Levi goes local

Case study 05 - Levi Strauss Goes Local

Case Discussion Questions

1.    What marketing strategy was Levi Strauss using until the early 2000s? Why did this strategy appear to work for decades? Why was it not working by the 2000s?

Answer

The marketing strategy that Levi had used until early 2000s was to sell the products worldwide without customization and localization. To achieve this, the company sold the products by doing the mass production or economics of scale. At that time, Levi achieved high sale rate due to the fact that people liked to wear jeans without consideration of its style. However, this strategy seems not to be working by 2000s because there were more competitors and people want different styles of jean to fit with their lifestyles and culture.

2.    How would you characterize Levi Strauss’s current strategy? What elements of the marketing mix are now changed from nation to nation?

Answer

How would you characterize Levi Strauss’s current strategy?

Levi’s business strategy is described as follows.

We have changed virtually every aspect of the business, including the entire process of how we develop, deliver and market products. The initiatives include (Sourcewatch, 2011):

Revamping our core Levi's® and Dockers® product lines to make our products more innovative, market-relevant and appealing to consumers.

Improving our speed to market and responsiveness to changing consumer preferences.

Launching the Levi Strauss Signature® brand for value-conscious consumers in North America and Asia.

Expanding our licensing programs to offer more products that complement our core brand product ranges.

Improving the economics of our Levi's® and Dockers® brands for retail customers.

Strengthening our management team and attracting top talent to key positions around the world.

Enhancing our global sourcing and product innovation capabilities.

Reducing our cost of goods and operating expenses.

Implementing a new business planning and performance model that clarifies roles, responsibilities and accountabilities and improves our operational effectiveness.

Therefore, it can be concluded that Levi learnt a lot about their failures in the past so they agreed to focus more on the trend changes in fashion and the adaptation to the local culture and norms in the selling countries. Levi also wanted to renew its branding to fit with new fashion trends and the customer preferences. Levi especially focuses on the new product development so they specially setup the dependant team to take care of new brand called Dockers which is the brand that they want to make products more innovative, market-relevant and appealing to consumers. In addition, Levi launched Denizen brand to target on the young generations (Sourcewatch, 2011).

What elements of the marketing mix are now changed from nation to nation?

According to the market mix knowledge, the marketing mix is the set of choices the firm offers to its targeted markets. Many firms vary their marketing mix from country to country, depending on differences in national culture, economic development, product standards, distribution channels, and so on(Global Business Today, 2009).

Marketing mix is consisted of choices about product attributes, distribution strategies, communication strategies, and pricing strategies that the firm offers to its targeted market.

Product attributes

Cultural difference, countries differ along whole range of dimensions, including social structure, language, religion, and education. These differences have important implications for marketing strategy (Global Business Today, 2009).

3.    What does the Levi Strauss story tell you about the “globalization of markets”?

Answer

There are some lessons learned from the Levi Strauss story as follows.

Find a competitive advantage

If there is no rule for choosing a strategy, then what is a retailer to do?  The answer is to figure out what the retailer might bring to the market that would enable it to beat the competition.  This can vary greatly and depends on the nature of the competitive environment.  In an emerging market that lacks much modern retailing, simply bringing modern supply chain management and merchandising as well as large financial resources might be sufficient.  In a more sophisticated market, competitive advantage can come about by offering a well known global brand, a unique format, a higher level of customer service, a more entertaining and informative customer experience, or a more efficient supply chain that enables low pricing (Deloitte, 2010). 

Learn much about local tastes and customs

The best global retailers spend substantial resources and time in learning about the local market.  This entails understanding supply chains, regulation, sources of merchandise, and, most importantly, consumer tastes and habits.  The latter is the most challenging.  There are examples of retailers which, even after years of research, fail to develop the right merchandising.  Understanding an alien culture is enormously difficult under the best of circumstances.  Hence, using a mix of local and expatriate managers can help to get it right.  Some of Europe’s largest food retailers, in developing new markets, have sent teams of managers to other markets.  Often, they spend months and sometimes years learning about consumer tastes, shopping and living behavior, cultural attitudes, and sensitivity to branding and pricing.  The end result is a compromise between using the strengths of their core business at home and adjusting to differences in the foreign market.  Sometimes it takes a period of tinkering before a foreign retailer finds the appropriate such compromise (Deloitte, 2010).

Be prepared to operate in a niche

Although scale is important, it is not always necessary to saturate a market, nor is it essential to appeal to a wide range of consumers.  In many locations, existing local and foreign retailers have already grabbed a considerable share of the market.  For a new retailer entering such a market, it is not helpful to simply replicate what others have done especially if the market is relatively saturated.  Instead, a new player might be able to fi nd a niche in which to operate.  In some emerging markets where global hypermarkets have invested heavily, other food retailers have found that simply investing in the hypermarket format will not suffice.  Instead, they have sought to connect with consumers through smaller, niche formats such as small supermarkets, discount stores, and convenience stores.  In the case of electronics retailers, rather than invest in a superstore format, a smaller neighborhood format might be appropriate given competitive and regulatory constraints (Deloitte, 2010). 

Use mostly local managerial talent

The best global retailers tend to rely on the fewest number of expatriate managers.  The ideal situation is for most stores to have local managers.  There are several reasons for this.  Local managers often possess connections to the local business community and government.  They usually have a better understanding of local consumer culture.   Finally, they often engender greater loyalty within the organization than foreigners.  The problem with expatriates is that, although they understand the company culture and processes, they don’t necessarily understand the local market very well — especially when there is a language barrier.  In addition, they may not be able to exert the same degree of authority on local employees as a local manager.  Finally, expats often are uninterested in staying in a foreign market for very long as it can represent a burden on their families.  One British company, operating in Hungary, found that the British employees in Budapest intentionally failed to learn Hungarian lest they be asked to stay longer (Deloitte, 2010). 

References

Deloitte. (2010). Revisiting retail Globalization. Retrieved 2011, from http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_retail_globalization.pdf

Sourcewatch. (2011). Retrieved 2011, from Sourcewatch: http://www.sourcewatch.org/index.php?title=Levi_Strauss#Business_Strategy

Global Business Today, Charles W.L. Hill, 6e / 2009