Levi’s Case|Legit essays

After reading the Levi’s Case (attached document), respond to the following prompts in one to five sentences:

Based on the information in the case:

• What is Levi’s strategy?
  • Where is Levi’s on spectrums of differentiation and cost leadership? What are other important elements of Levi’s strategy? Would these change under CCTC’s proposal?
• How is Levi’s able to differentiate?
  • Which source(s) of differentiation are relevant?
  • Which of Levi’s capabilities/resources are most important for maintaining a differentiation advantage?
• Evaluate the external environment and its strategic implications at two levels:
  • Broader industry: apparel manufacturers
  • Specific industry: jeans manufacturers
    • How attractive is its industry what are the key industry forces and success factors?
  • Do any major manufactures of jeans (with substantial market share) have broader product offerings (e.g. jeans < 50% of total revenue)
    • Should Levi widen their offering offerings (if so to where) based on the analysis of its competitors (both those who are focused and diversified)
• Analyze CCTC’s proposal & its impact on Levi’s participation in the value chain?
  • What does the value chain look like for Levi’s with & without the CCTC offer?
  • How else could Levi’s adjust its participation in the value chain?
  • Evaluate potential outcomes – Do Levi’s resources/capabilities support implementing CCTC’s offer; what are the strategic and financial upside and downside and how certain are the outcomes (e.g. impact of external environment change, reliability of the cost savings estimates, etc.)Case 2-2 (Levi’s) “I’ll have my recommendation to you by the end of the week.” Heidi Green hung up the phone and surveyed her calendar for appointments that could be pushed into the next week. It was a rainy afternoon in December of 1994 and she had yet to recover from the pre-holiday rush to get product out to retailers. She had three days to prepare a presentation for the Executive Committee on a new concept called Personal Pair. Custom Clothing Technology Corporation (CCTC) had approached Levi Strauss with the joint venture proposal that would marry Levi’s core products with the emerging technologies of mass customization. Jeans could be customized in style and fit to meet each customer’s unique needs and taste. If CCTC was correct, this would reach the higher end of the jeans market, yielding stronger profit margins due to both the price premium and the streamlined production process involved. On the other hand, the technology was new to Levi Strauss and the idea could turn out to be an expensive and time-consuming proposal that would come back later to haunt her, since she would have to manage the venture. The initial market studies seemed supportive, but there was no way to know how customers would respond to the program since there was nothing quite like it out there. She also was unsure whether the program would work as smoothly in practice as the plan suggested. Company Background & History Levi Strauss and Co. is a privately held company owned by the family of its founder, Levi Strauss. The Bavarian immigrant was the creator of durable work pants from cloth used for ships’ sails, which were reinforced with his patented rivets. The now-famous “waist-overalls” were originally created over 130 years ago for use by California gold rush workers. These were later seen as utilitarian farm or factory-wear. By the 1950s, Levi’s jeans had acquired a Hollywood cachet, as the likes of Marilyn Monroe, James Dean, Marion Brando, Elvis, and Bob Dylan proudly wore them, giving off an air of rebellious hipness. The jeans would become a political statement and an American icon, as all jeans soon became known generically as “Levi’s.” The baby boomer generation next adopted the jeans as a fashion statement, and from 1964 to 1975, the company’s annual sales grew tenfold, from $100 million to $1 billion. By the late 1970s, Levi’s had become synonymous with the terms, “authentic,” “genuine,” “original,” and “real” and wearing them allowed the wearer to make a statement. According to some who recognize the brand’s recognition even over that of Coke, Marlboro, Nike, or Microsoft, “Levi Strauss has been, and remains, both the largest brand-apparel company in the world and the number one purveyor of blue jeans in the world.” While blue jeans remain the company’s mainstay, the San Francisco-based company also sells pants made of corduroy, twill, and various other fabrics, as well as shorts, skirts, jackets, and outerwear. The company, with its highly recognizable brand name, holds a top position in many of its markets, and is sold in more than 80 countries. More than half of the company’s revenue

    was from its U.S. sales; nevertheless, Europe and Asia are highly profitable markets. Latin America and Canada are secondary markets, with smaller contributions to overall profits. As the following graphic shows, apparel imports were increasing faster than exports during this period. The company’s non-denim brand, Dockers, was introduced in 1986, and is sold in the United States, Canada, Mexico, and Europe. While it is composed of both women’s and men’s clothing, the men’s line of khaki pants occupies the leading position in U.S. sales of khaki trousers and sells well with baby boomers. Sales of Dockers have steadily increased with the rise in casual workplaces, and this line of non-denim products has helped in allowing Levi’s to be less reliant on the denim industry. Competition and the Denim Industry Denim is “one of the fastest-growing apparel fabrics,” and sales have been increasing approximately 10% per year. According to some surveys, an average American consumer owns 17 denim items, which includes 6 to 7 pairs of jeans. Levi Strauss and Company held the largest market share in 1990, at 31 percent, followed by VF Corporation’s Lee and Wrangler (17.9 percent), designer labels (6 percent). The Gap (3 percent), and department store private labels (3.2 percent). By 1995, women’s jeans had grown to a $2 billion market, of which Levi’s held first place. However, at the same time, many jeans producers were starting to move production to low- cost overseas facilities, which allowed for cost (especially labor) advantages. As the following graph shows, this trend was represented throughout the apparel industry and is clearly visible in employment statistics. Indeed, JC Penney, one of Levi’s long-time partners, had become a competitor by introducing a cheaper alternative, the Arizona label. They and other rivals had realized that by sourcing all production in cheap overseas facilities they could enter the business with a cost advantage over Levi Strauss. Levi’s, as a private company that viewed itself as having a strong “social conscience,” wanted to avoid being seen as exploiting disadvantaged workers. Accordingly, they preferred to have their jeans “U.S.-made” and Levi Strauss was a leader in providing generous salary and benefit to its employees. Accordingly, it did not relish the notion of entering into price-based competition with rivals committed to overseas production. Their delayed response led to some significant incursions by rivals into Levi’s core product arenas. Levi’s also wanted to avoid price-based competition because they had a history of brand recognition and brand loyalty. They were accustomed to the Levi’s brand carrying enough clout to justify a reasonable price premium. However, over the years, the brand name carried less cachet, and as hundreds of competitors with similar products dotted the landscape, it became necessary to create valued features that would help to differentiate the product in the eyes of consumers.

• SOLUTION
• Levi’s strategy is to position itself as a premium denim brand, leveraging its heritage and authenticity to appeal to consumers who value quality and style. The brand has positioned itself as a high-end, differentiated player in the denim market. Its strategy focuses on creating products that are well-designed, durable and environmentally sustainable.

  Levi’s is positioned towards the high-end of the differentiation spectrum and is not focused on cost leadership. The company’s strategy is centered around its brand image, quality, innovation and sustainability. CCTC’s proposal to source cheaper raw materials and focus on cost reduction may compromise Levi’s differentiation advantage and its premium brand image.