Levi's - Dilemmas in denim
Levi's is the company that invented jeans, and has been in business for a century and a half. It now must successfully answer a series of questions that will determine whether it can survive for another 150 years.
How can Levi’s continue to appeal to a market which consists mainly of fickle, fashion-conscious young people? Can it maintain a competitive retail price while operating in the cut-throat textiles business where wages are low and factory standards often poor? And can Levi’s manage to avoid the sort of damaging scandals that have hit the reputation of Nike and Gap?
Market pressures have been taking their toll on Levi's. Sales of its main products, jeans and Dockers casual-wear, have been falling since the mid-1990s. The company has cut 18,000 jobs in high-wage locations – in fact it's closed 30 factories in North America, and seven in Europe over the last five years.
Where once the company used to manufacture its own products close to the places where they were sold, it's increasingly sub-contracting the work in low wage locations in Africa and Asia.
But the company knows that cutting costs to the bone could damage the integrity of the brand if it's seen to be exploiting the workforce. Back in 1991 it drew up a code of conduct which imposes standards of health and safety, and bans abuses such as child labour. The company also supports good causes, including AIDS charities, and (in South Africa) a home for children who have suffered serious physical or sexual abuse.
It's managed to bear the extra cost of such programmes by maintaining a position at the higher end of the mass-market. Levi's has not traditionally been the cheapest brand of jeans. But the company is having to work hard and think in new directions to put itself back on the road to growth.
To reach the growing number of jeans-buyers who are more conscious of price than fashion, it's launching a new low-cost brand, Signature, through the giant Wal-Mart retail chain in the United States.
It's also offering trendier designs, such as flares and low cut waists, and a variety of denim textures, for younger people who currently may see Levi's as "middle aged". And buttressing these efforts will be the company’s famously innovative high-profile advertising to persuade a new generation that Levi's is at the cutting-edge of fashion.
Will this be enough to guarantee Levi’s continued survival?
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