The Main Issue Appears

Issues:

The main issue appears in this case that currently Levi’s face is the declining of its net income and market share in recent years. Also, Levi’s found itself at a disadvantage in both the upper and lower ends of apparel market.

Analysis:

There is no doubt that Levi’s is facing a fierce competition for market share and narrowing margins. Back to 1990, Levi’s held the largest market share which almost twice than the second rank; however by 1994, the market share and net income has dropped significantly. There are several reasons that lead to the declining of Levi’s sales; first of all, lots of Levi’s competitors had followed the global trend to move their productions to low-cost overseas facilities while Levi’s still persist in its “U.S.-made” style, which results a cost disadvantage compare with its competitors. Besides that, there are hundreds of competitors who carries similar products has entered into market, which lead a more severe competition.

In order to deal with the severe competition, Levi’s is planning to launch a new system called personal pair; under the new system, jeans could be customized in style and fit to meet each customer’s unique needs and taste. The personal pair system’s strength is that it is new to the market and customer, and customer could now have their jeans in their preferred style in a perfectly fit to their shape; also, the distribution cost would be lower as the final product is directly shipped to customer at his/her expense; moreover, the inventory cost would be lower as they only need to carry a small inventory of raw material. The weakness for the new system is that due to it is a new system to all, no one knows whether it will success; also, there will be an increase in invested capital, which includes the front investment of 3 million to integrate the system and an additional IT investment at $10/pair to maintain