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The Success of Levis in China

Essay by   •  March 6, 2019  •  Essay  •  2,393 Words (10 Pages)  •  17 Views

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*Introduction

Levi Strauss & Co is an American clothing brand. It was established in 1853 and the founder was Levi Strauss. The signature product of Levi Strauss & Co is  modern jeans. The company’s headquarters are located in San Francisco, California and United States. There are 2100 franchised & brand -dedicated stores. In 2001, Levi’s got into China’ market. They have opened the first shop in Shanghai. For the financial status of Levi's, the net revenue has increased 7 % in 2017 from 2016. (Levi Strauss, n.d.). The net income in 2017 was 285.56 millions in US dollars. Compared to 2015 , it has increased 74.67 millions in US dollars. (Statista , 2017)

 

*3C

Company

          The brand of Levi’s brings all-time popular jeans worldwide . Levi’s aims to bring the unique selling point of being the oldest jeans brand yet modern style. They became the largest manufacturer in jeans.

Customers

          The main target customers of Levi’s ware cowboys , workers and lumberjacks . Now, they have switched their target customers as youngers who wants a blend of style and comfort . At the same time, Levi’s targets upper class customers in China and focuses on both genders of them.

Competitor

          There are varying competitors in China including Calvin Klein, Gap Jeans and Tommy Hilfiger. They targeted high end customers. Levi’s was threatened by the competitors since the barriers of entry were low in the Jean market.

*Marketing strategies  

Chinese customers’ needs are different from America ‘s customers, ranging from offline to online platforms. Therefore, Levi’s has adopted varying marketing strategies in China in order to fit their target customers. They have divided the marketing strategies into 4 aspects including price, product, place and promotion.

 

Among all the aspects, pricing acts as a of paramount importance role for the success of a company. For pricing strategies, Levi’s has used markup strategy. It is because Levi’s ‘s understand that customers in China have ability and willing to spend money on clothing. At the same time, Chinese believe that high price products is prestige which can also represent their status. Therefore, Levi’s is offering a higher price in order to create value for customers in China. Levi’s believe that under the perceived value of high price is equal to good quality and service, marking up the price may positioning Levi’s a as adenim leader. Not only customers in China are buying the products, but also the brand value of Levi’s . In China’ company, a pair of jeans cost ¥600 - ¥800. Yet, compared to the Levi’s company in America, there are varying outlets only sell for $20-40 us dollars, which is ¥140-¥280, for the same pair of jeans. (Beijing time,2018) It shows the pricing strategies in America and China is totally different. If Levi’s in China is using the same pricing strategy, Chinese customers may perceive that Levi’s is a cheap brand. Moreover, customers in China may have less interest to purchase since they have no “face” if they purchase a cheap denim brand which cannot show status.

 

Aside from markup, odd even pricing strategy is also adopted by Levi's which involving the last digit of a product or service price. (Shopify, n.d.) In China's Levi's, most of the jeans prices ending in an odd number of 9. People read numbers from left to right and they are more likely to memorize the first number. (Luiss, 2017) For example, Levi's is selling ¥599 for a pair of jeans, people usually perceived that it is ¥500 but not ¥600 since they first read the number of 5. However, the fact is that it is closer to ¥600 but not ¥500. They are more motivated to buy due to the left-digit effect.

            Also, Levi’s in China has student discount in order to segment youngers. Youngers are most fast mouth spread in social media platforms. Levi’s can get the information of youngers after they get the discount.They may become loyal customers and bring higher future income since they will stick on the brand.

           Levi’s in China also adopted cut price as marketing strategy. They have cut price during the period of singles day(11/11). Many of the stores in China will have sales to attract customers. Levi’s in China has generated almost $18 billion in sales in 2016. Compared to China , Levi’s in America have Black Friday, Cyber Monday and Thanksgiving sales.

For placing strategy , Levi's have offline and online platforms in China. For online platform, Levi's has an official website for Chinese customers. In the website, they are using simplified Chinese. At the same time, the product price is shown as Renminbi, which is the currency of China. These changes suit the characteristic and features of Chinese. For offline platform, Levi's has many stores in China. All of the stores are selling high price clothing. However, in America, there are different retailer and distributor like Walmart is selling Levi's jeans too. At the same time, there are outlets in America and they are using a low price strategy to attract customers in there.

 

For products strategy, there is no customization in China. Some company provide customisation in products like Nike ID, people can choose their own design on the products. It helps to gain brand loyalty because the brand can give what customers want and customers are more likely to stick with the brand.

NPD Group conducted a study in 2011, which showed that consumers will pay approximately a 25% premium for customized goods. (Ostroff.D, 2014) Therefore , Levi’s can charge a higher price and generate more sales if they offer product customisation. Compared to America , they provide offline and online product customisation. People can choose the product and personal style. For example, add the name of the customers in the signature T-shirt. They have also opened

 

There are no product customization , however, Levi's has adopted focus strategy and launched a line for Chinese customers which called "Denizen". It is designed for Chinese body types , typically narrower and shorter than their western counterparts. (The wall street journal, 2010) They have developed the line into northern cities, including Beijing, and inland. Levi's are trying to create value for customers since they want to cater to Chinese customers' needs and features. It is a wise decision to use focus strategy. If they insist to sell the types of jeans in America but not focusing the needs of Chinese customers, Levi's cannot build a strong relationship since the brand is not creating something specifically for them.

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