How Levi’s Jeans Got into Wal-Mart

1. How Levi’s Jeans Got into Wal-Mart By: Jackie Hillhouse

2. Levi’s Jeans History • Levi’s Jeans is a privately held clothing company known for their denim jeans • Founded in 1853 by Levi Strauss • Began producing denim overalls • Modern jeans were not produced until 1920’s • Levi’s headquarters are in San Francisco • Company employs approximately 10,500 people worldwide • Recognized as an American icon • James Dean and Marilyn Monroe

3. Levi’s Missed the Trend • Baggy Jeans trend in the mid- 1990’s • Sales plummeted from $7.1 billion in 1996 to $4.1 billion in 2003 • U.S. Market share dropped from 18.7 percent in 1997 to 12 percent in 2003

4. Analyzing and Responding • Fashion-conscious buyers wanted high priced brands • Blue Cult, Juicy, and Seven • Parents wanted low priced jeans for their kids • Wrangler and Lee (Cost about $10 less than Levi’s) • Found at Wal-Mart, Target, and T.J. Maxx

5. Analyzing and Responding (cont.) • CEO Philip A. Marineau came to Levi’s from PepsiCo in 1999 • Had helped PepsiCo surpass Coca-Cola in sales for the first time • Marineau recruited David Bergen in 2000 from Carstation.com • Experience in clothing , retailing, and manufacturing • The Gap and Esprit de Corps in the 1980’s

6. Wal-Mart Requirements • Becoming one of Wal-Mart’s 30,000 suppliers was not easy • Wal-Mart requires up-to-date IT systems to manage the supply chain • Wal-Mart has strict supply chain management system requirements

7. Joining Wal-Mart • Wal-Mart’s requirements presented Levi’s with a serious hurdle • Supply chain management systems were in bad shape • Could not track where products were moving in the supply chain • Bergen created a cross-functional team of key managers • Created network upgrades, modifications to ordering and logistics applications, and data warehouse improvements

8. Joining Wal-Mart (cont.) • Transformation of Levi’s supply chain management allowed them to partner with Wal-Mart • Levi’s Jeans sells their signature line at Wal-Mart • Sells for around $23 and has fewer details than other lines

9. Questions 1.) Explain how Levi’s achieved business success through the use of information, information technology, and people. • Cross-Functional Team of key managers • Sales up in the third and fourth quarter of 2003, first time since 1996 • Digital Dashboard • Lets executives see the status of a product as it moves from factory floor to distribution centers to retail stores • Alerts executives of trends

10. Questions 2.) Using Porter’s five forces model, analyze Levi’s buyer power and supplier power. Which of Porter’s five forces did Levi’s address through the implementation of it’s updated supply chain management system? • Levi’s buyer power is high because buyers have many choices for jeans • Levi’s supplier power is low • Rivalry among existing competitors

11. Questions 3.) Which of the three generic strategies is the company following? • Broad Cost Leadership strategy • Wal-Mart • Reduced price and features • Appeals to a large audience

12. Questions 4.) Evaluate how Levi’s Jeans can gain business intelligence through the implementation of a customer relationship management system. • CRM system tracks all interactions between the customer and the organization • Get more out of established customers • Collects and organizes data about customers and analyze data for future opportunities • Target customer development efforts

13. Questions 5.) How can Levi’s use efficiency IT metrics and effectiveness IT metrics to improve it’s business? • Efficiency: • Using least amount of resources • Ensure information accuracy • Effectiveness: • Achieving goals • Increase Customer Satisfaction

14. Questions 6.) David Bergen, Levi’s CIO, put together a cross-functional team from IT, finance, and sales to transform the company’s systems to meet Wal-Mart’s requirements. Analyze the relationships between these three business areas and determine why Bergen chose them to be a part of his cross-functional team. • IT, Finance, and Sales need a strong relationship • Communication, Strategic thinking, and must understand how each department works so that they can improve their business • Chose these areas because they needed the most improvements

15. Questions 7.) Predict what might happen to Wal-Mart’s business if it failed to secure its partner’s information and all sales information for all products was accidently posted to an anonymous Web site. • Expose prices • Sued by the partners for not keeping information private • Partners might go out of business • Pay penalties to partners and could risk their business

16. Current Information • In July 2008, Levi’s second quarter net profits were down 98% on last year • Struggling to boost sales • Wal-Mart is cutting back on Levi’s inventory

17. Works Cited Cook, Rick. Five Reasons why CRM is even more important during a recession. 25 Aug. 2008. 11 Mar. 2009 <http://www.insidecrm.com/features/crm-important-recession-082508/>. Doyle, Leonard. Levi's Profits plunges. 10 July 2008. The Independent. 11 Mar. 2009 <http://www.independent.co.uk/news/business/news/levis-profit-plunges-98-per-cent-as-young-shun-its-jeans-863998.html>. Levi Strauss & Co. Wikipedia. 11 Mar. 2009 <http://en.wikipedia.org/wiki/Levi%27s>. Levi's Profits Slump. 9 July 2008. BBC News. 11 Mar. 2009 <http://news.bbc.co.uk/2/hi/business/7497076.stm>.

18. Questions?