LEVI STRAUSSCOMPANY.docx

LEVI STRAUSSCOMPANY.docx

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LEVISTRAUSSCOMPANY

LEVISTRAUSS&COMPANY–2005

Astheworld’snumber-onemakerofbrand-nameclothing,LeviStrauss&Company（）manufacturesandmarketscasualworkandnon-workjeansandsportswear.Itssignaturenameproductsaresynonymouswithcomfort.Awell-wornpairofLevi’swasonceastapleitemineveryteen’scloset.However,inrecentyearsLeviStrausslosttouchwithconsumertrendsandhasstruggledtofindtherightcombinationofstrategiestodefine（redefine）itselfanditssignatureproducts.Thecompany’spresidentandCEOPhilipMarineau,whowashiredawayfromPepsiin1999torestoreLevi’simageandperformance,issearchingforthecorrectcombinationofstrategiestoreturnLeviStrausstothepowerfulbranditoncewas.

CompanyHistory

LeviStrauss&Companywasfoundedin1853byLeviStrauss,whoarrivedinSanFranciscofromNewYorktostartawholesaledrygoodsbusiness.AgoldprospectortoldStraussofminers’problemsinfindingsturdypantsthatheldupunderthepressuresofpanningforgold.Sensinganopportunity,Straussmadeapairofpantsoutofcanvasmaterialfortheprospector.Itdidn’ttakelongforwordofthedurablepantstospread.Duringthe1860s,StraussswitchedthefabrictoadurableFrenchcloth（sergedeNimes）,whichsoonbecameknownasdenim.HecoloredthefabricwithanindigodyeandtogetherwithaNevadatailor,patentedtheprocessofputtingrivetsinpantsforstrength.That’showLevi’sjeanswerecreated.Thepantsquicklybecamethechoiceforworkclothingofcowboys,oildrillers,lumberjacks,farmers,andrailroadworkers.Fromitsbeginningasacompanywhoseclotheswerefavoredbyblue-collarworkers,Levi’sjeansultimatelybecamethepreferredclothingchoiceofteensaroundtheworld.Nolongerwerejeansviewedassomethingwornonlybyhardworkinglaborers.ThestrongpopularityandappealoftheLevi’sbrandjeansandclotheswouldlastwellintothe1990sbeforeproblemshit.Fromapeakof$7.136billionin1996,saleshavecontinuedtodeclineeveryyearwithsalesrevenueshitting$4.072billionin2004.Despitethesalesdeclines,LeviStrausshascontinuedtomakeaprofituntil2003whenitsufferedarecordnetlossof$349million.However,in2004,thecompanyreboundedandshowedasmallprofitof$30million.

CurrentOperations

LeviStrauss&Companyisaworldwidecorporationsellingjeansandsportswearinmorethan110countries.Itisorganizedintothreegeographicdivisions:

LeviStraussNorthAmericabasedinSanFrancisco;LeviStraussEuropebasedinBrussels;andtheAsiaPacificDivisionbasedinSingapore.TheNorthAmericandivisionisthecompany’slargestregion,andin2004accountedfor60percentoftotalsales.TheLeviStraussEuropeandivisionaccountedfor25percentoftotalsalesin2004.TheAsiaPacificDivision,establishedin1995,accountedfor15percentoftotalsalesin2004.

Thedeclineintotalsalesoverthepast8yearshasledtoimportantchangesinLevi’soperatingstrategies.Itclosed37ofitsmanufacturingfactoriesworldwideandnowusesindependentcontractmanufacturerslocatedinLatinAmericaandAsia.Includedinthisstrategicmovewastheclosureofthecompany’sremainingNorthAmericanmanufacturingfacilitiesinearly2004.Theseplantclosingshaveresultedinsome71percent（26,000plus）ofitsemployeesworldwidebeinglaidoff.

Thecompany’sstrategicmovetooutsourcinghaspresenteditsownchallengesbecauseofLeviStrauss’strongcommitmenttosociallyresponsiblebusinesspractices.In1991,LeviStraussbecamethefirstmultinationalcompanytoestablishacomprehensiveethicalcodeofconductforitsalliancepartnersinmanufacturingandfinishing.Thiscode,titledtheGlobalSourcingandOperatingGuidelines,establishesbusinesspracticessuchasfairemployment,workerhealthandsafety,andenvironmentalstandards.Thecompanyremainscommittedtoensuringcompliancewithitscodeofconductatallfacilitiesandworksonsitewithitscontractorstodevelopresponsiblebusinesspracticesandcontinuousimprovement.Trainedinspectorscloselyauditandmonitorthecontractorsandifitisdeterminedthatabusinesspartnerisnotcomplyingwiththeterms,LeviStraussrequiresthatthepartnerimplementacorrectiveactionplanwithinaspecifiedtimeperiod.Ifacontractorfailstotakecorrectiveactions,thebusinessrelationshipisterminated.

Marketing

Oneofthecompany’smostvaluableassetsisitsLevi’sbrand.However,thatvenerableLevi’sbrandhadlostmuchofitspopularity.AlthoughLeviStrausshasoneofthebest-knownnamesintheworld,itsmarketpowerhasdeclined.AnannualrankingofglobalbrandswiththemostimpactshowedLevi’srankedatnumber32in2001,number34in2002,number56in2003,andreboundingtonumber44in2004.Theproductsthatbabyboomersinthe1960sdefinedashipandanti-establishmentwerenowperceivedasnon-trendyanddull.Inthebrutallycompetitiveapparelmarket,thattypeofimage,particularlywithyoungerconsumers,hasproventobedisastrous.

Foryears,LeviStraussstucktothemiddle-of-the-roadjeansmarketdespitetheincreasingdivisionofthatmarketintothosecustomerslookingforpriceandthoselookingforfashion.Notwantingtodevalueitsbrand,LeviStrausschosetocontinuesellingitsclothingthroughmid-marketchannelssuchasJ.C.PenneyandSears.ItavoideddiscountstoresevenasitscorecustomersstreamedtomassdiscounterssuchasWal-MartandTarget.Atthesametime,itfailedtocapitalizeontheboominhigh-fashionjeans,andrivalssuchasDieselandLuckypouncedonthosemarkets.Finally,inlate2002,LeviStraussoverhauleditsmarketstrategybyrollingoutaseriesofnewbrands,thefirsttimeithaddonesosinceitintroducedDockersin1986.ThelaunchoftheLeviStraussSignature™brandtomassmarketretailerswasabigstep,aswastheintroductionofthemoreexpensivePremiumRedTablinesandLevi’sVintagelinessoldinstoressuchasNordstromandNeimanMarcus.Now,thecompanyhadproductsspanningtheconsumermarket.Byofferingjeansforvalue-consciousshoppersallthewaytothoseshopperswillingtopaypremiumpricesfortheirjeans,Levi’shopedtoregainsomeofthemarketshareithadlosttocompetitors.

Theintroductionofthelower-pricedSignaturebrandhasbeenparticularlychallengingforthecompanybecauseoftheincreasedneedforoperationalefficiencies.Pastlogisticsproblems,whichtoooftenhadresultedinretailersgettingwrongordersorlateshipments,wouldn’tbetoleratedbyWal-Mart.SoLeviStrausshadtogetalotmoredisciplinedinordertomeettheproductdemandsoftheworld’slargestretailer.Inaddition,marginsontheSignaturelinewerethinnerthanforthepremium-pricedRedTabline.Squeezingoutaprofitmeantstrictattentiontokeepingcostslow.AlthoughtheSignaturejeansareproducedinthesamefactoriesastheRedTabs,they’remadewithlower-qualityfabricandcheaperdyes.AndtheSignaturejeansareproducedinthreefitsonly（regular,relaxed,andclassic）andthreeshadesofblue（dark,medium,andlight）.RedTabs,ontheotherhand,comeinhundredsoffits,colors,andfabrictextures.Finally,inordertocontrolmarketingcostsontheSignaturejeans,thecompanychosetostickwithlow-tech,in-storepostersandotherpromotionsincludingamarketingdealwithNASCARanddriverJimmieJohnson,ratherthanusingexpensiveprintandtelevisionads.

Sofar,theSignaturelineappearedtobemakingsomeprogressinthecompetitivemassmarket.Thejeanslineaccountedfor$105millioninsalesinthefirstquarterof2004（11percentofthecompany’s$962millioninsales）.ExecutivesatWal-MartseemedtobesatisfiedandaspokeswomancalledtheSignaturelinea“significantbusiness”fortheretailer.

ProductDevelopmentandInnovation

Levi’salwayshadbeendescribedasafashioninnovator.Afterall,itcreatedthejeansmarket.Thequestionis—isitstillaninnovator?

Upuntilthe1990s,thecompanyhadbeenafashioninnovatorbecauseofitsabilityto“read”themarketandrespondwithvariationsofitscoreproducts.However,thatsamesuccesswithitscoreproductsledtoitsfailuretoseetheshiftawayfromtraditionaljeansstyling.Itmissedthepopulartrendsofflaredlegsandbaggyhip-hopjeansandoftenmarketedjeansinout-of-stylecolors.

Levi’swasoneofthefirstcompaniestotapintothemasscustomizationtrendbyofferingmade-to-orderjeans.In1999,thecompanyannouncedthatitwouldbeginofferingcustomizedversionsofitsclassicdenimstofiteverywoman’sbodytype.Likeothermanufacturersjumpingonthe“madeforme”bandwagon,Levi’ssoonfoundthatmasscustomizationwasn’teasyandeventuallypulledtheplugonthisprogram.

Despitethecompany’spastchallengesinproductdevelopmentandinnovation,itcontinuestorecognizetheimportanceoftherightproductstoitsfuturesuccess.OneofLeviStrauss’scriticalstrategicgoalsisto“innovateandleadfromthecore,”anditcontinuestointroduceproductinnovations.Forinstance,since2001,theAdvancedInnovationTeamfortheDockers®linehasintroducedseveralgroundbreakingproductinnovations.Forinstance,in2004and2005,theteamdevelopedthreenewandexclusiveproductinnovations.ThefirstwastheNever-Iron™Cottonthatdramaticallyminimizeswrinkling.AnotherwastheThermalAdapt™Khakipantsthatadjusttobodytemperature.AndthethirdwasDockers®ShirtswithPerspirationGuard™,aspecialfinishthatwicksawaymoisturefromthebodyandeliminatestheappearanceofperspirationmarks.

CompanyCulture

OnitsWebsite,LeviStrauss&Companystatesitsvisionasfollows:

“Peopleloveourcl