LEVI STRAUSS & COMPANY – 2005
As the world’s number-one maker of brand-name clothing, Levi Strauss & Company (www.levistrauss.com) manufactures and markets casual work and non-work jeans and sportswear. Its signature name products are synonymous with comfort. A well-worn pair of Levi’s was once a staple item in every teen’s closet. However, in recent years Levi Strauss lost touch with consumer trends and has struggled to find the right combination of strategies to define (redefine) itself and its signature products. The company’s president and CEO Philip Marineau, who was hired away from Pepsi in 1999 to restore Levi’s image and performance, is searching for the correct combination of strategies to return Levi Strauss to the powerful brand it once was. Company History
Levi Strauss & Company was founded in 1853 by Levi Strauss, who arrived in San Francisco from New York to start a wholesale dry goods business. A gold prospector told Strauss of miners’ problems in finding sturdy pants that held up under the pressures of panning for gold. Sensing an opportunity, Strauss made a pair of pants out of canvas material for the prospector. It didn’t take long for word of the durable pants to spread. During the 1860s, Strauss switched the fabric to a durable French cloth (serge de Nimes), which soon became known as denim. He colored the fabric with an indigo dye and together with a Nevada tailor, patented the process of putting rivets in pants for strength. That’s how Levi’s jeans were created. The pants quickly became the choice for work clothing of cowboys, oil drillers, lumberjacks, farmers, and railroad workers. From its beginning as a company whose clothes were favored by blue-collar workers, Levi’s jeans ultimately became the preferred clothing choice of teens around the world. No longer were jeans viewed as something worn only by hardworking laborers. The strong popularity and appeal of the Levi’s brand jeans and clothes would last well into the 1990s before problems hit. From a peak of $7.136 billion in 1996, sales have continued to decline every year with sales revenues hitting $4.072 billion in 2004. Despite the sales declines, Levi Strauss has continued to make a profit until 2003 when it suffered a record net loss of $349 million. However, in 2004, the company rebounded and showed a small profit of $30 million. Current Operations
Levi Strauss & Company is a worldwide corporation selling jeans and sportswear in more than 110 countries. It is organized into three geographic divisions: Levi Strauss North America based in San Francisco; Levi Strauss Europe based in Brussels; and the Asia Pacific Division based in Singapore. The North American division is the company’s largest region, and in 2004 accounted for 60 percent of total sales. The Levi Strauss European division accounted for 25 percent of total sales in 2004. The Asia Pacific Division, established in 1995, accounted for 15 percent of total sales in 2004.
The decline in total sales over the past 8 years has led to important changes in Levi’s operating strategies. It closed 37 of its manufacturing factories worldwide and now uses independent contract manufacturers located in Latin America and Asia. Included in this strategic move was the closure of the company’s remaining North American manufacturing facilities in early 2004. These plant closings have resulted in some 71 percent (26,000 plus) of its employees worldwide being laid off.
The company’s strategic move to outsourcing has presented its own challenges because of Levi Strauss’ strong commitment to socially responsible business practices. In 1991, Levi Strauss became the first multinational company to establish a comprehensive ethical code of conduct for its alliance partners in manufacturing and finishing. This code, titled the Global Sourcing and Operating Guidelines, establishes business practices such as fair employment, worker health and safety, and environmental standards. The company remains...
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