10 September 2008

Levi's Case Analysis

(9 September 2008) - Levi Strauss & Co. was the market share leader in the blue jeans industry for probably over one hundred years. Then came the 1990's, and the company was turned on its head. Levi's jeans were considered an icon of American culture. Its CEO was a very respected business leader. Still--it came. The company that had been successful for oh-so-long suddenly became a victim of the times--and outward value migration. While the world changed around it, Levi Strauss remained the same. The 1990s was an environment characterized by change and while Levi's external environment shifted, its internal environment was grasping tight its legacy systems, processes, technology, products, schools of thought, and management strategy.

Outward value migration is when value moves away from the old way of doing things and moves toward a new customer experience, an enhanced and relevant value. There are several categorized symptoms of a business or industry experiencing outward value migration and Levi Strauss has some easily citable examples. It had demand problems and loss of market share; demand shifted toward emerging jeans products to include those of high-end designers, strong private labels, and price-valued jeans. A 40 percent share of the teen male market for blue jean sales in 1990 diminished to 19 percent by 1998. Those are certainly indicators that a company might be missing something, or ignoring something. Levi's Strauss in the 1990's appeared to be in denial of the threats of new competitors and the new buying preferences of long-time loyal customers. Senior management failed to truly acknowledge that value was moving away from its core market strength of tradition, and in a panicked reactive mode commissioned several new products destined to be failures.

Levi Strauss' leaders inability to take appropriate action to effectively get the company's head back in the game was a result of the active inertia phenomenon. The firm's corporate behavior had become so patterned over time, ingrained into the daily flow of activities and management decisions, the only way company employees knew how to respond to a changing market was in the same way that had always done. This of course reinforced a now-failing business model, further driving away Levi's from its unmet goals.

Levi's target customer into the 1990's became a customer who did not want to be targeted by Levi's. The target customers identified by the company were teens and young adults. In the 90's, Levi's continued insistence to portray their jeans as a classic, standard, mythical brand became inconsistent with its markets' trend toward individuality. While blue jeans were the cool attire of John Travolta in Grease and the rugged companion of the Great American Cowboy, folks are now demanding jeans that provide a specific and comfortable fit, reflect a personality, signify inclusion to a societal class, or simply separate the style of today from the style of one's parents. With the corporate-identified target market saying all this, why wasn't Levi's listening? It seems the power of that active inertia creates a producer unable to hear.

The value proposition of the Levi's jeans line was simply the brand itself. Wear Levi's. Drink Coke. Drive a Chevy truck. All the same idea (and coincidentally all big successful companies who hit a wall at the turn of the millennium). In a modern globalized economy, images of a typical American, a faithful American have fast become blurred. CEO Robert Haas was certainly All-American. His social responsibility agenda was admirable, albeit perhaps painful for the company's future. He believed in employing American workers in American plants to produce American products. Haas paid Levi's employees a higher salary, with better benefits, at significant cost when business models were shifting toward globalized trends. This was all part of the Levi's brand idea--but paying a worker 9 dollars an hour versus 30 cents an hours makes a predictable impact on the bottom-line. Couple an emotional attachment to social ideals that fickle teen consumers don't care about with a brand image value that makes them think of their parents, and you've got what's called a losing differentiation strategy.

The marketing mix employed by Levi's into the 90's and beyond was a mess. Its blue jean product offerings suffered into irrelevance with ignorance to dramatically changing industry competition. Its distribution and sales channels remained heavily in large department stores in which teens and young adults now largely choose not to enter at all, in lieu of trendy specialty shops or affordable Wal-Mart. The long-term relationships of Levi's with the likes of May Company and Federated became shackles. The promotion of Levi's jeans was stale, unable to adapt. Price became middle of the road, when either cheap everyday jeans or expensive designer jeans or what its target market flocks to. A word of advice Levi's--charge less, or much more...but do not charge the same!

While many of the criticisms just made about the marketing strategy process of Levi Strauss & Co. have been addressed and tampered with by the company in various small and copycat ways, there's not much of a positive sales or revenue change to show for it. Since the introduction of brands such as Ralph Lauren, Calvin Klein, Tommy Hilfiger, Lee, Wrangler, Arizona, and Canyon River Blues, Levi's has just not executed (or planned) good marketing. New CEO John Anderson--number two since Robert Haas' positional departure in 1999--is driving a 2008 campaign to "Live Unbuttoned" and wear Levi's. The globally-oriented print and TV ads literally depict the company's same target market, teens and young adults, wearing their Levi's blue jeans unbuttoned. Promotion addresses one piece of the marketing mix--the world's response will quickly reveal if you've considered the rest, Mr. Anderson.


Anonymous said...

what environmental changes influenced the indusrty of levis was it just plain tradition or was it because they refused to adapt to change

Seth C. Burgess said...

Well, Levi Strauss did act quite indifferent about making any significant changes in the 1990s in pursuit of their target market.

The environmental influences though were not really the things happening within the Levi's organization, but those happening in the world around them. Things such as the emergence of the "Me" generation--young people who wanted to wear clothing as unique as their personal identity. The classical, persistent, and standard appearance of the time-tested Levi's blue jean pant is not what these people were interested in.

Also, realities in the economy and global landscape changed. The World became "flat" and new competitors of Levi's started to take advantage of cheap overseas labor and manufacturing while Levi's did not want to make such changes to its own business processes.

So, 2 major environmental influences were (1) changing trends of the target market and (2) globalization of business operations / processes.

Anonymous said...

what are the good marketing mix for its Live unbuttoned campaign?

Anonymous said...

"more info..

Anonymous said...

how does Levi's should adapt the changes in its strategy?

Anonymous said...

what are the competitive advantage of levi's strauss?

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