Levi Strauss & Co Case Study

                           TABLE OF CONTENTS

INTRODUCTION………………….…………………..…….………..3

PERSPECITVE 1………….………………………………………….4

PERSPECITVE 2…………….……………………………………….7

PERSPECITVE  3………………….…………………………………9          

CONCLUSION……………………………………..……….………..12

REFERENCES……………………………………………..………  13

                                       INTRODUCTION

Levi Strauss & Co. is a private clothing company known around the world for its Levi's brand of denim jeans. It was founded in 1853.  The company owned and controlled by descendants and related family members. Levi Strauss & Co. 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 blended cotton 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. Levi has to come up with new strategic approaches to overcome its competitors.

PERSPECITVE 1

PORTER’S FIVE FORCES MODEL

  THREAT OF RIVALRY

In the apparel industry, rivalry is modest to high. The apparel industry is comprised of several main rivals of the same size. When consumers establish brand loyalty, it is typically the design not the retailer. The small number of large clothing firms that compete on massive scale shows rivalry. When rival firms creating competition on existing firms it reduces their economic profits.  For examples of rivalry among existing apparel firms are frequent price cutting, intense marketing campaigns, and come up with new products. Most of the time celebrities and models are used to influence customers to purchase products in this industry. When Levi’s have high production capacity this can lead to increase economies of scale by producing large scale. This will increase the firm rivalry. Levis can use production capacity for the increase its competition and availability in the market. (www.levistrauss.com)

BARRIERS TO ENTRY

Barriers to entry are economies of scale and product differentiation. The economies of scale in the market because, volume of jeans production 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 per unit goes down. This means Levi’s can produce more at a lower price and increase the sale by improving the availability.

This will improve the profitability and high product differentiation 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 create threat to new entrants because of their customer’s brand loyalty. If Levi’s wants to enter into the high quality and high priced market they would need to have change their style at same time more fashionable in the US market. Therefore Levi’s, start-up costs are high. (www.levistrauss.com)

THREAT OF SUBSTITUTES

There is no substitute for apparel but there are substitutes for garments. For examples of substitutes for garments would be a short instead of a pant given the relativity of the situation, similar price 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 taste. 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, color, design, and price. 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 brands. Levi’s has introduced the 501 made different market segmentation. (www.levistrauss.com)

THREAT OF SUPPLIERS  

Two raw materials that are   important to the success of the apparel industry is the dependence on cotton and labor. The apparel industry’s demand for cottons unlikely to keep pace with consumption and the price of cotton is high likely to increase in the future, which would increase the raw material cost for the apparel production.

Today Levi’s focuses on sustainability production which is more emphasized on the global marketing strategies. Therefore Levi’s focus on the collaboration with the cotton growers to maintain proper relationship the to ensure the comply with set standards. Collaboration with other buyers Levis could create a more power over the suppliers. Policies taken by Levi’s such as child labor protection, industry standards and other industry sustainable have been considered.

                                                        (www.levistrauss.com/sustainability /production)

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THREAT OF BUYERS

The apparel industry buyers are as limitless as the population. Primarily the buyer decides the type of product to be sold in line with the fashion trends in the apparel industry. Buyers have small or none switching costs between brands or retailers. This has an impact to the industry where the buyer power increases .The large firms in the apparel industry should concentrate vertical integration would help on the create power over the buyers.Levi’s should focus on all the demographic in US and other international markets. Especially younger generation should be one of the target markets to be considered. Through vertical integration Levi’s can create more bargaining power over the buyer. (www.bcg.com.cn/Taking care brands through vertical integration)