BBDM2153 – Operations Management
Tutorial 10
Levi Strauss Goes Local
It had been a tough few years for Levi Strauss, the iconic manufacturer of blue jeans. Sales at the
company, whose 501 jeans became the global symbol of the baby boom generation and were sold in
more than 100 countries, dropped from a peak of $7.1 billion in 1996 to just $4.0 billion in 2004.
Fashion trends had moved on, its critics charged, and Levi Strauss, hamstrung by high costs and a
stagnant product line, was looking more faded than a well-worn pair of 501s. Perhaps so, but 2005-2008
brought signs that a turnaround was in progress. Sales increased for the first time in eight years, and after
a string of losses the company started to register profits again.
There were three parts to this turnaround. First, Levi’s made cost reductions at home. Levi’s closed its
last remaining American factories and moved production offshore where jeans could be produced more
cheaply. Second, the company broadened its product line, introducing the Levi’s Signature brand that
could be sold through lower-priced outlets in markets that were more competitive, including the core
American market where Walmart had driven down prices. Third, the company decided in the late 1990s
to give more responsibility to national managers, allowing them to better tailor the product offering and
marketing mix to local conditions. Prior to this, Levi’s had basically sold the same product worldwide,
often using the same advertising message. The old strategy was designed to enable Levi’s to realise
economies of scale in production and advertising, but it wasn’t working.
Under the new strategy, variations between national markets have become more pronounced. Jeans have
been tailored to different body types. In Asia, shorter leg lengths are common, whereas in South Africa,
women’s jeans need to be roomier in the back, so Levi’s has customised the product offering to account
for these physical differences. Then there are socio cultural differences in Japan, tight-fitting black jeans
are popular, whereas, in Islamic countries, women are discouraged from wearing tight-fitting jeans so
Levi’s offering in countries like Turkey are roomier. Climate also has an effect on product design. In
northern Europe, standard weight jeans are sold, whereas in hotter countries lighter denim is used, along
with brighter colours that are not washed out by the tropical sun.
Levi’s ads, which used to be global, have also been tailored to regional differences. In Europe, the ads
now talk about the cool fit. In Asia, they talk about the rebirth of an original. In United States, the ads
show real people who are themselves originals; ranchers, surfers, great musicians.
Levi’s has also differentiated distribution channels and pricing strategy. In the fiercely competitive
American market, prices are as low as $25 and Levi’s are sold through mass-market discount retailers,
such as Walmart. In India, strong sales growth is being driven by Levi’s low-priced Signature bran. In
Spain, jeans are seen as higher fashion items and are being sold for $50 in higher- quality outlets. In the
United Kingdom, too, prices for 501s are much higher than in the Unites States, reflecting a more benign
competitive environment.
This variation in marketing mix seems to be reaping dividens; although demand in the United States and
Europe remains sluggish, growth in many other countries is strong. Turkey, South Korea, and South
Africa all recorded growth rates in excess of 20 percent per annum following the introduction of this
strategy in 2005. Looking forward, Levi’s expects 60 percent of its growth to come from emerging
markets.
Source: Adapted from Hill, CWL., Cronk, T & Wickramasekera, R 2011, ‘Global Business Today’,
McGraw Hill Australia Pty Ltd., Asia-Pacific edn, pg 622-623.
Required:
1. Explain at which phase of product life cycle Levi’s face in year 2004 and discuss how the
company overcome the problem.
(12 marks)
1
BBDM2153 – Operations Management
Tutorial 10
Product life cycle at Levi’s in year 2004 was at decline phase. It was evidence from the case that
sales dropped from a peak of $7.1 billion in 1996 to $4.0 billion in 2004 due to a stagnant
product line and fashion trends had move on, its critics charged and customers are looking more
on the faded rather than a well-worn pair of 501s.
How the company overcome the problem:
(a) Levi’s made cost reductions by closing its last remaining American factories and moved
production offshore where jeans could be produced more cheaply.
(b) Levi’s broadened its product line by introducing the Levi’s Signature brand that could be
sold through lower-priced outlets in markets and were more competitive, including the
core American market where Walmart had driven down prices.
(c) Providing empowerment to national managers to better tailor the product offering and
marketing mix to local conditions.
.
2. Base on the above case, discuss the fundamental Levi’s organisation competitive strategy and
explain the various operations function implemented on its product decision in order to meet
various countries demand.
(12 marks)
Levi’s organisation competitive strategy is completing on product differentiation. Uniqueness can go
beyond both the physical characteristics and service attributes to encompass everything that
impacts customer’s perception of value. Levi’s tailored to different body types as follows:
 In Asia, Levi’s jeans are shorter in lengths as Asian heights are shorter.

In South Africa, women’s jeans need to be roomier in the back.
 In Japan, tight-fitting black jeans are popular and in Islamic countries, women are
discouraged from wearing tight-fitting jeans so Levi’s offerings in countries like Turkey
are roomier.
 In northern Europe, standard weight jeans are sold, whereas in hotter countries lighted
denim is used, along with brighter colours that are not washed out by the tropical sun.
3. Globalization has made business very competitive, many business fails and as operations
manager, you realized that to win market share you have to apply strategies to achieve
competitive advantage. Discuss these THREE (3) strategies.

o
Competing on product differentiation.
Uniqueness can go beyond both the physical characteristics and service attributes to encompass
everything that impacts customer’s perception of value.
2
BBDM2153 – Operations Management
Tutorial 10
Example
o Safe skin gloves – leading edge products

o
Walt Disney Magic Kingdom – experience differentiation
o
Hard Rock Cafe – dining experience
Competing on Cost
Cost leadership – cheaper
Provide the maximum value as perceived by customer. Does not imply low quality.
To use financial resources effectively, by identifying the optimum size (and investment) allows
firms to spread overhead costs, providing a cost advantage.
Example
o Southwest Airlines or Air Asia – secondary airports, no frills service, efficient utilization of
equipment
o Wal-Mart – small overhead, shrinkage, distribution costs
o
o
o

Competing on respond
o
Response is a set of values related to timely product as well as reliable scheduling and flexible
performance.
o
Response is often thought of as flexible response and also refers to reliable and quick respond.
o
Flexible response may be thought of as the ability to match changes in a marketplace where
design innovation and volumes fluctuate substantially.
o Timeliness is quickness in design, production, and delivery.
Example
o Pizza Hut develop respond quickly have the competitive advantage. Hewlett-Packard (HP), a
firm that demonstrated flexibility in both design and volume changes in the volatile world of
personal computers.
4. Discuss why companies wanted to globalize?
1.
2.
3.
4.
5.
6.
Improve the supply chain
Reduce costs and exchange rate risks
Improve operations
Understand markets
Improve products
Attract and retain global talent
3