University project for a Marketing class

1. “Knowledge is power”
“The leader who does not want to buy information
is inconsiderate and can never win.”
Fr. Bacon

2. It is the strategic audit that covers the gathering of
this vital information.
External Internal
Strategic audit
Examines the macroenvironment Examines all aspects of the company

3. A SWOT Analysis in turn
summarizes the main elements of this audit into a statement
of the company’s strengths, weaknesses opportunities and
threats.
Organization’s inability to
exploit external
opportunity because of
internal strength
Internal strength
matches
external opportunity
External threat undercuts
the organization’s position
because of internal weakness
External threat can
damage the
organization’s
strength
A SWOT Analysis also helps managers to identify what organizational
activities can be realistically achieved over the course of time

4. Using the SWOT analysis I will present to you the historical
development of LEVI’S jeans.
Founded in 1853, it is a firm that still dominates the jeans
industry

5. Bavarian immigrant to America, Levi – Strauss carted a load of
heavy fabric to California to make tents during the gold rush.
He found that the gold seekers needed trousers more
than tents, so he used the fabric to make canvas trousers.
and found himself in the first quadrant of the SWOT diagram.
I.e. he took advantage of the opportunity
that occurred when an environmental trend
played to his strength

6. For the period of 1950 – 1970, he had no problems
retaining this position...
The explosion in the number of young people,
caused by the baby boom, made jeans
selling easy.
Levi simply had to make enough jeans
to satisfy a seemingly insatiable market.
No strategic marketing or planning
effort was needed.

7. However by the early 1980s, demographics had
caught up with the jeans industry...
Its best consumers – the baby boomers - were ageing and their
tastes were changing to their waistlines :p
Thus LEVI’S found itself fighting for share
in a lading jeans market...
Meanwhile, the 24-year-old segment -
– the group traditionally most likely to buy jeans,
was shrinking.

8. It was exactly then that Levi fully understood the
importance of strategic planning.
And goes on with the strategic objectives, the strategic audit, the
SWOT analysis, the portfolio analysis, objectives and strategies.
The strategic plan involves adapting the firm
to take advantage of opportunities
in a constantly changing environment.
It also sets the stage for the marketing plan.
Strategic planning starts with the overall purpose and mission

9. A mission states the purpose of the company.
i.e what it wants to accomplish in the larger environment.
1. Therefore, a mission must be clear.
A clear mission statement acts as an “invisible hand” that
guides people in the organization, so that they can work
independently and yet collectively.
2. A mission must be motivating
It should give people something to believe in

10. 2. Specific: it should fit the company and no other
3. Realistic
4. Market-oriented: it should define the business based on
satisfying basic customer needs.
5. A mission must also fit the environment...
A mission should be:

11. Let’s see why this is important...
At first, despite the declining market in the 1980s, Levi – Strauss & Co.
stuck closely to its basic jeans business.
It sought growth through mass-marketing strategies, thereby substantially
increasing the advertising and selling through mass retailers.
However, these tactics failed and profits continued to plummet.
And this was so, because the company’s mission no longer fitted
the environment.

12. So, when an organization is drifting or its mission no longer defines an
optimal course for the company, as in LEVI’S case, the management must
renew the search for its mission
To do that it must ask the following questions:
1. What business are we in?
2. What do customers value?
3. What are we in business for?
4. What sort of business are we?
5. What makes us special?

13. And this is exactly what LEVI’S did as well...
As a result, they went in for diversification into faster growing
fashion and apparel business.
By 1984 LEVI’S had already managed to diversify into a
muddled array of businesses.
As one analyst put it: “Levi became unstitched...It slapped its
famous name on everything from running suits to women’s
polyester pants”

14. The results, of course, were disastrous...
Profits collapsed by 79% and the
company slashed about 5000
jobs.
and found themselves even in a
worse position than before…
Thus, LEVI’S turned out to be unable to
exploit an external opportunity because
of an internal weakness

15. In 1985, in an effort to turn around the ailing Levi-Strauss&Co.
the new management implemented a bold new strategic plan..
It sold most of the ill-fated fashion and specially apparel
businesses…
This was a decision based on the analysis of its current
business portfolio
The business portfolio is the collection
of businesses and products that make up the company

16. Portfolio analysis helps managers to identify the most
profitable businesses and the least profitable ones.
Thus, they can easily decide in which businesses they would want
to put stronger resources and which businesses to phase down.
The company’s first step when doing portfolio analysis is
to identify the strategic business units

17. A strategic business unit (SBU) is a unit of the company that
1. has a separate mission and objectives
2. can be planned independently from other companies
business
Most standard portfolio-analysis methods evaluate SBUs on two
important dimensions:
 the attractiveness of the SBU market or industry
The strength of the SBU position in the market or industry
The best-known method is the BCG growth-share matrix

18. The BCG growth-share matrix
The vertical axis provides a
measure of market
effectiveness
The horizontal axis measures the
company’s strength in the market
4 types of SBU can be
distinguished in the matrix
1. Stars
2. Cash cows
3. Question marks
4. Dogs

19. Stars
 Stars are high-growth, high-share businesses or products.
 They often need heavy investment to finance their rapid
growth
 Eventually, their growth will slow down and they will turn into
cash cows

20. Cash cows
 Cash cows are low-growth, high-share businesses or
products
 They need less investment to hold their market share
 Thus they produce cash that the company uses to finance
other SBUs that need investment

21. Question marks
 Question marks are low-share business units in high-growth
markets.
 They require cash to hold their share, let alone increase it
 Management has to think hard about question marks – which
ones they should build into stars and which ones they should
phase out

22. Dogs
 Dogs are low-growth, low-share businesses and products
 They may generate enough cash to maintain themselves
but do not promise to be large sources of cash

23. As time passes SBUs change their positions in
the growth-share matrix
I.e each SBU has a life cycle

24. When applying the BCG approach, a company has to:
1. Identify the various SBUs making up the company
2. Assess their attractiveness and decide how much support
each of them deserves
3. Once it classifies them according to the BCG matrix, it
needs to determine what role each of them would play in
the future.

25. From here on, the company has 4 alternative strategies:
a) Invest more in the business unit to build its share
b) Invest just enough to hold its share at the current level
c) Harvest the SBU thus milking its short-term cash flow regardless
of the long-term effect
d) Divest of the SBU by selling it or phasing it out
And this is exactly what Levi-Strauss & Co. did with the
business diversifications it had introduced earlier on…

26. Thus the company went straight back to what it had always done
best – making and selling jeans…
…which in combination with the investment of $38 million dollars in
the now-classic 501 blues’ advertising campaign, turned out to be a
very profitable move for them
The campaign more than doubled the sales of 501s.
Building on the solid base, LEVI’S
continued to add products, which had
even broader appeal than
anticipated…

27. In addition to adding new products, Levi-Strauss & Co. also
stepped up its efforts to develop new markets.
Thus, one more time did
LEVI’S find itself in the 1st
quadrant of the SWOT
diagram
This was partly thanks to help of the
product/market expansion grid, which
is a useful device for identifying
growth opportunities

28. As you can see the grid shows 4 routes to growth…
Market penetration, new markets, new products and
diversification

29. The routes that LEVI’S used were:
1. Diversification before 1984 – this however, proved
unsuccessful because it stretched into too many areas
and this led to a decrease in quality.
2. Then, in 1985, LEVI’S went for product development. This
proved quite successful as the blue 501 got established in
the market.

30. 3. Finding that successful, the company continued with it.
So in the late 1986, following the enormous success of blue
501, LEVI’S introduced Dockers – the casual and comfortable
trousers targeted at ageing baby boomers. In the few years
since its introduction Dockers had become a 6-billion-a-year
success
4. Market development: In addition to developing new products,
LEVI’S also developed new markets. Thus in 1991, it created
jeans designed especially for women and launched an
innovative $12 million “Jeans for Women” advertising
campaign in order to promote them

31. 5. Market penetration: LEVI’S most dramatic turnaround has
been in international markets. After selling its stumbling and
unprofitable foreign operations in 1985, the company has
developed what was a patchwork of foreign licenses into a
well-coordinated-team of worldwide subsidiaries. Guided by
the strategy “To think globally, act locally”, the company
turned the Dockers line into a worldwide bestseller.
However, within this global strategy, LEVI’S encourages local
units to tailor products and programmes to their own markets
This is how the Feminina line in Brazil was developed

32. The huge success of LEVI’S penetration abroad was
partly due to its boldly playing its deep American roots
That strategy was the at core of their marketing strategy
i.e the market positioning strategy, which LEVI’S adopted

33. Marketing strategy provides the marketing logic by which
the business unit is to achieve its marketing objectives
Consumer targeting is at the centre of the marketing strategy
Consumer targeting requires the company to:
1. Identify the total market
2. Divide it into smaller segments
3. Select the most promising ones
4. And design strategies for profitably serving them
better than its competitors
The process described above involves 5 steps:

34. 1. Demand measurement and forecasting – involves estimating
market size and the possibilities for future market growth,
as well as identifying all competitive products
2. Market segmentation – involves determining which
segments offer the best opportunity for achieving company
objectives
3. Market targeting – involves evaluating each market
segment’s attractiveness and selecting one or more
segments to enter
4. Market positioning – gives a product a clear, distinctive and
desirable place in the minds of target consumers compared
with competing products
5. Competitive positioning – to position a product competitively,
the company must offer greater value, either by charging
lower prices than competitors or by offering more benefits to
justify higher prices

35. The clever market positioning abroad and innovative global
marketing efforts have produced stunning results for LEVI’S…
As the domestic market shrank, foreign sales accounted
for most of LEVI’S growth
Dramatic strategies and marketing planning actions have also
transformed Levi-Strauss into a vigorous and profitable company,
one better matched to its changing opportunities
By building a strong base in its core jeans business, coupled with
well-planned product and market development, Levi has found ways
to grow profitably despite in the decline in the domestic jeans market

36. As one company observer suggests – “Levi has
learned that with the right mix of persistence and
smarts cracking new markets can seem as effortless
as breaking in a new pair of jeans”