Levi Strauss & Co.: A PESTEL Analysis of the UK Fashion Retail Market

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Retail Theory and Practice
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Introduction to Retail
Retail is a process of selling goods by a business to consumers. It involves the direct selling of
product from multiple sales channels to the intended customer who are ready for its
consumption. These sales channels are medium to sell product and could be anything form brick-
and mortar retail storefront, a shopping website or direct mail. Retail is final transaction of
supply chain hierarchy where Manufacturers sell the product in large quantities to retailers, and
retailers further sell those products to end consumers. Through retailing manufacturers can solely
focus on producing quality product rather being distracted by the effort of selling it to the
customers. Fashion retailing involves buying designed clothes from manufacturers and selling it
to customers. Retailers buy the clothes which are currently in trend because chances of selling
them are high. The main purpose of retailers is to make purchase of goods easy for the consumer.
Retailers try to sells those products to the end user by displaying benefits and features of the
products or by giving them heavy discounts.
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Introduction to the company
Levi Strauss & Co., also called Levi’s, is the larges blue denim jeans maker in the world. They
are not only famous for jeans but also for, shirts, jackets, belts, slacks and hats. Levi’s has their
headquarter currently in San Francisco. The company was started by a Bavaria immigrant, Levi
Strauss in San Francisco in 1853. He started with making durable pants for miners from tent
canvas but later it was substituted by denim. The organization was passed from several hierarchy
in family and during 1950 they got most spectacular growth. They achieved popularity when
American cowboys started wearing their jeans. 1960s and 1970s was a “blue jeans era” and it
served as catalyst for the growth of the company. Levi’s acquired a Canadian clothing
manufacturer, Great Western Garment Company (GWG) which led them to enter more deeper
into stone-washed jeans market. This technique is still use by company and helped in nurturing
the growth of the company. Upon achieving successful peak the company expanded its growth
from 16 plants to more than 63 plants in United States. Over the period of a decade they had 23
plants overseas. Levi’s always had stringent policies regarding human right and as a result their
plants were voted as the best performing, organized and cleanest plants. The organization kept on
growing and later on reached to manpower of more than 23,000, in 50 plants, in almost 35
countries. (Baumgarten, 2018)
In 1986 the company launched a brand, Dockers, which helped the company to grow as sale of
their famous denim brand begin to fade. It was later sold in 2004 to relieve the company’s
outstanding debt of $2.6 billion. Levi’s debut on New Your Stock Exchange in March 2019 and
valued at $6.6 billion organization as IPO prices (Roland, 2017). Levi’s, a brand which houses
Dockers and Denizen has 500 stores in 110 countries around the world.
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Key relevant changes within the UK fashion retail
Levi Strauss & Co. can take the help of PESTEL Analysis to analyze the internal and external
factors impacting the situation of company.
PESTEL stands for – Political, Economic, Social, Technological, Environmental and Legal.
These are the factors that impact the operational macro environment of the organization.
(Evariste, 2013)
Political Factors impact
Political factors mean to a what extent a UK government can intervene into the operations of an
organization working in a UK. It can include various factors like government policy, tax policy,
trade restrictions, corruption, political instability, foreign trade policy etc.
Levi’s has overseas presence in various market and it has to manage diverse regulations of its
market. The organization has faced scrutiny over different regulations in different country.
According to sources it has come under international pressure so many times to follow
international regulations. Various different factors in UK like NGOs, activist and pressure groups
play crucial role in developing policies within organization. Levi’s should collaborate and
discuss all the matters with these organization in UK for proper operations. (Yang, et. al., 2017)
As Levi’s has global presence so it has to comply with policies of each and every country based
on the regulations of the country.
Economic
Economic factors includes various important sub factors like change in inflation rate, interest
rate, foreign exchange rate, labor market conditions, taxation rate and current stage of economy
of a country. The impact of these factors either may provide highly profitable market, or can
incur a heavy loss to the business. (Maximillian, 2016)
There are few economic factors that Levi should consider before investing in a country are
following:
1) The GDP rate of growth of the country which may also affect the growth of Levi.
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2) Interest rates in a country. High interest rates means more growth for Levi’s.
3) Health of financial market can also affect the operations of Levi’s. The rate of demand
and supply must be kept in mind.
4) The exchange rate and currency rate in the country can make an impact on the
profitability of Levi.
5) High level of unemployment means cheap labors for Levi’s.
Social Factors
Social Factors can leave great impact on the social image of the Levi’s. Social media is almost
everywhere in the world and growing with a rapid rate. Levi’s can leverage it as marketing
network for rapid growth of organization. A great understanding of society people, their lifestyle,
education and beliefs can help in designing products to achieve success.(Evariste, 2013)
Social Factors are:-
1) Before marketing a product levi’s should research about the population demographics so
that they market right product to right people.
2) The educational background of target market may make it difficult to market the product.
3) They should be aware about the various classes of people of country. They shouldn’t try
to sell premium product to low class people.
Technological Factors
In the technological era where everything is driven by technology, having a technical advantage
can give you competitive edge in industry. It is extremely important to go with the technology to
maximize profits and try to gain leading position. (Maximillian, 2016)
The technological Factors that may affect Levi’s operation are following:-
1) Levi’s should monitor all those technology that is gaining popularity in the industry and
must use it to gain extra revenue.
2) The technology they are using must be easy to use for their targeted market.
3) Taking the help of technology to gain insights of competitor and their future predictions.
4) Leveraging technology for innovation and development of new products & services.
5) Using latest technology to lower down the cost of production to increase profit.
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Environmental Factors
Every industry has to follow environmental norms to prevent themselves from activist and
environmental agencies. Levi’s should priorities their product according to the environmental
standards of the country.
Environmental factors that can significantly impact on success of Levi’s.
1) Weather conditions in country can put significant impact on transportation of resources
and goods of Levi’s.
2) The company should monitor its waste production limit because exceeding pollution limit
will lead to pollution fines.
3) Levi’s should rely on renewable energy resources to make a good relation with
government and its customers.( Yang et. al., 2017)
Legal Factors
Legal factors of a country play significant role in working of an organization. The laws which
comes under the legal factors are- discrimination laws, Health and Safety laws, copyright laws,
intellectual property rights etc. (Maximillian, 2017)
The legal factors that Levi’s must study before operating in a country are:
1) Levi’s should ensure protection of data of their employees to avoid legal action and
defamation.
2) According to discrimination laws of a country, Levi’s should ensure that each and every
employee should be given same opportunity and treated fairly regardless of their religion,
age, gender or ethnicity.
3) Levi’s should have Health and safety policies for their employees and must avoid to force
their employees to work in extreme conditions. Failing to follow health and safety laws
of country can leads to damage of brand recognition and expensive fines.
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Relevant changes within the micro environment
The micro-environment factors can affect the performance of organization operating in certain
area of operation. These factors include company, competitors, Public, Suppliers and customers.
It is important to understand these factors so that future strategies can be formulated on the basis
of their affects. (Umar, 2017)
Customers: - No business can run without their customers. Levi’s is worldwide renowned brand
and has their stores in more than 110 countries. Their customers can easily purchase their
products from Levi’s stores. They can also purchase product online from their authorized retail
houses. They worked with local marketing agency to advertise their product because of their
strong hold over their local area.
Competitor: -
Calvin Klien is one the toughest competitor of Levi’s and it has able to shift the Levi’s market
because of successful advertising and branding. There were some key marketing strategies used
by their competitors to get ahead from Levi’s. Those key strategies are: -
They keep themselves updated with European designs and trends such as low ankle jeans.
They spend heavily on advertising to break into the Levi’s market.
They keep themselves updated with the customer preferences and their budget.
Supplier: -
Suppliers provide all the material needed by a company to carry out their operations. A
supplier’s and their distribution operation can also affect the business efficiency of Levi’s. A
Proper well managed supply chain the easily reduce the costs of products, thus high profit.
Where a poor supplier can degrade the product quality with can incurs loss to the company.
Levi’s should maintain close relationships with their suppliers to secure high quality in their
products. (Blazquez, et. al., 2019)
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Media: -
Media attention can easily make and break an organization overnight. Organisations should
avoid circumstances which can leave a negative impact on their reputation. They must try to get
positive promotions from the media which will also help them to gain trust of their consumers.
Big brands like Levi’s has public relation (PR) consultant who manage the event and activities
that can engage with the media.
Employees: -
Employees are the backbone of an organization. It is one of the crucial micro-economic factors
as success of any organization depends on its employees. The productivity and profitability of
business is ensured by performance of its employees. Big brands like Levi’s should ensure that
their employees must be skilled and highly motivated. They must acquire and retain best talent to
achieve success. (Yang, et. al., 2017)
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Strategies to overcome challenges
Macro-Environmental Factors
Social factors
The social factors encompass culture, belief, ethics and values of the society in which Levi’s
operates in. These social factors not only affect the operations but also the marketing strategy of
the organization. The designing of product for consumers of different countries require a
research on consumers, their lifestyle, education, culture, beliefs and mindset. All this
collectively leads to the success of venture. (Mou, et. al., 2018)
Social factors that Levi’s can encounter and tactics to overcome them are as follows:
1) The demographics like ages, genders, of population can vastly impact the designing and
development of product. Levi’s should design their product by keeping buyer’s persona
in their mind.
2) Keeping in mind of class of population also must be taken in consideration. For example,
selling a premium product to lower class majority of people wouldn’t be a good business
strategy of Levi’s.
3) Levi’s shouldn’t lose their connection with the interest and priorities of their target
market. They musk acknowledge the difference in the educational background of their
target market. A close study must be don’t on the education background of the target
market so that right product can reach to right people of their targeted market. (Sachdeva,
2015)
Technological Factors
Technology can easily dismantle a brand or can raise a brand to the sky within a night. It can
disrupt the price points and competitiveness of a company in the industry. It is necessary for an
organization to constantly innovate in their sector to not only maximize the profit but also to
become market leader. There were multiple incidents where innovative products have revived a
business and changed the entire industry from its working. (Maximillian, 2016)
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There are certain technological factors that can leave impact on smooth running and future of
Levi’s:
Technology is going through a rapid development and many competitors are using it as a
breakthrough. Levi’s should have their watch over the technology which is gaining popularity in
the market and have its use for their development and customer reach.
The must keep on innovating to improve their production and product quality. It is also necessary
to keep their innovation confidential so that competitors don’t get any access to that.
The technology has potential to increase or decrease the profit margin drastically over the cost
for product of the company. The profits gained may be reinvested for further research and
development or to enhance customer experience with the product.
Micro-Environmental Factors
These Factors can affect the operation and performance of business in area of working. Micro-
environment factors commonly include suppliers, channels, customers, media, employees,
shareholders. Among all these the major factors that can affect the workflow of the organization
are: -
Customers:
It is one of the most import microenvironment factor. Having a close knowledge of your
customer understanding help the businesses to generate more revenue and profit. Levi’s should
also do surveys and research to know about the liking of their targeted audience. Having a better
understanding will also help in strategizing marketing campaigns to attract and retain them.
(Maximillian, 2016)
Public and Media:
The public image of brand is also a deciding factor in determining future of the brand. Social
media is everywhere and anything can go viral in seconds. Levi’s can make a good social image
by participating in social cause and though saving environmental. A good image of brand gets
easily noticed which further help in attracting more customers.
Recommendation for Retailers
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Retail industry is more dynamic than ever before. To increase sales and profitability, retailers
must evolve with the industry trends. There are challenges that retailers face and how they can
overcome them are as follows: (Mou, et. al. 2018)
Sales Opportunities
From selling to their audience or entering into a new category, a retailer should never miss an
opportunity to sell to their customers.
Customer Service
Customer service can affect the growth of a brand. Retailers must train their employees to prove
excellent customer service to gain loyalty of their customers.
Keep up with the trends
A retailer should be up to dated with the trends in the market and monitor the shopping behavior
of their customers. They must innovate according to the trends but shift the main motive of
product in between innovation. (Baumgarten, 2018)
Customer Loyalty
Many of the retailers fail to maintain customer loyalty and end up losing their customers. The
key factor for developing a brand loyalty is providing a rich customer experience. Remember,
loyal customer always returns.
Proper internal communication
It is always tough to maintain internal communication for retails who has established as big
brands. Big retailers operate from multiple divisions and any improper communication can easily
disrupt internal business workflow. An ERP system is a perfect solution to maintain internal
communication. (Mou, et. al. 2018)
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Conclusion
One of the leading engines of the domestic market is the retail industry. Retailing should be
developed in growing economies to meet the high consumer demands in those countries.
Retailing industry is very dynamic and it changes with the current trends of the market so
whatever working today in retailing industry probably won’t work there in tomorrow. Retailers
play a major role in controlling the industry politically, socially and economically. Various
strategies can be used by retailer to reduce cost, increase profit and brand value of their product.
They should always make analysis of the retail industry data to achieve insight of the market.
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