2010 Acharya

School of

Management

Bangalore Submitted By-

Sayeed 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 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 denim overalls in the 1870s, modern jeans were not produced until 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 largely through department store chains, helped the 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. Levi’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 marketing 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 in November of 1998 Levis.com began selling 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. This means Levi’s can produce more at a lower price and possibly

sell for more.

This 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. 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-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 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 plan 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 every 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 consider 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.

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.