Issue: How could Levi’s Strauss sustain its competitive advantage/differentiations to retain the customers? Whether the company should accept the personal pair proposal?
Strength - Levi’s holds a top position in the clothing industry. It has successfully applied differentiation strategies in its business with its history of a highly recognizable brand name and brand loyalty. It charges customers a premium on its products by providing valued features.
Weakness - Levi’s has high labour costs due to its strong “social conscience,” “US-made” persistence, and generous salary and benefits packages. Also, the chain of Original Levi’s Stores (OLS) is a weakness in Levi’s operations. Even though the OLS has a 30% higher profit per pair of jeans than the wholesale channel, it was less profitable than the wholesale channel because of the significant operation costs (largely due to the additional SG&A costs) and inventory costs. In addition, the brand name does not carry as much cachet, so Levi’s required new valued features to differentiate itself.
Opportunity - Apparel imports were increasing faster than exports and the denim sales grew approximately 10% per year. These indicated that there was a significant demand in the market and potential growth for the company. Also, there is an emerging requirement of providing sufficient customization and maintaining reasonable costs and operational feasibility, which created a high-end niche market that allows Levi’s to avoid price-based competition and strive for differentiation.
Threat - In the lower end market, jeans producers set up cheap overseas facilities. This enabled the low-cost, high-volume producers to gain cost advantages over Levi’s. In the upper end of the market, more expensive brands targeted the affluent customers. As a result, Levi was at a disadvantaged position in both market segments.
There are two main alternatives for the Levi’s effort to retain its competitive...
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