Levi Strauss & Co. is one of the most iconic name in the clothing and fashion industry. However, the brand lost its way in the beginning of this century and suffered for almost two decades. Levi Strauss & Co. encountered the somber issues of excess capacity that brought about the crisis of dropping sales, declining market share, eroded profit base, and sagging business diversification. The excess capacity at Levi Strauss & Co. was fueled by the consistently increasing market competition, which subsequently pressurized the company to cut down its production cost. The excess capacity issue had a number of underlying causes such as the business failed to recognize the needs of trending fashions that are more efficiently identified by its competitors, inappropriate marketing and communication, slower distribution and restricted pricing policy. It infuriated the retailers prompting them to carry other brands. Another major factor was the usage of advance technology and cheaper labor that was resourcefully and competently adopted by the competitors, enabling those offering substitutes at cheaper rates. The entire situation posted decline in demand for Levi Strauss & Co. making its existing production excessive (Scott, 2015).
In order to cope up with the issues, Levi Strauss & Co. shut down 22 of its plants in United States, which resulted in devastating layoff of 6,395 worker. The company cited declined demand, needs to cut production cost, and excess capacity as the major reasons for layoffs. If I would be required to make a decision to optimize the capacity, I would primarily emphasize finding out the alternatives to cut the production cost and digging out the precise needs of customers and fashion trends in order to produce what is actually in demand. I would also focus on developing improved relationship with the retailers and also focus towards improving the pricing policies. This would not only enable Levi Strauss & Co. to incorporate the capacity gap but also help it achieving the economies of scale and cutting its production cost to meet the competition (Scott, 2015).
References
Scott, M. (2015). Chip Bergh is excited about the future at Levi Strauss & Co. Retrieved From http://www.sbnonline.com/article/chip-bergh-is-excited-about-the-future-at-levi-strauss/ on May 2, 2016
