Done by: Odia Dinnall
Analysis using Porter’s five forces model
Barriers to Entry
On analyzing the case we will seek to look at two relevant barriers to entry; namely, product differentiation and economies of scale. The economy of scale refers to the decline per unit in product cost as the volume of production increases. Levi’s could have exploited opportunities to outsource their production facilities where labour is cheaper, in order to mass produce and have a cost advantages. Volumes of jeans have been produced in this market because other labels such as Arizona Jeans have exploited the opportunity. If they exploit the opportunity it means that they could produce for less and sell at a higher cost to their profitability.
The Levi’s brand has product differentiation because there is a history of brand loyalty; the product carries enough clout to justify a reasonable price premium. They had embarked on a project to create a niche market to attract higher income customers who were willing to pay a premium for a perfect fit. In this case the threat would be brand loyalty because there are a lot of producers of jeans.
Threat of Rivalry
Threat of rivalry includes all distributors and stores that sell jeans. Example of stores is the likes of JC Penny stores who were once a business alliance, they have sought out cheaper alternatives such as the Arizona brand of jeans and have become their competitor; there is also Gap, Lee and Wrangler. Each of these brands has their own market or customer base. With all of these competitors in the market there is likely competitive pricing for the product.
Threat of Substitutes
There are other forms of clothing that can substitute for jeans example cotton, linen and other forms of material that makes clothing. In this case though Levi’s has created a “personal pair for a perfect fit” this proposal has created the niche market for Levi’s through a jeans...