Levi’s Porter’s 5 Five Forces: 2022 Detailed Overview

Written by portersfiveforcesteam in Porter's Five Forces Analysis

 

Porter’s Five Forces Analysis of Levi Strauss

 

Key Facts

 

Name Levi Strauss & Co.
Industry Apparel
Founded May 1,1853
Headquarters San Francisco, California, U.S.
President &CEO Chip Berg
Revenues US $5.8billion,2021,Annnaul Report
Profit US$ 601 million, 2021,Annual Report
Competitors Calvin Klein, Wrangler, Gap,

 

 

Company Overview

 

Headquartered in San Francisco, California, USA Levi’s is world’s leading, apparel, athlete apparel, footwear and accessories Company famous for its denim jeans worldwide. It was founded by a German immigrant Levi Strauss as a goods company in 1853, later Levi and his business partner, tailor Jacob Davis invented denim blue jeans in 1873 after a lot of efforts. Its reported revenues are $ 5.8billion, with Net Assets of US$ 5.9 Billion and Net Profit of 0.55 Billion as of FY 2021.Levi’s also ranked the 540th place in Fortune 500.

  

Porter’s Five Forces Analysis

 

The Porter’s Five Forces Analysis is developed by Micheal E. Porter in 1979, Professor at Harvard Business School for organizations to better strategies their business as per their Industry structure for better profits and less competitive environment.

It is one of the most famous and referred model by business managers for analyzing their business’s competitive environment as per their industry’s structure.

 

Levi’s Rivalry among Existing Competitors

 

  • Levi’s Revenue Analysis Yearly 2019-2021:Levi’s gave a record recovery revenue of US$ 5.8 (approx.) Billion in FY 2021,compared to prior year of US$ 4.4 Billion in FY 2020.Levi’s also faced a drop in sales due to COVID-19 impact. While Levi’s has a track record of US$ 5.7 Billion sales revenue in FY 2019 and US$ 5.5 Billion in 2018.
  • Levi’s Revenue Segmentation by Category and Analysis: Levi’s is offers globally bottoms which comprises it’s revenue by 75%, tops which comprises 20% and footwear and accessories comprises 5% of it’s total revenues.
  • Levi’s Revenue Segmentation by Brands and Analysis: Famous brands offered by Levi’s are Levis which comprises 87% of total Levi’s sales, Signature and Denizen comprises of 8% of total Levi’s sales, Dockers and Beyond Yoga comprises 5% of total sales of Levi’s.
  • Levi’s Revenue Geographical Segmentation: Levi’s is operating globally with more than 50,000 retail stores and 16,600 employees globally. Levi’s have highest sales in United States of America which comprises 51% of it’s total sales, while Europe is the second largest market which comprises of 30% of total Levi’s sales. The third largest market is Asia which comprises of 14% respectively.
  • Levi’s Supply Chain Infrastructure: Levi’s has retail presence in approximately 50,000 locations with 3,100 brand-dedicated stores, including shop-in-shops. The Wholesale Sales comprises 64% of the total Levi’s sales, company operated Stores Sales comprises of 25%, E-Commerce Sales(Company Operated Only) comprises of 8% and Shop-in-Shops Sales comprises of 3% of total Levi’s sales.
  • Battle of the Brands -Levi’s &Calvin Klein: Calvin Klein (brand of PVH’s) gave a record sales of US$ 3.7 billion in FY 2021.Calvin Klein also has a largest market in North America which comprises 49% of total Calvin Klein’s sales revenue, while Europe is the second largest market with 33% sales contribution, Asia Pacific with 16% and Latin America with 2% respectively.
  • Battle of the Brands -Levi’s &Wrangler: gave a record revenue of US$ 1.57 Billion in FY 2021.It is owned by Kontoor’s Group Wrangler and Lee brands. The Wrangler brand gave a revenue of US$ 1.3 Billion in FY 2020.
  • Battle of the Brands -Levi’s &Gap: While GAP gave a record sales of US$16.67 billion in FY 2021, which is an increase of US$2.5 billion, from US$13.8 Billion compared to prior year. The GAP is also having 2,835 stores globally. GAP has very established market in North America with 520 stores in North America.

 

Levi’s Threat of New Entrants

 

  • High Capital Investment & Digital Sales Streams: High Capital is one the core threat for a new entrant, another development has been seen in recent years that these giant companies like Levi’s established themselves on E-Commerce Platforms strong with high capital spending. Levi’s CFO Harmit mentioned that Levi’s is increasing it’s capital spending on Digital Initiative to US$ 210 million in 2021 which were US$ 130 million, a prior year. Digital revenues reached to 22% of the total net revenue of the company, mentioned by Levi’s in their Annual Report.
  • Established Brand and Heavy Marketing Budgets: Levi’s is established brand and run heaving marketing campaigns, being so long in the market and being giant Levi’s reached such economies of scale that no new entrant can compete it. Levi’s spent out US$434.5 million in it’s marketing and advertising in FY 2021, while US$331.4 million in 2020, compare to US$399.3 million in 2019.

 

Levi’s Bargaining Power of Suppliers

 

  • Levi’s Digital Sales: Levi’s successfully able to launch the it’s extensive E-Commerce infrastructure .Digital revenues were reached to a height of 26% declared by Wall Street in April 2021.The company spent two-third of it’s spending on digital initiatives. Digital Sales structure of Levi’s comprising of it’s own e-stores which decrease the dependence on suppliers.
  • Levi’s Supplier Industry Influencer: Levi’s being a established brand and highly focused on latest high-tech and environment friendly solutions so it is more influencing the supplier industry and practices. Better Cotton Initiative (BCI) improved the lives of 1.6 million farming families.

 

Levi’s  Bargaining Power of Buyers

 

  • Levi’s Customer Opinion and Customer Satisfaction Score in USA: Levi’s scored 70% in a survey conducted regarding the opinion of U.S. people amongst the” leading clothing and footwear brands”. Another brand Fruit of the Loom and Levi’s rates amongst the top 3 brands in U.S. market.
  • Brand Loyalty: Levi’s is catering the segment which comprises of higher class of the society and which is less price sensitive and more brand loyal. As there are no such huge alternative or recognized brand in comparison of Levi’s so buyers have less bargain power in this situation.

 

Levi’s Threat of Substitute Products or Services

 

  • Substitute Products from Competitors (Bio-Vegan & Environment Friendly Trends): Any new launch of any new type of product like Organic Bio Cotton Clothing ,any other bio-vegan or environment friendly trending may replace the Levi’s products and can be potential threat.
  • Global Economic Situation: Global Economic situation may result into deep cut in corporate sales and world is going to hit inflation which may affect the sales of Levi’s as it is catering the premium market. Levi’s already missed sales of US$ 30 million to US$ 40 million due to supply chain disruptions due to COVID-19 impact and Russia-Ukraine war. In place of 11%to 13% growth Levi’s is reporting a growth of 6% to 7 % as of October 2022, declared by Yahoo Finance.

 

 

References

 

  1. Levi Strauss, Fortune 500 Companies, Available atFortune 500
  2.  Levis, You wear Jeans, You Live in Levi’s. Available at Levi’s
  3.  Statista (February, 1, 2022) Net Sales of Levi Strauss worldwide from 2010 to 2021(in million U.S.dollars).Availableat Statista
  4. Levi’s Annual Report 2021, Available at Levi’s
  5. Statista (April 25,2022) Net sales of The Gap, Inc. worldwide from 2007 to 2021 (in million U.S. dollars) .Available at Statista
  6. Statista (April 25,2022) Number of Stores of the Gap,Inc.worldwide from 2010 to 2021,by store brand and region .Available at Statista
  7.  Statista (November 7,2022)Calvin Klein retail sales share worldwide in 2020,by region. Available at Statista
  8.  Statista (October 24,2022) PVH’s Calvin Klein brand’s revenue worldwide from 2017 to 2021(in billion U.S.dollars). Available atStatista
  9.  Statista (September 26, 2022) Kontoor Brand’s revenues worldwide from 2017 to 2021, by brand (in million U.S.dollars). Available atStatista
  10.  Statista (January 12, 2023) Advertising and promotion expenses of Levi Strauss worldwide from 2015 to 2021 (in million U.S.dollars). Available atStatista
  11.  The Wall Street Journal, (April 12,2021) Levi’s CFO Plans to Increase Capital Spending on Digital Initiatives. Available at The Wall Street Journal
  12.  Statista (September 16, 2022) Leading clothing and footwear brands in popularity among consumers in the United States as of the 2nd quarter of 2022.Available atStatista.
  13.  Finance Yahoo,(October 7,2022) Levi Strauss cuts 2022 profits forecast on inflationary pressures ,strong dollar. Available at Finance Yahoo
  14.  Levi Strauss & Co,(August 10,2016)Making Strides Through the Better Cotton Initiative .Available at Levi Strauss & Co

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