Final marketing audit

CONTRIBUTORS Anna Tuckett Michael Marshall Jason Reid Kiera Griffis Alecia Bennett Austin McDermott

TABLE OF CONTENTS Executive Summary Chapter One: Macroenvironment Chapter Two: Competitive Environment Chapter Three: Marketing Strategies and Programs Chapter Four: Plan of Action Chapter Five: Promotions and Social Media Strategy

VISION OVERVIEW Our analysis indicates that Levi’s traditional customers -- high-quality seeking, working class consumers, price-conscious -- are confused by its current two-handed strategy and consequently, Levi’s products are perceived as less valuable. Increasingly, Levi’s customers are turning to low-cost substitutes and athleisure clothing. Our primary recommendations for Levi’s are as follows: • Discard the attempted two-handed strategy by increasing exclusivity in distribution, • Improve online presence, • Advertise the consumer benefits of “green” products by emphasizing the comfort of eco-friendly jeans with the slogan “Natural Comfort” (where the “o” in “comfort” will be a fig leaf shape) to combat the growing athleisure trend and rebranding them as “Live Freely” jeans instead of “water<less” and “waste<less”, • Form loyalty programs, • Implement “Levi’s Shelf” outlet stores, • Capitalize on partnerships with environmental groups by improving marketing efforts

EXECUTIVE SUMMARY

MARKET SITUATION OVERVIEW Levi Strauss & Co. is an established brand that has been in the apparel industry since the mid-1800’s. Early on, Levi’s was an industry leader but in recent years, the market has become more saturated and commodified. Levi’s has become just one among the crowd due to its lack of differentiation and innovation.

Growing trends in athleisure and ecommerce have hurt the Levi’s brand and has forced the company to redefine its brand multiple times. For example, it started out as the original rugged jean for the gold rush era. Over time, it has evolved into a modern urban brand for young people in cities. The brand now keeps up with social causes such as feminism, environmentalism, and the entrepreneurial movement. People used to buy Levi’s because it was the original jean company, then moved into more of a bad-boy brand appeal in the 60’s and 70’s. Now, Levi’s has become less of a unique brand, devolving into just another “me-too” brand in the strategy. This, in combination with the attempted use of the two-handed marketing strategy has gotten them stuck in the middle and caused confusion among its customer base. Levi’s product offering and distribution has become so broad that customers no longer know whether Levi’s is a high-end brand or a low-cost leader.

We are proposing Levi’s rebrand as a comfortable, business-appropriate apparel in order to appeal more to the creative class of Silicon Valley entrepreneurs and millennials with the tagline “feels like the gym, looks like the office.” By rebranding, Levi’s will better satisfy the needs of the consumers who want a more comfortable apparel option than they currently have. This will help Levi’s gain customers whom it may have lost through the athleisure trend. By adding stores like Levi’s Shelf, improving the company’s online presence, and including partnerships with environmental groups in marketing efforts, Levi’s will appeal more to millennials and the creative class of entrepreneurs.

ARTICULATION OF KEY RECOMMENDATION AND PLAN OF ACTION: • Build a more expansive online presence and develop an app. Levi’s online presence has been mediocre, at best. Current global trends are moving toward online shopping without a brick-and-mortar store. In order to meet the needs and wants of its growing target market, we recommend expanding and improving the Levi’s website and online store and developing an app. These efforts will increase brand loyalty by simplifying the shopper’s experience. Many of Levi’s competitors have released successful shopping apps and lookbooks. Levi’s needs to follow suite and build one of its own, offering consumers a way to shop on the go without a store and without a computer.

• Re-brand the “environmentally-conscious” clothing. Because there has been an increased consumer focus on environmentally-friendly products and global conservation, Levi’s has developed products such as “Water<Less” and “Waste<Less” Jeans to capitalize on these consumers. We recommend these products be re-worked to better portray the benefits that come from wearing them, rather than just pointing out that the “green” aspects of the products. By re-branding these lines, Levi’s can keep the attention of its current customers and still use these lines to attract the environmentally conscious consumers. To further attract those specific consumer groups it needs to better market its environmental efforts and partnerships with environmental groups with a tagline along the lines of “classy enough for work, comfy enough for ____” where the last word is different for each target segment. For example, for Levi’s Commuters, it will say, “classy enough for work, comfy enough for the commute.” For Levi’s Skateboarding, “classy enough for work, comfy enough for the skatepark.” The main purpose of these efforts should be to demonstrate how the fit, feel, and functionality of the products have improved because they are “green.”

• Differentiate the Levi’s brand based on comfort, green initiatives, exclusive distribution, and engaging online presence. Continuing to differentiate Levi’s products as a more upscale and stylish alternative to athleisure to appeal to current trends in the market. By advertising its new and improved Water<Less denim technology, consumers will find greater value in Levi’s products and will become more loyal to the brand. Continuing to develop stylish, functional as well as comfortable products will help Levi’s combat the threat of athleisure apparel and help regain control in the industry. Levi’s will focus more on selling direct to customers and making shopping more convenient for shoppers by increasing its online presence. With the development of an app and an increased presence on social media consumers will able to shop Levi’s from any location and interact with its brand more than ever before. This will enhance the shopping experience for Levi’s customers and entice them to go from “brand floater” to one of its loyal customers.

• Continue to develop strategies to maintain its loyal customer base by: • Forming Loyalty Programs To develop loyal customers, it’s imperative that Levi’s build a loyal brand. Our proposed loyalty program will be named “The Levi’s Club” and will allow customers to collect points when they purchase Levi’s products in-store and online that will result is discount offers that can be used during their next trip to Levi’s. Among offering discounts the program will offer free shipping opportunities and a “no-return fee” policy for all returns in store and online.

• Student Discounts To help incentivize sales, specifically online sales, we will offer a 10% student discount for all current higher education customers who shop on its website or app. Social media and in-store promotions will be utilized to advertise Levi’s new customer loyalty benefits. By introducing these new programs we anticipate that an increase Levi’s loyal customer base that will allow the company to maintain a large market share.

• Reduce typical brick and mortar stores and replace them with a Levi’s Shelf. Because there is an increase in off-price stores, we will implement a differentiator strategy and introduce an off-price store that offers last season’s surplus clothing at a discounted rate. Distribution will be re-routed to high end stores such at Nordstrom while setting a resale price minimum to gain value from consumers. This will reduce consumer confusion that current exists in the market since Levi’s high quality products have been offered in low-priced, average quality stores like Wal-Mart. Price and placement is often correlated with quality and since Levi’s is high quality brand, the implementation of a clear product-placement strategy will increase brand image and sales.

• Capitalize on the partnerships and technology that Levi’s already has through better, more focused marketing efforts. Firstly, Levi’s should revise the name of its waste<less and water<less jeans to emphasize the product benefits. By changing the name to something like “Live Freely”, Levi’s can reiterate the jeans’ casual, comfortable style. By communicating the comfort and functionality, Levi’s can appeal to more than just environmentally-conscious audiences. Additionally, by focusing marketing efforts on Levi’s partnerships with environmental groups, the company can better appeal to millennial audiences. We propose Levi’s includes some of these partnerships, WWF, Project Wet, etc., in social media, in-store, and mass media promotions. For example, to capitalize on its clothing recycling partnerships with I:CO and Goodwill, Levi’s could have a campaign in which its audience sends their old Levi’s to the company and the jeans are then sent internationally to people who could use them. Levi’s could promote this initiative on social media by encouraging its followers to post pictures of them with their old jeans and the hashtag #LevisGivesBack or #ForThePlanetAndThePeople.

• Become the jean of choice for hip, cool millennials. Incorporate the tagline “classy enough for work, comfy enough for ____.” Revamp the social media campaigns to focus on independence and individuality by developing and emphasizing a feature program for young and rising entrepreneurs. To increase customer engagement and build a loyal brand following with young people, Levi’s will incorporate a scholarship program where students can submit new ideas to Levi’s. Levi’s goal is to inspire and promote creativity among entrepreneurs and the creative class. Despite the market loss that Levi’s will suffer by moving away from its former blue-collar market focus, focusing on the rising generation of business leaders and the creative class will resonate with millennials and generation x.

CONCLUSION Rebranding and revamping Levi Strauss & Co. to appeal more to the creative class will fix many of the key problems its are facing. By moving away from the two-handed strategy of trying to balance price leadership and luxury, Levi’s will be able to eliminate consumers’ confusion with regards to the brand. Our proposal to increase the brand’s exclusivity and focus on ecommerce will better reach the key target demographic of young working professionals. An increased focus on comfort and functionality through green technology will reinforce the image that Levi’s needs to develop a unique and high-quality alternative to the athleisure trend that is currently eating away at its market share. Implementing loyalty programs will help build relationships with new customers and strengthen ties with long-time Levi’s shoppers. These programs will help Levi’s retain customers who may be put off by the new, more exclusive branding. While moving into more exclusive distribution chains may risk losing many blue-collar customers, our research indicates that the loss will be offset by the increased loyalty Levi’s will gain among the creative class and millennials. By implementing a distribution strategy resembling the Nordstrom and Nordstrom Rack model, Levi’s will be able to retain many of the blue-collar workers who can’t afford to shop at more exclusive locations. This model will also allow Levi’s to craft an exclusive, luxurious image without alienating the price-sensitive portion of its current customer base.

CHAPTER ONE: MACROENVIRONMENT INTRODUCTION Levi Strauss & Co. is part of the apparel industry which constitutes of the selling and distribution of women, men, and kids’ clothing including outerwear, underwear, footwear, and accessories. The apparel industry is always changing and adapting to trends but Levi Strauss & Co. consistently focuses on its jean production and distribution while still heavily promoting its casual wear items. This chapter introduces the apparel industry and its ever-changing market.

DEMOGRAPHICS Levi’s jeans are popular across many different demographic groups, ranging from the nostalgic older generations like the baby boomers to the up and coming post-millennial generation Z, and just about everything in between. For the purpose of this evaluation, we’ve divided them into two main focus groups.

THE RISING GENERATION The first main group within the Levi’s market are middle-income men and women from ages 15-30, full of 90’s nostalgia and into

the Americana “grunge” look and feel. These people often work in more relaxed, less formal workplaces and look for clothes that will be comfortable and stylish both out on the town and at work. These people are very commonly students and young professionals. This is a very fashion-conscious market, emphasizing the importance of social acceptance while simultaneously advocating for freedom of expression and individuality.

To corner this market, Levi’s emphasizes the semi-rebellious look of popular icons from the 90’s and earlier.

MID-LIFERS The second main group are known as mid-lifers. Ranging from around 30-50, these men and women are often blue-collars and working professionals who have been wearing Levi’s since they were kids and have established a lasting connection with the brand. These consumers value loyalty, American pride, and the familiarity they feel with their well-known and wellloved Levi’s. This class tends to be middle to higher income individuals that are fairly financially stable.

ECONOMIC TRENDS Economic trends have a major influence on the apparel industry within the United States. The rapid evolvement of economy trends translates to changes in consumer behavior that impacts the sales of clothing in a unique way. Rising energy prices, drop in employment, the “green” movement, and recessions continue to sway consumers to fast fashion retail trends, a choice that is saving millions of Americans money (Mehta). With that being said, the growth of the apparel industry has steadily increased in recent years.

ECONOMIC TRENDS AND EVOLUTION OF CONSUMER BEHAVIOR Trends may be affected by the economy; however, consumption of apparel products continue to increase at a steady rate.

According to the Bureau of Labor Statistics (BLS) 2014 Consumer Survey, Americans’ spending on “Apparel and Services” increased 11% between 2013 and 2014, to $1,786 per household per year. (Josephson) Americans are still spending money clothes, so what is changing? The clothes we choose to buy. Americans aren’t buying less; they are just buying cheaper. Teens

and college-aged students are redefining their wardrobe to a “mix and match” style in efforts to spend less, because of rising costs in gas, higher education, the reduction of teen job employment, and various other variables. Because this progresvsive style is mainly attributed to inexpensive clothing choices, it shows that consumers values are evolving. More money is being invested in technology rather than on fashionable apparel.

ECONOMIC INFLUENCES The change of trends and constant volatility of the economy is a direct attribute to the failure of major apparel companies.

American Apparel, JCPenny, Abercrombie & Fitch, and Pacific Sunwear are all struggling to preserve customers and maintain positive revenues. These companies traditionally do not have lower priced apparel options and simply rely on the brand to drive sales. Consumers are turning to apparel companies like Forever 21, H&M, ASOS, and even Target to style their closet because of the cheap and affordable prices that these companies offer. As economic trends change, people are becoming more conscious of their financial state and reprioritizing where they spend their money. According to Marshal Cohen, an apparel analyst at the NPD Group - a marketing research firm - when business gets tough, as it does in recessions, retail shrinks down the less popular businesses and expands the higher-margin categories like shoes, cosmetics or accessories.

This shift in consumer priority has a major affect on the apparel industry and forces companies to adjust their own business strategies in order to continue to appeal to the needs of consumers (Ewoldt).

TECHNOLOGY’S IMPACT Technology has been a major factor in the evolution of trends in the United States. The increase in demand of innovative technologies negatively impacted the demand of higher-priced apparel products. More consumers are choosing to spend their money of new iPhones, iPads, and computers because they find greater value in these products.

This is a great example of how consumer’s values are changing because of economic activity and trends. Contrary to the negative impact technology has had on the industry, the internet has provided the industry with a way to do more efficient, consumer-convenient business. Technology makes it easier for consumers to go from inspiration to purchase. For example, if a customer sees someone at a football game wearing a jacket they feel the need to have, technology will help them find it (Kumar). Companies are already capitalizing on this buy developing applications for phones and updating their websites for a more interactive, user-friendly experience. The impact economic trends have on the apparel industry and the influence it has on the sales of companies should be taken

into careful consideration when developing business plans and strategies.

ENVIRONMENTAL/NATURAL RESOURCES There are four major environmental trends that are impacting the apparel industry.

These include: (1) millennials are demanding more sustainable products and processes, (2) the apparel companies are being pressured to decrease the environmental impact of their production processes, (3) many ethical clothing companies are surfacing, and (4) the increasing popularity in recycling used clothing.

MILLENNIALS AND SUSTAINABILITY A more environmentally-conscious generation has created an increasing need for apparel companies to decrease the negative environmental impacts created by production processes. Millennials are demanding products that decrease waste and are created with environmentally-friendly materials. In Brosdahl and Carpenter’s study on consumer knowledge of the environmental impacts of textile and apparel production, it discusses how apparel companies and man-

ufacturers are addressing the consumer’s’ growing concern for environmentally-friendly processes. “Apparel and textile manufacturers and retailers are attempting to satisfy this need through eco-friendly textile and apparel products that help combat the effects of man’s growing carbon footprint, including eco-friendly fibers and fabrics, natural dyes, and non-toxic finish processes (Brosdahl, D.J., Carpenter, J.M., 2010, p.1).”

Previously, the fashion industry has been evaluated in terms of cost and appearance, but the industry’s complexity is increasingly getting more attention. In a study by Mor Aframian, she found that the key to amplifying this attention and increasing the demand for sustainable fashion is to “encourage consumers to establish a connection with their purchase by providing the origins of the product and education about disposal of post-consumer textile waste” (2014, p.1).

SUSTAINABLE PRODUCTION PROCESSES While the apparel industry has been known for its environmentally harmful production processes, jeans are among the worst. The scrutiny that surrounds the production of jeans largely lies with the manufacturer’s use of harsh, toxic chemicals to create fades that are currently trending. These chemicals are used primarily in mass production. To make jeans ethically, higher prices are necessary. The last 10 years of fast fashion has sold consumers on cheap, low-quality items, but millennials are gradually buying into the idea of a “circular economy,” high-quality items will less of an impact (Agbanrin, M., 2016).

Patagonia is an example of a

company that has effectively targeted audiences that are thoughtful and particular about purchases. The company openly discusses its anti-consumerism messages and uses them to sell products and bring attention to the new idea of sustainable fashion. By placing focus on the company’s initiatives, it’s able to successfully market its sustainable processes as well as products and demand that consumers pay attention to where their clothing comes from. In turn, Patagonia is able to charge higher prices for its clothing (MacKinnon, 2016).

The company implements this “anti-growth” strategy throughout its business model. This can be seen in

how it treats its employees.

The company offers on-site daycare, great healthy benefits, flexible work hours, and other work perks that contribute to its increased productivity and high retention.

Neil Blumenthal, one of the founders of Warby Parker, has met with Patagonia CEO and applauds his successful processes. “They’ve shown that you can build a profitable business while thinking about the environment and thinking about your team and community.” Surveys have shown that millennials are more likely to work for a company that is concerned about a social issue, like the environment, than one offering higher compensation (Schulte, 2014).

ETHICAL CLOTHING Ethical clothing is a trend that is beginning to appear across the Western world, but particularly in the UK. The companies introducing ethical clothing are branding themselves around high quality and the fact that they’re made with natural, decomposable, and/or recyclable materials. A student at Texas Tech University discusses her discoveries on one struggle surrounding ethical fashion. “In general, most consumers have positive attitudes regarding eco-friendly apparel and see prospective success in this new market as long as the product offering is similar in fashion and price to other apparel brands” (Adams, A., 2012, p. 21).

Consumers are willing to buy ethical clothing as long as they can still look fashion-forward and it’s convenient. So while millennial consumers may discuss the importance of ethical clothing, they are not necessarily willing to purchase if for this reason alone. This is an issue that others have observed as well. C. Joergens conducts a study to better understand ethical fashion consumption and comes up with a similar result. She finds that personal needs play the largest role in consumers fashion buying decisions, not environmental friendliness. The study additionally discusses the importance of communicating messages effectively for ethical fashion companies (1996.)

RECYCLED CLOTHING According to Mattias Wallander, CEO of US-

Again, a textile-recycling company, “Americans now buy five times as much clothing as they did in 1980.” Donating clothing to nonfor-profit organizations and charities is a concept dating back to the early 20th century.

But today, secondhand stores are given more clothes than they can sell. Additionally, on average, Americans only donate about 15% of their used clothing. This creates a large gap in sustainable practices that recycling has started filling. Increased efforts have been made to provide recycling bins and pick up for Americans in larger cities, like New York and Chicago. Additionally, secondhand stores are donating the additional clothing that they’re unable to sell to for-profit recycling companies that, in turn, make these articles into carpet mats or insulation (Cline, 2014).

Traditionally, textiles are bleached, printed on, and treated with toxic chemicals. This has contributed previously to the rise of organic cotton apparel. Organic cotton textiles are compostable and do not threaten nearby groundwater. But non-organic textiles are still dominating the textile industry and recycling poses a sustainable opportunity for apparel companies (Wicker, 2016). Because the idea of textile recycling has received increasing attention, creating textiles that can be easily recyclable minimizes the industry’s environmental impact and creates an opportunity to reach the younger generation that understand this growing problem (Hustvedt and Dickson, 2009).

10 SCIENCE/TECHNOLOGY There are two important scientific and technological trends facing the apparel industry.

These include (1) Wearable technology (2) Materials Technology and (3) Manufacturing Technology. Each trend is discussed below.

The apparel industry has been going through many different technological changes. The changes that are being seen in the world range from how to the technology that goes into how an item is made all the way to having technology built into the apparel itself.

The world today is seeing a lot of technological advancements and we see those advancements getting put into play in this industry as well. This section will discuss those changes. The areas that will be discussed will be; wearable technology, materials technology, and environmental technology.

WEARABLE TECHNOLOGY When a person thinks of wearable technology, their first thought is usually thinking about products like watches headphones, or something of the like. While those kinds of technologies are gaining popularity and usefulness, there are other types of wearables that are entering the apparel industry. There are many companies out there that are creat-

ing clothing that can monitor your vitals and motion and give you feedback according to that data that is gathered. Right now these technologies are mostly only used by elite athletes, who have money to spend on such products. The technology is growing and improving so it probably won’t be long until it becomes available to the majority.

There are some types of wearable technology companies that are trying to find different uses for technological apparel. There are a few that are trying to make it so jackets, pants, or other types of clothing can do things like control your phone, turn on lights, or pretty much anything else you could do with electronics. Levi’s has actually partnered with Google on a project called “Project Jacquard” that is geared towards developing motion controlled smart clothes. Google has filed for the patents for this technology as well.

MATERIALS TECHNOLOGY While there has been a growing demand for wearable technology, there has also been a lot of development in the materials that go into apparel or even the way the items are made. There have been advancements in technology that can help material stay lightweight and flexible, but is designed to keep

you warm and to not restrict motion. One type of technology that is being looked into, but not really taking off too fast is the 3D printed technology. 3D printing has been around for a little while now but some designers are starting to see if it would be possible to merge that technology into the clothing industry which could make it possible to print your own clothes at home in the future.

MANUFACTURING TECHNOLOGY The way apparel is manufactured is always changing. Companies in this industry need to stay on top of fashion trends as well as finding ways to keep costs down. A lot of the new technology we are seeing in the world today is also focused on being more “green” or lowering our carbon footprint. This is also true in the apparel industry, mainly in the manufacturing process. In this industry manufacturers are either trying to make production processes better by using less water, better ways of manufacturing; Levi’s is actually one of those companies. It has found a way to use much less water during the manufacturing process. This saves the company money and also is better for the environment, which also makes Levi’s look good as well. Recycled material is another option being looked into, or even creating a whole new material that is better for the environment as well.

POLITICAL/REGULATORY ISSUES FACING THE INDUSTRY CHILD LABOR AND ILLEGAL WORKING CONDITIONS The apparel industry is constantly at risk to face allegations of child labor and working conditions that do not pass the legal regulations. Therefore, there is a large risk when outsourcing labor. Regulations are stable and strict within the apparel industry in the United States. Although, there have been some insights into conditions and regulations that exist in factories in other countries -used by United States companiesthat have caused worry for consumers who are wanting an honest and ethical apparel market

Many apparel companies are not aware of the factory conditions that their employees have to work in when production plants are located in foreign countries (Bain). While most apparel companies will pull its business out of countries if it discovers the working conditions are not up to code- some companies ignore the problem to keep profit margins high. This causes worries among both good-faithed companies and consumers.

GAP, INC CHILD LABOR DISASTER In 2007 Gap has admitted to unknowingly using child labor when outsourcing to India. Dan McDougall, an ABC reporter travelled to India to investigate the allegations and returned saying: “ The children were working without pay as virtual slaves in filthy conditions, with a single, backed-up latrine and bowls of rice covered with flies. They slept on the roof.” Gap was quick to launch a full investigation and ensured consumers that the ‘no child labor’

policy was being enforced strictly by company officials. Gap was criticized by millions and attempted to avoid more disaster by continuing to investigate its factories and never selling clothing that resulted in child labor (Brown).

HONESTY IN CARE LABELING REGULATIONS Labels in the apparel industry require strict adherence to honest regulations set by the Federal Trade Commision. The label must include aspects of the origin, what materials are used, and how to care for the product (Apparel Labeling). Honest regulations may increase brand loyalty and can be a valuable aspect of brand image. Companies that do not adhere to the honest labeling have been, in many cases, taken to court for “ injury in fact” (By Closing This Window). Although, the Federal Trade Commision determines base regulations some states have increased information requirements on the care label.

CULTURAL/SOCIAL TRENDS For years cultural and social trends have been transforming the retail industry. Every year new trends come out, which many stores have to conform to in order to stay high in the industry. The main trends that have transformed the industry are fast fashion brands, internet retailing, recycled clothing, celebrity fashion trends, and athletic apparel. These new trends cause industries to improve quality of products and come up with new ideas.

FAST FASHION RETAIL TRENDS Fast fashion brands like H&M and Inditex have been on the rise since around 2008 (Fast Fashion). These brands offer affordable, functional clothing which are popular among younger generations. As trends are changing, these fast fashion companies are able to adapt to the changes in faster and more efficient ways than most companies. This allows for consumers to receive the latest fashion without having to pay too much money while companies are beating the competition.

INTERNET RETAILING Online and in-app purchases have become popular as smartphone and tablet use have increased.

Consumers have found that they can grab their phone and within a few finger touches have a new outfit being sent to them. Social media sites including Instagram and Pinterest have made it even easier for consumers to buy products that are seen on retailer’s sites. This shows how important it is for retail companies to have large social media accounts that can reach loyal consumers almost instantly. (Fuse Marketing) RECYCLED CLOTHING Many men and women are starting to recycle their clothes through stores by exchanging clothes for money. After they receive the trade money, typically consumers will go through the store and find themselves a new outfit to wear. In the past, many consumers would only buy in retail stores but now the retail industry is finding that people don’t care to have new, never worn clothing, they just want something new to them. Most consumers don’t want to be seen in the same outfit more than twice so this gives them the opportunity to sell the old and get “new.” This new process could be dangerous for retail stores because why pay full price when someone can get a new gently worn outfit for cheaper? (Friedman)

CELEBRITY FASHION TRENDS Celebrities have always played a big part in fashion industry trends but now they play an even bigger part because of social media. Many people follow celebrities on social media sites like Instagram and Facebook to keep up with the everyday fashion of famous idols. Consumers see what these celebrities are wearing and feel the need to dress the same way. Because of this, many retail stores will sale lookalike clothing that certain celebrities wore so consumers can dress the same way. (Thorpe, JR) ATHLEISURE Companies in the retail industry are realizing that consumers want to be able to move freely in their clothing and be comfortable at the same time. As of lately in order to do this we see people wearing gym clothing on a daily basis rather than denim jeans and button down shirts. We have noticed that dress codes in many companies are becoming more relaxed which means we won’t see as many business men dressed in suits and ties on a regular basis. ”Yoga pants have grown 341% in the last three months compared to the same period in 2014. Average price is up 14%”(@edited_hq). This shows us how big this movement is becoming and how it is most likely going to stick around for quite some time.

CONCLUSION In conclusion, the most important opportunities and threats facing both LEVI Strauss & Co. and the apparel industry as a whole are: THREATS • Millennials are focusing more on cheaper “fast fashion” trends, where you buy it cheap, wear it out fast, and quickly replace it.

• Many young people have also moved toward more comfortatble athletic wear as an alternative to more traditional every-

OPPORTUNITIES • A potential opportunity is the ethical and environmental trend - younger generations are more focused on environmen`vtally responsible clothing, which is something that Levi’s is currently working on developing.

• Focusing more on internet sales and developing a user friendly website • The athleisure trend shows growing consumer preference for greater comfort and mobility in clothes.

KEY OBJECTIVES • If Levi’s were able to institute a program/facility that could ensure equal human rights and wages for its factories in foreign countries, then its brand image would increase among its target audien ce, thus potentially increasing sales.

• Levi should develop an app to increase brand loyalty through ease of purchase and promotions.

• Market its “environmentally aware” clothing such as its recyclable and “Water<Less” jeans

consumption more heavily toward millennials (but still advertise the basic consumer benefits) • Levi’s should continue to differentiate themselves as a more upscale and stylish alternative to athleisure that still provides the same benefits, like comfort and mobility.

Opportunities • A potential opportunity is the ethical and environmental trend - younger generations are more focused on environmentally responsible clothing, which is something that Levi’s is currently working on developing.

• Focusing more on internet sales and developing a user friendly website • The athleisure trend shows growing consumer preference for greater comfort and mobility in clothes.

MARKET LIFE CYCLE LIFE CYCLE STAGE Since the 1800’s the retail industry has been growing heavily, because of the growth, this industry is now at the mature stage of its lifecycle. The Family Clothing Store industry is expected to grow 1.1% by 2021 (Rivera) whereas the Men’s and Women’s clothing store industries are expected to decline between 0.30.5% by 2021 (Hurley). Because this industry is mature, there is a significant competition between companies to produce the least costly clothing possible. The decline in the Men and Women’s clothing industries show us that these industries are suffering because of the lack of differentiation between key players in the industries (Cohen).

Retail companies are constantly competing over brand image, design, quality, price, etc.

These companies have found how loyal consumers are to certain brands and typically will only buy a product with a certain brand name on it. This creates a new competition where other brands will create products to compete with competitors products and lower its price so they can convert the loyal customers. These price competitions are only

acceptable when companies and brands are in the same target market.

PROGRAMS AND ORGANIZATION OF RETAIL INDUSTRY Main industries competing with retail companies are mainly warehouse clubs and superstore industries. These industries have become competition because in these stores, men and women are able to shop for the entire family by going to one store rather than individual stores for different family members. Retail companies are beginning to bring in different styles and sections of clothing for different family members to compete with the warehouse and superstore industries (Cohen) A tactic that successful companies are using to beat the competition is by having a clear marketing position. This provides consumers with a clear and constant image of the brand and the company. This marketing position draws consumers to the company because it gives them a clear image of what they are receiving and allows them to see that one of their favorite companies isn’t constantly changing like many others (Rivera).

CHAPTER TWO: COMPETITIVE ENVIRONMENT

CUSTOMERS/BUYERS â&#x20AC;&#x201C; BARGAINING POWER END USERS HAVE HIGH BARGAINING POWER Buyers have very high bargaining power on an individual retailer in the apparel industry because price consciousness is the most influential basis for purchasing. Consumers have many different options in this industry and trends are always changing (Industry Research). Buyers have a low switching cost which results on comparison shopping until they find what they view as bargain. It is fairly easy for buyers to shop around because of the increase in technology. Online shopping has become increasingly popular, especially during large volume purchases such as holidays. The product variation, range of offers, and quality will also determine if the buyers will make a purchase. Therefore, sellers in the apparel industry are subject to changes in the market- primarily dictated by the consumers/buyers (Rick).

Sellers need to balance their price with their quality and range of product to ensure a the perspective of customers remains positive toward the specific brand. The power of buyer is especially high for a company like Levi

Strauss because the trend is going away from a dressier look of jeans, and more towards the athleisure look. Levi Strauss has been working on way to differentiate the product offering it has now to appeal to current trends. It has had success by doing simple things like selling direct to consumers, and is also looking at changing the way consumers look at jeans. Consumers are looking for more comfortable options, and there are many out there (Bain). This has impacting the industry and specifically Levi Strauss because that is not an area it has ever been in. With consumer preferences moving toward athleisure and off-price stores, it has to look for new ways to bring in new customers.

The apparel industry is widespread because of the high bargaining power that resonates with buyers. An industry consisting of high customer bargaining power can seem less attractive than an industry with low customer bargaining power. In a low customer bargaining industry there is an increased chance of higher profit. Although, as a result of high bargaining power among buyers honesty is increased and promoted throughout the industry (Jim).

CONSUMER POPULARITY OF OFF-PRICE RETAILERS INCREASES RETAIL BARGAINING POWER Off-price retailers have high bargaining power because customers perspective of a fair price moves to a discounted, yet high quality product sold at off-price stores. As many consumers flock to off price-stores they become large buyer in the apparel industry.

The off-price stores are obtaining increased bargaining power as popularity increases, accessibility increases, and customerâ&#x20AC;&#x2122;s negative perceptions of department store prices increase (Staff ). Customers are willing to search through other brands to find a fair deal even though the options may be limited.

Therefore, consumers are indirectly impact-

ing the branded stores as they move their purchases to the off-price stores while the store receives increases power (Business).

The apparel industry may invest a high portion of available resources into the wholesale market. Therefore, the larger department stores have a higher bargaining power than the end average user- a customer who purchases at a checkout from the brand. The larger department stores within the industry can be attempting to increase their prices margins and looking to reduce costs in manufacturing (Staff ). A potential tool to achieve such goals can influence the manufacturing selling price

COMPETITORS- THREAT LEVEL Threat levels to the industry are high and rising from direct competitors. Due to a general lack of differentiation, the jeans industry has become relatively commodified. The most significant competitors to Levi Strauss & Co. are VF Corp (which owns Wrangler, Lee, and Rustler brands), apparel brands such as Gap, American Eagle, Zara, and H&M, as well as private label brands by major retailers like Wal-Mart and JCPenney.

COMMODIFICATION The mid-range apparel industry has become increasingly commodified for the last couple of decades. As styles evolve, brands adapt to fit them, and over time, each company’s product lineup becomes more and more similar to its direct competitors. This has resulted in a market that is oversaturated with jeans and other clothing items that are virtually the same. Lack of differentiation creates a lack of brand loyalty in almost all but the most die-hard brand fanatics. If a shopper can enjoy the same benefits from any brand of jean, then there are virtually no switching cost between brands - other than the fact that each brand of jeans fits a little bit differently than its competitors’.

BIG INDUSTRY COMPETITORS The most significant competitors in the midrange apparel industry, specifically focusing on jeans, are VF Corp, Gap, American Eagle, Zara, H&M, and private labels from retailers like Wal-Mart and JCPenney.

RUGGED AND RURAL FOCUSED VF Corp is a large corporation that owns many brands, including Wrangler, Lee, and Rustler.

VF Corp is Levi’s number one competitor.

These brands go after a more rugged, rural demographic and have found great success in doing so. These less fashion-conscious

customers are looking for a durable jean that is long lasting and functional, and have found it within the VF Corp’s brand lineup.

Prices tend to be on the lower end, although slightly higher than retail stores’ private labels. These brands tend to struggle with more fashion-focused groups like millennials and generation X. They are highly popular with blue-collar workers and those in agricultural fields.

FAST FASHION Mid-range apparel brands are the next highest competitors, and are currently being heavily inf l u e n ce d by an emerging group of brands known as fast-fashion retailers. These brands, such as H&M, Zara, and Uniqlo are growing in popularity among young people due to their lower prices and high fashion. The biggest weakness of these brands is an overall lack of durability and quality. These products are designed to look good, but to be replaced often. This forces quality-conscious fashionistas to look elsewhere to find jeans that meet their needs.

MIDRANGE A P PAREL BRANDS Other midrange apparel companies are the most direct competitors to Levi Strauss & Co. These include brands like Gap, American Eagle, and Abercrombie & Fitch. Companies in this category go after those left unsatisfied by the cheaper fast-fashion retailers and the more expensive designer labels. Levi’s falls most directly into this category. In recent years, this category has struggled due to lack of differentiation and an inability to

communicate a clear value proposition over that of fast-fashion brands. In 2015, these brands struggled, with Gap declining by 9%, Abercrombie & Fitch by 10%, and Aeropostale by 20%. This trend must be addressed in order for Levi’s and other competitors to stay afloat.

RETAIL PRIVATE LABELS Private label brands by major retailers have continued to remain steady in a relatively volatile market. Companies like Wal-Mart, JCPenney, and Target offer inexpensive, generic jeans that are popular with those from low-income areas and the less fashion-conscious. Customers who buy these jeans typically don’t care as much about style or fit, but instead focus on simple functionality. These jeans struggle with those in higher-income families and more fashionable demographics.

SUPPLIERS - BARGAINING POWER BARGAINING POWER The bargaining power of suppliers is generally low as far as the apparel industry is concerned (Fleisch). Most suppliers are controlled by the company that they sell its product to because the brand companies are the ones that understand current market trends and consumer demand. Suppliers are essentially told what to produce and for what cost based off of the needs of a specific compa-

ny, like Levi’s. If a supplier does not comply with the need of a company, the company will look elsewhere for a supplier that is willing to work with its budget and demand. Competition between manufacturers is high because apparel products are mass-produced and suppliers are breaking into the industry at a rapid pace because of the feasibility factor.

A great real world example of this is the monopoly of Chinese suppliers in the apparel industry. More denim companies are resorting to alternative suppliers based in Bangladesh, Vietnam, Pakistan, Turkey and Ethiopia rather than relying on Chinese suppliers that most companies have done business with for decades (Fleisch). The reason companies are

making a change is the bargaining power they have over suppliers in these different countries. Due to the fast fashion phenomenon in the industry, apparel companies bargaining power has increased dramatically. Activists have called out the fast fashion business and continually refer to it as an “evil system.” The fast fashion companies are like drug pushers: they go into poor countries promising to lift millions out of poverty, make the appropriate business deals, and once production starts they start pushing prices down (Josephson).”

Suppliers don’t have much of a voice in terms of the relationship that they have with companies, mainly because of the fast-fashion trend as well as specialization, the only job of a supplier is to produce.

Large industry players have the ability to negotiate favorable contracts because of their dominance in the market. Whether it’s with suppliers or other companies, big name brands, like Levi’s, can make deals that will only help the company. If suppliers or other companies do not cooperate, it isn’t very hard for large industry players to choose another supplier or make a deal with an alternative company (Bush). The goal of larger companies is to maintain dominance within thet in-

dustry so negotiating contracts with smaller competitors is a strategic method that is often used by industry leaders. With the power to negotiate comes the power to increase oneâ&#x20AC;&#x2122;s market share. More market share increases the number of stakeholders and drives revenue through the roof. The ability for a company like Leviâ&#x20AC;&#x2122;s to utilize this kind of power is a huge advantage and opportunity especially in such a competitive environment like the apparel industry.

INPUTS There are various inputs that go into the production of apparel and textile products. The most important factors include the infrastructure to support production of textile and apparel inputs, particularly reliable power supplies and abundant clean water; the cost and availability of capital; the age of existing plants and equipment; the capabilities, cost, and stability of the local labor force; and the cost and availability of raw materials, such as cotton.

Power is an important variable because most fabric mills run non-stop; without power and clean water the production process would be disrupted and negatively impact sales for suppliers and retailers. Capital is a vital component to producing material because suppliers are always in need of growth, from expanding plants to purchasing of new equipment for more cost-effective production techniques. Of course, the labor force is a key player in the input of clothing material.

Without the skilled individuals, suppliers will struggle to produce the necessary quantity of products needed to experience a profit. Lastly, one of the biggest factors suppliers must face in producing apparel products is the cost of material it takes to make shirts, pants, shoes, etc. If material is not easily accessible or is priced at a higher price than desired/ budgeted for, then suppliers may struggle to keep up with the demand of retailers ulti-

mately affecting business as well as business partnerships with other companies (Boron et al).

COSTS In order to make money, suppliers and brand companies must obviously charge a higher price than what it cost to produce one item of clothing. For example, if it costs $35 to produce a pair of jeans, then those pair of jeans are typically sold for around $180-$200 (Li).

The costs of inputs for apparel suppliers is fairly constant right now with the exception of rising labor costs in China. Like stated previously, more and more retailers are partnering with new suppliers in other foreign countries to essentially avoid having to pay higher labor costs. This is destroying the manufacturing monopoly that we are used to in China, but it is saving companies a lot of money in the end.

Rising costs in power supply and natural resources needed for production, generally occur when there are natural disasters or contamination in the factoryâ&#x20AC;&#x2122;s main water supply. These costs are typically constant for the most part, because there is not much that would affect a spike in prices of these sources. Companies are started to gear towards making clothes with cheaper material as the costs of traditional fabrics, like cotton, continue to increase.

POTENTIAL ENTRANTS - THREAT LEVEL The overall threat level of new entrants in the apparel industry is medium. This threat level is based on three ideas: (1) establishing processes takes time and resources, (2) technology and flexibility make it easier than ever to start a clothing company, and (3) companies are entering the market and driving trends.

tion in place the will allow them to cross barriers more easily. Although, companies from other industries may not understand or have the resources to effectively learn the complexity of fashion retail. Fashion is constantly evolving. Without a clear understanding of the industry and target audiences, established companies could struggle to keep up with customer demands.

BARRIERS Most of the barriers that may keep new entrants from deciding to break into the apparel business involve infrastructure and processes. Large clothing companies like Leviâ&#x20AC;&#x2122;s already have the manufacturing and distribution processes in place that allow them to maintain low production prices. Start-up companies still have to establish these processes and this could take years. Companies that are looking to disrupt the apparel industry already have manufacturing and distribu-

INCENTIVES Statistia projected that from the year 2012 to 2025, the United States apparel industry will grow a mere two percent (President, 2016). But new companies are still breaking into industry for multiple reasons.

Firstly, there is a broad definition of the market. Apparel includes all clothing textiles, including various styles, articles and qualities.

A company can create clothing for the mass market, or for a small, hyper-specific niche. Another incentive for entry is the lowered barrier that e-commerce has created. Start-up companies are easily able to create websites to sell clothes, use social media to gain attention, and utilize sales websites like Shopify or Etsy to sell clothing lines (Cecilio, 2015).

AMAZON AND ONLINE BOUTIQUES Online boutiques are a rising trend in the fashion world.

These companies are generally small start-ups that use websites and social media, primarily Instagram, to build their brand. By posting beautiful pictures of people wearing their clothing, or just their clothing itself, these companies are able to captivate an audience

in a changing market where consumers are willing to pay more for high-quality clothing.

But a large player entering the apparel industry is Amazon. According to Business Insider, the online retail giant is “scooping up talented people in the fashion world for roles on its merchandising teams. And now there is widespread speculation the brand will start its own clothing label (Lutz, 2016).” If Amazon created its own clothing label, it would be a new entrant into the apparel industry, competing with companies like Levi’s. The added benefit of being a one-stop-shop for all consumer needs, could be either helpful or harmful to Amazon’s label. Something that works for pens and detergent may not work for fashion.

But if Amazon’s label were successful and included in the Prime membership, that could potentially raise switching costs.

COMPETITIVE SUBSTITUTES - THREAT LEVEL Levi’s faces significant threats from competitive substitutes. The rising global trend of athleisure directly opposes the Levi’s brand and product lineup and is currently the biggest threat to the mid-to-high-end retail industry to which Levi Strauss belongs.

ATHlEISURE Athleisure is a major threat because of the overall shift in consumer values and desires.

Customers’ preferences are shifting from higher-end clothing to more comfortable and casual clothes. It has become increasingly popular and socially acceptable to wear what once would have only been worn to the gym; yoga pants, sweats, joggers, etc. Manufacturers and retailers who make and sell these types of clothing are exploding, while companies like Levi’s and Nordstrom suffer the losses. Customers are beginning to prefer these styles over the less comfortable, more formal options from before. Of course, the less informal clothing that Levi Strauss and its competitors offer still have their place, but it is becoming more and more common to see people out and about in “workout gear” looking like they came straight from the gym.

Buyers who used to wear only nicer clothes, like Levi’s, have little to stop them from dressing down a little and going for the athleisure look. In recent years, there has been a mass movement towards body-acceptance, individuality, and personal freedoms. This movement has, in large part, contributed to the trend towards more casual wear. Those who used to wish to be able to dress down a little, but who were formerly held back by social norms calling for more formality in dress, are now dressing however they want.

STAKEHOLDERS/INFLUENCERS/SHAPERS – THREAT LEVEL There are many different type of stakeholders in the apparel market. This section will cover the following three stakeholders and the opportunities and threats associated with them.

(1) Environmentalists and the growing power they have to demand change; (2) Worker well-being and the power human rights/labor activists have to change it; (3) The power media and charity groups have on the message a company is trying to convey.

ENVIRONMENTALISTS This group poses a high level of threat to the apparel industry. This is also a group that is getting stronger, or gaining more influence, each year. The main points environmentalists have been attacking in the apparel industry are water useage, pollution, and the chemicals used in production.

Groups like the World Wildlife Fund (WWF), and other environmentalist groups are able to get messages out to the public much easier now using social media, blogs, and other websites. It is important to be aware of what these groups are saying so companies can act proactively and stay away from problems these groups can cause. One of the most significant issues between environmentalists and the apparel industry is in cotton. Cotton requires a lot of pesticides to get a healthy crop and all of those pesticides get washed into the ground, which has a noticeable effect on the ecosystem in those areas.

Using cotton to make any article of clothing also uses a lot of water. According to the WWF, it takes â&#x20AC;&#x153;20,000 litres of water to produce 1kg of cotton; equivalent to a single T-shirt and

pair of jeans.â&#x20AC;? When water is a scarcity already, this can have a significant impact on communities in the surrounding areas.

It is important to be aware of what environmentalist groups are saying and for companies to work to protect themselves from what is being said. Levi Strauss has done well in this area. It has teamed up with a group called Project Wet to provide water education, and it has started their Water<Less Partnership with water.org to actually use less water during production. By doing things like this,

WORKER WELL-BEING As with environmentalists, the threat level for human rights and labor activists is growing which poses a high level of threat to companies in the apparel industry. These activist groups are good at pointing out companies who don’t have good working conditions and continue to ignore the quality of life of workers. If these companies continue to ignore this threat, it’s likely they will run into challenges in the future.

At this time, it seems that Levi Strauss has been working hard to stay ahead of the curve.

Levi Strauss has a lot of factories all over the world. Levi Strauss has been taking many steps to improve the well-being of its workers in many of those factories. This is also good for Levi Strauss because it can show this to the media to help improve its image and differentiate themselves from other competitors MEDIA/CHARITY GROUPS It is very easy for consumers to get information now. Everyone has access to news from all over the world, so media and charity groups also pose a high threat to the apparel industry. It’s easy for someone to latch onto any small thing a company is doing, good or bad, and show it to the whole world with just a few clicks. Because of the power the media has these days, it is harder for companies to maintain a desired image.

Because media groups have this power, it is important to know that it can be both a threat and an opportunity. It is a threat because they have so many ways to push people away from a specific company or lifestyle.

The same power is something that can be used in favor of a company as well. Because media groups like to latch on to something they think will create a buzz, companies can use that to their advantage. Teaming up with charity groups and creating initiatives to show that the company has a positive relationship

with the community can draw consumers to a company. Another technique that is used is implementing tactics that will influence a change in the consumer’s lifestyle that will result in increased sales within a company.

This is something Levi Strauss has been doing well also. It has teamed up with radio stations and used them to promote concerts where the artists all use Levis in some way.

It has also teamed up with a charity which is good media, and allows them to show how jeans can be more of an everyday lifestyle again.

Conclusion We have identified four important opportunities/threats in our Porters’ Five Force analysis. The opportunities are (1) increased environmental awareness; (2) Industries that enter into off-price stores can obtain higher market share.

The threats include; (1) increased popularity in athleisure; (2) growing popularity of e-commerce.

OPPORTUNITIES Because environmental groups are gaining power to influence consumer behavior, this is influencing the way many players in the apparel industry are looking at environmental concerns. If companies don’t stay on top of issues such as water consumption or agricultural issues, they risk damaging established reputations with consumers. This provides a great opportunity for Levi’s because it already

works with environmentalists. Levi’s needs to portray the benefits that have come from these partnerships ie softer cotton, more flexible material, longer lasting, better fit.

Athleisure is taking up a greater market share than ever before. Millennials have moved toward more comfortable athletic wear as an alternative to more traditional everyday wear like jeans, hurting companies like Levi’s and

its competitors. Levi’s should not try to move into the already saturated athleisure market, but instead needs to continue to differentiate themselves as a competitive substitute to athleisure by emphasizing the comfort of its jeans.

THREATS Off-price stores such as Tj Maxx and Ross are becoming increasingly popular among consumers. Although the off-price stores do

not have a wide range of products for each brand, consumers view the price to be more fair than the branded stores. A perspective of a fair price is more often viewed in the offprice stores rather than the branded store because the quality is equivalent in each store. This is damaging to sales in the original stores as consumers become accustomed to a discount. This increases the bargaining power of off-price stores due to consumer

popularity.

Consumers are turning more and more to internet shopping to satisfy their fashion needs. The convenience of browsing apparel on a company’s website or app could threaten Levi’s sales if it doesn’t provide comparable services. The increased popularity of e-commerce provides an opportunity for Levi’s to connect directly with customers and utilize new vehicles for delivering its messages.

KEY OBJECTIVES Levi has the opportunity to increase its marketing efforts for eco-friendly products and processes; continually educating customers. Because Levi’s already capitalizing on its partnerships, it can use this situation to improve its marketing strength.

Levi’s has already positioned themselves well in the green sphere through partnerships with eco-friendly companies and non-profits. It needs to capitalize on these partnerships by emphasizing the benefits of these endeavors in marketing campaigns. Levi’s can also show how these partnerships have made its products superior by making them softer and giving them a better fit. Similar to the way Coca-Cola markets it’s partnership with the Special Olympics, Levi’s needs to capitalize on its current partnerships with environmental groups to improve consumer goodwill towards the brand.

Levi’s needs to continue to differentiate as an alternative to athleisure. By incorporating the benefits of athleisure but providing a higher class alternative, Levi’s will be able to capture those customers who need something a little nicer than yoga pants, but still want to dress comfortably.

Marketing efforts should focus on the fact that you can feel like you’re at the gym and still fit in at the office.

Levis has become victim to Porters “stuck in the middle” com-

plex. In order to combat increased popularity in off-price stores and move into the differentiator strategy; levis should reduce its typical brick and mortar stores and replace them for a Levi’s Shelf. An off-price store offering last season’s surplus clothing at a discounted rate. It should move its distribution to high end stores such at Nordstrom while setting a resale price minimum to gain value from consumers.

This will reduce consumer confusion as Levi’s has been available in stores ranging from Wal-Mart to Macy’s. Price and placement is often correlated with quality, because Levi is high quality, green product and the implementation of a clear strategy will increase brand image and sales.

As mentioned above, Levi’s should remove brick and mortar stores and sell primarily online and in high-end stores. Because of the increased popularity of e-commerce, Levi’s should continue to sell directly while using its online presence to educate consumers about its differentiators such as: going green, Levi’s Shelf, and improved comfort with a slogan such as: “feels like the gym, looks like the office”. Levi’s should capitalize on its social media platforms and reach out to millennials including pop culture and environmental partnership posts to increase brand awareness. Lastly, Levi’s should create an app to increase the accessibility and ease of purchase for a technologically-dependent generation.

PORTER’S FI Bargaining Power of Customer Threat Level MODERATE TO HIGH • Customers seek bargains at increasingly popular offpriced stores (-) • Consumers are increasingly price sensitive (-) • Consumers increasingly use Internet to compare prices (-)

Substitutes Threat Level: HIGH • Growing athleisure trends among millennials (-) • Wearable technology accounts for larger wallet share (-) • Secondhand and off-price stores gaining popularity (-) Stakeholders Threat Level: MODERATE TO HIGH • Environmentalists demand less pollution in apparel industry (-) • Human rights and labor activists demand better working conditions (-) • Increased partnering with charity and environmental organizations improves industry image (+)

FIVE FORCES Competitors Threat Level HIGH • Greater commodification of the apparel industry (+) • Low differentation accounts for three major players dominating the industry (-) • Low switching cost between brands (-) • Moderate to high brand loyalty among Generation X (+)

Potential Entrant Threat Level: MODERATE • Ecommerce reduces barriers to entry for fashion in startup companies (-) • Giants such as Amazon create cross boundary disruption by creating a new clothing label (-) • Consumers desire for established brand identity impedes potential entrants (+)

Bargaining Power of Suppliers: LOW • Production material increase in price (-) • Decrease of Chinese production monopoly allows for more competition (+) • Jeans giants wields great power in contract negotiations

CHAPTER THREE: MARKETING STRATEGIES AND PROGRAMS STRATEGIC MARKET POSITION Levi’s is currently striving to take a hybrid approach in the market position by combining both a differentiation strategy and the cost leadership approach. It is trying to be unique and different by marketing as a trendy and cool brand, but it also wants to appeal to everyone, putting themselves out there as the “workers’ jeans” and distributing its products in a broad array of stores. This is causing confusion for the consumer, because they’ll see Levi’s products in both high-end stores and places like Wal-Mart.

“The Mission of Levi Strauss & Co. is to sustain responsible commercial success as a global marketing company of branded apparel. We must balance goals of superior p ro f i tability and return on investment, leadership market positions, and superior products and service. We will conduct our business ethically and demonstrate leadership in satisfying our responsibilities to our communities and to society. Our work environment will be safe and productive and characterized by fair treatment, teamwork, open communications, personal accountability and opportunities for growth and development.”

Levi’s mission statement effectively defines its image, ethics, standards of teamwork, and human resources. The company has learned from the mistakes of other companies, like Gap, about the importance of finding clean supply lines and ethical manufacturing and made the necessary changes. It strives to have a strong leadership strategy which is essential for business growth. Lastly, it produces high quality, superior products as a standard for its company and customers.

In the past, Levi’s has attempted to match its competitors’ strategies, like Calvin Klein, by distributing on a broad scale in both highend and low-end retailers, but have found little success in doing so. Its overall marketing strategy has been too broad - trying to be both cost leaders and differentiators, by placing its products too widely. In conjunction with its attempted hybrid approach, Levi’s has tried to appeal to the masses as a product that is ideal for everyday workers but also trendy millennials. This strategy has confused consumers by its breadth and lack of focus.

LOW

LOW

HIGH

HIGH

WOMENâ&#x20AC;&#x2122;S SLIM AND SHAPING JEANS, MENS STRETCH SLIM FIT JEANS

Market Growth

PRODUCT PORTFOLIO

Market Share

CLASSIC JEANS

RECYCLABLE, WASTE<LESS, WATER<LESS JEANS

Levi’s doesn’t have any dogs. It needs to increase marketing for the problem children and turn them into stars and cash cows.

Levi’s doesn’t currently have any stars due to the commoditized jeans market. It needs to hone in on its key differentiators and turn them into strategic advantages.

COMPETITIVE ADVANTAGE ASSESSMENT Levi’s has high brand loyalty and utilizes its resources well - for exmaple, partnering with Will.I.Am and various environmental groups.

Due to the longevity of the company, it has become a big name in the industry have great leveraging power to form partnerships and negotiate contracts with suppliers and distributors.

Levi’s is still highly valued because of the commodification of jeans. Levi’s has an advantage in comfort because of its waterless jeans technology that is softer than competitors products which makes it more difficult to substitute. Levi’s has a great brand identity, which allows for more innovation opportunities comparative to its competitors. Renaming its waste<less jeans to “Live Freely” will help emphasize the practical benefits of athleisure and comfort that these jeans offer

as well as the functionality of the eco-friendly jean more than the fact that it is a green product.

Build on the hybrid strategy by rebranding as a cost-driving innovator and eliminating many of its brick-and-mortar stores and focusing on placing product in higher-end retailers, as well as opening up retail outlet stores. Levi’s should also develop a stronger online presence by revamping its website and building an app.

CONCLUSION STRENGTHS Levi’s has strong brand equity due to its commitment to ethics and teamwork, as well as its longevity - Levi’s has been a developed brand since 1853- leading to broad brand awareness and positive association through consistent quality and service. It is showcasing successful innovation with recycled jeans that appeal to many environmentalists while bringing in superior comfort desired by the greater population. Lastly, Levi’s has a loyal customer base, largely made up of the blue-collar population, that continues to love the consistent quality of the brand.

WEAKNESSES Levi’s has struggled to define a specific marketing strategy, attempting to take on a two-handed approach, combining the differentiation and cost-leadership strategies.

This makes it difficult for customers to know whether Levi’s is a high-end luxury brand or a low-cost everyday brand for the masses.

OBJECTIVE 1 Levi’s needs to increase marketing efforts by focusing on its innovative jeans and environmental partnerships to capitalize on the advantage of partnering and supporting an ethical cause. It should increase its marketing efforts specifically on social media as technology advances increasing customer awareness of the go-green for comfort initiative.

OBJECTIVE 2 Levi’s should focus on a more high-end jean with above-average comfort. This will target the creative class while also fulfilling the

needs of everyday workers in the blue-collar market. The necessary increase in price will be offset by the increased comfort and functionality. The price increase will cause some market share loss among blue-collar buyers, but this loss will be offset by the boost in sales among the creative class. This strategic move will help address the confusion caused by the current two-handed strategy Levi’s has taken.

OBJECTIVE 3 Continue to develop strategies to maintain its loyal customer base, by forming loyalty programs through offering a card that will allow customers to collect points and receive discounts for future purchases. Levi’s should also offer a credit card which will provide users with special discounts, free shipping, ability to make small payments which will raise switching costs for consumers allowing Levi’s to maintain a large market share. .

CHAPTER FOUR: PLAN OF ACTION SUMMARY OF MAIN FINDINGS Several factors have influenced the strategic decisions outlined in this chapter. In summary, they are as follows: From our Porters Five Forces analysis we identified athleisure as a competitive substitute. Many young people have moved toward the more comfortable athletic wear, referred to as athleisure, as an alternative to more traditional everyday wear like jeans. Athleisure has become more acceptable in many environments as many industries accept a more casual everyday wear. We do not recommend that Levis develops its own athleisure wear, we suggest that Levi’s instead address the substitute with a more comfortable and creative product range as part of the marketing strategy and product development. Levi’s should rename its waste<less jeans “Live Freely” to emphasize the practical benefits of athleisure that these jeans also offer. It should name the jean to promote the comfort and functionality of the eco-friendly jean more than the fact that it is a green product.

Because there has been an increased consumer focus on environmentally-friendly products and global conservation. This gives Levi’s a great opportunity to capitalize on some of its products that fall in the “problem children” section of the BCG model noted in chapter three. Along with increasing market-

ing efforts of its water<less, waste<less “Live Freely” line the company can also highlight the environmental efforts and its partnerships with environmental groups.

The Porter’s Five Forces analysis brought to light the opportunity for online sales and interaction as technology develops and becomes a further necessity in shopping. Many consumers choose to stay in the comfort of their home to shop instead of visiting a brick and mortar store to make a purchase. Thus there is increased importance of online presence and ecommerce through the retail industry; in which Levis resides. Levi’s should develop its social media presence through interaction and promotion, introduce an app to bring an ease to the online shopping experience, and upgrade its website to improve clarity for customer checkout.

Levi’s has previously attempted to appeal to all audiences by placing its products in highand low-end stores. This inconsistency in messaging confuses customers and devalues the brand. Levi’s two-handed strategy has resulted in marketing messages that lack focus and, in turn, has not targeted audiences effectively. As a solution, Levi’s should consider dropping the two-handed strategy and returning to a higher price point. By exclusively distributing to high-end retailers and setting

a price minimum, Levi’s can better communicate the high-quality of its products.

Consumers have found a cheaper substitute for typical high brand brick and mortar stores such as off-price stores and secondhand stores. The increased desire for a “good deal” among the growing price-conscious population is a developing problem for Levis as a high end brand.

It should offer a Levis Shelf that offers previous years unsold products at a discount to capture the price-conscious population. This is a similar strategy as Nordstrom; it has developed Nordstrom Rack that is increasing in popularity among Nordstrom’s loyal customers. If Levi’s institutes a Levi’s Shelf, its loyal customer base will expand as it meets the desired need of its customers.

PROPOSED NEW/IMPROVED MARKET POSITION PROPOSED MISSION STATEMENT The Mission of Levi Strauss & Co. is to sustain responsible commercial success in brand

ed apparel. We strive to please our customers by providing high-quality, eco-friendly, and comfortable apparel that promotes creativity and self-expression. We will conduct our business ethically and demonstrate leadership in satisfying our responsibilities to our communities, to society, and to the earth.

PROPOSED NEW MARKET POSITION Levi’s is currently “stuck in the middle” and needs to move either up or down in order to stay afloat. We recommend moving to a differentiated strategy based around a strategic focus on the things that consumers are looking for in jeans: high-quality, comfort, and creativity. This more focused strategy will reduce customers’ confusion and give marketing efforts a more strategic and consistent focus, improving brand image. This appeals to the rising generation of everyday millennials who are entering the workplace and looking to make their mark on the world.

STRATEGY MAJOR OBJECTIVES (ENDS) • Improve consumer perception of Levi’s to address the confusion caused by its current stuck in the middle, two-handed strategy • Increase appeal to millennials and younger generations by capitalizing on the current trend moving toward environmental-friendliness and comfort • Increase online presence to capitalize on the current ecommerce trend • Differentiate Levi’s products in a commodified market SCOPE Levi’s will grow its market share by 10% within the creative class over the next year.

It will do this by rebranding as a comfortable, business-appropriate apparel in order to appeal more to the creative class of Silicon Valley entrepreneurs and millennials. By rebranding, Levi’s will better satisfy the needs of the consumers who want a more comfortable apparel option than it currently has. This will help Levi’s gain customers whom it may have lost through the athleisure trend. By adding stores like Levi’s Shelf, improving the company’s

online presence, and developing an app, Levi’s will appeal more to millennials and the creative class of entrepreneurs.

MEANS The competitive advantage this gives us is a better advantage due to the increased comfort and quality in an eco-friendly product. We fill the need for comfort and convenience just like athletic-wear, but in a higher-class product that is more suitable for the professional atmosphere. By adding the convenience of an app, we’ll better reach the more tech-savvy millennials and creative class.

PLAN OF ACTION PLAN OF ACTION A. Eliminate retail brick-and-mortar stores because consumers are moving more towards online shopping 1. Customers often feel more confident buying clothing when they can try the items on in-store. By making distribution more exclusive and focusing more on ecommerce, Levi’s is making it harder to try on clothes in store. To counteract that, we recommend that Levi’s offer free shipping on all returns. This will help customers feel more comfortable shopping online and will mitigate sales lost due to the more selective distribution.

2. Levi’s needs to improve its online sizing guides so returns won’t be necessary. By showing consumers how other brands’ sizes compare to Levi’s sizes (Example: If you purchased/own a Medium shirt at American Eagle, you will be encouraged to buy Small-sized shirts at Levi’s). This will also help customers feel more comfortable buying online instead of buying in-store.

3. Allow customers the opportunity to review jeans to give “real” reviews on how they fit. In exchange for these reviews, whether positive or negative, customers

will receive a small discount offer on their next purchase. This will help build brand loyalty and will also make customers feel more comfortable purchasing online.

4. Distribute more exclusively and eliminate the option for stores to discount.

This will reduce consumers’ confusion and solidify Levi’s market position as an exclusive brand B. Not contradicting because we’re still offering the new lines at premium costs while offering older lines for lower prices 1. It plays to the needs of consumers as they desire more off priced stores so they feel like they are getting a good deal 2. Giving different prices in different places because of demographics C. Open up select discount stores similar to Nordstrom Rack because the buyers have so much power D. Build the online presence by boosting the website and developing an app E. Main differentiator is the new technology that makes our jeans more comfortable F. Capitalize on the partnerships and tech we already have through better, more focused marketing efforts

MARKETING MIX IMPROVEMENTS PRICE Levi’s is attempting to implement the two handed strategy but it has left them stuck in the middle.

Levi’s will have a better brand image which will allow them to maintain high prices in high-end retail stores and eliminate mid-range and low-price products from lowend retailers. Instead, replace the mid- and low-price retailers with the low-price option of the Levi’s Shelf.

PLACEMENT Similar to price, by moving away from the two-handed strategy, Levi’s be able to increase exclusivity.

PRODUCT Because of the trend toward comfortable clothes, we will continue to improve the products’ comfort and flexibility by further developing recycled cotton and waterless jeans technologies.

PROMOTION To meet millennials’ increasing concern with environmental issues, Levi’s will show how its environmental partnerships improve its products. The company will focus its efforts more on so-

cial media and online presence to reach its target market of the creative class and boost ecommerce.

In the future, it will be adding an app to further assist its online efforts.

IN SUMMATION The proposed new set of marketing mix variables are to drop low prices in exclusive retail stores and only offer lower prices in the Levi’s Shelf, while keeping products in high-end retail stores.

Levi’s should also develop an app and increase its social media presence to improve ecommerce and brand image. It should also continue to improve and heavily market the comfort and durability obtained through better environmentally-friendly tech.

By being consistent in its marketing mix, Levi’s will be able to better reach its target market, known as the “creative class” - young people, entrepreneurs, and those who live active lives. These people value comfort and flexibility but also need something classy enough to wear to the office. This new marketing mix supports our proposed marketing vision by addressing the threat of athleisure and the rising trend of ecommerce, while also clarifying Levi’s brand image and demystifying the company’s market position as an exclusive brand.

CHAPTER FIVE: PROMOTION AND SOCIAL MEDIA STRATEGY DIAGNOSTIC PROMOTION/SOCIAL MEDIA PROFILE Levi’s current promotional objective is to appeal to younger, urban markets by using Facebook, Instagram, Twitter, Pinterest, Tumblr, and YouTube and specifically targeting women and the feminist movement. By maintaining multiple segmented accounts across these diverse social media platforms, it is reaching out to several specific markets. In each of these separate segments, Levi’s has brought in celebrities, athletes, and musical icons to draw in more customers. It has avoided using humor and sex appeal, focusing more on independence and individualism, specifically targeted towards women.

Levi’s also sponsors the San Francisco 49ers’ stadium and opened a “Levi’s Lounge” music venue for concerts and other special events.

From its start in the mid 1800’s, Levi’s has been an iconic, all-American brand built to be rugged and dependable for a people that are rugged and dependable. Levi’s markets

itself (accurately) as the original blue-jean brand. But as time has gone by, Levi’s has evolved its product lineup to fit the needs of an evolving nation, keeping pace with various social causes like feminism, the green movement, and the current movement towards greater freedom in the workplace - both in clothing styles and entrepreneurial spirit. In recent years, Levi’s has strayed from its original branding and style as the blue-jean for everyone. The Levi’s social media profiles currently portray a brand that is urban, upscale, and made for young people who work in cities and ride their bikes to work.This approach is inconsistent with the company’s former branding of being the everyday American jean for blue-collar workers, but falls perfectly into line with the strategic focus that we are recommending to focus more on a specific market of young people through music and independence. It includes the following hashtags and accounts on its social media: #LevisCommuter, #LevisSkateboarding, #LadiesinLevis, #LiveinLevis, @Levis.vintage.clothing.

DIAGNOSTIC PROMOTIONAL MIX PROFILE Levi’s YouTube channel has great content, but low distribution. All the effort it puts into creating quality content gets them only 2575,000 views over the space of a full year.

Levi’s needs to put these ads out on various other channels like Netflix, Hulu, and TV. DIAGNOSTIC SOCIAL MEDIA PROFILE Levi’s does a good job of including diverse customers within its target market through using different segmented accounts on each social media platform. Similarly, Levi’s maintains accounts for most of the main countries in which it distributes in, appealing more to international customers. To target specific segments within the market, Levi’s has separate accounts with focused content on that particular demographic. For example, the Levi’s Skateboarding profiles present a brand that is on the edgier side with darker tones and a strong focus on independence.

On the Levi’s Commuter pages, it focuses on brighter colors and clean lines with imagery of young people in a hurry and going places. Levi’s has a strong musical focus on its twitter accounts as well as its YouTube channel, presenting musical artists who break the mold and push the envelope. Its NFL line tar-

gets mostly young men and shows off partnerships with well-known athletes, focusing on strength, independence, and being a part of something bigger. One of its strengths is that it doesn’t overwhelm followers with huge quantities of posts like many brands do. Instead, it limits posts to one or two every day.

This allows customers to be engaged with the brand without feeling bombarded by it.

PROGNOSTIC PROMOTION/SOCIAL MEDIA ANALYSIS The new vision for Levi’s marketing communication is to increase individual interaction and drive traffic from social media toward the online Levi’s store. As of now, Levi’s only responds to negative customer interactions on its social media platforms. To further engage individual customers, Levi’s should make it a policy to respond to both negative and positive customer engagements online. This will not only help rebuild relationships with unhappy customers, but will also reinforce relationships with happy customers. In order to drive traffic from its social media sites to the online store, Levi’s needs to post the creative content it already has on its YouTube channel (or at least links to it) to other social media

involved in the ideas, promotions, and humor of Levis. For example: it should have a post that asks a question such as: “What is your favorite holiday sweater?”, while the image has an array of sweaters that Levis offers. This gives the audience a chance be involved as well produces good customer feedback for Levi’s.

sites and include links to the Levi’s online store. The company has millions of followers on Facebook and other social media sites, but the exclusive creative content on YouTube that showcases the benefits and features of its products typically only gets a few thousand views. This is caused by the lack of connection between the two platforms. By connecting these platforms, Levi’s will create a more consistent brand image and boost traffic to its improved online store.

In order to link the two platforms, Levi’s will also need to have more interactive posts that allow consumers to respond and be more

Social Media is a great way to promote and educate customers about new and innovate products and services; especially products that are eco-friendly because the typical social media demographic consists of environmentally aware millennials who are interested in such products. Although there is an interest in eco-friendly products such as the waste<less jean Levis is currently developing, Levis should showcase the benefits, specifically comfort, that the jeans provide. Capitalizing on the comfort of the jean allows consumers to clearly understand the benefit of the product instead of the product simply being a “go green” effort. Overall, it is very important for Levis to continue to develop the “go green” efforts as the eco-friendly trend continues while being very aware than some consumers are purely looking for the benefit.

Currently Levi’s charges a fee for any returns through its online store. We recommend eliminating this charge to help get customers feel more comfortable buying online. With more exclusive distribution and increased focus on ecommerce, customers may feel less comfortable buying Levi’s products because it will be harder to try them on before buying. After taking away the return fee, we recommend Levi’s push this on social media in an effort to guide people from social media pages over to the Levi’s website to eventually make a purchase.

To help incentivize online sales for Levi’s, we recommend that it offers a 10% student discount. To get the discount the student just needs to put in a student email address and the 10% coupon will be applied. This can easily be promoted both on the website as well as in other marketing campaigns. By offering a student discount, Levi’s will increase its loyal customer base.

PROMOTION SUMMARY From our research on Levi’s current promotional strategy, we found that Levi’s doesn’t have a strong, engaging relationship with its customers, but it does provide images of new products and are willing to respond with customer questions. We recommend that it focuses on engaging with customers on its social media channels more interactive as well as making it a point to drive them to the Levi’s website with the ultimate intent of making a purchase.

FEATURED ENTREPRENEURS We recommend that Levi’s implement a program to feature rising entrepreneurs. Young entrepreneurs would create videos that showcase their business ideas and enter a contest between thousands of other entrepreneurs and aspiring entrepreneurs competing for a chance to win funding and sponsorships from Levi’s. Entrants will post videos on social media describing a current or new business idea and then tag Levi’s in their post to encourage online engagement amongst customers. This will create an innovative and interactive platform that engages customers with the brand and helps promote Levi’s image as a brand powered by and built for the creative class.

LEVI’S SCHOLARSHIPS Levi’s should utilize its current targeted profiles and collections (like Levi’s Skateboarding, Levi’s Commuters, and Ladies in Levi’s) to create a competitive scholarship opportunity for young students, called the Live In Levi’s Scholarship Program. These students can come up with new ideas for Levi’s to expand its current target segments and collections. Students will submit their ideas by making a video, posting it on social media and tagging Levi’s.

Levi’s will then select winning ideas, implement them, and award scholarships to the students who came up with them.

ENVIRONMENTAL SHIFTS

ENVIRONMENTAL SHIFTS Levi’s should shift the focus of its environmental initiatives from being environmentally friendly to having superior fit, feel, and functionality. While we discussed the growing demand for environmental awareness, the majority of consumers are still primarily looking for benefits and place less emphasis on the “green” initiatives.

Utilizing its social media platforms to enhance customer service by responding to both positive and negative messages will create more credibility for Levi’s and build trust with consumers. There is more to the purchase than just the product and by creating valuable customer service via social media, consumers will develop greater loyalty to the Levi’s brand.

Implementing a “no return fee” policy to all online purchases will add benefit to consumers and incentivize them to not only utilize and buy from its online store, but continue to purchase Levi’s jeans and apparel in a convenient way. This will not only increase sales for Levi’s, but it will also increase traffic on its website and social media accounts which will maximize the reach of Levi’s marketing ultimately making it more effective.

Many of our social media recommendations for Levi’s will support the initiative to get rid of brick-and-mortar stores and adapt to the growing trend of e-commerce used by millennial consumers. By increasing its engagement on social media platforms Levi’s will have the ability to shift the focus of loyal customers to its online website and mobile app as well as influence brand floaters to choose Levi’s over competitors, because of increased convenience. Consumers will find greater value in Levi’s products, specifically jeans, through creative social media content that advertise its revolutionary jean technology that provides comfort, style and functionality.

By offering an online student discount, Levi’s will meet the standards established by competitors like J. Crew and Old Navy.

This will also help establish a loyal brand following among young people who will remain loyal as they grow older and become more financially independent and stable.

Emphasizing this discount in its targeted marketing will help drive traffic toward the online store. tplease our customers by providing high-quality, eco-friendly, and comfortable apparel that promotes creativity and self-expression. We will conduct our business ethically and demonstrate leadership in satisfying our responsibilities to our communities, to society, and to the earth.

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