Levi's is Hiking Up its Pants.

Alternatives Solutions

Status Quo

The no change scenario is when management does not change any aspect of the business. Levi Strauss & co. would continue as it is, without acknowledging any problems in the company. They would continue on with their ignorance of the organizational environment. If this is continued many problems will arise for the formidable jean entity.

Pros

• For a while longer, this organization would continue on as a textile and apparel giant in the economy.
• Levi Strauss & Co. would still be loved as a brand name due to its brand loyalty
• The company’s will still be viewed as a generous company and will still receive high praise for perks and pay.2

Cons

• There would be no new business; the company’s only consumers would be the slowly recessing and dying out crowd of older clients.

• The wishes of the new generation of hip-hop inspired, teenagers who want baggy clothing, will remain unanswered. This is a huge missed opportunity due to the facts that, “By the time they’re 24 they’ve adopted brands that they will use for the rest of their lives.” 1 And, “…teens set fashion trends that influence even older shoppers...” 1

• Competitors like Tommy Hilfiger, Ralph Lauren, Wrangler and Lee would in the near future, console the needs of today’s customers better than Levi’s. This would result in loss of market share and profit by Levi’s.

By not changing anything at Levi’s, the company will continue to be run with emphasis only on sales. This would ignore other aspects such marketing, planning and, globalization. Key marketing factors such as new products, consumer service, public relations and advertising or expansion would become obliterate therefore, keeping the company at a stand still. Management has a great company with a solid and trusted brand name, which is synonymous with quality and value. Unfortunately, with no action taken to appeal to new customers, the company will not have a prolific future.

Change in Management

While change in management seems like a drastic measure, it may be one of the most rational alternatives. Robert Haas became president in 1984, being the son of the previous CEO of Levi Strauss & Co., Walter Jr. Haas. Through a 1996-leveraged buy-out, Robert Haas caused the arrears of US$3.3 billion in Levi’s finances. In response to changing external market conditions, Haas left Levi's in organizational chaos, out of touch with their customers, and trying to lower costs. While re-privatization was the clear motivation for the first leveraged buy-out in 1985, Haas' 1996 motivations, were simply strengthening family power. 3 Robert Haas is too emotionally involved and, this affects his capabilities of making clear and logical decisions that are beneficial for the company. Also, the majority of management at Levi’s is from the inside and management does not solicit enough independent opinions. 4

Pros

• Hiring the “right new manager,” perhaps from the outside, that has been through a similar situation would be crucial in getting Levi’s down the right path.
• Acquiring new managers from different domains, would import new fresh ideas for Levi’s. This would be beneficial as opposed to having everyone think the same way.
• New unconstrained outlooks of all aspects of management would now be heard.
• Allows for strategy to be created for all three levels of a company; corporate, business and functional level.

Cons

• The “right new manager” for Levi’s would require one of the best of the best in terms of management. Finding someone like this, who is willing to accept the position is a difficult task.

• New business strategies such as SWOT analysis are very in-depth and time consuming that may dissuade a company from taking this path.
• Chance that the new managers from outside corporations have an obscure vision for future of Levi’s.
• A large step to take, recovering from a reconstruction in management can take a long time.

A change in management can make or break a company. If such reconstructing were emplaced using steps, it might actually work. This alternative would bring about new managers that have been adapting to dynamic environments that could in the long run help out. But, considering Robert Haas and his family own seventy percent of Levi shares it would be near impossible to take the position away from him. To make this alternative succeed, Robert Haas must accept that he cannot fulfill his role as a manager and step down to allow someone who can.

Restructuring of the marketing department

The restructuring of the marketing department encompasses many aspects of productive business planning. These include product, distribution, advertising, public relations and customer service. 1 Levi’s new marketing department will focus on what the consumers want as opposed to just sales.

Pros

• Improving the customer relationships of the company will lead to increased competitiveness
• Levi’s perception of itself will broaden resulting in understanding of problems and challenges related to changing consumer preferences.
• Development of new types and styles of jeans will be created relating to the vast range of customers. These new styles will be sexy and rebellious which will cause a positive feedback from the younger customers.
• New advertisements that include sex appeal, rebellion and youth will become a lure for younger buyers trying to get the edge in fashion that they’ d like.
• Sponsoring concerts that teenagers attend will also result in positive feedback and understanding that Levi’s is hip once again.

Cons

• It may be difficult for previous marketing managers used to making one-sided decisions for particular products or product lines agree to the new structure
• Researching and developing the new styles of clothes would take a bit of time
• Higher funding for advertisements will drain add to the company’s expenses  

In this alternative the funding and time invested would pay off with customer satisfaction and a new youthful image of the Levi’s company. This alternative solves the problem of the study of the organizational environment by actually doing so and responding to the weaknesses. This alternative will open the eyes of the marketing division and eventually, the new consumer attentive Levi Strauss & Co. will flourish as a jean global power.

Further Global Expansion

Levi Strauss & Co.’s production costs are considerably higher than its rivals. Levi’s still produces a substantial amount of its apparel in company-owned factories in the United States and never followed the trend of moving and manufacturing overseas where labor is significantly cheaper. At this time of when this company is losing profits, a good choice for Levi’s would be to acquire the cheapest labor possible.

Pros

• Labor in countries such as Mexico or China is a fraction of the cost that Levi’s pays here for them this would lead to cost reductions.
• The selling price could be decreased increasing competitiveness amongst other jean labels.

Cons

• Lay offs of North American workers and hiring new workers abroad would not look good to the public, resulting in a negative image for Levi’s.
• If some North American plants remained open, the low morale of the workers that are insecure about their jobs would result in decreased productivity. Resulting in more North American plant closures creating a vicious circle.
• Training new inexperienced workers and opening up a new factory abroad would cost a great deal of money.
• In order to keep somewhat of an image, Levi’s would have to distribute severance packages for the laid off North American employees, this would generate severe expenditures.
• The need to pay tariffs and taxes as a result of doing business at a global scale would just add to the list of operating costs.

The generous severance packages that would be issued would distract the public from seeing the global expansion into lower waged countries. This alternative would help in analysis and coping with the dynamic environment in North America by increasing competition through reducing prices of Levi’s jeans. Although there are numerous start up costs, they would pay themselves off with the money saved on cheap labor.

SWOT Analysis

Levi Strauss & co. must thoroughly analyze their corporate ideals and structure. Due to the lack of enthusiasm with regard to taking on more business, Levi’s must use SWOT (strengths, weaknesses, opportunities, threats) analysis to identify the key strengths and weaknesses of the company as a whole. This jean company will be able to see that through SWOT analysis the following will be made apparent.  

Pros

• SWOT analysis is a broad first step, which allows for a bigger picture of the company as a whole. Analyzing the strengths and weaknesses of the company will surely give greater scope to all management involved.  
• Levi’s has the ability to have an enormous range of customers but the need to carry out opportunities such as appealing to the teenage crowd is needed.
• SWOT analysis will show that one of Levi’s strengths is brand loyalty; they can utilize this power to sell to all age groups.
• Levi Strauss & co. can also realize through SWOT techniques that one of their weaknesses is the lack of new ideas from outside executives; leading to the hiring of fresh businessmen for the jean industry.

Cons

• If the managerial staff itself is not up to the task of identifying strengths and weaknesses, then SWOT analysis will be a wasted endeavor.
• SWOT analysis is very in-depth and time consuming which may dissuade a company from taking this path.

SWOT analysis is vital for Levi Strauss in order for it to analyze and evaluate its marketplace, which is at up most importance and this time. It is probable that Robert Haas and his board of directors can understand that they must adapt to their task environment and not wait around for the environment to acclimatize to them. The assessment of the company’s internal and external environments in search of causes for ineffectiveness would be recognized as higher production costs relative to competitors and poor monitoring of consumer trends. Therefore, setting new goals in response to the threats and opportunities identified and based on more efficient utilization of company resources would determine what strategies must be changed in order meet the new goals, resulting in identification of the need to both close plants and restructure. The result of a SWOT analysis would set some concrete strategies and goals into motion, preferably leaning towards better marketing and managerial tactics.

Recommended Solution

In order to solve the main problem at Levi’s, management must do a SWOT analysis in order to evaluate the company as a whole. The next step would be to react accordingly to opportunities and threats through the newly restructured marketing division.

        This combination of alternatives solves the main problem, the management’s inability to analyze itself adequately in its dynamic North American organizational environment. It also solves most of the satellite problems to a certain degree. By evaluating the company using SWOT analysis, management will better understand their strengths, weaknesses, internal and external environment. With all these factors management will be better equipped to familiarize this company within it’s environment. By implementing these alternatives we solve the main problem as well as the following satellite problems. The first problem is that Levi’s positive notable image of rebellion and youth is slowly deteriorating and causing the youth to go to competitors for trendy styles of jeans. The second satellite problem can be assessed when performing the SWOT analysis it will allow Levi’s to see that being too complacent is one of their weaknesses. The targeted age group will now not only be younger but broader as well. With the new consumer relationship fueled marketing strategy as many consumers as possible will be targeted. By using the strategy Levi’s can supply the needs of fashion hungry teens. The new marketing section will help in all aspects of innovative advertising making consumers aware that Levi Strauss & Co.’s are all the rage. Operational inefficiencies will be flushed out once SWOT comes into play and marketing accurately delivers to suppliers. SWOT analysis weakness evaluation will once again help out. Both in helping this company out in the cultivation of new talent and the introduction of fresh ideas and, realizing that Dockers and launch of dress clothing line Slates were a distraction.

        The personnel will feel a new sense of fun working for such a trendy company. It will solve the problem of low morale. Hopefully with a little time, Levi Strauss & co. new image and strategy will appeal to a broader range of consumers and regain Levi’s spot at the top as a dominant force in the jean industry.

Implementation

Immediate Action:

The immediate action that will be taken by the Levi’s is to call a meeting and educate all management in the areas of SWOT. By doing this, it will ensure that all managers understand the dynamic environment that they are facing and it will help them form plans for the future. By the end of the six months, the company’s situation should be analyzed in terms of SWOT and their weaknesses and threats will be evident. Factory workers are encouraged to suggest cost saving ideas for a reward. The Marketing gang should be taken to a learning seminar weekend retreat. They should be told that Levi’s has a new vision of doing business, which focuses on consumers. They will be assigned to come up with advertisements, new styles and promotional ideas within the next six months. Hopefully, the all expenses paid weekend retreat with open bar karaoke nights will consolidate any doubts or arguments by conservative marketing managers.

Short Term Action:

        The short-term action that will be taken by Levi’s will be to put the ideas of the marketing team to the test. They will have to find new consumers, generally, in the teenage stage of life. Being skilled individuals, their advertising campaign works and teenagers buy up the new products offer to them. This will help put their plans into action and bring them closer to completing their goals. Top management will have to assessing the environment and putting together plans to accommodate the changes in the environment. New managers are now hired, and encouraged to suggest ideas to help the company in all aspects. Factory workers begin to see the new Levi’s increasing productivity is the result.

Long Term Actions:

        In the long term, Levi Strauss & co. will produce a vast variety of styles for an assortment of people. The company will continue to use SWOT as a major factor in analyzing the industry and environment in which they operate. The strategy will continue to aid them in growth and maintaining an edge on competitors. The company will have a more challenging atmosphere, which will lead to motivating the employees to attain the company’s vision. Also, the employee’s existing manufacturing skills and expertise are used in a more efficient manner because they are applied to different areas of the industry.  Levi’s will adapt the now implemented strategy causing them to flourish in the jean industry.

        

Endnotes

1 “Contemporary Management” p.87

2

3 

4  “Contemporary Management” p.88

Bibliography

1. Abend, Jules; "Modular manufacturing: The line between success and failure;" Bobbin; Columbia; Jan 1999.

2. "Levi Strauss & Co. to Close 11 of its North American Plants;" Levi Strauss & Co. press release from web site at  Feb 22, 1999.

3. Hill, Suzette; "Levi Strauss & Co.: Icon in revolution;" Apparel Industry Magazine; Atlanta; Jan 1999.

4.

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6. Jones et. all, Contemporary Management, 1st Edition, McGraw-Hill Ryerson Toronto, 2002.