Economic Factors
This chapter seeks to explore the economic factors for “[Levi Strauss & Co., being] one of the world’s largest brand-name apparel marketers with sales in more than 100 countries” (Vrontis & Vronti, 2004, p.392). Focus is placed on the current impact of ever-expanding regulation on consumer choice, economic decision-making, pursuits in producing goods/services, and the use efficiency of limited resources.
“There is no other country with a comparable global presence in the jeans and casual pants market” (Vrontis & Vronti, 2004, p.392). Findings comprise of three significant categories that define the scope of purchasing behaviours for jeans among teenagers. Thomas, Woodward, and Herr (2000, p.253) conducted a study consisting of students 14-18 years of age, to identify the selection criteria and incentives for selecting particular stores and jeans, results found price, brand, and quality were the main driving factors. This transforms the customer’s needs, wants and demands into current value, satisfaction and quality. “A global strategic and tactical approach therefore enables Levi Strauss to maximise competitive advantage across the world market” (Vrontis & Vronti, 2004, p.397).
Marketing management should only need to persuade initial purchases (male youth) being free to venture private wealth, produce a new product (semi-formal denim), and start to sell it. To implement successfully in new consumer bases while securing a larger market share, there must be in place business measures/practices that create customer value and build relationships. “Such incentives could be the ability to enjoy economies of scale as a consequence of large output, the ability to extend the life cycle of their product in the phase of a mature domestic market and the escape from increasing levels of domestic competition” (Vrontis & Vronti, 2004, p.389-90).
“It is illustrated that global standardisation and international adaptation do take place, and can bring benefits” (Vrontis & Vronti, 2004, p.395). For the new product venture to achieve optimal results across the marketing mix, note universal business practices (product design and advertising) are unsustainable in local markets as distinct from the international. Local markets are seen to do very well in disposable income per capita, which impacts upon consumer decisions (Vrontis & Vronti, 2004, p.395). Standard prices would result in poor countries being unable to purchase products, losing market share. To adapt to low prices it requires quality reductions to cut costs and ensure profitability. Toward achieving an ‘AdaptStand’ balance (adaptation versus standardisation), shown in figure one.
Figure one: AdaptStand:
Image source: (Vrontis in Vrontis & Vronti, 2004, p.391).
Gains from trade and rising growth rates arise from diversity rather than uniformity. Developments in labour standards can also be brought about with free/unrestricted trade. Regulation is the former impediment toward unnecessary costs stemming from high taxes, trade barriers/tariffs, inflation, and labour unions. “[Pressure to lower prices forces the] company cut 5 per cent of Levi’s worldwide work force of 12,500 employees and continues an overhaul that has eliminated thousands of Levi’s jobs” (Vrontis & Vronti, 2004, p.392). To bring cheaper products to the market, more efficient suppliers are required, whether in operations or use of limited resources. “In an effort to overcome this problem […] Levi’s has designed more clothes to appeal to teenagers and young adults, and cut costs to lower prices” (Vrontis & Vronti, 2004, p.392).
Competitor Analysis
Levis Strauss is placed in a market structure that has monopolistic competition. Bisley Workwear (indirect competitor) has similarities in satisfying consumer demand for the durable desired qualities of denim wear, however captures the physical labourer professions market with multiple product variations: industrial strength gear, inherent flame resistant denim fabric, and reflective red tape. Togged and Kitmeout (indirect competitors) capture the eco-friendly/sustainable jeans market, sourcing sugarcane fibres for material.
Direct/substitute competitors are KKCL, Wrangler, Mavi, Just Jeans, Rag & Bone delivering similar jeans that satisfy customer needs for style, comfort, and trends. “Growth and expansion means that KKCL is able to boast a portfolio containing brands which variously: span price points from premium to budget; incorporate a wide range of clothing products to wear on different formal and informal occasions; feature innovative design; offer quality, fit and comfort; and are sold through a variety of outlets.” (The jeans genie, 2016, p.30)
KKCL – the largest denim brand in India with a relative competitive advantage (cutting-edge technology) to differentiate and lower costs. “KKCL is better placed than most to exploit opportunities [with] the following features: access to manufacturing technologies which have been comparable with that of most global competitors for over a decade.” (The jeans genie, 2016, p.30) KKCL’s TUKA system installation (Tukatech’s development software) helps design new products and streamline production processes, “[…] key to the organization’s ability to innovate; a strong emphasis on integration from design to manufacturing and beyond; and utilizes its five manufacturing plants at different stages of a production process that begins with the sourcing of raw materials and ends with finishing and packaging.” (The jeans genie, 2016, p.30)
“Between its launch and 1996, the Killer brand of jeans generated significant profits for KKCL [considering] Wrangler, Levis and Pepe were the three mainstays of the market at that time, this was no mean feat.” (The jeans genie, 2016, p.29-30) Wrangler – an American brand standing for integrity, honesty, and getting the job done, prides itself on high standards and own production facilities.
“China’s economic growth rate is the world’s fastest, and India’s is the second fastest.” (Jin, Yong, & Sang, 2010, p.181) Encouraging areas of opportunity associate around China’s and India’s growing middle class, promoting the growth of the distribution system, accessibility to online marketplace, backwardness growth rates and social responsible investment. “China and India clearly stand out as the two largest middle-income countries of origin.” (WIPO, Cornell University, & INSEAD, 2014) “China represents the world’s second largest apparel retail sales market, after the US” (Baker, in Jin, Yong, & Sang, 2010, p.181).
“Product diversification and the provision of added value for customers ensure that KKCL is well positioned to serve the rapidly expanding Indian apparel market.” (The jeans genie, 2016, p.30) However, Wrangler finds difficult to match and deliver brands that align connotations to the Indian marketplace having its distinct and iconic image of an American cowboy. “[KKCL] products are mainly targeted at younger consumers.” (The jeans genie, 2016, p.30) Wrangler also targets those 20-35 years of age, though priority should provide uniform products worldwide.
KKCL’s large retail presence sells directly to the consumer, helping to adapt differences toward buyer preferences. “Chinese consumers placed the highest importance on price, followed by fitting, brand country of origin, quality, and design, whereas Indian consumers placed importance on fitting, brand country of origin, design, price, and quality, in descending order.” (Jin, Yong, & Sang, 2010, p.180) Preferences are useful for each brand’s marketing strategies:
| Marketing Strategies: | Wrangler | KKCL |
| SEGMENTATION | Casual denim wear to men from upper and middle class that show: affordability, comfort, toughness, and lasting quality. | Denim wear for men, that showcases the internal utilisation of cutting-edge technology and its external environment being well-placed in the Indian market and its growing middle-class. |
| TARGETING | Designed for cowboys, denim jeans to help them feel Born Ready for life in the saddle. | Designed for the new generation of everyday workers and design denim jeans for those with busy lifestyles. |
| DIFFERENTIATION | American differences in jeans, style and image. | Indian differences in jeans, style and image. |
| POSITIONING | Well-known for trademarks, design, advertising, and quality. Being an American icon in largest market for jeans. | Well-known for universal design, advertising, and quality. Being an Indian brand in emerging economies. |
Franchised K-Lounges allows KKCL to supply inventory to stores from outright sale, reducing risk from market uncertainty that causes remaining unsold products. (The jeans genie, 2016, p.31) “Use of these stockists helps to improve the efficiency of supply chain management.” (The jeans genie, 2016, p.31) Surprisingly, as it would increase costs in relation to the franchise model “[…] e-commerce is well down [KKCL’s] list of priorities.” (The jeans genie, 2016, p.31)
“KKCL bases its pricing on total cost and aims to supply products around 20 per cent cheaper than equivalent international alternatives.” (The jeans genie, 2016, p.31) Placing Wrangler at a significant disadvantage toward the lower-middle class. “But the plethora of unorganized players in the Indian apparel market ensures that getting the price right is often challenging.” (The jeans genie, 2016, p.31) An opportunity for Wrangler to compete on price internationally, once cost reductive manufacturing and distribution processes are set-up in worldwide markets. “Price perceptions can vary considerably and it can have disastrous consequences for firms that set prices too low.” (The jeans genie, 2016, p.31) While, competition for the growing middle-class is fierce, comparing sustainable initiatives detracts from the true meaning of discretionary responsibility and community outreach.
India is a growing export economy though held back by government regulation that eliminated the rule of law. No property rights (secure ownership/authority over resources/capital) cause entrepreneurial activity at the ‘street level’, reduced capital accumulation/saving/productivity, that would otherwise have purchased equipment and machines. Encouraging signs for the economy are in India’s international trade has grown with reductions in tariffs. There is potential opportunity for a less coercive tax structure, free trade, and China’s/India’s untapped rural market for long-term sustainable growth. Challenges account for Confucian influences on employees’ behaviour, rural to urban inequality, manufacturing and distribution infrastructure, corporate governance compliance with China’s unclear laws and regulations and focus on international one-way trade.
Reference List
Jin, B., Yong Park, J., & Sang Ryu, J. (2010). Comparison of chinese and indian consumers’ evaluative criteria when selecting denim jeans: A conjoint analysis. Journal of Fashion Marketing and Management: An International Journal, 14(1), 180-194. doi:10.1108/13612021011025492
The jeans genie. (2016). Strategic Direction, 32(2), 29-31. doi: 10.1108/SD-11-2015-0173
Vrontis, D. & Vronti, P. (2004). Levi Strauss: An international marketing investigation. Journal of Fashion Marketing and Management: An International Journal, 8(4), 389-398. doi: 10.1108/13612020410559984
World Intellectual Property Organisation WIPO, Cornell University, & INSEAD. (2014). The Global Innovation Index 2014: The Human Factor in Innovation. Second printing. Fontainebleau, Ithaca, and Geneva. Retrieved [08/09/2016] from <http://www.wipo.int/econ_stat/en/economics/gii/>.
Featured image supplied free from Unsplash.
Copyright © 2016 Zoë-Marie Beesley. All Rights Reserved.
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