Various Dimensions of Strategic Management of Levi Strauss and Company - Case Study Example

LEVI STRAUSS AND COMPANY of the of the This study deals with various dimensions of strategic management. Strategic management encompasses implementation and formulation of business goals and objectives. This approach is usually undertaken by the top management in order to achieve set objectives. In real world scenario strategic management is at core of all business operations. It not only takes into account effective management of resources but even encompasses thorough analysis of external and internal business environments. Strategic management is solely responsible for providing direction to a firm. This approach is not static by nature and its frameworks usually comprise of feedback loop so as to evaluate or monitor performance. In this particular study different strategic frameworks shall be included and applied on Levi Strauss & Company. This brand is known to be number one amongst cloth manufacturing company. The company was founded by Levi Strauss in 1853. Over the years, Levi Strauss & Company has brought forth certain changes as per changing market trends. It markets and manufactures non-work and casual work sportswear and jeans. Their products have been able to achieve high levels of customer satisfaction and are presently known for greater degree of comfort. In earlier years Levi’s jeans was considered to be a staple product for every teenager. The company in the present scenario has lost its close connection with customer’s hidden demand. There has been continuous struggle from company’s perspective in context of achieving right combination of strategies. Current mission statement of the firm will be analyzed along with some proposed recommendations. There are certain theoretical frameworks included in this study like CPM, EFE, IFE, Space Matrix, Grand Strategy Matrix and QSPM. All these models will be evaluated with respect to widespread operations performed by Levi Strauss Company. The company is externally surrounded by many competitors who have retained their brand image from past many years. In this case the major strategic challenge for the firm is to reformulate their brand image and sustain it for many years. It is indeed a challenge to keep blue jeans within their famous jeans sector. There would be four major aspects of the firm which shall be monitored like marketing, production, financial position and company culture. In overall context the firm has to adopt market oriented approach so as to remain competitive in the market place. Companys current mission and a proposed new mission Levi Strauss & Company was initially founded in 1853 and later in 1860 the famous Levi’s jeans was manufactured from French cloth. The company’s products were firstly preferred by blue-collar workers but later on it became most popular amongst teenagers. Levi’s jeans were responsible for changing customer perception who thought jeans are only worn by hard working people. Till 1990s the brand’s appeal and strong popularity helped the firm to acquire high profit margins. The mission statement of the company is to maintain commercial success and be known as a global branded apparel marketing firm. Top management is more inclined towards balancing goals of return on investment, superior profitability, superior service or products and leadership market positions. The company believes in conducting their overall business operations ethically. Their leadership position is totally dependent on their fulfilling responsibilities towards local communities and society. They promised to deliver a work environment that is productive and safe and characterized through open communications, fair treatment, personal accountability, growth or development opportunities and teamwork. It can be stated that the company’s mission is all about retaining their market position and achieving desirable business goals (Schlosser, 2004). The entire mission statement highlights only company’s objectives but there are no such keywords which represent customer’s perspective. Though the current mission of the firm is to regain its brand image but there is a need for more clarity within its mission. Customers can be considered as the key driver for organizational success and growth. Levi Strauss & Company needs to focus more on customers and their hidden demand or wants. This shall enable the firm to secure high profit margins and sustain market position. The company operates in an intensely competitive market segment. In order to survive and regain its brand image it is essential to understand customer demand and effectively meet them. The market trend year’s back is not similar to that in present scenario. This is where the firm is lacking since it is focusing only on its signature product. The recommended mission of the company should be to increase satisfaction level of customers and deliver more innovative products. Customer or market oriented approach would support the firm to gain required market share and develop a strong base of loyal customers. The company can even highlight its new mission by stating that they work for people and are inclined towards enhancing comfort level of customers. External and internal audit CPM The competitive profit matrix or CPM is a technique that is used to compare a company with its rivals. It even reveals relative weakness and strength of an organization. Firms usually utilize this model to analyze competition and external environment in a significant industry. The matrix even helps to outline key competitors of a firm and evaluate them in terms of critical success factors. CSF or critical success factors are the key areas which need to be taken into consideration if an organization plans to excel in a particular industry. These critical success factors are given weights ranging to 1.0 or high importance and 0.0 or low importance. Ratings in the CPM matrix majorly represent the areas where the firm is performing well. These ratings are from 4 to 1 in which 4 is major strength, 3 indicates minor strength, 2 is minor weakness and 1 can be stated as major weakness. Levi Strauss & Company would be compared with three main competitors such as Gap Inc., VF Corporation and Tommy Hilfiger. The key success factors shall be product range, brand reputation, successful new product innovations, low cost structure, and sales per employee, market share, effective distribution channels, and wide base of loyal customers, superior IT capabilities, online presence and effective promotional campaigns. CPM matrix for the firm has been outlined below-     Levi Strauss & Company Gap Inc. Tommy Hilfiger VF Corporation Critical Success Factors Weight Rating Score Rating Score Rating Score Rating Score Product Range 0.04 2 0.08 2 0.08 3 0.12 4 0.16 Brand Reputation 0.13 3 0.39 3 0.39 3 0.39 3 0.39 Successful new product innovations 0.09 2 0.18 1 0.09 2 0.18 3 0.27 Low cost structure 0.05 2 0.1 2 0.1 1 0.05 2 0.1 Sales per employee 0.08 2 0.16 1 0.08 2 0.16 2 0.16 Market share 0.14 3 0.42 3 0.42 3 0.42 4 0.56 Effective distribution channels 0.07 3 0.21 2 0.14 2 0.14 3 0.21 Wide base of loyal customers 0.06 3 0.18 2 0.12 3 0.18 4 0.24 Superior IT capabilities 0.11 4 0.44 3 0.33 2 0.22 3 0.33 Online presence 0.15 3 0.45 2 0.3 3 0.45 2 0.3 Effective promotional campaigns 0.08 4 0.32 2 0.16 2 0.16 3 0.24 Total 1   2.93   2.21   2.47   2.96 The most essential success factors as per the matrix are online presence, market share and brand reputation. The total score obtained from the matrix usually indicates competitive position of firms. VF Corporation secures highest score on basis of success factors that is 2.96. However there is negligible difference between scores of Levi’s and VF Corporation. The major strengths of Levi Strauss & Company in comparison to its rivals are brand reputation, IT capabilities, promotions, online presence, market share, loyal customers and effective distribution channels. EFE EFE matrix is a strategic management tool that is utilized for analyzing current business conditions. This matrix is basically implemented in order to prioritize threats and opportunities. EFE matrix is closely associated with identifying wide array of external factors. The opportunities and threats are then given appropriate weights so as to reflect upon their importance. These external factors can be classified as social, environmental, cultural and demographic variables. It even encompasses economic variables, business trends, political, legal and government variables. The opportunities or threats are given weights and this is as per high or low importance. EFE matrix for Levi Strauss & Company has been given below- Opportunities Weight Rating Weighted Score High disposable income 11% 4 0.44 Product Differentiation 10% 3 0.3 Internet and Communication technologies 8% 2 0.16 Export and import factors 12% 4 0.48 Increased customer demand 16% 3 0.48 Threats       Economic downturn 15% 1 0.15 Tax regulations 8% 3 0.24 High level of competitiveness 10% 1 0.1 Government oversight 5% 1 0.05 Declining margins 5% 2 0.1 Total 100%   2.5 As per the matrix, opportunities and threats has been weighted respectively within a scale of 0 to 1. The sum total of all the assigned weights needs to be 100%. It can be stated that Levi’s as a brand faces new challenges in highly competitive industry. External factors basically cause a strong impact on the firm. The major opportunities for the firm which has been identified through EFE matrix are increased customer demand, import and export factors, product differentiation and high disposable income. On the other hand, threats of high importance been outlined are economic downturn, high level of competitiveness and tax regulations. The ratings are given on basis of firm’s effectiveness. This indicates suitability of company’s current strategies in context of responding to mentioned factors. The overall weighted score that has been highlighted represents the current position of the company in relation to exploring opportunities and mitigating external threats. According to the EFE matrix the firm has secured a score of 2.5. Total weight score as outlined in the matrix reflects the firm has slightly less capability in context of responding to mentioned external factors (Beatty, 2004). This even states that Levi Strauss & Company has to enhance their competencies and skills in order to make maximum utilization of opportunities. There are various opportunities available to the company but it is not being able to effectively incorporate them within business operations. IFE IFE matrix or internal factor evaluation is another strategic management tool that is implemented to analyze internal business conditions. This matrix represents internal weaknesses and strengths that are closely knitted with functional areas of a company. IFE matrix evaluates and identifies relationship amongst key areas. The weights are given to internal strengths and weakness as per the level of importance. Those which are given high weights are regarded as major strengths of the company. Over the years Levi Strauss & Company has been delivering high quality products to all its customers. However intense competition in apparel industry has facilitated the firm to expand its product range for attracting large base of customers. There are certain strengths and weakness of Levi Strauss & Company which has been outlined in the form of IFE matrix. Strengths Weight Rating Weighted Score Valuable brand 0.09 4 0.36 Wide range of products 0.06 2 0.12 Market share 0.13 2 0.26 Strong financial position 0.08 3 0.24 Extensive advertising campaign 0.15 2 0.3 Geographical expansion 0.08 2 0.16 Effective production and distribution facilities 0.09 3 0.27 Weaknesses       Declining brand image 0.07 3 0.21 Growing competition 0.06 3 0.18 Less aggressive marketing strategy 0.08 2 0.16 Problems with cost structure 0.11 3 0.33 Total 1   2.59 The matrix clearly reveals that there is a set of strengths and weaknesses possessed by the company. These factors are closely knitted with wide array of functions performed by Levi Strauss & Company. IFE matrix highlights that there are certain strength factors of the firm. The major internal strengths are its brand value, strong financial position amongst other players and effective production as well as distribution facilities. These factors has supported the firm to perform significantly well in highly competitive market place. On the other hand, internal strengths even facilitate gaining competitive advantage. This in turn enhances long term growth and success (Lee, 2004). Apart from strengths, the matrix even outlines some key weaknesses of an organization. These weaknesses are solely responsible for reducing capability of a company in context of exploring opportunities and mitigating any form of risks. There are some factors which have been encompassed within the matrix. Levi Strauss & Company from the past few years are trying to incorporate the right combination of strategies in order to stay competitive in the market place. Decreasing level of profit margins clearly indicates that the company is still facing strategic challenges. On basis of the IFE matrix the major weaknesses witnessed by the firm are declining brand image, intense competition in the industry and problems linked with controlling cost structure of business operations. SPACE Matrix Space matrix or strategic position and evaluation matrix is a strategic management tool which is basically incorporated so as to determine most suitable business strategy for a company. It is mainly associated with strategy formulation that enables a firm to occupy competitive position in the industry. The entire matrix can be broken down into four quadrants where each determines nature and type of a strategy. These quadrants are aggressive, conservative, defensive and competitive. The space matrix is inclined towards analysis of four areas such as financial strength, competitive advantage, environmental stability and industry strength. There exist certain internal factors that strengthen market position of a firm. Simultaneously external conditions even affect business operations to a great extent. Levi Strauss & Company has been able to establish their brand value since many years. With growth of intense competition revenue margins of the firm has decreased considerably. There is a need to adopt right action plan in the current scenario so as to retain as well as attract large base of customers. X-axis and Y-axis factors in the matrix would be evaluated within range of 1 to 6. Competitive Advantage (CA) values shall range from -1 to -6. Industry Strength (IS) will be rated within a range of +1 to +6. These values obtained from the matrix would be plotted along X-axis. Financial Strength (FS) can be ranked between -1 to -6. On the other hand, financial strength (FS) values shall range between +1 and +6. The values will be plotted along x and y axis in order to determine the point of intersection. Intersecting point shall reveal the most suitable strategy that can be implemented by Levi Strauss & Company.     Internal Strategic Position   External Strategic Position     Competitive (CA)   Industry (IS) Axis X -3 Brand image +4 Growth potential   -1 Market share +4 Availability of funds   -1 Product quality +6 Entry barriers   -2 Product life cycle +5 Consolidation   Average -1.75   Average +4.75       Total axis X score: 3.00         Financial (FS)   Environmental (ES) Axis Y +5 Cash flow -1 Technology   +6 Liquidity -4 Taxation   +5 ROA -2 Demand elasticity   +4 Leverage -2 Inflation   Average +5.00   Average -2.25       Total axis Y score: 2.75     The values are given to all four areas which shall be plotted on a graph to identify intersection point. In the negative horizon -6 represents worst whereas -1 represents best. Simultaneously in positive horizon +1 indicates worst and +6 can be stated as best. The average of all four quadrants has been outlined in the matrix given above. Average values are plotted in graph as represented in figure 1. Figure 1: Space Matrix The space matrix in figure 1 indicates that the intersection point belongs to first quadrant. As per internal and external factors of Levi Strauss & Company the suggested strategy is being aggressive in the market place (Berman and Beatty, 2004). Internal strengths and external conditions would support the firm to pursue this strategy. This shall encompass integration with other firms, product development, competitor acquisition, etc. Grand Strategy Matrix Grand strategy matrix is an effective strategic management tool that is used for developing alternative strategies. There are four basic quadrants of this matrix. Each of the quadrants consists of a set of strategies. Firm along with their widespread divisions has to belong to a specific quadrant. There are two dimensions of this matrix such as market growth and competitive position. As per the matrix those firms who belong to first quadrant secures a strong competitive position. These firms need to mainly focus on existing market scenario through encompassing market development, product development and wide array of market penetration strategies. Firms which are placed in first quadrant are basically inclined towards single product and can incorporate diversification strategy. This in turn shall reduce overall risks associated with restricted product line. Quadrant two highlights those firms who are a part of rapidly growing industry but do not possess required competencies. Horizontal integration is the best approach for firms not possessing competitive advantage. On the other hand, liquidation also emerge as an strategic option that makes fund available for strategic business units and even helps to acquire other firms. Firms in quadrant three represent those having weak position and being a part of slow market growth. Noticeable modifications have to be made by firms in order to sustain their market position. Most common strategies available to such firms are diversification strategy so as to spread its resources and retrenchment strategy. Companies that are operating in quadrant four do possess a strong competitive position but is a part of slow growth industry (Stone, 2004). These firms utilize their resources so as to enter into untapped market segments. There is restricted internal growth for such firms but easy availability of funds facilitates both unrelated and related diversifications. Grand strategy matrix has been outlined in figure 2. Figure 2: Grand Strategy Matrix Figure2 highlights the different quadrants along with their respective strategies. As per the analysis on Levi Strauss & Company, the firm belongs to rapidly growing industry but encompasses less competent skills or capabilities. Hence the company needs to develop their competitive advantage with the support of wide range of strategies and their internal resources. It is highly advisable that the firm encompasses product development, market penetration, market development, liquidation strategies, etc. These strategies would enable the firm to secure high profit margins and perform competitively in market place. QSPM The high level approach of management process used in evaluating different strategies is known as Quantitative Strategic Planning Matrix (QSPM). It is an analytical method mainly used in the process of matching and comparing alternative feasible options. This matrix of analysis falls in the stage three of the analytical framework of formulating strategies. The objective of this matrix is to select the best strategy for the business. Inputs of QSPM are taken from few computation and different management techniques. It is a method to of using inputs from the analysis of stage 1. Then the analysis is matched with the result of the analysis of stage 2. After this the alternative strategies and the objectives are decided. This model helps to compare two alternatives. According to the strategies of stage 1 and stage 2 the executive of the company determines the strategies required for developing its new product and market penetrating. The strategy of the company can be implemented in two ways. Acquiring a company is one of the strategies and expanding internally can be another strategy. Alternative 1(Acquire competitor) Alternative 2 (expand internally) Strengths Weight Rating Weighted Score weight rating Weighted score Valuable brand 0.09 4 0.36 0.13 2 0.26 Wide range of products 0.06 2 0.12 0.09 3 0.27 Market share 0.13 2 0.26 0.09 3 0.27 Strong financial position 0.08 3 0.24 0.15 1 0.15 Extensive advertising campaign 0.15 2 0.3 0.06 4 0.24 Geographical expansion 0.08 2 0.16 0.11 1 0.11 Effective production and distribution facilities 0.09 3 0.27 0.07 3 0.21 Weaknesses       Declining brand image 0.07 3 0.21 0.08 1 0.08 Growing competition 0.06 3 0.18 0.06 2 0.12 Less aggressive marketing strategy 0.08 2 0.16 0.08 4 0.32 Problems with cost structure 0.11 3 0.33 0.08 3 0.24 Total 100%   2.59 Opportunities Weight Rating Weighted Score Weight rating Weighted score High disposable income 0.11 4 0.44 0.1 3 0.3 Product Differentiation 0.1 3 0.3 0.12 1 0.12 Internet and Communication technologies 0.08 2 0.16 0.08 4 0.32 Export and import factors 0.12 4 0.48 0.11 2 0.22 Increased customer demand 0.16 3 0.48 0.16 2 0.32 Threats  100%     Economic downturn 0.15 1 0.15 0.05 1 0.05 Tax regulations 0.08 3 0.24 0.15 3 0.45 High level of competitiveness 0.1 1 0.1 0.05 4 0.2 Government oversight 0.05 1 0.05 0.08 2 0.16 Declining margins 0.05 2 0.1 0.1 1 0.1 Total 100%   2.5 Total attractive score 5.09 > 4.51 Since the total weighted score of the alternative 1 is greater than that of alternative 2, it would be viable for the company to take the decision of acquiring another company rather than expanding internally. Conclusion and recommendations As per the study strategic management is an effective approach that helps to determine current market position of a firm. Levi Strauss & Company has been witnessing severe downfall in its profit margins from the past few years. Theoretical frameworks incorporated in this study clearly states that the company is lacking in certain areas. Internal strengths and weakness forms the base which enables a company to explore external opportunities and eliminates external threats. CPM matrix formulated on basis of certain success factors outlines VF Corporation to possess high market share in comparison to Levi Strauss & Company and wide range of other players. On the other hand, IFE and EFE were utilized in order to identify potential strengths and weaknesses along with external threats and opportunities. Space matrix is another strategic management tool that is utilized to determine most suitable strategy for a company. As per the matrix the company should follow aggressive strategy so as to establish their brand image. Grand strategy matrix revealed that the firm belongs to quadrant two and there is a need to undertake innovative strategies. QSPM is an important an important analytical tool to determine the alternative strategies for the business. This tool has been used to analyze in this case study with the aim to know the perfect strategy for the business. According to this matrix acquisition of another company is the best strategic decision for Levis. On basis of the results obtained through strategic frameworks it is recommended that Levi Strauss & Company should implement market development or product development strategy. Acquisitions or mergers can also provide the company with a platform through which it can acquire wider base of customers. Marketing or promotional strategies of the firm has been strong over the past many years and hence it now needs to focus on product innovations. In a highly competitive industry it is essential to attract target customers as well as retain existing ones. This could be achieved by the firm by analyzing hidden demands of customers and designing products as per hidden needs or wants. References Beatty, S. (2004). Levi Strauss plans to continue its sales strategy on jeans styles. Wall Street Journal, p. B3. Berman, D.K., and Beatty, S. (2004). Levi to sell its dockers brand to vestar for $800 million. Wall Street Journal, p. B6. Lee, L. (2004). Jean therapy, $23 a pop. Business Week Online. Schlosser, J. (2004). Cashing in on the new world of me: a handful of companies are finally perfecting made-to-order for the masses, here’s how. Fortune Online. Stone. (2004). Web retailing gets really personal. Business Week Online. Read More