CASE STUDY: Levis Case

NAME: ___KANGKE, KIM UGIN M.________ Score:___________

Levi’s holds a top position in the clothing industry. It has successfully applied differentiation strategies in its business with
its history of a highly recognizable brand name and brand loyalty. It charges customers a premium on its products by
providing valued features.

Levi’s has high labour costs due to its strong “social conscience,” “US-made” persistence, and generous salary and benefits
packages. Also, the chain of Original Levi’s Stores (OLS) is a weakness in Levi’s operations. Even though the OLS has a
30% higher profit per pair of jeans than the wholesale channel, it was less profitable than the wholesale channel because of
the significant operation costs (largely due to the additional SG&A costs) and
inventory costs. In addition, the brand name does not carry as much cachet, so Levi’s required new valued features to
differentiate itself.

Apparel imports were increasing faster than exports and the denim sales grew approximately 10% per year. These indicated
that there was a significant demand in the market and potential growth for the company. Also, there is an emerging
requirement of providing sufficient customization and maintaining reasonable costs and operational feasibility, which created
a high-end niche market that allows Levi’s to avoid price-based competition and strive for differentiation.

In the lower end market, jeans producers set up cheap overseas facilities. This enabled the low-cost, high-volume producers to
gain cost advantages over Levi’s. In the upper end of the market, more expensive brands targeted the affluent customers. As a
result, Levi was at a disadvantaged position in both market segments.

Directions: Identify Levi’s Strauss current industry/market positions by preparing a SWOT Analysis.

STRENGTHS WEAKNESSES

-​ Top position in the clothing industry. -​ Levi’s has high labour costs due to its strong
-​ Highly recognizable brand name and brand “social conscience,”
loyalty -​ The chain of Original Levi’s Stores (OLS) is a
-​ It allows the company to charge premium prices weakness in Levi’s operations.
by offering valued product features, supporting -​ It was less profitable than the wholesale channel
its differentiation strategy. because of the significant operation costs.
-​ Levi’s “US-made” approach and generous -​ The brand name does not carry as much cachet,
employee benefits enhance its ethical image and so Levi’s required new valued features to
appeal to socially conscious consumers. differentiate itself.

OPPORTUNITIES THREATS

-​ Apparel imports were increasing faster than -​ The company is squeezed between low-end
exports and the denim sales grew approximately competitors who benefit from cheap overseas
10% per year. production, allowing them to offer lower prices,
-​ significant demand in the market and potential and high-end brands that target affluent
growth for the company consumers with premium products.
-​ An emerging requirement of providing sufficient -​ Levi’s maintains high operating costs due to its
customization and maintaining reasonable costs commitment to U.S.-based manufacturing, strong
and operational feasibility. social responsibility practices, and generous
-​ a high-end niche market that allows Levi’s to employee compensation.
avoid price-based competition and strive for
differentiation.