Levi and Strauss & Co

Levi Strauss & Co. is a flourishing business. Since the early days, it has been a leader in the garment industry. The original and close famous Levi Strauss product is blue jeans. Jeans have become desirable and even fashionable clothing for not only miners, farmers, and cowboys, but also for movie stars, executives, women, children, and teenagers from all told over the world. Throughout its history, however, the keep company has researched and developed a number of other products. The company now markets a wide range of clothing and accessories, all beneath the brand name Levis.Many new Levi products have been launched over the years. Some of these have succeeded beautifully, but others have flopped completely. The company is still best known, however, as the maker of Levi jeans, the knickers that are guaranteed to shrink1, wrinkle, and fade2. In 1954, flushed with the success of the cotton twill pants it had introduced a few years earlier, Levi brought out a line of permanent cheer (no-iron) slacks. Within six months, 5 out of every 100 pairs sold had been returned, and Levi had to admit it didnt have the right fabric for permanent press.Fifteen years later, as the company was planning its major expansion, it hit on a couple of equally dramatic flops. First was the denim bathing suitwhich, when wet, weighed the wearer down to the doom of imminent drowning. Next was a line of disposable (throw-away) sheets and towels. These, Levi discovered, were not high on the consumers list of priorities. Unable to interest hotels in the product, the company was saved when the factory that made the sheets burned down. Levi absorbed the $250,000 loss.Eventually Levi created six new divisions, ranging from jeans to accessories and including a sizable effort in womens sportswear, Levis for Gals. The diversification3 worked. In the mid-1970s Levis gross revenue hit the billion-dollar mark, having taken 125 years to reach that milestone. Four years later sales hit $2 bil lion. In 1979 the company ranked 167 on Fortunes4 list of the 500 largest industrial corporations, and 20 in net profits. 5 Between 1970 and 1980 Levi had grown an average of 23 percent a year.In 1979 wholly it sold 143 million garments. In menswear, though, all Levi products had been aimed at the middle of the market. The company had brought out a line of moderately dressy slacks and polyester leisure suitsthe work Slack and Action Suitand was doing a brisk business with them. But the tempting upper end of the market remained untouched. If we want to grow were bethe likes of going to have to go to upper moderate price points, one Levi official explained, and somewhat higher taste level for our products. In short, they needed to dole out more expensive clotheslike the well-kept Classic. If Levi could sell sport coats, dress slacks, and, above all, suits, a whole new market would open up. The Tailored Classic might make money all by itself. But even more important, it would get Levi into the business of producing fancier and costlier clothing. The consumer would come to think of it as a manufacturer of dress apparel and it could spin off6 many more such lines in the future. Why, with such a record of success would any company be worrying about making new products?Part of the answer, obviously, is the sheer riskiness of depending so heavily on a single item. The yowl in jeans was in many ways a historical accident, and what history has given it can also take away. Then, too, the demographics of the marketplace were already beginning to change. Jeans, to be sure, were no nightlong the exclusive province of youth baby boomers7 who had grown up on Levis kept on wearing them into their twenties. But they would no longer be wearing them everywhere and all the time, as they did when they were teenagers.And the next generation of adolescents was not so numerous. The birthrate had peaked in 1957 by 1964, demographers agreed, the baby boom in the United Stated was over. The bulge in the population that the boom had created would soon be moving into a world of casual slacks, leisure suits, and coats and ties. From a marketing point of view, thats where the action would be. Finally, the competition had been gearing up. Levis had always shared the market with Blue Bells Wranglers and other national brands like Lee. But now everyone seemed to be selling jeans.Back in 1970 Levi probably couldnt have foreseen the popularity of designer jeans skimming off8 the upper end of the market. But they could sure as shooting anticipate cut-rate models gnawing away at the low end. To sell their wares, Levi knew, retailers would have to slash prices. The profit outlook in a saturated, competitive marketplace like this was bleak. Adapted from Boyd, F. (1994). Making Business Decisions Real Cases from Real Companies. USA Addison-Wesley Publishing Company. _________________________________________________________________________________________