Levi Strauss Co An Analysis EEP 142 Group Project Young Lee James Moon Michael Lin Problem The Levi Strauss company is experiencing losses and is continuing to under perform in the denim jean market The firm faces the general problem of a dominant firm losing market share when more firms enter the market Problem Background Successes Competition Solutions Responsibility Conclusion Q A Background History The company was founded by Levi Strauss in 1853 primarily selling wholesale dry goods The company was founded in San Francisco California A tailor named Jacob Davis thought of an idea to use copper rivets to reinforce the points of strain on pants Davis and Strauss purchased the patent of the idea of using copper rivets in clothing on May 20 1873 Problem Background Successes Competition Solutions Responsibility Conclusion Q A Background Company Growth The innovation of the rivets in the jeans differentiated Levi s jeans from others because of its increased durability Over the years Levi s jeans have become more popular initially due to its durability Jean products expanded targeting different consumers Levi Strauss Co eventually captures most of the denim jean market becomes the largest manufacturer of jeans and profits reach 1 billion by 1974 Problem Background Successes Competition Solutions Responsibility Conclusion Q A Background Time Line 1853 Levi Strauss begins selling dry goods in San Francisco 1873 Levi Strauss Co patent riveted jeans and begin selling them 1912 Koveralls denim playsuit for children is first nationally sold product for the company 1935 Company sells first blue jeans for women 1940s U S government issues denim work clothes for employees in the defense industry 1974 Company sales reach 1 billion 1986 Company introduces Dockers as a new casual line of clothes Problem Background Successes Competition Solutions Responsibility Conclusion Q A Successes Monopoly Since the patent of the rivets in jeans in 1873 the company achieved monopoly power Monopoly power was gained through entry barriers The patent granted the firm monopoly rights to sell riveted jeans Also by product differentiation The rivets on the jeans allowed for longer durability a form of vertical differentiation Product differentiation and barriers to entry allowed the company to gain more popularity and market share Problem Background Successes Competition Solutions Responsibility Conclusion Q A Successes Expansion By 1977 Levi Strauss Co is the world s largest jean manufacturer Department stores and boutiques sell Levi s products and are additional channels of distribution for the company Levi s provides a wide range of products that target different market segments capturing demands After the release of the 501 product line Levi s enjoys worldwide market dominance in the denim jean market Levi Strauss Co maintains it s image as an American Icon and the originator of American jeans Problem Background Successes Competition Solutions Responsibility Conclusion Q A Successes Positioning Other marketing strategies like the position of the product created increased differentiation contributing to the companies market power In 1930s the company survived the Great Depression due to increased interest in Western culture Jeans were positioned as being worn by cowboys cowboys Levi s jeans were issued to employees in the defense industry including veterans during World War II Post World War II veterans that went to college wore Levi Levi s jeans on campuses increasing popularity WWII veterans were regarded as heroes Jeans were shown to be suitable for casual wear rather than work work During the Baby Boom era Levi Levi s targets younger consumers and positions product as cool cool Early movie stars wore Levi Levi s jeans An example of celebrity endorsement Consumer demand shifts from durability of jeans to fashion of jeans Culturally jeans became symbol of youth and rebellion In 1960s student protesters wore jeans as a uniform In 1970s company sells bellbottom jeans The firm positioned its products with changing times and changing demands keeping existing customers and capturing new markets Increases in sales ultimately increased profits Problem Background Successes Competition Solutions Responsibility Conclusion Q A Competition Effect Levi Strauss Co was threatened by competition because barriers of entry were relatively low in the jean market excluding the patent Some of Levi s competitors include Calvin Klein Gap Jeans VF Corp Lee Wrangler Tommy Hilfiger The entrance of new competitors had many effects on Levi s Levi Levi s no longer has monopoly power more competitive prices lower profits Availability of substitutes firm faces increase in elasticity of demand Consumers prefer other brands Levi Levi s customers buy from competition lowering Levi Levi s market share These newer upstarts are able to chip away at Levi s market dominance because they are able to capture segments VF Corp captures lowlow end jean consumers Calvin Klein captures highhighend consumers Problem Background Successes Competition Solutions Responsibility Conclusion Q A Competition Strategies Competitors successfully were able to take from Levi s market due to heavy advertising and branding Branding was especially effective for companies like Calvin Klein that targeted high end consumers Some of the marketing strategies that competitors like Calvin Klein used to differentiate their product and brand included Celebrity endorsements Calvin Klein and Brooke Shields UpUp toto date European product designs low low rise tighter Advertise jeans as designer designer These advertisements were used as a barrier to entry because of spurious product differentiation Although Levi s jeans may be physically the same as its competitor s consumer preferences are affected by brand name In addition to the idea of branding Levi s largest consumer market were Baby Boomers and by the time competitors increased in the 1980s the Levi s brand was perceived to be mommy jeans This reinforced the more youthful perception of other brands Problem Background Successes Competition Solutions Responsibility Conclusion Q A Competition Premium Jeans Levi s failed to recognize and enter a new and booming premium jeans market originating in 2000 and led by brands such as Seven For All Mankind True Religion and Rock Republic Levi executives themselves admitted failing to see the premium jeans trend and the company was forced into radical cost cutting closing dozens of