Consumer Behaviour of Levi Strauss and Co - Case Study Example

?  (Consumer Behaviour) By Presented to Location Due Executive Summary This case study analysisstudies and identifies the key issues that are recently affecting the success of Levi Strauss & Co. being a giant apparel company. It is notable that the company is performing poorly in its operation evident in the drop in sales revenue and the loss of the major retailers on its Jeans and cloth wear. The major challenge is the failure to shift with the trends of the consumer behavior as in the various market segments and the application of inappropriate technologies. Situational analysis on the company is conducted to determine the strengths, weaknesses, opportunities and threats which used as a basis of formulating the various alternative strategies for addressing the underlying issue. The best option is selected for the implementation and this option is cost effective and has significant favorable effects to the company. Problem statement Levi Strauss & Co. is a giant apparel company based in San Francisco and it is privately by the Levis for the last 147 years which has been marked by the years of success characterized with increased profits and the overall sale of its cloth wears. Levi Strauss is an all American brand and that its corporate image among the potential and the existing customers has a higher level of publicity. Therefore the goals and the objectives of this giant apparel cloth wear company for the last few years is to constantly sustain their increased sales and profitability, maintain its market share, consistently develop new products that is available to the existing and the emerging market segments through regular company research and development and finally is to consolidate its customer base by maintaining customers loyalty and satisfaction. Unfortunately Levi Strauss & Co in the recently over a period of time has become difficult in meeting these goals and objectives. Notably this trend has been attributed by the consumer changes in the cloth ware and apparel industry where there is frequent changes in fashion and designs thus affecting the changes and preference of the consumers across the entire market segment (Stamatiadis 2009). The key move that Levi Strauss & Co did not take keenly in during this period of fashion change and designs of the clothing wear in this industry is the failure to make changes according to the changes in the taste and preference of their existing customers thus contributing to Levi Strauss & Co being always seasons behind in terms of the emerging trends and designs hence their major competitors. More important is that they have not been able to sustain the market segment that comprises the young comprising of the under twenty five and the kids who have perceive that the Levi’s styles are too tight and they are suitable for the old generation thus resulting into the loss of the market share in which the younger generation has been Levi Strauss & Co major existing customers. One of the major setbacks is the failure to consolidate the younger generation who have been contributing more to their profits (Stamatiadis 2009). These emerging issues has resulted into the company realizing little success in its operations and the overall revenue generation and the loss of the customers and the reduced market share in the cloth wear industry, the changes in the consumer behavior in due to change in their taste and preference has resulted into their competitors such as JNCO, Old Navy and Kirkwear having an added advantage over them this resulting into the loss of market share from 31% to 17% despite increase in the market of jeans wear and the overall cloth wear in a span of three years. The implication of these problems to Levi Strauss & Co include tumbling sales due to the loss of market share and the existing customers, layoffs of the employees where they reduced the number of employees by 40% laying off over 15000 total number of employees, plant closings due to the reduced sales and the loss of the major retailers such as Chicago-based chain that quit selling Levi’s because of the lack of fashion shifts to meet the consumer behavior and the trends on taste and preference and finally is the failure to woo kids online. The company needs to immediately address some issues to recover from the situation. The identified areas of concern is mainly to increase sales, to develop new product designs that are in consistent with the current fashions notably is to target both the younger generation as well as the older generation, to regain the market share they had lost to its competitors, convince and persuade their major retailers and other stakeholders of the company and finally is to ensure that customer satisfaction is achieved. With all the major issues that need to be addressed by the company has been identified the company has a chance to recover from its situation by addressing issues of more importance affecting profitability, competitive advantage, customer satisfaction and putting the company in a strategic position with efficient and effective operations and supply chain (Stamatiadis 2009). With all these of great importance and urgency having been addressed the Levi’s can be able to recover from its current situation to become a giant in the jeans and cloth wear Apparel Company. Situational Analysis External analysis The external analysis of this company will involve the examination of the major factors that are not in direct control of the company that has significant effects on the apparel industry. These factors have a great impact on the attractiveness, competitiveness and the forces of demand and supply in the industry, these factors can be categorized into legal political, economic, social and technological (Grossi 2005). Legal political factors The legal political comprises of factors such as the government regulation on tax provision, subsidies and incentives which varies from one federal government to another. Levi Strauss & Co among other companies operating in the same industry does not have notably unfavorable legal political factors. Therefore it can be concluded that the legal political factors does not have a significant impact on the current situation of this apparel and cloth wear company. Social factors These are factors mainly comprising of the society culture, norms beliefs and the emerging behavior trends in the contemporary location in which Levi Strauss & Co has it as the target audience which can vary in various locations. There are some factors that has resulted into impacting negatively on the sales performance of Levi Strauss & Co. Notably is the high school teenagers perception on the Levi’s wears styles they perceive that the design of Levi’s style are too tight and they consider them to be associated with the older generation and they instead prefer baggy cloth wears from Levi Strauss & Co main competitors such as JNCO and Kikwear. Levi Strauss company brand is perceived to be an all American brand the company has a higher level of social publicity (Grossi 2005). Economical factors The economic factors of Levi Strauss & Co involve the current financial performance and sales being a major determinant. The has been a decline in sales revenue for the last one year where it dropped from its peak of $ 7.1 billion to $ 5.4 this can be translated into reduced net profits. This situation at the same time there is escalating operations costs and other costs which are related to the employee’s layoff and the closure of some of its production plants. This has also led to the company losing its credit worthiness as well as its credibility by the investors, Moody’s investors service, Standard & Poor’s and Fitch IBCA have downgraded Levi’s $ 800 million in senior insecure debt further worsening the financial situation of Levi Strauss & Co. Technological factors Technology is also a major factor that has significantly contributed to the current situation of this company. With the advent of the new technologies most companies are coming up with sophisticated technologies which are applied in designing new products that meets the customer requirements. With the reluctance of Levi Strauss & Co to get along with the new technologies led to their competitors who adopted in their manufacturing designs which designed products that got along with the shift in fashion trends thus gaining competitive advantage. The adoption of online technologies in selling its wears had unfavorable implications while performing better with some of its competitors (Grossi 2005). This has attributed to the highest level of competition and rivalry in this industry with the entry of new firms because of its attractiveness with new sophisticated technologies. Internal analysis This is the examination on the ability of the company to address various challenges impacting unfavorably in achieving its objectives. Levi Strauss & Co. in their effort to address the challenges it faces by formulating measures and strategies. The first move they have made is to employ a qualified chief executive officer who has adequate experience especially for the makeover situations like the case of Levi Strauss & Co and had achieved success as the head of Pepsi North America unit and he shall be able to deliver the set objectives despite the challenges. The CEO being a marketing veteran, there is intensive research and development aiming at developing innovative products that will be to compete with the existing products from the competitors. The Company is unveiling a line called Engineered Jeans referred to as reinvention as an attempt to meet the changing trends in the customer needs. The reinventions of the new styles are designed to appeal all the market segments and all the stores that are flocked with all the generations from kids, teenagers to the old (Grossi 2005). The company is considering for a marketing campaign to promote the new renovated products with new styles. This consideration is enhanced by the strong brand name that Levi Strauss & Co. has among the American people. To address the issues of technology the company there is an underway project of establishing a computerized automatic replenishment system to sustain the retailers and ensure that there is an effective and efficient operation and chain supply thus maintaining a consistent supply of its main products. It is also important to note that the company has got enough assets and facilities that are needed for the renovations as the closed plants can be used in its expansions. To avoid the high costs in relation to the less volume of sales the company is experiencing they scrapped online sells of jeans and finally is that they have renegotiated bank loans and securing them with the available assets including its trademark and brand. Alternatives Levi Strauss & Co despite the efforts made to overcome the challenges there are options that they can implement to achieve full recover from the current situation and its initial goals and objectives (Grant 2010). The following are the probably options that Levi Strauss & Co. can integrate into their operations in order to respond appropriately to these underlying issues limiting its success. Innovation of Products, Research and Development Levi Strauss & Co. should increase the budget allocation on the innovation of new products that suits the various market segments in which there a large number of the potential and the existing customers. The most targeted group which has been greatly neglected by this company is the youth and the young generation customers. The jeans and the cloth wears should be design to suit the shift in the fashion trends in the society and to achieve this, the company should apply appropriate technology through an extensive market research and development to come up with the best options on how to innovate its manufacturing design and products in a cost effective manner (Grant 2010). This will ensure that their jeans and its cloth wears are able to compete with those of their competitors. The main drawback associated with this option is the expensiveness; this will cost the company a significant budget allocation which might not be available hence the need to look funds from other sources. Improving Marketing Strategies The company needs to come up with focused marketing strategies that will increase the sales volume and to influence the target audience in different market segments in a convenient and cost effective (Grant 2010). Marketing is a major tool in many companies and with the advent of the new technologies Levi Strauss & Co. should take advantage of associated techniques such as social media tools to reach out the mass audience in the social media. Appropriate marketing strategies will enhance the brand awareness and also the perception and the attitudes of the audience on the launch of the new innovated products such as the launch of the engineered jeans. The benefit of this strategy is that the company will enhance it brand and the awareness of the new product. Its drawback is the costs and the uncertainties surrounding the effectiveness of the selected marketing in relation to the audience. Operations and Chain Supply strategies This option in very crucial to the success of Levi Strauss & Co. which involves the movement of the products and services from the manufacturing to the distributors, retailers and to the target customers. These strategies comprise the summary of all the process that is involved by the company from the production, marketing and reaching out the target customer conveniently. This strategy ensures that the supply chain is complete and effectively performing. It may be costly to the company at the recovery stage. Final Decision From the above options the most suitable and appropriate because it covers the whole operations and the supply chain of the Company where all the systems are updated to be automatic to ensure that all the retailers are completely persuaded to sell the jeans and the cloth wear of the company (Cohen 2004). Compared to other strategies this method is cost effective because its impacts can make a better performance in the short run thus reducing the duration that is required by the company to recover. The closed plants through this strategy can be reopened for the effective supply chain. The summary of this will improve the sales revenue improving the entire profitability and the financial position of the company (Cohen 2004). Implementation After the identification of the various alternatives and the best option selected what follows is the implementation or the action plan of the process. The implementation of the operations and the supply chain strategies involves the review of the production and the manufacturing designs of the renovated engineered Jeans where a cost effective with effective quality control designs are put in place in the production and the manufacturing systems (Cohen 2004). What follows in the supply chain strategies is to ensure that the new line penetrates into the market and the retailers and the consumers are influenced by the use of appropriate marketing tools. With the skills and expertise of experienced and competent employees the operations and supply chain strategies will ensure that the company achieves its goals and objectives (Cohen 2004). Reference Grant, R. M. (2010). Contemporary Strategy Analysis. New York: John Wiley and Sons. Patricia Grossi, H. K. (2005). Catastrophe Modeling: A New Approach To Managing Risk. London: Springer. Shoshanah Cohen, J. R. (2004). Strategic Supply Chain Management: The Five Disciplines for Top Performance. New York: McGraw-Hill Professional. Stamatiadis, N. (2009). Quantifying the Benefits of Context Sensitive Solutions. Colorado: Transportation Research Board. Read More