Analysis: This case examines the environmental factors affecting the Levi’s manufacturing plants, which in turn helped to reinforce the decision to close the plants in America



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Environmental Analysis on Levi Strauss

Amanda Walton

Submission Date:

2/10/2004

MKT- 113

Professor Karen Stone



Analysis:

This case examines the environmental factors affecting the Levi’s manufacturing plants, which in turn helped to reinforce the decision to close the plants in America. Among these environmental factors, many have multiple examples and reasons behind them, which in turn helped the closure of the American plants.



  1. Environmental Factors:

Demographic Factors: Demographic factors are factors that affect certain individuals or companies as a whole by given statistics such as age, race, income, and anything that is measurable. Using Demographic factors, I have found things that would affect Levi’s manufacturing plants. According to the American Fact Finder results of 2004, the population of American people that are under the age of 18 are roughly 25% out of the whole. Eventually, this percentage of the population will grow and create a different market than the one we have today, which will target towards this age group. Unfortunately, Levi’s is not yet realizing this and targeting this age group to start making profits. The percentage of Americans between 18 and 65 are 61.9% (American Fact Finder, 2004), which also affects Levi’s marketing targets and production of specific styles of jeans or clothing.

Economic Factors: Economic factors are factors that affect the company through the distribution of the income. Income can either be the companies’ income, or the consumers’ income. Unfortunately for Levi’s, there is now a low-demand for their line of jeans. Their jeans are not only rather expensive, but they are also being competed against with other lines that are just as “branded” as they are, yet less expensive. Levi’s devised a plan to send out a Signature Series of their jeans to places such as Wal-Mart and Target, and they are supposedly doing well at those places (WSJ, 2003). This might ultimately help in their economic stature within America.

Cultural Factors: These factors uphold the culture’s beliefs within the society. These factors can affect a company if a company has done wrong in some way. In Levi’s case, there was a lawsuit filed against them by two individuals that were alleging tax and accounting fraud (WSJ, 2003). Levi’s didn’t admit to it and hired a professional tax executive. The executive reported that there was no fraud found, however, there was an insufficient supply of 6 years of documentation on tax positions. This lawsuit could have affected Levi’s because of the views and beliefs of the consumers. Many could have thought that the company was in a scandal.

Political and Legal Factors: These factors come in such packages as laws, agencies, and pressure groups that would affect the company in some way. One Legal factor that affected this company greatly was the restriction on the low-cost imports from overseas, which are to be completely eliminated (WSJ, 2003). This is not a very good thing for Levi’s. It might even cut down their income greatly because of the present restriction on apparel and the competition that will eventually go along with it.

Competition Factors: These factors are based on the other influences on the company that will create competition for the company. One of the competitive factors affecting Levi’s is the suppliers that are now relying on independent manufacturers from outside of the US, which helps cut costs down for consumers and helps the competitors to concentrate more on style and design along with the trends of the specific society (WSJ, 2003). Another factor that affects Levi’s in the competition spectrum, is one in which is to restructure its’ plants. This is believed to ultimately help ease competition (WSJ, 2003). One last impact that the company faces is the factor of outsourcing. This, in fact, may actually help to save the company money and start creating a more competitive environment for Levi’s many competitors.

  1. Factors that are threats or opportunities.

    • Under the Demographic Factors, I have mentioned a couple of percentages of the American population. I have done this to show what Levi’s company is aiming at. The percentage is important to find out what type of styles should be more produced to receive more profit for the company. Granted there are greater percentages of individuals between 18 and 65, Levi’s should also start to look at the percentage of 18 and under. The styles vary greatly. These two factors can either be a threat or an opportunity. If Levi’s takes the initiative to produce styles suited towards the younger population, I’m sure they would start to see a profit increase. On the other hand, Levi’s is already producing products for the percentage of people between 18 and 65. This is a great opportunity to push more products out to them, since they are the bulk of society.

    • The economic factors that I have mentioned may also be either a threat or opportunity. Because Levi’s is running out of resources, Wal-Mart and Target may be the best places to go to send out a specific, affordable series. This might spark the interest of many consumers and even start to create a higher demand, rather than the low-demand that they are now experiencing.

    • The cultural factors mentioned will have a great impact on Levi’s. Unfortunately, the American culture doesn’t like the idea of even remotely being close to a fraud. If it is even a rumor, people will tend to believe it and even abandon certain aspects of the economy. For example: Nikes’ hiring of children does not spark interests of those against child labor laws. For Levi’s it was a lawsuit against tax fraud and accounting fraud. Even though it was found that there was no fraud, it was also found that there was a lack of documentation within the company for 6 years. This will significantly impact the company as a threat because of the beliefs within the culture around Levi’s establishment.

    • The Political and Legal factors that affect the company are also a threat to the company. Levi’s wants to import low-cost apparel to places all over the world. They now cannot do this easily because of the elimination of the quota that was set forth a long time ago. This is ultimately a threat because it gives competition a better chance to get their lines out there easier.

    • Competition factors are not always a threat to companies. Sometimes they can be great opportunities in disguise. For Levi’s, one factor that is a threat dealing with competition is the suppliers that are relying on manufacturers outside of the US. I believe this to be a threat because Levi’s is still trying to finish getting out there, while many other competitors are just a call away. Two factors that are opportunities are the restructuring of plants because it may become most cost-efficient and production may be slashed, and outsourcing because it also creates a cost-efficient system. Just note that all threats can become opportunities and all opportunities may become threats if they are not dealt with properly.




  1. Most Important Environmental Factor

I believe that the most important environmental factor that is facing Levi’s today is the Demographic Factors in general. I believe this because if Levi’s starts to pay attention to the statistics in population and percentages thereof, and if Levi’s begins to produce specific styles geared towards that group, they will begin to see a significant impact in their business. Any business should be aware of the affects of population, whether it is race, age, sex, or anything else that can impact their company. Also, looking at the demographic factors of income can also hint at what can or should be produced that people would want and can afford.

Works Cited Page:

Beatty, Sally. (September 26, 2003). Levi Strauss Plans To Cut More Jobs, Shut Factories. Wall Street Journal. Retrieved on February 6, 2004. From Website: http://gateway.proquest.com/openurl?ctx_ver=z39.88-2003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=000000411410081&svc_dat=xri:pqil:fmt=text&req_dat=xri:pqil:pq_clntid=49311



Beatty, Sally. (December 4, 2003). Levi Strauss Sells Low Cost Jeans to Target in Bid to Increase Sales. Wall Street Journal. Retrieved: February 4, 2004. From Website: http://gateway.proquest.com/openurl?ctx_ver=z39.88-2003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=000000476439441&svc_dat=xri:pqil:fmt=text&req_dat=xri:pqil:pq_clntid=49311
Beatty, Sally. (December 2, 2003). Levi Retains Turnaround Adviser and Replaces it’s Finance. Replaces it’s Finance. Wall Street Journal. Retrieved: February 3, 2004. From Website: http://gateway.proquest.com/openurl?ctx_ver=z39.88-2003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=000000471378561&svc_dat=xri:pqil:fmt=text&req_dat=xri:pqil:pq_clntid=49311
Wall Street Journal. (November 14, 2004). Consumer Products Brief—Levi Strauss & Co.: Fiscal-Year Forecast Is Lowered Retrieved: February 4, 2003. From Website: http://gateway.proquest.com/openurl?ctx_ver=z39.88-2003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=000000446109911&svc_dat=xri:pqil:fmt=text&req_dat=xri:pqil:pq_clntid=49311
Agins, Teri. (April 9, 2002). Levi Will Cut 20% of Work Force, Shut 6 Plants in Restructuring. Wall Street Journal. Retrieved: February 5, 2003. From Website: http://gateway.proquest.com/openurl?ctx_ver=z39.88-2003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=000000446109911&svc_dat=xri:pqil:fmt=text&req_dat=xri:pqil:pq_clntid=49311
Beatty, Sally. (December 29, 2003). Deals & Deal Makers: Mending Levi May Be Tall Order; Restructuring Artist Alvarez Must Balance Debt and Denim With Existing Management. Wall Street Journal. Retrieved: February 8, 2004. From Website: http://gateway.proquest.com/openurl?ctx_ver=z39.88-2003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=000000516099191&svc_dat=xri:pqil:fmt=text&req_dat=xri:pqil:pq_clntid=49311
American Fact Finder. (2000). Census 2000 Summary File 1 (SF 1) 100- Percent Data. Retrieved: February 9, 2004. From Website: http://factfinder.census.gov/servlet/QTTable?_bm=y&-geo_id=01000US&-qr_name=DEC_2000_SF1_U_QTP1&-ds_name=DEC_2000_SF1_U&-_lang=en&-_sse=on


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