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Jawad Saleem Group members mentioned below Final Project Principles of Marketing (MBA-Exe) 25th April, 2011
Group Members: Imran Butt Iraj Sohail Jawad Raza Ahmad Rohafa Babar
Teachers Comments:
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Table of Contents
Executive Summary About Levis Strauss and Co. Vision Value The Brand Understanding the Marketing Environment Microenvironment Urban Growth Retail Evolution Industry Overview (Pakistan) Suppliers LS&Co. Code of Conduct Implementation At the Factory Industry Collaboration Intermediaries Customers Ethical Standards Legal Requirements Environmental requirements Community involvement Competitors Macro Environment Natural Environment Other Raw Materials Political Environment Cultural Environment Demographic Environment Technological Environment Economic Conditions of Pakistan Analysis - SWOT Strength Weakness Opportunities Threats Customer Driven Marketing Strategy Product Price Pricing Strategy Place Levis Strauss Signature
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Promotion Current Segmentation, Targeting, and Positioning Strategies LS Signature Positioning Market Segmentation Target Market Market Segmentation and consumer profiling Demographic Segmentation Geographic Segmentation Psychographic Segmentation Holistic Marketing Approach In Perspective Of Ansoff Matrix Suggested Growth Strategy Market penetration strategy Suggested Marketing mix Strategies Product Strategy Pricing Strategy Promotion strategy Placement/ distribution Strategy Proposed Distribution Proposed P&L 2011 Suggestions and Recommendations Conclusion
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Executive Summary
Levis Strauss and Co. is a brand known for quality and prestige. It strives to provide the world's casual workday wardrobe, inside and out. LS&CO., a top manufacturer of brand-name clothing globally, sells jeans and sportswear under the Levi's, Dockers, and Levi Strauss Signature names in more than 110 countries. For its 12 years in Pakistan, it stands proud as a market leader in denim and non-denim garments and is the first preference for especially the youth. Its superior quality products are known for innovation in style and fashion with an utmost focus on comfort and image. Its target market consists of Upper, Upper middle and Middle class consumers. They have a wide range of products with constant seasonal and occasional improvements happening every now and then. Focal point being the youth! This report will take you through the marketing direction of Levis Strauss and Co. with respect to the market in Pakistan. The brand of focus in our report is their recently introduced line; Signature, which is especially designed to reach out to the Middle income class who could not previously afford the Levis Strauss products. Without any compromise on quality, the brand has very successfully penetrated into the targeted group, providing them more value at just the right price! We hope that after studying the report, you will be able to understand and comprehend the marketing plan, strategies, ideologies and strategic direction of Levis Strauss and Co.s Signature. Special thanks to Mr. Jawad Saleem for his support and guidance so far.
Thank You.
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It was founded in 1853 when Levi Strauss came from Bettelheim, Franconia, (Kingdom of Bavaria) to San Francisco, California to open a west coast branch of his brothers' New York dry goods business. Although the company began producing denim overalls in the 1870s, modern jeans were not produced until the 1920s. Levi Strauss & Co. (LS&CO.) strives to provide the world's casual workday wardrobe, inside and out. LS&CO., a top manufacturer of brand-name clothing globally, sells jeans and sportswear under the Levi's, Dockers, and Levi Strauss Signature names in more than 110 countries. It also markets men's and women's body wear and loungewear. Levi's jeans -department store staples -- were once the uniform of American youth, but LS&CO. has been working to reconnect with the niche and expand outside the US. It has transformed its products portfolio to include wrinkle-free and stain-resistant fabrics used in making some of its Levi's and Dockers slacks. The Haas family (relatives of founder Levi Strauss) owns LS&CO.
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Vision
We believe that business can drive profits through principles, and that our values as a company and as individuals give us a competitive advantage.
Values
Empathy walking in other peoples shoes Empathy begins with paying close attention to the world around us. We listen and respond to the needs of our customers, employees and other stakeholders. Originality being authentic and innovative The pioneering spirit that started in 1873 with the very first pair of blue jeans still permeates all aspects of our business. Through innovative products and practices, we break the mold. Integrity doing the right thing Integrity means doing right by our employees, brands, company and society as a whole. Ethical conduct and social responsibility characterize our way of doing business. Courage standing up for what we believe It takes courage to be great. Courage is the willingness to tell the truth and to challenge hierarchy, accepted practice and conventional wisdom. It means standing by our convictions and acting on our beliefs. We are the embodiment of the energy and events of our time, inspiring people from all walks of life with a pioneering spirit. Generations have worn Levis jeans, turning them into a symbol of freedom and self-expression in the face of adversity, challenge and social change. Our customers forged a new territory called the American West. They fought in wars for peace. They instigated counterculture revolutions. They tore down the Berlin Wall. Reverent, irreverent they took a stand.
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The Brand
The Signature by Levi Strauss & Co brand, launched in 2007, demonstrates that distinctive products, with premium fabrics and finishes, can be available to people from every walk of life. The brand offers high-quality, fashionable jeans at affordable prices to value-conscious consumers at international value departmental stores such as Wal-Mart, Target and Kmart internationally, Metro, Makro and a number of standalone stores nationwide in Pakistan and abroad. With denim and casualwear for men, women and children, Signature by Levi Strauss & Co. apparel is the ideal fit for families who know the value of quality craftsmanship and quintessential style the very things that have made Levi Strauss & Co. brands world famous for generations. The Signature by Levi Strauss & Co. brand includes a collection of denim and non-denim pants, shirts, skirts and jackets for men, women and children. Superior Fit, Comfort and Style are the words emblazoned on the patch of every pair of our Signature jeans.
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Microenvironment
In microenvironment Levi Strauss Signature is affected by Suppliers, Intermediaries, Customers and Competitors. These four groups affect the company in many different ways and exert pressure and effects differently. In 2005 textile was given a tax exemption and was made 0 dbase. Now in 2011 that exemption has been withdrawn and a 6% tax has been in posed on the local textile sector; however textile exporters are exempted from this tax.
Urban Growth
It is estimated that in 2008, about 6.8 million of the 50 million people living in urban Pakistan belonged to the upper and uppermiddle class and this segment is projected to grow to 17 million people by the year 2010. Per capita income grew by an average rate of 13.5 percent per annum during the last three years rising from $736 in 2007 to $831in 2010
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Retail Evolution
Three years of strong economic growth complemented by record low interest rates and the ongoing structural shift of many households in Pakistan toward higher consumption have injected new life into domestic spending. Despite inflation the invisible arm of the economy continues to be strong, reflecting positively in the consumer disposable income. Over the last decade the retail sector in urban Pakistan continues to evolve rapidly. The emergence of new formats such as superstores, VISS and shopping plazas catering to the urban middle class and upper disposable income groups is accelerating. Signs of modern retail presence are emerging. Global mass retailers such as German Metro, Dutch Makro and the French Carrefour have announced entry the Pakistani market. Local player Q-Mart has already opened its first 10000sqft store as a part of 100+ chain. The entry of such firms is going to profoundly alter the retail landscape further. Retail demand is modernizing the retail landscape.
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Stores selling export quality and imports reflect a consumer opportunity for standard. Department stores & MBO`s are expected to grow and represent a distribution opportunity for the Signature brand.
Suppliers:
For more than 155 years, Levi Strauss & Co. has worked to honor the pioneering spirit of hard work, individuality and authenticity in how weve made our products, and how weve run our company. They have dedicated themselves to elevating the dignity of the people who work to bring their clothing to market. And theyve invested our time, energy, heart and resources in improving the future of those sourcing communities.
Almost two decades ago, in 1991, they were the first multinational apparel company to establish a comprehensive workplace code of conduct for their manufacturing suppliers. Their Terms of Engagement spell out labor, health and safety, and environmental requirements. It is based on United Nations documents such as the Universal Declaration of Human Rights and International Labor Organization (ILO) Core Conventions. Over the years, many companies have adopted similar codes of conduct, and today most of those reflect their original Terms of Engagement. In 1995, they added strict water quality standards as part of our environmental requirements. And in 1999 and 2005, they strengthened protections of workers rights to form unions and conduct collective bargaining.
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Implementation
Over the years, LS&Co has established a strong program to assess how well their suppliers are meeting their code and, when we identify problems, how to improve. They have also learned that monitoring their suppliers is only one part of improving working conditions. In addition to working directly with their suppliers, they have programs in the communities to strengthen worker rights. Levis also work with governments to strengthen labor laws and their enforcement. Ultimately, improving working conditions in their supplier factories requires the involvement of their suppliers, local organizations, governments and other buyers that may be sourcing in those factories. At the Factory
Levis employ full-time factory assessors, located around the world where their suppliers are. These experts understand the scope of our labor and environment, health and safety standards and know the local languages, laws, culture and business context of each country in which Levis operates. They conduct regular assessments of every factory contracted to manufacture our products. These assessments are based on standards found in their Social and Environmental Sustainability Guidebook, which all Levis suppliers receive in their local language. Industry Collaboration LS&Co. is a member of the Fair Factories Clearinghouse along with brands like adidas, L.L.Bean, Starbucks, Timberland and VF Corp., which are dedicated to improving workplace conditions.
Intermediaries
Levis is mainly operating through a franchise channel and same is the structure for Signature. However there is a wholesale component to it as well. There is a natural contrast of working n the two channels, franchise maintains a lower forward inventory cover and works on replenishment while the whole sale sellers maintain a broader inventory cover. The margin % as well as the product line is different for the two channels/intermediaries. The company has one single distribution center/warehouse which furnishes product throughout the country. Two years
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back the company shifted to the state of the ask SAP system for financial controls which has proven to be extremely efficient from all aspect including inbound and outbound shipments.
Customers
Before we move any further we should clarify the terms customer and consumer. At Levis customer is the franchise partner and the consumer is the end user. From a customer stand point Levis as an organization puts a lot of emphasis on the choice of right king of business partners. Business Partner Terms/ customers standards
LS&Co. business standards assist them in selecting business partners that follow work place standards and business practices consistent with their Company's policies. As a set of guiding principles, they also help identify potential problems so that Levis can work with their business partners/customers to address issues of concern as they arise. Specifically, they expect their business partners to operate workplaces where the following standards and practices are followed: Ethical Standards: They identify and utilize business partners who aspire as individuals and in the conduct of all their businesses to a set of ethical standards not incompatible with Levis standards. Legal Requirements: They expect their business partners to be law abiding as individuals and to comply with legal requirements relevant to the conduct of all their businesses. Environmental Requirements: Levis only does business with partners who share their commitment to the environment and who conduct their business in a way that is consistent with Levi Strauss & Co.'s Environmental Philosophy and Guiding Principles. Community Involvement: They will favor business partners who share their commitment to contribute to improving community conditions.
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Competitors
Being a global company Levis has two sets of competitors local and international. Some of the top competitors for Levis are.
-Guess Jeans
- Diesel
- True Religion Jeans Competition in retail channels is fragmented but emergence of mass channel players and some local brands has changed the landscape in the last 2 years. The Standard Jeans market in Pakistan. Major competitors in the market place are as follows.
1. Stone age
2. Cross Road
3. Outfitters
4. Few other local brands ( having very low market share) While its competition some of these channels also represent an expansion opportunity. Stores selling export quality and imports reflect a consumer preference ad if addressed can be persuaded to sell Signature. Department stores & MBOs are key channels for Selling Imports & export jeans wear and represent a distribution opportunity for the Signature brand for volume
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generation. Having said that, Standalone Signature stores will be critical to establish brand authenticity.
Market Share 2008 Signature Stone age Outfitters Cross Roads Others Total 15% 30% 20% 35% 2009 38% 16% 17% 15% 14% 2010 39% 24% 17% 11% 9%
Market Share
100% 80% 30% 60% 40% 20% 0% 2008 2009 2010 15% 35% 20% 14% 15% 17% 16% 38% 24% 9% 11% 17%
39%
Signature
Macro Environment
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In macro level environment; Levis Signature is being affected by number of factors which include natural, political, cultural, demographic, technological and economic conditions of Pakistan and the world. Like other successful companies, Levis Signature also has realized that the marketing environment presents a never-ending series of opportunities and threats. The major responsibility for identifying significant changes in the micro and macro environment falls to a companys marketers. Many opportunities are found by identifying trends (directions or sequences of events that have some momentum and durability) and mega trends (major social, economic, political and technological changes that have long-lasting influence). Within the rapidly changing global picture, the marketers of Stone Age are monitoring the following six major Environmental Forces: Natural Environment Political Environment Cultural Environment Demographic Environment Technological Environment Socio economic Environment
Natural Environment:
Cotton Cotton is the foundation of Levi Strauss as an organization and its products. Cotton accounts for 40% of the worlds fiber production and generates a $40 billion a year textile market. It is grown in more than 100 countries, with China, India and the U.S. accounting for nearly two-thirds of global output. More than 40 million farmers and 290 million farm workers make a living by growing cotton. About 80% of the cotton farms are small, many are family owned. About 70% of the industry is labor intensive, especially outside the U.S. and it typically uses a lot of pesticides and water.
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Though Levis is a big consumer of cotton, they use less than 1% of the worlds annual cotton crop. Trying to promote more sustainable practices in an industry that is so fragmented is a challenge. By creating alliances with other big cotton consumers, Levis leverage the power of their brands in support of more sustainably produced cotton which uses less water and fewer pesticides. They have joined forces with other brands and retailers, including The Gap, Marks & Spencer, Adidas and IKEA, as well as other groups like WWF, Pesticide Action Network UK, and farmers organizations such as the International Federation of Agricultural Producers to form the Better Cotton Initiative
Political Environment
Political environment in Pakistan continues to be challenging. The democratic government of Pakistan peoples part which came in power approximately three years back has been unsuccessful on delivering its of basic promise of food, clothing and shelter. The Pakistani government is actively encouraging foreign investment, but faces formidable challenges in its attempts to improve the operational environment. Corruption remains endemic at all levels and officials often demand kickbacks. Bureaucracy is slow and obstructive, and the infrastructure falls well short of desirable standards. Inconsistent policy implementation also poses problems. The government's anti-corruption and privatization drive has slowed down significantly amid severe political and security instabilities, which has left numerous sectors such as power, agriculture, and financial services in dire need of reform.
Cultural Environment
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Cultural environment in Pakistan continues to be challenging as there is a natural resistance towards the west especially in women clothing area. Local dresses still dominate the apparel industry for both men and women; Bareeza, generations, gul Ahmed, Junaid Jamshed, and Amir Adnan etc are examples of this statement. However the recent trends have extended some optimizes to this cultural scenario due to an influx of information through liberated media which has significantly increased general public exposure. When it come to western fashion, Pakistan follows the US for casual and Europe for formal fashion trends. Levis was present in Pakistan long before it was formally launched here.
Demographic Environment
Pakistan is the sixth largest country in the world in terms of population. With a population base of over 180million people, 60% of the population of Pakistan is between 15-20 years of age. This makes Pakistan one of the most lucrative jean market in the world, as it fits perfectly in the target age bracket.
Technological Environment
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Pakistan seems to be doing better in the tech sector which includes telecommunication, IT, textile technology. Here we are primarily focusing on the textile sector only. Pakistan is ranked as the worlds fourth largest producer and the third largest consumer of cotton, with a spinning capacity of 2.89 million kg of yarn and weaving capacity of 8.94 million sqm of cloth. The textile industry of Pakistan contributes over 50% to the countrys total exports with an investment of US$ 7 billion over the past six years. Textile exports in the last fiscal year were US$ 9.48 billion. There are more than 4000 textile related industrial units operating in Pakistan out of which 90% of the units are using latest machinery and imported parts. In order to facilitate the local textile industry, the Government of Pakistan has allowed duty free import of a wide range of textile machinery and equipment.
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Analysis - SWOT
Strengths
Strong company name Levi Strauss &Co. to back the brand, giving it credibility and authenticity. Strong brand awareness. Global support in term of technology, research and product design. First mover advantage, since Levis has been operating in Pakistan for the past 12 years. Best business partner for retailing and manufacturing. Experienced, motivated and experienced operational team.
Weakness
Low penetration in the smaller cities. Absence of online shopping option. Just one warehouse in Pakistan (in Lahore) which sometimes results in delayed shipments to Karachi and other distant areas.
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Opportunities
Population base of 180 million people with 60% below 20 years of age. Opportunity to penetrate into smaller cities and Azad Kashmir. Introduction of kids range which is already being produced here in Pakistan for Europe and US. On-line shopping solution is a big opportunity as the internet penetration in Pakistan is growing at a very fast pace.
Threats
Vertical brands local brands with low operating cost and high penetration in tier 2/3 cities posing strong competition. Political instability and security situation in the country can result in retail prolonged market closure with can cause heavy losses. Increasing inflation can result in increased input cost. Weak legislation against intellectual property rights. Parallel imports and counterfeit product from china and Thailand can impact Signature brand proposition.
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Local Sourcing improves landed cost substantially due to lower import duty & freight cost (approximately 25-30%).
Competitive Retail margin & credit period terms in the standard segment is critical for brand success.
Place: The business will need to create footprint which has an integrated & controlled retail brand presence. Need to establish geographic footprint with appropriate Franchise, SIS & Shelf presence in relevant markets. Create specific product distribution models and criteria for different channels, including direct to retail option as appropriate. Optimize seasonal inventory investment at the affiliate level by focusing on a sell-in process based on made to order.
2008 Total Stores Franchise O&O
-MBO -Dept Stores -Supermarket/Hypermarket
2009 31 8 3
8 10 2
2010 40 15 4
8 10 3
22 4 2
5 10 1
Promotion: Adopt and adapt global/regional communication to create brand authenticity. Create brand awareness for Signature by adopting mass communication channels e.g. Outdoor, print, electronic (TV& radio) and in-store. Consolidate our communication in limited mediums and create optimal presence instead of spreading out thin.
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Ensure product range and communication is aligned with the target age group and profile. (i.e. Price & Brand Conscious consumers).
Ensure standardization and uniformity in Store format and VM & merchandizing display to create brand recognition and top of mind awareness.
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Market Segmentation and Consumer Profiling Demographic Segmentation o Behavioral Segmentation15-24+ year olds, early & late adopters & regulars, they live with his/her parents. o Living in B & B+ residential areas of top ten metro-cities of Pakistan. o Average Household Income ranging from $250-$500 per month. o High School & University students and job beginners starting their professional careers on entry level positions. Geographic Segmentation o Signature covers Pakistan urban population. o Primarily top 5 urban cities Karachi, Lahore, Gujranwala, Sialkot, Islamabad, Rawalpindi, Faisalabad and Multan, Psychographic Segmentation o They are fun loving, confident and expressive. o They are young mobile users who like to switch cell phones frequently. o They like to hang out with friends in hip restaurants and caf. o Likes to spend money and has excess to credit cards. o They like music, sports current affairs and have knowledge about the global trends.
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1500
1000
500
$3.3- $6.5
&10- $ 13.2
$13.3-$ 16.5
$16.6-$19.9
$20- $23.2
$23.3-$ 26.5
$26.6- $29.9
$30- $33.2
R6.6-$9.9
$33.3>
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Promotion strategy Signature is continuously offering deals to its consumer to keep their interest intact in the brand. But still more aggressive and focused campaign could help it re-inforcing its low-priced attribute. Mass marketing could be improved by the total amount of marketing budget being spent on the promotional activities in below mentioned proportions:
Proposed A&P Allocation TV Radio Outdoor Print Tactical Marketing Retail (includes windows, shops, construction) Internet Sponsorships Agency Fees Market Research TOTAL A&P % Spend 10% 5% 4% 3% 15% 20% 18% 5% 15% 5% 100%
Device sales promotions which are tactical in nature. We suggest introductions of better bundle deals on t-shirts, cross promotions between tops and bottoms category, etc. Online shopping option strategy to be introduced. Could use forums on the Signature website. Huge potential!
Placement/ distribution Strategy Customer traffic is the name of the game. Higher the foot fall the better will be the sale; it does not matter if it is a high profile or low profile market, mall or bazaar. They should never lose sight of the fact that the size of the prize/market is 180 million people. Signature is following the mass spread model of distribution which is spread it as far as you canjean for everyone, its basic clothing. To live up to this they need to penetrate into pother high potential markets, by entering other major cities of Pakistan, which are still virgin.
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Also, penetration into Middle class is also another strategy which can be used, as considering the price, they are very much a potential market, especially the youth, who may not be frequent in buying Levis but it would be their first choice when they have the capacity to buy it. More smaller stores in Mass markets could reinforce this.
Proposed distribution Continue to expand footprint in Metro cities through franchise network. Need for deeper penetration in tier 2 cities with value added deals and products. Expand into these markets through distributor/wholesale channels to manage dist cost. Concentrate more on multi-brand apparel stores in tier 2 locations. Recommended cities Wah Cantt, Jehlum Kentt, RYK, Abottabad, Azad Kashmir
2011 71 25 4
25 15 2
40 15 4
8 10 3
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MGP MGP%
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Conclusion
We conclude the project by saying that it has been an excellent learning experience to conduct this research and analysis. Levis Strauss and Co. is undoubtedly one of the best organizations in the world, proving excellent customer value and quality products to its consumers and stands out as a market leader, and rightly so ! Its truly the brand for the youth!! Thank You.
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