Levis Strauss Canada Holding an Ember: the Gwg Brand

4 April 2017

Q1. Why do consumers buy jeans? What is the buying decision based on? -Jeans were invented in 1873 by Levy Strauss. Consumers’ perceptions about jeans are following: 1. Durable and extra strong-In terms of durability Jeans are considered more durable than other fabric pants . This extra strong image attracts customers for the feel of rough and tough personality. 2. Symbol of rebellion :Blue jeans were adopted as a workers’ jeans and in the 1950 they became a symbol of rebellion when stars such as Marilyn Monroe and James Dean began sporting variations of the Denim bottom . Manual Labor through High Fashion : In modern time a blue jeans is considered as an everyday common garment for varied occasions . It has a fashion relevancy as well as it is a casual wear of daily use. 4. It reflects own Personal independence and style. It reflects the utilitarian image. People wear jeans for work , relaxation ,to be themselves ,to attract others and to feel good. 5. Jeans are considered as ‘Cool’ ,They are famous for comfort, ease and compatibility factor.

Many a times the buying decision of a consumer is based on the modern fashion relevancy. Jeans are very famous as Casual cloths , which can be used in College or even offices, workplaces . For younger generation, youth are often spurred on by ‘image’ and peer pressure, hence these factors influence their buying behavior in purchasing jeans. A wide variety exists of jeans for diverse lifestyles, for example relaxed fit for comfort, ultra baggy, low waist for younger generation. So jeans have attracted all age group, all ethnicities. Denim is universal.

Levis Strauss Canada Holding an Ember: the Gwg Brand Essay Example

How are people influenced for buying jeans, apart from fashion and trend, jeans appeal for purchase because of their longer durability and even after a long time they are usable as they considered better as they fades. Most of the very good brands are affordable for middle class income group they are not considered as luxury clothing hence they are more popular and sold, 70 percent of people in western countries uses jeans. With the rise of woman empowerment, there is an advent of new market for denim. The young women and girls have been greatly attracted by jeans. Q2.

What is happening in the overall market place and channels? Ans: The various happenings in the market place and channels can be grouped into three parts: Consumer tastes Consumer taste varied from diverse lifestyles to fashion preferences like Flare jeans for fashion conscious consumers and ultra baggy for younger consumers. The trend of casual wear in the work place was also increasing allowing the combination of different pant styles, including blue jeans, corduroy and khakis. The jeans market of women section experienced greater flux and change. It varied on alternative purchases such as khakis, shirts or Capri pants.

Industrial observers believed that the marketplace moved from jeans to casual pants with the popularity of the khakis pant from 1998 to 2000. In 2001, the denim cycle was believed to begin again. Competitive Scenario Market Players: The retail chains produced fierce competition. The average price paid for jeans had fallen consecutively for five years due to increased promotional pricing by the departmental stores such as the Bay and Sears and entrants like Wal-Mart and Costco pushing down the average price. The Levi’s jeans were market leaders owning 16. 1% of men’s jeans market.

Levi’s jeans had good brand recall. Wrangler was competitor to Levi’s. Private labels: Nevada at Sears and Rockland at Costco, Originals at Wal-Mart were some of the private label brands that owned significant portions of the men’s and women’s jeans market. The pricing was suited for mass market. These labels offered strong promotional pricing up to 40% of listed price. Premium brands: Premium brands were sold through dedicated shops with in department stores. Tommy Hilfiger and Diesel were in the process of opening their own line of stores in shopping malls and storefront locations.

Specialty retailers: The specialty retailers developed their own brand like Mark’s Work Wearhouse with Denver Hayes and catered special age groups. Distribution Channel: There were six distribution channels for jeans in Canada. Department Stores – The departmental stores like The Bay, Sears, Eatons. These stores kept 80% of jeans in price ranges up to $49. 99. Specialty Stores – The specialty stores like Thrifty’s, the Gap, Mark’s Works Wearhouse, Old Navy. Large Mass Merchants – The large Mass merchants like Wal-Mart, Zellers. The large mass merchants generally kept jeans ranging up $29. 9. Around 80% of jeans in price ranges up to $ 29. 99. Small Mass Merchants – The small mass merchant like Saan, Best value, fields, NorthWest, Gaint Tiger, Harts, Cohoes. Others – The others consisted of Winner, Costco, outlets Stores and catalogue sales. Wal-Mart and Costco offered jeans between $ 15 and $ 20. 3. What is the context within which Klee needs to make a decision? The dilemma that is faced by Klee here is somewhat synonymous to the one faced by the management board of General Motors in case of Oldsmobile being phased out.

In this case Klee’s major concern was that where exactly does the GWG as a brand and product fit into their overall portfolio. It is pretty common for any organization to focus on its core competencies and so Klee has also advocated that they had two market leading brands in Dockers and Levi’s. Like any company they also have limited amount of marketing fund and being a part of a multinational business, seeking profits and market share growth around the world they cannot there investment into GWG.

The problem is GWG is underdeveloped in market place and in order to justify an investment it needs to produce higher volumes and profits. So if they don’t invest it can’t grow but unless it grows, Klee can’t justify an investment particularly with urgent market pressures facing their higher return brands i. e. Levi’s and Dockers. Klee has also stated his discomfort with the way Licensee has gone about GWG. He hasn’t invested money into it, hasn’t, updated any of the fits and hasn’t tried to build it as a brand at all. Klee was very much concerned that if the situation continues like this the Brand’s past glory will be lost.

Klee knew that her priorities laid with the leading brands i. e. Levi’s and Dockers but on thinking about GWG as a brand she felt that there was an indifference shown by them towards the brand. Though she was not sure whether if the brand was taken aback there can be any growth beyond the sales figures of Jack Spratt’s sales number of the first year. On doing the mathematics and calculation on various operations required to rejuvenate GWG production and sales she was still not very much convinced with the result of cost benefit analysis.

All the exercise and data crunching that was done by her was not giving a very clear cut direction to whether the brand should be revived or not. There were issues with minimum cost of production, shipping cost, no. of days of inventory needed, management staff needed to update the fits and increase brand awareness, create refreshed point of sales materials, how to sell the brand to retailers an how to support its production from the existing infrastructure. In the end Klee was still introspecting and asking herself the same question which was pretty evident from the start itself, “Should she try to revive the brand”.

Q4. What are the Channel implications and financial considerations? Ans. Financial Considerations: ?The minimum cost of manufacturing a pair of jeans is $15 per unit and they have to maintain inventory of at least 90 days. All this adds to the operational cost and an excess burden on already weak financial status of the company. They have to pay tax rate about 40% of the sales. ?They would need new workforce to manage the brand and a person in general management would cost company around $60000/annum. The supporting infrastructure would cost the company an extra $50000 Channel Implications: ?The GWG brand has not being able to build a own identity over the years due to no marketing plans by Spratt, hence selling it via specialty stores will not be a feasible option as there are existing brands working aggressively on their strategies. ?The units sold by GWG remained the same more or less from 1998 to 2001 and before that it seriously affected sales of Orange Tap and hence we cannot sell it with GWG if they revive it. Although they can sell it via mass merchants who do not favor any particular brand and this could also boost sales of the brand. ?Retailers are using Economies of scale to reduce the price of production of per unit of jeans and this has brought down the margins and challenged the other channels who have to reduce the margins and hence profits. ?Besides GWG is limited only to Men’s jeans and it showed significant decrease in market share. If Levis tries and revive it will be a challenge for them because they have to capture the lost market and also help GWG grow.

The above mentioned implications suggest that the overall cost of manufacturing a pair of jeans will go up and in order to increase profits, Levis has to price it upwards of 30$. The company has to work on pricing strategy because they already have Levis Orange Tab in this range so it may cannibalize its own product. If they increase the price somewhere in between the 29$ price tag for Orange Tab and 49$ price tag for Red Tab they can have a alternate product in their portfolio filling in the gap. The company also needs to select the channels appropriately so as to get higher margins and position the brand as planned.

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