2010 Acharya School of Management Bangalore Submitted BySayeed Ahmed PGDM 09, ASM 0901006
[PCM REPORT ON LEVI’S JEANS] Submitted to :- Prof. Arun Bhattacharya ( Asst. Prof. Marketing , Acharya School of Management
Acknowledgement “
No man is indispensable but there are certain mortal without whom the quality
work suffers their guidance becomes important i mportant in acquiring quality results”.
I am thankful to my faculty Mr Arun Bhattacharya (Prof. Marketing) who provides me all the theoretical knowledge related to financial products. Without theoretical knowledge it was impossible to use concept in this project report.
Executive Summary Levi Strauss and Co. is a privately held company owned by the family of its founder, Levi Strauss. The company was created about 130 years ago and currently is one of the leading apparel companies in the world. The company produces and sells a range of men's, women's and children's jeans and casual wear including cotton and cotton blend casual and dress casual pants, tops and seasonal pants and shirts, denim jackets, accessories, and footwear. The company has three major brands Levi’s, Dockers, and Levi Strauss Signature.
Even though Levi’s brand image is very strong, it cannot maintain its brand image anymore
as a result of missed fashion trends. Levi has to come up with new strategies to overcome its competitors that have brought new fashion trends and low price products to the apparel industry. Its competitors including Lee, Wrangler, Pepe Jeans, Spykar have also gained strong brand images by producing their products at low cost and continue to gain perceived value in the industry. The apparel industry is considered a mature industry with numerous competitors. The competitors offer similar products and services that Levi can produce. Therefore, product differentiation will be the key issue in order to increase the perceived value of the new product.
Company Overview Levi Strauss & Co. (LS&CO) is a privately held clothing company known worldwide for its Levi's brand
of denim jeans.
It was
founded
in
1853
when Levi Strauss came
from Bettelheim, Franconia, (Kingdom of Bavaria) to San Francisco, California to open a west coast branch of his brothers' New York dry goods business. Although the company began producing producin g denim overalls in the 1870s, 18 70s, modern jeans j eans were not produced until unti l the 1920s. The company briefly experimented (in the 1970s) with employee ownership and a public stock listing, but remains owned and controlled by descendants and relatives of Levi Strauss' four nephews.
Organization Levi Strauss & Co. is a worldwide corporation organized into three geographic divisions: Levi Strauss Americas (LSA), based in the San Francisco headquarters; Levi Strauss Europe, Middle East and Africa (LSEMA), based in Brussels and Asia Pacific Division (APD), based in Singapore. The company employs a staff of approximately 10,500 people worldwide, and owns and develops a few brands. Levi's, the main brand, was founded in 1873 in San Francisco, specializing in riveted denim jeans and different lines of casual and street fashion.
From the early 1960s through the mid-1970s, Levi Strauss experienced explosive growth in its business as the more casual look of the 1960s and 1970s ushered in the "blue jeans craze" and served as a catalyst for the brand. Levi's, under the leadership of Jay Walter Haas Sr., Peter Haas Sr., Paul Glasco and George P. Simpkins Sr., expanded the firm's clothing line by adding new fashions and models, including stone-washed jeans through the acquisition of Great Western Garment Co. (GWG), a Canadian clothing manufacturer. GWG was responsible for the introduction of the modern "stone washing" technique, still in use by Levi Strauss. 2004 saw a sharp decline of GWG in the face of global outsourcing, so the company was closed and the Edmonton manufacturing plant shut down. The Dockers brand, launched in 1986 which is sold largel y through department store st ore chains, helped the t he company grow through the mid-1990s, as denim sales began to fade. Dockers were introduced into Europe in
1993. Levi Strauss attempted to sell the Dockers division in 2004 to relieve part of the company's $2 billion outstanding debt. Launched in 2003, Levi Strauss Signature features Jeanswear and casualwear. In November 2007, Levi's released a mobile phone in co-operation with ModeLabs. Many of the phone's cosmetic attributes are customisable at the point of purchase.
Product Positioning and Market Segment Advertising professionals realize that the heart of any campaign is the product and the position it holds in people’s minds. Products and their brand names are newsmakers
themselves. Understanding the complexities of a brand identity and its position is no easy task. One of the most controversial areas of product concept is the brand extension. A new product gets to share the name of an older, established brand. Early suggested that brand extension would sap market clout from the established product, but these fears proved groundless. Today brand extension occurs not only within the company, but companies are licensing their brand names to all kinds of products in the hope of increasing brand awareness. Market segmentation
Market segmentation is the selection of groups of people who will be most receptive to a product. The most frequent methods of segmenting include demographic variables such as age, sex, race, income, occupation, education, household status, and geographic location; psychographic variables such as life-style, activities, interests, and opinions; product use patterns; and product benefits. Much segmentation involves combinations of these methods. No matter how segments are defined, however, they are characterized by considerable change over time. The readings in this section exemplify areas of rapid change. Basis of Market Segmentation
Demographic segmentation Geographical segmentation Psychographic segmentation Behavioural segmentation
Target Market
501® JEANS targets its market by evaluating the wants of customers. Mostly Levi’s targets its market among the following classes Upper Class Upper Middle Class
Target Marketing Strategy
Target market strategy adopted by Levis is basically on having long-term relations with their customers and to provide them with better product.
Benefits of Segmentation
Levis has got customer oriented approach by segmentation. Company is promoting its products effectively within segments by print media as well as electronic media, e.g. Newspapers, Signboards, Television commercials, Internet, etc. Company is providing their customers with stylish better quality and different product keeping in view its cost
Marketing Mix Product
Product means set of tangible and intangible attributes which may include packaging, colour, price, quality and brand plus the seller’s services and reputation. A product may be a place, service, good or promotion. Brands
Brand is a name, term, sign, symbol or design that adds value to the products. LS & CO. earns remarkable revenues throughout the year coz its products are considered to be the world’s largest quality products .
LS & CO. is basically divided into 3 sub brands i.e. Le vi’s, Dockers and Levis Strauss Signature. All the three brands are providing different quality products.
LEVI’S®
-
The Levi’s brand epitomizes classic American style and effortless cool and is positioned as
the original and definitive jeans brand. Since their inception in 1873, Levis jeans have become one of the most recognizable garments in the world reflecting the aspirations and earning the loyalty of people for generations. Consumers around the world instantly recognize the distinctive traits of Levi’s jeans — the double arc of stitching, known as the Arcuate Stitching Design, and the red Tab Device, a fabric tab stitched into the back right pocket. Today, the Levi’s brand continues to evolve, driven by its distinctive pioneering and innovative spirit. Our range of leading Jeanswear and accessories for men, women and children is available in more than 110 countries, allowing individuals around the world to express their personal style. The current Levi’s product range includes: Levi’s Red Tab Products These products are the foundation of the brand. They encompass a
wide range of jeans and Jeanswear offered in a variety of fits, fabrics, finishes, styles and price points intended to appeal to a broad spectrum of consumers. The line is anchored by the flagship 501» jean, the original and bestselling five-pocket jean in history The Red Tab line also incorporates a full range of Jeanswear fits and styles designed specifically for women. Sales of Red Tab products represented the majority of our Levi’s brand net sales in all three of our regions in fiscal years 2009, 2008 and 2007. Premium Products In addition to Levi’s Red Tab premium products available around the world, Levis offer an expanded range of high-end products. In 2009, we consolidated the management of our most premium Levi’s Jeanswear product lines under a new division based in Amsterdam. This division will oversee the marketing and development of two global product lines: our existing Levi’s Vintage Clothing line, which showcases our most premium
products by offering detailed replicas of our historical products, and Levi’s Made & Crafted, a recently-launched line of premium apparel. Levi’s brand products accounted for approximately 79%, 76% and 73% of our total net sales in fiscal 2009, 2008 and 2007, respectively, approximately half of which were generated in our Americas region.
DOCKERS -
First introduced in 1986 as an alternative between jeans and dress pants, the Dockers brand is positioned as the khaki authority and aspires to be the world’s best and most -loved khakis.
The Dockers brand offers a full range of products rooted in the brand’s khaki heritage and appropriate for a wide-range of wearing occasions. We seek to renew the appeal of the casual pant category by dealing up khakis’ masculinity and swagger and reminding men what they love about the essential khaki pant. This positioning is reflected in the “Wear the Pants”
campaign launched globally in December 2009. The brand also offers a complete range of khaki-inspired styles for women with products designed to flatter her figure and provide versatility for a wide range of wearing occasions. Our Dockers» brand products accounted for approximately 16%, 18% and 21% of our total net sales in fiscal 2009, 2008 and 2007, respectively. Although the substantial majority of these net sales were in the Americas region, Dockers brand products are sold in more than 50 countries.
Levis Strauss Signature –
Levis seek to extend the style, authenticity and quality for which our company is recognized to more value conscious consumers through our Signature by Levi Strauss & Co.TM brand. Levis offer products under this brand name through the mass retail channel in the United States and Canada and value-oriented retailers and franchised stores in Asia Pacific. Levis use these distribution channels to reach consumers who seek access to high-quality, affordable and fashionable Jeanswear from a company they trust. The product portfolio includes denim jeans, casual pants, tops and jackets in a variety of fits, fabrics and finishes for men, women and kids. Signature by Levi Strauss&Co.TM brand products accounted for approximately 5%, 6% and 6% of our total net sales in fiscal years 2009, 2008 and 2007, respectively. Although a substantial majority of these sales were in the United States, Signature by Levi Strauss & Co.TM brand products are sold in seven additional countries in our Americas and Asia Pacific regions.
Price
It can be simply defined as: The currency value charged to a Client by the company for a product or service. Is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organization, the remaining 3p's are the variable cost for the organization. It costs to produce and design a product it costs to distribute a product and costs to promote it.
List Price:
Levis all products are sold at listed price, which are settled by the Company (Singapore). There is no discount to offer. Credit Sales:
Company also deal with credit sales, but don’t overcharges to the customers, company pay it our self to the bank (3%). Products are only sold for cash or on credit cards Discount:
Levis don’t give the discount to customers, even to the employees of the Levis. Company
prices are fixed. Payment Period & Credit Terms are settled by the company
Price Determination
During the determination of the price company not considered the competitors, but the standard that is used is considered .Company’s price is influenced by the following factors:Cost of the product Affordable for the target market Demand of the product Uniqueness and innovative features of the products
Competitors
Levis products completely satisfy consumers, that’s why company don’t face much competition in business. But yet there is some competitor’s e.g. Pepe Lee Wrangler Spykar Levis prices are not influenced by the competitors. Such a stuff, design and fashion which don’t have the enough sales are recall back to the
company. Again company issues this stuff to their own outlets for sale at discount prices. Place Placement objectives:-
To equalize the demand and supply of products at all places.
To provide desired products at proper place. To fulfil the requirements of every locality according to the taste of the people To increase the brand equity by reaching every corner of the world Promotion
For the promotion of sales Levi Strauss & Co. adopt a very effective but comprehensive strategy. Levis pays attention to the publicity of its products. The major source of promotion of Levi’s is done by creating public relations. The sales promotion of LEVIS targets the end
consumers. Since the Levi’s JEANS are in growth stage in India, therefore, the promotional Strategy is based on persuading of prospective buyer Levi’s uses the following promotional strategies to promote its product
Personal selling- Personal selling by the representative of the organization takes place face to face with final consumers. Mass selling- Levis does mass selling to inform a bulk of persons by advertising Advertising Medium
The advertising media used by the company are Television Fashion Magazines, Newspapers Internet Bill boards, banners etc. 1. Advertisements of Levi Strauss & Co. are very innovative and eye-catching. Buyers are attracted towards the product. The advertisements are placed at the international level 2. For fashion magazines and newspapers LS&Co. is a target due to its grand brand equity, it has become a benchmark for all the others to follow. The newspaper gives coverage to the social events in which LS &Co takes part with great interest. Whereas fashion magazines are always dealing with the gorgeous models working with LS& Co and the unique outfits of the model 3. Levis provides up-to-date information to their customers through electronic media i.e. from their website 4. Billboards and banners are also used for the advertisement purpose
Levis.com
Levis.com was launched by fashion retailer Levi Strauss & Co. in 1996 as an informative company Web site that included pages on the firm's history and current operations, culture, and fashion. Two years later, the Web site became a sales outlet for more than 120 clothing items in 3,000 different styles. However, in 1999 Levi Strauss pulled the plug on its online sales efforts, using the Levis.com site instead to promote the firm's brand image. While Levi Strauss continued to utilize the Levis.com Web site for f or marketing mark eting purposes, company management eventually set plans in motion to turn the popular site into a shopping destination. The firm's market share had slipped from 30% in 1990 to 17% in 1998, and Levi Strauss planned to use its online efforts to regain a hold on the apparel market. The company also was prompted to begin e-tailing when customers began complaining about not begin able to order Levi's brand products online or by telephone. As a result, an e-commerce plan was developed and an d in November of 1998 Levis.com began selling selli ng 120 items from the Levi's branded apparel line. Levis.com faced many problems and did not fare well in its first year as an online shopping destination. The transition from selling large quantities to retail outlets versus shipping to individual consumers proved to be costly. The site did not sell the famous Levi's 501 Blues line until March 1999, worried that Asian and European customers, who could not buy the jeans online and were paying more than U.S.-based customers, would boycott the firm. Many customers continued to shop at retail outlets to avoid online shipping charges. In addition, the online return policy also was discouraging to customers because merchandise bought onLevis.com could not be returned at retail stores. Sales Force: - Levi’s holds a very big sales department as it is working in many countries .
Levi’s is using selective but intensive distribution level for the distribution of its products. For example in India Levis has opened its outlets, sales offices and sales branches in major cities like Delhi, Mumbai, Bangalore, Kolkata and Chennai. Sales Offices and Sales Branches
Sales offices for Levis act as a display center for their Products from where the customers can get information about latest designs and up to date fashion introduced. While the actual sale of the products take place at the sales outlet of the company
Porter Five Force Analysis
Barriers to Entry
The threat of entry is some of those outlined by the S-C-P model (Barney, 41). These barriers are economies of scale and product differentiation. The economy of scale is present in this market because of the volume of jeans produced in the market. Entry into a market where the production volume is so high already is not really a threat because the cost of production goes down. down. This means Levi’s can produce more at a lower price and possibly possibly
sell for more. This would would improve the profitability of the company.
Product differentiation is high
because everybody buys different jeans and each brand has different values to different people. This threat would be brand loyalty. Levi’s created the first denim jeans which poses a threat to new entrants because of their customer’s brand loyalty. loyalty. If Levi’s were to enter into
the high quality and high priced market they would need to have change their style or become more fashionable in the United States. If this were to be the case for Levi’s, then start -up costs would be high. Threat of Rivalry
In the apparel industry, rivalry is moderate to high. The apparel industry is comprised of several main rivals of equal size. When consumers establish brand loyalty, it is typically the designer (specific brand or line of apparel) rather than the retailer. This shows that the small number of large apparel firms that compete on a grand scale show signs of rivalry. When rival firms threaten existing firms it reduces their economic profits. Examples of rivalry among existing apparel firms are frequent price cutting, intense advertising campaigns, and frequent introductions of new products. Often times in the apparel industry, celebrities and models are used to influence customers to purchase products. The apparel industry is highly competitive and has large-scaled competitors that are global and publicly traded. When the firms are large they have a high production capacity. According to Barney and Hesterly, rivalry tends to be high when production capacity is added in large increments therefore the ability for an apparel firm to be of high production capacity creates economies of scale.
Threat of Substitutes
Essentially there is no substitute for apparel or clothing. However, there are substitutes for garments. Examples of substitutes for garments would be a short instead of a pant given the relativity of the situation, similar price point, and comfort. The short would meet approximately the same customer needs, but do so in different ways. In some cases the short would not satisfy the pants characteristics if the climate was cold, but if the customer’s needs were to have pockets, it would satisfy them. Another form of a substitute of apparel is consumer preference. Not every customer is the same some might prefer pants in the summer over shorts. Customers also might substitute brand for their preference such as fit, colour, design, and price point. As long as the approximate needs of the customer are met, substitutes play an increasingly important role in reducing profit potential in a variety of industries.
Threat of Suppliers
Two raw materials that are crucial to the success of the apparel industry is the dependence on cotton and labour. The apparel industry’s demand for cotton is unlikely to keep pace with consumption and the price of cotton in highly likely to rise in the future, which would increase the raw material cost” for the apparel industry.
Since the apparel industry is a global process, obtaining the highest quality labour at the lowest price possible is difficult. It is difficult because of technological advances such as the internet. Customers and potential customers are able to blog and research the company to find out company practices. One topic customers desire to know is by whom it was made by, such as a child worker in a sweat shop. Consumers are able to find out this information and pictures on the internet. These intimate views on the supplier “can threaten the performance”
of the firm.
Threat of Buyers
The apparel industry buyers are as limitless as the population. Every reasonable consumer is a buyer of the apparel industry. Primarily the buyer dictates the type of product sold, often times fashion trends in the apparel industry. Given the industry, apparel products have little differentiation. Because there is little differentiation, the threat of buyers can be greater. Buyers have small to none switching costs between brands or retailers. This also poses a threat to the apparel industry and increases buyer power. The large firms in the apparel industry shouldn’t concern themselves with vertical integration, as buyers don’t pose a
successful or equal threat to a large apparel firm, given the barriers of entry.
Competitor Analysis
There are a several large firms competing against Levi Strauss Co. in the apparel industry. The closest competitor to Levi Strauss is the Pepe, Lee, Spykar, and Wrangler.
Competitive Advantage In the short-run, the competitive advantage could be hard to find because the returns of a mass marketing campaign will take time to show through.
Good times to introduce a new line and
advertise for it on a vast scale would be before August or around the time school starts. August also shows to be a low shopping month so it would be important to advertise the back to school AND the younger look of Levi’s together. In the long long-run the competitive advantage would be huge! If the marketing campaign is successful, Levi’s would be one of the only clothing companies to have
captured every demographic in the United States as well as internationally. Currently, the younger generations are missing from Levi’s target demographic so once they capture those ages, the growth potential is endless. Levi’s already makes tough, reliable clothing that are also comfortable. They have a line that is hand
made for increased quality as well as casual business wear so they are diverse while being consistently top of the line line at an affordable price. This combination is hard to beat. Once they capture their missing age groups they will fully dominate the casual clothing sector in the market. If the marketing pl an works the growth will prove to be sustainable because Levi’s will be gaining a whole new market base They will gain loyal customers at the younger age, those of who will grow up wearing Levi’s. Brand recognition is the key once this marketing plan is put into action because while the name of Levi’s is already highly recognized, it needs to send a positive message to
the 20 year-old that hears it. Once that happens, they will continue shopping for Levi’s products for years to come. It will be fairly easy to measure one Levi’s produces a new more exclusive line they will see sales or they will lose money. They will be able to track that inventory very easily between their wholesale contracts, online orders, and the Levi’s Store.
With the technology in e very major
company these days, tracking inventory is not typically a problem because items are scanned when received and sold so Levi’s will be able to watch the exact movement of their products. Ideally,
the new line will only be in a few higher end stores, but would still be affordable so they will stick out to the shopper as a “new brand” at an inexpensive rate.
SWOT Analysis Levi’s global presence provides the organization with widespread brand recognition.
Currently, the company is extremely strong, and has numerous opportunities. However, just as there are constant new opportunities that Levi’s can observe, assess, and experiment with,
there are frequent threats as well. Each of these threats has to be taken seriously. Levi’s must continue to recognize that our world is in a cycle of continual change. The company has to understand its strengths and weaknesses in order to evolve with their changing desires of the market. Levi’s needs to analyse their internal issues, recognize strengths and weaknesses,
build upon strengths, and work on weaknesses. Furthermore, in the apparel industry, Levi Strauss must focus externally and concentrate on current market trends. The company must take advantage of all available opportunities and protect themselves from potential threats.
Strengths
With all of the competition in the apparel industry, Levi’s differentiates itself from all other
competitors through the ability to brand products through strong brand image. According to Levi’s website, the company markets its products under leading brand names that are among
the most successful apparel brands in the world and it is one of the most widely recognized brands in the history of the apparel industry. Additionally, Levi’s currently has numerous retail locations including 67 company operated stores in 10 countries. The company distributes its products in a wide variety of retail formats around world including franchise stores, company owned stores, specialty stores, chain and mass channel retailer.
Weakness
One critical weakness that Levi Strauss faces is relying too heavily on few customers. The company actually depends on a group of key customers for a great portion of sales. Net sales to its ten largest customers totalled about 43 % of total sales. Therefore, the company needs to change in customer relationship.
Opportunities
With Levi’s continuous growth, many opportunities have surfaced for the company. The
company needs to transform management strategies so that it can generate and sustain competitive advantage. It has been executing a number of business turnaround strategies that
have resulted in significant improvements in performance. The company has been expanding licensing programs to offer more products that complement its core brand product ranges Therefore, Levi’s will be able to generate more profit through licensing relationships.
Secondly, the company plans to increase dedicated retail stores for value-conscious consumers in Asia. The dedicated stores are an increasingly important part of Levi’s strategy for expanding distribution of its product in all regions of operations. The company currently plans to open approximately 150 new stores in Asia, 65 in Europe, and 20 stores in North America. This would help maximize profit for the company.
Threats
Although Levi’s has experienced many opportunities and much growth throughout its history,
the company must be aware of potential threats. One critical threat that the company faces is the decline of global cotton production. Cotton prices have increased since global cotton production decreased in 2009. Denim is made entirely out of cotton. Therefore, increased cotton prices affect higher raw material cost and lower company margins.
Managerial Implication
A valuable lesson that can be taken from this case is how imperative it is to keep up with your brand image. Being content with one niche in a market such as clothing is never acceptable. Styles, times, and preferences are changing so rapidly, that a clothing line must be able to meet the needs of their customers. While Levi’s still had a market in the older generations, they were missing out on a huge
market that likes to shop. The second thing learned was how difficult it can be to be a privately owned company. While researching the financials, it became apparent that Levi’s has more debt than assets. Levi’s could could consider going going public to help with their amount of
debt as well as their brand. Yes, they would lose a certain amount of control, but they could gain a lot in additional resources. Many of their international stores are publicly held as well. well. The third implication that can be applied to other companies would be their option for strategic alliance.
Levi’s really needs some help in the area of brand image and by
collaborating with Steve Madden they have a whole new consumer market. Levi’s has
learned that they cannot be comfortable in one market for too long because that alienates another market such as the younger generations.
Conclusion So from all of our above discussion and explanation, we conclude that: If a company wants to reach the heights of glory, it must have to focus strongly and efficiently on its customer’s needs to create greater customer value, loyalty and satisfaction &Carefully analyse the strategies of its competitors in order to develop and use more Efficient marketing strategies than its competitors for greater growth and market share. And keep pace with modern trends.
Bibliography http://www.levistrauss.com/sites/default/files/librarydocument/2010/6/lvisf2009arc.pdf http://www.levistrauss.com http://en.wikipedia.org/wiki/Levi_Strauss_%26_Co.
