Business Strategy
Levi’s business strategy is to maintain its brand image of offering not just higher quality jeans, but the original product from which the generic came from. All other products are knockoffs of Levis. Levis wants to beat its competitors by exempting itself from the pricing game.
Economics
The numbers coming in between 1990-1994 should be considerable cause for concern for the executive team at Levi. Running the numbers shows that from1993 to 1994 Levi’s net income was down 34.8%. This sort of decay factor points to more problems down the road and is reflective of a shifting market.
1993 was a surprisingly good year for Levi’s, but the trend from 1994 shows that net income had been down for the last five years. The 1994 numbers for net income are lower than any year with the exception of 1990. If the current downward trend were to continue, according to the numbers, within five years the net profit would be down to $57,122.
Recommendations
Levi Straus & Co. at the time of their decision to go with the Personal Pair comes at the start of a changing market place. The financial performance from 1990-1994 shows uneven income levels due to disruptions to the market. While still profitable, these problems are not going to go away even as globalization continues.
Custom Clothing Technology likely wants to work with Levis because they are the Coca-Cola of the clothing industry. There is every reason to think that if Levis opts out of the Personal Pair proposal that CCT will approach another company to implement their customization technology. Levis will then still be in the same declining market place position, but with the added competition of competing against the customization technology it opted out of.
While it is true that other companies might follow suit and begin to offer customization technology, Levis by being the first to implement can then begin to plan for this. Also, customers who have had their size taken with Levi are likely to continue to use their system once they are familiar with it. Levis can also offer discounts for subsequent purchases of their customized jeans.
Internally, Levi cannot just continue to operate with its existing business strategy. The market will continue to steal away its customers. Levi because of what their brand stands for stands for potential image damage by outsourcing, but this should also be an option on the table. Likewise, externally, Levi’s brand is declining in terms of image and with an older generation being their hold steady customers, needs to diversify its branding and marketing.
Alternative Strategies
Alternative strategies include outsourcing. Levis could also become more aggressive in pursuing higher market shares in places like Latin America and Canada. Brand is very important to the high classes in Latin America, and by being an America product Levis already has a good chance of getting consumers to pay more for their product.
Levis could alternatively work to eliminate the middleman of the retailers that sell their products. In the 90s the Internet was just beginning to make inroads into American culture and lifestyle. Every year more and more consumers do their purchasing online. Levis, because it has the capital for investment, could work to corner the market of online sales of jeans. This might make it difficult for other companies to catch up.
Overview
External Analysis – Macro Environment
External Analysis - Porter’s 5 Forces - Threats
(+ high, 0 neutral, - low)
External Analysis - Industry Stage - Opportunities
Business Level Strategy
Vertical Integration
Corporate Diversification
Corporate Diversification – Organization
Strategic Alliances
Mergers & Acquisitions
Miscellaneous
Conclusions
