francisco in 1850 during the Gold Rush, bringing dry goods for sale to miners. Hearing of the miners' need for durable pants, Strauss hired a tailor to make garments out of tent canvas. Later, denim was substituted, and copper riveting was added to pocket seams. A merchandising partnership of Strauss and his two brothers, Jonas and Louis, was formed in 1853.

After Strauss's death in 1902, leadership of the company passed to four nephews and, after 1918, to in-laws, the Haas family. The company's most spectacular growth occurred after 1946, when it decided to abandon wholesaling and concentrate on manufacturing clothing under its own label. By the 1960s, Levi's and other jeans—once worn chiefly by American cowboys—had become popular worldwide. When the company went public in 1971, it was operating in 50 countries.

In 1985 the Haas family, along with other descendants of Levi Strauss, staged a leveraged buyout that returned the company to private ownership. In 1986, Levi Strauss & Co. introduced in the United States a new line of casual pants called Dockers; the brand was released in Europe in 1994.

In 1991, an investigation revealed that some products that Levi Strauss had represented as made in the United States were actually manufactured in the Northern Mariana Islands (a U.S. commonwealth) by Chinese laborers working in illegal sweatshop conditions. The subcontractor managing the island factories was fined nearly $10 million by the U.S. government, and Levi Strauss subsequently took steps to improve labor standards and inspection practices for its offshore suppliers.

During the 1980s, because of increasing competition and financial difficulties, Levi Strauss closed nearly 60 of its U.S. manufacturing plants and began shifting production overseas. In 1990 a class-action lawsuit against the company alleged that it had closed its plant in San Antonio, Texas, and relocated it to Costa Rica to avoid paying pension, disability, and other benefits to its workers; the case was eventually dismissed.

1.1. The Vision:

When LS & Co. describe the future of Levi they are talking about a building on the foundation they have inherited: affirming best of their Company's tradition, closing gaps that may exist between principles and practices and updating some of their values to reflect contemporary circumstances."

1.2. The Values:

Levis values are the fundamental to the success, they are the foundation of the company, define who they are and set them apart from competition they underlie their vision of the future, their business strategies and decision actions and behavior, they live by them & they consider these values as the heart of Levi Strauss & CO

- Empathy

Begins with listening. Paying close attention to the world around them, understanding, appreciating and meeting the needs of those they serve including consumers, retail customers, shareholders and each other employees Empathy also means engagement and compassion, giving back to the people they serve and communities they operate in, is a big part of who they are

- Originality

As the makers and keepers of Levi Strauss legacy, they must look at the world with fresh eyes and use the power of ideas to improve everything they do across all dimensions of the business from modest improvements to the to the total reinventions

- Integrity

Include the willingness to do the right thing for the employee, brands, the company and the society as a whole, it continues to anchor their beliefs and behaviors and it is one of the reasons consumer trust their brands

- Courage

Is the willingness to challenge hierarchy, accepted practices and conventional wisdom, courage includes truth telling and acting resolutely on their beliefs

1.3. The Mission:

The Company believes that shared goals are as critical to the Company's success as providing quality products and service and being a leader in the apparel industry. In order to identify and focus these shared goals, the Company adopted the following "Statement of Mission and Aspirations":

- Mission Statement

The mission of the Company is to sustain responsible commercial success as a global marketing company of branded casual apparel. We must balance goals of superior profitability and return on investment, leadership market positions, and superior products and service. We will conduct our business ethically and demonstrate leadership in satisfying our responsibilities to our communities and to society. Our work environment will be safe, productive, and characterized by fair treatment, teamwork, open communications, personal accountability and opportunities for growth and development.

- Aspirations for the Company

We want a Company that our people are proud of and committed to, where all employees have an opportunity to contribute, learn, grow and advance based on merit, not politics or background. We want our people to feel respected, treated fairly, listened to and involved. Above all, we want satisfaction from accomplishments and friendships, balanced personal and professional lives, and to have fun in our endeavors. When we describe the kind of company we want in the future what we are talking about is building on the foundation we have inherited: affirming the best of our Company's traditions, closing gaps that may exist between principles and practices and updating some of our values to reflect contemporary circumstances. In order to make our aspirations a reality.

1.4. The Products:

The Levi's brand jeans have become the most popular in the world - capturing the imagination and loyalty of people for generation. It was known as classic American style and effortless cool. The success of this brand is the range of leading Jeanswear and accessories that appear in more than 110 countries, allowing individuals around the world to express their personal style Levis Curve ID: focus on shape of women, not her size. Levis introduced Go Forth "real to work" that will empower and inspire workers everywhere.

The Dockers

The Dockers is designed for men and women all over the world. In recent days, Levis introduced "Wear the pants" with more styles, new fit, and bold color to put forth a new definition of masculinity. It helps men feel strength and sensitivity.

Signature by Levis Strauss

This brand is ideal fit for family because the goods were made from denim and casualwear for children, men, and women. The collection of this brand includes pants, shirts, and jackets. Furthermore, Signature by Levis Strauss try to reach high quality and fashionable jeans at affordable price.


With slogan: fit for everybody, the dENIZEN brand focus on that takes everything you love about a classic pair of jeans. Furthermore, dENIZEN means "inhabitant": living on earth, living in a place, just being. dENIZEN brand also is ideal fit for friends, workers and families who frequents in particular place

1.5. Customers:

Levi's traditional target market included males between the ages of 15 and 25, but the "It's Wide Open" campaign was designed to attract men up to 34 years of age. Levi's initial Wide Leg jeans campaign, "Make Room," targeted the youth market in an attempt to gain popularity and loyalty

1.6. Current Strategy:

The Company markets products in over 40 countries. As in the U.S., demand for jeans outside the U.S. is affected by a variety of factors that vary in importance in different countries, including socio-economic and political conditions such as consumer spending rates, unemployment, fiscal policies and inflation. In many countries, jeans are generally perceived as a fashion item rather than a basic, functional product and, like most apparel items, are higher priced relative to the U.S. The non-U.S. jeans markets are more sensitive to fashion trends than the U.S. market.

Additionally, the retail industry differs from country to country. In certain countries, the Company's primary retail customers are large "chain" retailers with centralized buying power. In other countries, the retail industry is comprised of numerous smaller, less centralized shops

2. SWOT analysis

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2.1 Strengths

The business went from strength to strength to become one of the twentieth century's best- known global brands. During the 1980s, the company branched out into a range of garments including suits, before refocusing on one of its heritage products Levi 501s in the early 1990s. A TV commercial showing Nick Kamen stripping down to his boxer shorts in a launderette boosted the sales of all jeans, not just of Levi 501 s and thousands of men switched to wearing boxer shorts.

The Levi Company has always had a reputation for innovation, bright ideas, excitement and enthusiasm. However, it has not always been so successful in maintaining the detailed processes necessary to ensure continued product success - hence the need for effective brand management. Brand management involves having the technical skills to create a successful brand management plan, as well as good ideas.

2.2 Weakness

By the late 1990s, it was all too apparent that the brand was slipping and needed to be put back on track. Since the 1960s, success had been based on the brand's association with youth culture. During the 1990s, this association began to lose some of its vitality. While sales of the brand continued to grow, it began to suffer from declining equity. By this, we mean that the perception of the brand in terms of the desired position was beginning to slip.

While in the 1980s Levi's were seen as 'cool, youthful, innovative and sexy', market research revealed that this was no longer the case by the late 1990's. Brand managers at Levi's realized that they needed to revitalize the perception of the brand. The company had, wrongly, been emphasizing its role in wholesale merchandising - i.e. selling millions of pairs of blue Levi is to retailers and ensuring good sales volumes and profits for these retailers. However, this focus tended to ignore the consumer.

Since the late 1990s, Levi's brand managers have changed the emphasis to consumer focused brand management. Brand managers recognize that their responsibility is to deliver the image of the brand both to consumers and to retailers, as well as ensuring high sales volumes and achieving retailers' financial goals.

The emphasis now is therefore less inward looking - e.g. 'how many units have we sold?' and more outward looking, e.g. 'what do consumers see Levi's as being?'

2.3 Opportunities

Many opportunities have come to the picture with Levi's continuous growth. The company has been expanding licensing programs to put forward more products that complement its core brand product ranges. Hence, Levi's should be able to produce more profit through licensing relationships. Moreover, Levi's plans to boost dedicated retail stores for value-conscious consumers in Asia

2.4 Threats

Even though Levi's has cherished many opportunities and great growth throughout the business's history, the company must alert of the possible threats

3. Internal Factors Evaluation (IFE)

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4. Value Chain Analysis of Levi Strauss

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Levi Strauss to realize that all activities or functions do not require same scrutiny level. Therefore, the first step of adapting Value Chain framework is to identify the importance of activities according to their role in product/service delivery process.

4.1 Primary Activities

The primary value chain activities of Levi Strauss are directly involved in producing and selling the product to targeted customers.

4.1.1 Inbound Logistics

It is important to develop strong relationships with suppliers, as their support is necessary to receive, store and distribute the product. Without analyzing the in-bound logistics, Levi Strauss can face various challenges in product development phases. Analysis of in-bound logistics requires a company to focus on every aspect of transformation from raw material to finished product. Some examples of inbound logistics are retrieving raw material, storing the inputs and internally distributing the raw material and components to start production.

4.1.2 Operations

The importance of analyzing operational activities raises when raw material arrives, and Levi Strauss is ready to process the raw material into the end product and launch it in the market. Some examples of operational activities are machining, packing, assembling and testing. Equipment repair and maintenance also falls into this category.

It includes both- manufacturing and service operations. Analysis of operational activities is important for improving productivity, maximizing the efficiency and ensuring the competitive success of Levi Strauss. The increased productivity can help Levi Strauss to achieve consistent economic growth, increase profitability and set a powerful basis for competitive advantage.

4.1.3 Outbound Logistics

Outbound logistics include the activities that deliver the product to the customer by passing through different intermediaries. Some outbound logistics activities are material handling, warehousing, scheduling, and order processing, transporting and delivering to the destination. Levi Strauss can analyses and optimize the outbound logistics to explore competitive advantage sources and achieve its business growth objectives. Because, when outbound activities are timely managed with optimal costs and product delivery processes put a minimum negative effect on the quality, it maximizes the customer satisfaction and increases growth opportunities for the firm. Levi Strauss should pay specific importance to its outbound value chain activities when its offered products are perishable and require quick delivery to the end customer.

4.1.4 Marketing and Sales

At this stage, Levi Strauss will highlight the benefits and differentiation points of offered products to persuade the customers that its offering is better than competitors are. Only producing a high quality product at affordable costs and distinctive features cannot create value until Levi Strauss invests on the marketing and sales activities. The sales agents and marketers play an important role here. Some examples of Levi Strauss's marketing and sales activities are- sales force, advertising, promotional activities, pricing, channel selection, quoting and building relations with channel members. The company can use the marketing funnel approach to structure its marketing and sales activities. The marketing strategies can either be push or pull in nature, depending on the Levi Strauss's business objectives, brand image, competitive dynamics and current standing in the market.

Effective and wisely integrated marketing activities can develop the brand equity of Levi Strauss and help it stand out from the competition. However, Levi Strauss must avoid making false commitments about product features that cannot be fulfilled by the production department. It indicates the need to ensure coordination between different value chain activities.

4.1.5 Services

The pre-sale and post-sale services offered by the Levi Strauss will play an important role in developing customer loyalty. The modern customers consider post-sale services as important as marketing and promotional activities. Poor support service cannot be undermined in the current technologically advanced era. The company must analyses its support activities to avoid damaging brand reputation, and instead use it as a tool to spread positive word of mouth due to quick, timely and efficient support services.

4.2 Secondary Activities

The support activities play an important role in coordinating and facilitating the primary value chain activities. Levi Strauss can also benefit from analysis of its support activities as explained below.

4.2.1 Firm infrastructure

The firm infrastructure denotes a range of activities, such as- quality management, legal matters handling, accounting, financing, planning and strategic management. Effective infrastructure management can allow Levi Strauss to optimize the value of the whole value chain. Levi Strauss can control the infrastructure activities (or commonly called overhead costs) to strengthen the competitive positioning in the market.

4.2.2 Human resource management

Levi Strauss can analyses human resource management by evaluating different HR aspects, including- recruiting, selecting, training, rewarding, performance management and other personnel management activities. The effective HR management can allow Levi Strauss to reduce competitive pressure based on motivation, commitment and skills of its workforce. The company can also achieve its cost minimization objectives by analyzing hiring and training costs with their relative return. The heavy dependence of Levi Strauss on employees' talent will increase the importance of this value chain support activity.

4.2.3 Technology development

In a modern, technological advanced era, almost all value chain activities depend on technological support. The technological integration in production, distribution, marketing and human resource activities requires Levi Strauss to realize the importance of technology development. It can be divided into product and process technological development activities. Some examples are- automation software, technology-supported customer service, product design research and data analytics. The research and development department of Levi Strauss is classified in this category.

4.2.4 Procurement

The procurement in value chain denotes the processes involved in purchasing the inputs that may range from equipment, machinery, raw material, supplies, raw material and other items necessary for producing the finished product. Due to its linkage with multiple value chain activities, Levi Strauss should carefully consider its procurement activities to optimize the inbound, operational and outbound value chain.

5. VRIO Analysis

5.1 Value

Since they were first founded back in 1853, Levi's carries a long company legacy. This legacy allows Levi has to promote the image of quality and value to their brand reputation.

The brand image Levi's encompasses results in them having a higher price tags compared to other brands. Consumers are willing to justify the higher price because of the brand name. However, the higher price tag does not automatically mean higher revenues for the company. With the increasing price of cotton, Levi's was forced to increase their prices in order to neutralize the price increase. The company also started to start outsourcing their labor overseas to lower their cost of manufacturing. Despite these changes, Levi's still produce the classic quality apparel they have made since 1853.

5.2 Rarity

The apparel industry is a growing industry since the popularity of fashion is constantly increasing, because of this popularity; there is an increase of competitors. The reason of the increase of competitors is because the majority of raw materials being available at such a low cost and the labor wages overseas are low as Regardless of the increasing competitors, Levi's carries a brand name with heritage which is a rarity in itself. Since Levi's most notable product is denim jeans, the company has protected the design and processes with patents. This includes the stitching designs on the back pockets, metal rivets on the pockets, and red tag on the pocketing stitching. These design differences added rarity to their product lines and gives them a competitive advantage, which differentiates them from other companies.

5.3 Instability

The imitability in the apparel industry is quite high. Competitors can copy the styles of clothing that Levi produces to a certain extent. Majority of the competitors' use the same manufacturer, same raw materials, and they are all distributed through the same channels. This is not favorable for Levi's since their products are easily replicated. Levi must rely on their brand image, marketing, and industry experience to continue their growth.

5. Organization:

Currently Levi is a privately held company by the family descendants. Shares of the company stock are not publicly trades; however, Levi Strauss Japan are publicly traded. Levi staffs an approximate 10,000 people worldwide which includes the 1,010staff members in their San Francisco Headquarters. To manage all these employees, Levi uses what they simply call "The Management Systems Framework." This system consists of five sections, Policy, Planning, Implementation/Operations, Monitoring/Corrective Action, and Management Review/Follow- up. Policy institutes and communicates the company's position and dedication. Planning recognizes the code of conduct issues and necessities. It also identifies the initiatives and resources needed to accomplish their business goals. Implementation/operations describe the program, responsibilities and procedures that are needed to apply the key initiatives to obtain the company goals. Monitoring/Corrective Action simply monitors the effectives of the company operations on a regularly basis.

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Strategic Management. Levis Case Analysis
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ISBN (eBook)
ISBN (Book)
Strategic Audit Final report David & David
Quote paper
Dr. Khaled Bekhet (Author), 2019, Strategic Management. Levis Case Analysis, Munich, GRIN Verlag,


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