Jeans Case Study

Denim Industry In US Till 1960s

Indigo-dyed denim produced in the U.S until the 1960s was possibly the least fashionable of apparel fabrics. Denim was primarily found in garments for manual laborers, it was widely viewed as being low-class

The 1970s

the demand reached explosive levels as a result of the potential for color fading of Indigo. Faded jeans became associated with rebellion and independence: youth rebellion. An American film, Easy Rider, portrayed young men wearing faded jeans, riding motorcycles and smoking marijuana. demand for denim increased far beyond capacities that were then available. Prices increased existing denim companies (5 at the time) rushed to expand production and other textile companies moved quickly to enter the denim business the demand for denim, even low-quality fabric, was so great that even the worst denim could be marketed at a profit

The 1980s

In a period of a few years the U.S. denim business went from near extinction, producing some tens of million of meters per year, to hundreds of millions. The U.S. was the center of the international denim business The history of blue jeans was transformed forever. Denim debuted as high fashion. The term designer jeans was coined: creation of slimmer, tight, butt hugging jeans.

The Decline Of The US Denim Mfg. Industry

By around 1990, the U.S. denim industry was showing signs of decline : Denim executives in the U.S. were shy about taking risks and avoided making the hard, strategic decisions for long-term survival. Instead of mounting a defense of their industry, they often looked to joint ventures outside the U.S. as away to economic salvation. - provided short-term benefits, U.S. domestic manufacturing was weakened in the long-term.

U.S. denim companies in the 1980s concentrated on expanding their production capacity to the point that they became too big to effectively control. Producing large volumes of denim became an end-in-itself: resulted to larger inventories and lower prices.

The Decline Of The US Denim Mfg. Industry

burst of corporate greed in the U.S. in the 80s : - Textile companies were a favorite target of financial looters, both inside and outside the textile companies. - textile executives sought to enrich themselves by arranging for compensation in the millions of dollars. - top managers in textile companies, fearing a takeover of the company by outside investors, arranged for management buy-outs, in which the companies assumed massive debts so that the managers could become owners of the company. Major purchasers of denim, the Brands, developed a strategy to increase the scale and profits of their business; characterized by cunning and driven by ruthless greed: - expand garment volume and create garment price stability, but still increase their profits. - forcing fabric suppliers to accept smaller margins, even though garment prices stayed the same. The reduced margins paid to the fabric suppliers are absorbed as profits by the big apparel

significant change in the attitudes of American consumers toward clothing. Americans had long appreciated quality in their garments and had been willing to pay for it. young people : - demonstrated a clothing fetish: quantity over quality - typically own enough clothes so that they can wear something different every day for weeks. - more disposable income than any previous American generation

Lee in the 1990s

environment characterized by change While Lee's external environment shifted, its internal environment was grasping tight its legacy systems, processes, technology, products, schools of thought, and management strategy. The company that had been successful for ohso-long suddenly became a victim of the times-and outward value migration. While the world changed around it, Lee remained the same.

demand problems: shifted toward emerging jeans products to include those of high-end designers, strong private labels, and price-valued jeans.
Loss of market share: - Lee was in denial of the threats of new competitors and the new buying preferences of long-time loyal customers. - Senior management failed to truly acknowledge that value was moving away from its core market strength of tradition

result of the active inertia phenomenon: inability to take appropriate action to effectively get the company's head back in the game: - corporate behavior had become so patterned over time, ingrained into the daily flow of activities and management decisions - employees respond to a changing market in the same way that had always been done - reinforced a now-failing business model, further driving away Lee from its unmet goals. target customer became a customer who did not want to be targeted by Lee : teens and young adults.

Lee continued insistence to portray their jeans as a classic, standard, mythical brand became inconsistent with its markets' trend toward individuality: Demand on jeans: provide a specific and comfortable fit, reflect a personality, signify inclusion to a societal class, or separate the style of today from the style of one's parents.
the emergence of the "Me" generation--young people who wanted to wear clothing as unique as their personal identity. The classical, persistent, and standard appearance of the time-tested Lee's blue jean pant is not what these people were interested in.

The value proposition of the Lee jeans line was simply the brand itself. All the same idea (and coincidentally all big successful companies who hit a wall at the turn of the millennium). In a modern globalized economy, images of a typical American, a faithful American have fast become blurred. The 1990s was the start of globalization: - The World Bank provided enormous funds to developing countries, much of which was used to improve their ability to compete with U.S. textile companies. - emergence of China as an economic power: * with the single-minded goal to eventually become a world power. * The U.S textile market was a primary target of the Chinese.

The marketing mix employed by was a mess. Its blue jean product offerings suffered into irrelevance with ignorance to dramatically changing industry competition. According to the case study, Lee made a tactical blunder of broadening its distribution to mass-market chains such as Bradlees and Target. This is not entirely true. Its target market was becoming predisposed to either designer jeans or cheap affordable ones. The mistake was in the timing and in the pricing. In the 90s, instead of the 80s, the timing would have been perfect. In comparison, in the 90s, Levis had problems with its its distribution and sales channels remaining heavily in large department stores in which teens and young adults now largely choose not to enter at all, in lieu of trendy specialty shops or affordable Wal-Mart.

realities in the economy and global landscape changed. The World became "flat" and new competitors of Lee started to take advantage of cheap overseas labor and manufacturing while Lee made a wrong choice in selecting its overseas contractor

The environmental influences were not really the things happening within the Lee's organization, but those happening in the world around them.

With the corporate-identified target market saying all these, why wasn't Lee listening? It seems the power of that active inertia creates a producer unable to hear.

Recommendations

Enter into joint-venture overseas productions with Lee overseeing management especially quality processes with local partners providing experience with local environmental conditions Constant improvement of information systems, to know what the customers are buying so the shelves would always be stocked with the right items at the right time Supply chain management to address the issue on high inventories

Customer surveys Creation of a new retail/shopping system that would help better identify the right jeans using pictorial descriptions of body types Change the image of Lee from the jeans that fit to the jeans that fit your lifestyle or your cause Since Lee is the strongest jeans brand in the VF group, for VF to consider to treat Lee as its flagship jeans product Co-branding with brands that are synonymous with the different market segments targeted

The VF Corporation

The Early Years 1899 - when eight men formed the Reading Glove and Mitten Manufacturing Company and began producing and selling knitted and silk gloves. 1914 - the company expanded into the manufacture of silk lingerie, and after three years of successful sales, they decided to conduct a contest to find a brand name for their lingerie line. The winner : "Vanity Fair." early 1920s - the rising success of the lingerie product line prompted Vanity Fair to discontinue its glove manufacturing operation and devote itself exclusively to the business of making lingerie.

Innovation and Expansion in the Mid-1900s 1950 - Vanity Fair became the first lingerie manufacturer to receive the Coty Award for Design for introducing products made from nylon tricot material. 1950s and early 1960s - the company achieved steady growth through its production of lingerie and foundation garments. 1958 - Overseas expansion began when Vanity Fair entered into an agreement with the U.K. firm Wolsey Ltd. to make Vanity Fairstyle lingerie under the brand Wolsey-Vanity Fair. A similar agreement was reached with an Australian firm the following year. 1962 - An International Division was created to help drive foreign expansion. 1967 - as sales growth for lingerie items was beginning to top off, Vanity Fair attempted to offset the effects by expanding into the robe and loungewear market

First Acquisitions in 1969; Emergence of VF Corporation late 1960s - Vanity Fair began its evolution into a multibrand clothing powerhouse under the leadership of Manford Lee. 1969 - acquired H.D. Lee Company, Inc., a manufacturer of men's and boys' jeans and casual pants and Berkshire International Corporation, one of the world's largest producers of women's hosiery. - changed its name to VF Corporation 1971- acquired Kay Windsor, Inc., a manufacturer of budget-priced, ready-to-wear women's dresses and sportswear. 1977 - a VF Corporation International Division was established to manage the company's growing operations overseas: export of Lee Company products to Europe and the Far East

An Industry Leader in the 1980s - entered the 1980s in a more profitable position than the two other major jeans makers, Levi Strauss & Co. and Blue Bell, Inc.; attributed to less dependence on foreign markets; earnings from other areas, such as lingerie; million-dollar investments in capital improvements; and tighter inventory controls. - Lee became VF's largest operating division - marketing strategy : set Lee apart from other jeans industry leaders by segmenting production into men's and women's lines - developed the Ms. Lee brand, which soon became the best-selling line of women's jeans in the United States. - increased spending for advertising, expanded the company's retail distribution channels, and increased the size of the VF sales force 1984 - acquired Modern Globe, Inc., a manufacturer of men's and women's cotton undergarments - purchased Bassett-Walker, Inc., a producer of fleece activewear

1986 - VF became the United States' largest apparel manufacturer and domestic jeans supplier when it acquired the Blue Bell Holding Company, Inc., a competitor that was the producer of Wrangler jeans, the Rustler jeans product line, Jantzen and JanSport swimwear and sportswear, Red Kap occupational apparel, and licenses to the Marith and Franois Girbaud VF had grown considerably in size as a result of its acquisitions but the declining jeans sales finally caught up to it in 1989 due to: * its decision three years earlier to begin marketing its Lee jeans through mass merchandisers and discount outlets. * moving into the discount realm ended up alienating department store buyers, who began refusing to carry the Lee line because of the lower-quality image it now possessed. * no advertising support given to retail stores where low-cost importers with widely recognized brand names and large consumer advertising budgets dominated * growing popularity of a new line of casual men's apparel called Dockers by Levi Strauss. * did not change its basic Lee Rider style; neglected to notice the advantage of new apparel trends.