Levi Strauss: PEST factors
Some firms are increasingly recognising the benefits of becoming multinationals and expanding internationally. The case study will outline theoretical exegesis of global standardisation and international adaptation. Levi's the fashion clothing retailer and their jeans' subdivision is utilised to exemplify PEST factors as outlined. In identifying and analysing the level of globalisation and assessing the feasibility of global marketing strategy and tactics, the case study will focus on jeans as product, specifically Levi jeans. Levi has been chosen as consequence of its widespread penetration of the international jeans market. It is the world's largest manufacturer of trousers, notably blue denim jeans. Initially aimed at cowboys, blue denim jeans spread to the whole US population and were eventually exported worldwide (Britannica Encyclopedia, 1999). Just recently, Levi's closed six US manufacturing plants in a move that redundant 3,600 workers (Liedtke,2003). The jeans maker has been struggling to reverse six-year slide in its sales as consumers began buying trendier or less expensive clothes.
PEST factors
There gas been diversity of PEST oriented factors determine whether the marketing mix can be standardised for all customers in the jeans market or whether it needs to be adapted to suit specific market conditions.
Political/Legal factors
Promotional activities are regulated in all countries by legislation. One of Levi Strauss's most famous television commercials used the music of Martin Gaye as a background to 1950s image of young man stripping to his boxer shorts and washing his 501's in a laundrette. There has been variety of adaptations were required in local markets. For example, the original commercial had to be re-shot in Australia and Brazil because the local regulations insisted on domestic produced commercials. Furthermore, many South East Asian countries exercised their censorship power and banned the commercial completely (Jeannet et al., 1998). There are relatively few legal restraints upon the choice of distribution channel. However, there are exceptions such as France and China's prohibition against door to door selling which may not be particularly applicable to jeans.
Economic factors
The economic factor is increasingly important in enhancing adaptation. Local markets vary enormously by their disposable income per capita. Therefore, standardising prices would mean that poor countries are likely to have reduced market for jeans. Different levels of income and changes in income levels will affect both the price that can be charged and the product quality that is appropriate for each local market. Prices for jeans do vary very substantially between markets and such price discrimination may be partly for reasons of income but may also be because of the severity of competition and the inaccessibility of the territory. For example, standard Levi jeans in the UK sells for approximately £46 whilst in certain US states £20 is the norm.
The nature of the promotional campaign will also be affected by the stage of the economic development of the individual country and therefore require a degree of adaptation. Advertisements for jeans in affluent societies are quite sophisticated and rely on the communication of ideas about lifestyle and imagery. By contrast, advertisements in poor countries are more rudimentarily based upon factors such as function and value for money. Distribution channels may require adaptation in relation to the stage of development of each local market. Advanced countries possess multiplicity of different retail outlets while choices are likely to be much more constrained in less developed countries. Therefore the full range of selling patterns employed for advanced markets cannot be deployed in poorer ones.
Socio-cultural factors
Socio-cultural consists of language, religion, ethnics, values and customer perceptions. It heavily affects the product and promotion elements of the marketing mix because they are the most culture-bound aspects. Differences in culture attitudes lead to enormous variations in product and advertising standards and expectations. Levi wishes to minimise the degree to which culture prevents them from producing standardised promotional campaigns. This is because of the benefits of economies of scale and the higher quality that can be obtained for a single advert than for multiplicity of local adverts. Consequently, Levi Strauss paid $550,000 for one series of TV commercials(Jeannet et al., 1998) to use around the globe. However, it should be mentioned that Levi's success turns on its ability to create a global strategy that does not stifle local initiative. It is a delicate balancing act, one that often means giving foreign managers the freedom needed to adjust their tactics to meet the changing tastes of their home markets (Business Week, 1990).
In addition to the effect on the design of adverts, cultural differences have linguistic implication with regard to the product name. The brand name of product is a key element of its promotion but care has to be exercised to avoid causing offence in translation or using symbols that do not have the same significance worldwide. Moreover, Japanese consumers prefer tighter fitting jeans than the American counterparts (Czinkota et al., 1995). It is therefore evident that fit, design and style of jeans need to be adapted to meet the requirements of the local buyers. Levi Strauss when setting up its own direct sales force, found that the debt collection period was six month period in Japan compared with a one month period in the home country(Terpstra et al., 1994), adaptation to such local trading customs was necessary in order to penetrate the Japanese market.
Technological factors
Technological considerations concern whether the local market has sufficiently developed technologies to take full advantage of the product. High technologies are required to make full use of the variety of promotional methods using alternative advertising media such as television or Web sites. Similar considerations apply to the distribution of the product. For example, whether consumers can utilise online home shopping facilities. In less developed countries, for example in Africa, where such technologies are in rather inchoate stage, adaptation is required such that a greater extent of use is made of more traditional methods. On the other hand, in developed countries Levi make use of the electronic data interchange system to order and monitor stock levels with their customers such as major department stores in order to avoid costly stock-outs. (Kotler, 1997).
References
Britannica Encyclopaedia (1999)
Business Week (1990), "For Levi's, a flattering fit overseas", Business Week, pp.76-7
Czinkota, M.R., Ronkainen, I.A. (1995), International Marketing, 4th ed., The Dryden Press, Hinsdale, IL
Jeannet, J., Hennesey, H. (1998), Global Marketing Strategies, 3rd ed., Houghton Mifflin Company, Boston, MA
Kotler, P. (1997), Marketing Management - Analysis, Planning, Implementation and Control, 8th ed., Prentice Hall, Englewood Cliffs, NJ
Liedtke, M. (2003), available at: http://forums.transnationale.org/viewtopic.php?p=5277
Terpstra, V., Sarathy, R. (1994), International Marketing, The Dryden Press
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