Introduction
Companies use various strategy models to analyse their current status and formulate strategies for future directions they ought to take (Johnson et al., 2014).With the high level of dynamism than characterises the present-day business environment, companies need to be aware of their internal capabilities, and use them to deal with the external threats and opportunities.Among the models that can aid in this Porter’s generic strategies, the PESTEL and SWOT frameworks and Porter’s five forces (Zott, Amit and Massa, 2011).
This paper presents an analysis of a case study about Levis Strauss three Porter’s generic strategies, and further determines the company’s strategic position using SWOT analysis.
Models
2.1. Porters’ Generic strategies (From the case study)
Narrow Market ScopeSegmentation strategy
1.Older disaffected shoppers – “fans who love us but quite frankly left us”
2.The lost generation – “fans who don’t really know who we are”
Broad Market ScopeDifferentiation strategy
1. Classic pieces of clothing such as button fly and trucker jacket that are the seam for the giant business of denim
2. Return the brand to its roots while moving forward
3. Innovation- Levi Strauss is using high-tech by involving a team of 30 people on its Eureka lab to work on 30 prototypes a week. The company encourages the conversion of ideas into design in less than 24 hoursCost leadership
1. Reduction of inflated cost structure by the new Levi CEO
2. Progressive growth in sales volumes for successive years.
Uniqueness CompetencyLow Cost Competency
2.2. SWOT Analysis (From the case study)
Strengths
1. Popular and strong brand name
2. Expertise and experience in the denim Industry
3. Focus on things other than profits- captioned ‘profits through principles’ for examples, donations and scholarships
4. Levi Strauss company has a visionary CEO in Chip Bergh
Weaknesses
1. The company focuses too much on brand protection
2. Limited business growth due to increase in competition from other denim companies
3. Complacency in coming up with innovative designs for customers
4. Delays in trends such as colored jeans for women and more tailored jeans for men
5. With 16200 employees, the company incurs high expenses in paying wages.
Opportunities
1. The casual wear market is growing fast
2. Internationalisation into emerging markets characterised by low cost manufacturing and production
3. High tech re-invention that is the use of technology to create a tech-advanced women’s denim that fit depending on body shape.Threats
1. Fast changing consumer tastes
2. Increasing Competition from low end substitutes such as Lee and Wrangler hence lower market share
4. Very close competition for market share with rivals targeting the same high-end customer base
Discussion
3.1. Porter Generic strategies
Michael Porter suggests 3 broad generic strategies that can be used by a company to outperform its competitors (Porter, 2008). These are segmentation, differentiation and cost leadership strategies. From the analysis of Levi Strauss’ case, the strategies from Porter’s generic model are clearly exhibited. Cost leadership, according to the model, refers to a strategy where a company sets its prices below that of its rivals and is independent of the market structure. From the analysis, this strategy was implemented on entry of Chip Bergh; the company’s new CEO cut the cost and pricing structure that was previously inflated as it targeted high-end customers. The adopted prices might not be lowest in the industry, but is close to that of the company’s key rivals, which also makes Levi products to attract new price-sensitive customers and those that were lost to other cheaper brands. The differentiation strategy is also evident at Levi Strauss. Companies use different approaches to differentiate themselves from their competitors. These include creation of unique designs, adoption of new technologies and making changes their brand images (Zott, Amit and Massa, 2011). Levis has used all these strategies to achieve uniqueness in the denim industry. The company capitalises on the specific designs that will attract consumers and win their loyalty, including those that had shifted to other less costly brands.
In regard to the segmentation strategy, the company strives to meet the needs and specification of a given target market for instance; type of product, location of sales or the category of customers it targets. In relation to Levis, the customer segments it targets are the ‘older disaffected’ shoppers who genuinely left the company for alternatives that suited them better and the ‘lost generation’ customers, who know nothing about it. By defining its customer segments, the company is able to design products and services that are tailored towards matching the needs and preferences of these groups. as argued by Porter (2008), a company that fails to develop any strategy in regards to the three broad categories defined by Porter is considered as being ‘stuck in the middle’ because it will have no competitive advantage in the market.
3.2. SWOT Analysis
SWOT analysis is a strategic tool that is used to subjectively assess information about a company or organisation outlining its strengths, weaknesses, opportunities and threats (Ommani, 2011). Whilst strengths and weaknesses are internal elements of an organisation, opportunities and threats are external elements that the company has no control of. From the analysis present in section 2.2, Levi Strauss draws one of its strengths from the fact that it has a big brand name in the denim industry with a lot of expertise and experience drawn from the fact that it is the oldest denim company. In addition to this, the company known to focus more on things related to the smooth flow of business than only on profits and it has a fast growth of retail shops. These strengths have enabled the company to survive the competition it has faced from companies like Zara and H&M.
The major weakness that was noted about Levi Strauss is the complacency of the company’s design team in coming up with unique products. Such weaknesses make the company prone to competition from rivals that are committed towards providing the best designs and are flexible enough to match the changing market trends. As stated by the company’s CEO in the case, “At Levi, designers sit in the company’s archives and look at old Western shirts and jeans…We have one of the greatest brands in the world, but I think that there may have been periods where we thought the brand itself could carry us through thick and thin, there is no question that we got complacent”.
The opportunities that have been identified in the SWOT analysis above give the company a prospect for better performance in future, especially if it puts its strengths to beneficial use. These opportunities include the increase in market demand for casual wear, opportunities to expand operations into new markets, and the technological developments taking place in the fashion industry, which can greatly increase production and marketing efficiency of the company. In regard to the probable increase in demand of casual apparel, the company needs to device strategies that will motivate its employees avoid complacency and embark on designing competitive products. Failure to do so will make the company to lose these potential clients to rivals because these opportunities are for all companies in this industry (Grant, 2013). The main threat, as highlighted in the case study, is the rivalry that exists in the industry. This has to be overcome by application of the strategies that were earlier discussed in Porter’s generic strategy model. This will make the company a formidable competitor in the industry.
Conclusion and Recommendations
From the analysis above by the use of Porter’s generic strategies and SWOT analysis it has been identified that whilst the company may have some weaknesses, it also possesses several capabilities if well utilised, will strengthen its brand position in the denim apparel industry. Several recommendation can however be made for Levi Strauss. One of these would be that the company should focus on the frequently changing needs of consumers in the denim market and ensure that its operations and designs are flexible enough to match with these changing trends. Taking advantage of technological milestones in the fashion industry also recommended. This will ensure the production of unique yet trendy designs. From the Ansoff matrix below, the strategic directions that a company can use to position itself in the market are presented (Taylor, 2012).
Two of the four strategic directions suggested by this model have already been adopted by Levi Company, that is, selling existing products to existing markets and extending existing products in new markets. It can however recommended that the company should adopt one of the two remaining factors of this model, which is the diversification through creation of more designs of products that suit a wider demographic scope of customers. This will lead to larger consumer base hence higher revenue.
References
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