Jeans Case Jeans Case StudyStudy

Denim Industry In US Till Denim Industry In US Till 1960s1960s

Indigo-dyed denim produced in the Indigo-dyed denim produced in the U.S until the 1960U.S until the 1960’’s was possibly the s was possibly the least fashionable of apparel fabrics. least fashionable of apparel fabrics.

Denim was primarily found in Denim was primarily found in garments for manual laborers, it was garments for manual laborers, it was widely viewed as being widely viewed as being ““low-classlow-class””

The 1970The 1970’’ss the demand reached explosive levelsthe demand reached explosive levels

as a result of the potential for color as a result of the potential for color fading of Indigo. fading of Indigo.

Faded jeans became associated with Faded jeans became associated with rebellion and independence: rebellion and independence: ““youth rebellion””. .

An American film, An American film, ””Easy Rider””, , portrayed young men wearing faded portrayed young men wearing faded jeans, riding motorcycles and smoking jeans, riding motorcycles and smoking marijuana. marijuana.

demand for denim increased far demand for denim increased far beyond capacitiesbeyond capacities that were then that were then available. available.

Prices increased Prices increased existing denim companies (5 at the existing denim companies (5 at the

time) rushed to expand production and time) rushed to expand production and other textile companies moved quickly other textile companies moved quickly to enter the denim business to enter the denim business

the demand for denim, even low-quality the demand for denim, even low-quality fabric, was so great that even the worst fabric, was so great that even the worst denim could be marketed at a profit denim could be marketed at a profit

The 1980The 1980’’ss In a period of a few years In a period of a few years

the U.S. denim business the U.S. denim business went from near extinction, went from near extinction, producing some tens of producing some tens of million of meters per year, million of meters per year, to hundreds of millions. to hundreds of millions.

The U.S. was the center of The U.S. was the center of the international denim the international denim business business

The history of blue jeans The history of blue jeans was transformed forever. was transformed forever. Denim debuted as high Denim debuted as high fashion. fashion.

The term The term ““designer jeansdesigner jeans”” was coined: creation of was coined: creation of slimmer, tight, butt hugging slimmer, tight, butt hugging jeans.jeans.

The Decline Of The US The Decline Of The US Denim Mfg. IndustryDenim Mfg. Industry

By around 1990, the U.S. denim industry was showing By around 1990, the U.S. denim industry was showing signs of decline :signs of decline :

Denim executives in the U.S. were shy about taking Denim executives in the U.S. were shy about taking risks and avoided making the hard, strategic risks and avoided making the hard, strategic decisions for long-term survival. Instead of mounting decisions for long-term survival. Instead of mounting a defense of their industry, they often looked to joint a defense of their industry, they often looked to joint ventures outside the U.S. as away to economic ventures outside the U.S. as away to economic salvation. salvation.

- provided short-term benefits, U.S. domestic - provided short-term benefits, U.S. domestic manufacturing was weakened in the long-term. manufacturing was weakened in the long-term.

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

The Decline Of The US Denim The Decline Of The US Denim Mfg. IndustryMfg. Industry

burst of corporate greedburst of corporate greed in the U.S. in the 80 in the U.S. in the 80’’s :s :- Textile companies were a favorite target of financial - Textile companies were a favorite target of financial looters, both inside and outside the textile companies. looters, both inside and outside the textile companies.

- textile executives sought to enrich themselves by - textile executives sought to enrich themselves by arranging for compensation in the millions of dollars. arranging for compensation in the millions of dollars.

- top managers in textile companies, fearing a takeover of - top managers in textile companies, fearing a takeover of the company by outside investors, arranged for the company by outside investors, arranged for management buy-outs, in which the companies assumed management buy-outs, in which the companies assumed massive debts so that the managers could become owners massive debts so that the managers could become owners of the company. of the company.

Major purchasers of denim, the Major purchasers of denim, the ““BrandsBrands””, developed a , developed a strategy to increase the scale and profits of their business; strategy to increase the scale and profits of their business; characterized by cunning and driven by ruthless greed:characterized by cunning and driven by ruthless greed:

- expand garment volume and create garment price - expand garment volume and create garment price stability, but still increase their profits. stability, but still increase their profits.

- - forcing fabric suppliers to accept smaller marginsforcing fabric suppliers to accept smaller margins, , even though garment prices stayed the same. The reduced even though garment prices stayed the same. The reduced margins paid to the fabric suppliers are absorbed as profits margins paid to the fabric suppliers are absorbed as profits by the big apparel companies. by the big apparel companies.

significant significant change in the attitudes of change in the attitudes of American consumers toward clothing. American consumers toward clothing. Americans had long appreciated quality in Americans had long appreciated quality in their garments and had been willing to pay for their garments and had been willing to pay for it.it.

young people :young people : - demonstrated a clothing - demonstrated a clothing ““fetishfetish””: quantity : quantity

over qualityover quality - typically own enough clothes so that they can - typically own enough clothes so that they can

wear something different every day for weeks.wear something different every day for weeks. - more disposable income than any previous - more disposable income than any previous

American generationAmerican generation

Lee in the 1990Lee in the 1990’’ss environment characterized by environment characterized by changechange While Lee's external environment shifted, While Lee's external environment shifted,

its internal environment was grasping its internal environment was grasping tight its legacy systems, processes, tight its legacy systems, processes, technology, products, schools of thought, technology, products, schools of thought, and management strategy.and management strategy.

The company that had been successful for The company that had been successful for oh-so-long suddenly became a victim of oh-so-long suddenly became a victim of the times--and outward value migration. the times--and outward value migration.

While the world changed around it, Lee While the world changed around it, Lee remained the same. remained the same.

demand problems: shifted toward demand problems: shifted toward emerging jeans products to include those emerging jeans products to include those of high-end designers, strong private of high-end designers, strong private labels, and price-valued jeans. labels, and price-valued jeans.

Loss of market share: Loss of market share: - Lee was in denial of the threats of new - Lee was in denial of the threats of new

competitors and the new buying competitors and the new buying preferences of long-time loyal customers. preferences of long-time loyal customers.

- Senior management failed to truly - Senior management failed to truly acknowledge that value was moving acknowledge that value was moving away from its core market strength of away from its core market strength of tradition tradition

result of the active inertia phenomenon: result of the active inertia phenomenon: inability to take appropriate action to inability to take appropriate action to effectively get the company's head back in effectively get the company's head back in the game: the game:

- corporate behavior had become so - corporate behavior had become so patterned over time, ingrained into the daily patterned over time, ingrained into the daily flow of activities and management decisionsflow of activities and management decisions

- employees respond to a changing market in - employees respond to a changing market in the same way that had always been donethe same way that had always been done

- reinforced a now-failing business model, - reinforced a now-failing business model, further driving away Lee from its unmet further driving away Lee from its unmet goals.goals.

target customer became a customer who did target customer became a customer who did not want to be targeted by Lee : teens and not want to be targeted by Lee : teens and young adults. young adults.

Lee continued insistence to portray their Lee continued insistence to portray their jeans as a classic, standard, mythical jeans as a classic, standard, mythical brand became inconsistent with its brand became inconsistent with its markets' trend toward markets' trend toward individuality:individuality:

- Demand on jeans: provide a specific and Demand on jeans: provide a specific and comfortable fit, reflect a personality, comfortable fit, reflect a personality, signify inclusion to a societal class, or signify inclusion to a societal class, or separate the style of today from the style separate the style of today from the style of one's parents. of one's parents.

- the emergence of the "Me" generation--young the emergence of the "Me" generation--young people who wanted to wear clothing as unique people who wanted to wear clothing as unique as their personal identity. The classical, as their personal identity. The classical, persistent, and standard appearance of the persistent, and standard appearance of the time-tested Lee's blue jean pant is not what time-tested Lee's blue jean pant is not what these people were interested in. these people were interested in.

The value proposition of the Lee jeans line was The value proposition of the Lee jeans line was simply the brand itself. All the same idea (and simply the brand itself. All the same idea (and coincidentally all big successful companies who coincidentally all big successful companies who hit a wall at the turn of the millennium). In a hit a wall at the turn of the millennium). In a modern globalized economy, images of a typical modern globalized economy, images of a typical American, a faithful American have fast become American, a faithful American have fast become blurred. blurred.

The 1990The 1990’’s was the start of globalization:s was the start of globalization: - The World Bank provided enormous funds to - The World Bank provided enormous funds to

developing countries, much of which was used developing countries, much of which was used to improve their ability to compete with U.S. to improve their ability to compete with U.S. textile companies. textile companies.

- - emergence of Chinaemergence of China as an economic power: as an economic power: * with the single-minded goal to eventually * with the single-minded goal to eventually

become a world power. become a world power. * The U.S textile market was a primary * The U.S textile market was a primary

target of the Chinese. target of the Chinese.

The marketing mix employed by was a mess. Its The marketing mix employed by was a mess. Its blue jean product offerings suffered into blue jean product offerings suffered into irrelevance with ignorance to dramatically irrelevance with ignorance to dramatically changing industry competition. changing industry competition.

According to the case study, Lee made a tactical According to the case study, Lee made a tactical blunder of broadening its distribution to mass-blunder of broadening its distribution to mass-market chains such as Bradlees and Target. market chains such as Bradlees and Target. This is not entirely true. Its target market was This is not entirely true. Its target market was becoming predisposed to either designer jeans becoming predisposed to either designer jeans or cheap affordable ones. The mistake was in or cheap affordable ones. The mistake was in the timing and in the pricing. In the 90the timing and in the pricing. In the 90 ’’s, s, instead of the 80instead of the 80’’s, the timing would have been s, the timing would have been perfect.perfect.

In comparison, in the 90In comparison, in the 90’’s, Levis, Levi’’s had problems s had problems with its its distribution and sales channels with its its distribution and sales channels remaining heavily in large department stores in remaining heavily in large department stores in which teens and young adults now largely which teens and young adults now largely choose not to enter at all, in lieu of trendy choose not to enter at all, in lieu of trendy specialty shops or affordable Wal-Mart. specialty shops or affordable Wal-Mart.

realities in the economy and global realities in the economy and global landscape changed. landscape changed.

The World became "flat" and new The World became "flat" and new competitors of Lee started to take competitors of Lee started to take advantage of cheap overseas labor advantage of cheap overseas labor and manufacturing while Lee made a and manufacturing while Lee made a wrong choice in selecting its wrong choice in selecting its overseas contractoroverseas contractor

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

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

RecommendationsRecommendations Enter into joint-venture overseas Enter into joint-venture overseas

productions with Lee overseeing productions with Lee overseeing management especially quality processes management especially quality processes with local partners providing experience with local partners providing experience with local environmental conditionswith local environmental conditions

Constant improvement of information Constant improvement of information systems, to know what the customers are systems, to know what the customers are buying so the shelves would always be buying so the shelves would always be stocked with the right items at the right stocked with the right items at the right timetime

Supply chain management to address the Supply chain management to address the issue on high inventoriesissue on high inventories

Customer surveysCustomer surveys Creation of a new retail/shopping system that Creation of a new retail/shopping system that

would help better identify the right jeans would help better identify the right jeans using pictorial descriptions of body typesusing pictorial descriptions of body types

Change the image of Lee from the Change the image of Lee from the ‘‘jeans that jeans that fitfit’’ to the to the ‘‘jeans that fit your lifestyle or your jeans that fit your lifestyle or your causecause’’

Since Lee is the strongest jeans brand in the Since Lee is the strongest jeans brand in the VF group, for VF to consider to treat Lee as VF group, for VF to consider to treat Lee as its flagship jeans productits flagship jeans product

Co-branding with brands that are synonymous Co-branding with brands that are synonymous with the different market segments targeted with the different market segments targeted

The VF CorporationThe VF Corporation

The Early YearsThe Early Years

1899 - when eight men formed the Reading 1899 - when eight men formed the Reading Glove and Mitten Manufacturing Company Glove and Mitten Manufacturing Company and began producing and selling knitted and and began producing and selling knitted and silk gloves. silk gloves.

1914 - the company expanded into the 1914 - the company expanded into the manufacture of silk lingerie, and after three manufacture of silk lingerie, and after three years of successful sales, they decided to years of successful sales, they decided to conduct a contest to find a brand name for conduct a contest to find a brand name for their lingerie line. The winner : "Vanity Fair."their lingerie line. The winner : "Vanity Fair."

early 1920s - the rising success of the lingerie early 1920s - the rising success of the lingerie product line prompted Vanity Fair to product line prompted Vanity Fair to discontinue its glove manufacturing operation discontinue its glove manufacturing operation and devote itself exclusively to the business and devote itself exclusively to the business of making lingerie. of making lingerie.

Innovation and Expansion in the Mid-1900sInnovation and Expansion in the Mid-1900s 1950 - Vanity Fair became the first lingerie 1950 - Vanity Fair became the first lingerie

manufacturer to receive the Coty Award for manufacturer to receive the Coty Award for Design for introducing products made from nylon Design for introducing products made from nylon tricot material. tricot material.

1950s and early 1960s - the company achieved 1950s and early 1960s - the company achieved steady growth through its production of lingerie steady growth through its production of lingerie and foundation garments. and foundation garments.

1958 - Overseas expansion began when Vanity Fair 1958 - Overseas expansion began when Vanity Fair entered into an agreement with the U.K. firm entered into an agreement with the U.K. firm Wolsey Ltd. to make Vanity Fair-style lingerie Wolsey Ltd. to make Vanity Fair-style lingerie under the brand Wolsey-Vanity Fair. A similar under the brand Wolsey-Vanity Fair. A similar agreement was reached with an Australian firm agreement was reached with an Australian firm the following year. the following year.

1962 - An International Division was created to help 1962 - An International Division was created to help drive foreign expansion. drive foreign expansion.

1967 - as sales growth for lingerie items was 1967 - as sales growth for lingerie items was beginning to top off, Vanity Fair attempted to beginning to top off, Vanity Fair attempted to offset the effects by expanding into the robe and offset the effects by expanding into the robe and loungewear marketloungewear market

First Acquisitions in 1969; Emergence of VF First Acquisitions in 1969; Emergence of VF CorporationCorporation

late 1960s - Vanity Fair began its evolution into a late 1960s - Vanity Fair began its evolution into a multibrand clothing powerhouse under the multibrand clothing powerhouse under the leadership of Manford Lee. leadership of Manford Lee.

1969 - acquired H.D. Lee Company, Inc., a 1969 - acquired H.D. Lee Company, Inc., a manufacturer of men's and boys' jeans and casual manufacturer of men's and boys' jeans and casual pants and Berkshire International Corporation, pants and Berkshire International Corporation, one of the world's largest producers of women's one of the world's largest producers of women's hosiery. hosiery.

- changed its name to VF Corporation - changed its name to VF Corporation 1971- acquired Kay Windsor, Inc., a manufacturer 1971- acquired Kay Windsor, Inc., a manufacturer

of budget-priced, ready-to-wear women's dresses of budget-priced, ready-to-wear women's dresses and sportswear. and sportswear.

1977 - a VF Corporation International Division was 1977 - a VF Corporation International Division was established to manage the company's growing established to manage the company's growing operations overseas: export of Lee Company operations overseas: export of Lee Company products to Europe and the Far Eastproducts to Europe and the Far East

An Industry Leader in the 1980sAn Industry Leader in the 1980s - entered the 1980s in a more profitable position than - entered the 1980s in a more profitable position than

the two other major jeans makers, Levi Strauss & Co. the two other major jeans makers, Levi Strauss & Co. and Blue Bell, Inc.; attributed to less dependence on and Blue Bell, Inc.; attributed to less dependence on foreign markets; earnings from other areas, such as foreign markets; earnings from other areas, such as lingerie; million-dollar investments in capital lingerie; million-dollar investments in capital improvements; and tighter inventory controls. improvements; and tighter inventory controls.

- Lee became VF's largest operating division - Lee became VF's largest operating division - marketing strategy : set Lee apart from other jeans - marketing strategy : set Lee apart from other jeans

industry leaders by segmenting production into men's industry leaders by segmenting production into men's and women's linesand women's lines

- developed the Ms. Lee brand, which soon became - developed the Ms. Lee brand, which soon became the best-selling line of women's jeans in the United the best-selling line of women's jeans in the United States. States.

- increased spending for advertising, expanded the - increased spending for advertising, expanded the company's retail distribution channels, and increased company's retail distribution channels, and increased the size of the VF sales forcethe size of the VF sales force

1984 - acquired Modern Globe, Inc., a manufacturer of 1984 - acquired Modern Globe, Inc., a manufacturer of men's and women's cotton undergarmentsmen's and women's cotton undergarments

- purchased Bassett-Walker, Inc., a producer of fleece - purchased Bassett-Walker, Inc., a producer of fleece activewearactivewear

1986 - VF became the United States' largest apparel 1986 - VF became the United States' largest apparel manufacturer and domestic jeans supplier when it acquired manufacturer and domestic jeans supplier when it acquired the Blue Bell Holding Company, Inc., a competitor that was the Blue Bell Holding Company, Inc., a competitor that was the producer of Wrangler jeans, the Rustler jeans product the producer of Wrangler jeans, the Rustler jeans product line, Jantzen and JanSport swimwear and sportswear, Red line, Jantzen and JanSport swimwear and sportswear, Red Kap occupational apparel, and licenses to the Marithé and Kap occupational apparel, and licenses to the Marithé and François Girbaud François Girbaud

VF had grown considerably in size as a result of its VF had grown considerably in size as a result of its acquisitions but the declining jeans sales finally caught up acquisitions but the declining jeans sales finally caught up to it in 1989 due to: to it in 1989 due to:

* its decision three years earlier to begin * its decision three years earlier to begin marketing its Lee jeans through mass merchandisers and marketing its Lee jeans through mass merchandisers and discount outlets. discount outlets.

* moving into the discount realm ended up * moving into the discount realm ended up alienating department store buyers, who began refusing to alienating department store buyers, who began refusing to carry the Lee line because of the lower-quality image it now carry the Lee line because of the lower-quality image it now possessed. possessed.

* no advertising support given to retail stores * no advertising support given to retail stores where low-cost importers with widely recognized brand where low-cost importers with widely recognized brand names and large consumer advertising budgets dominatednames and large consumer advertising budgets dominated

* growing popularity of a new line of casual men's * growing popularity of a new line of casual men's apparel called Dockers by Levi Strauss. apparel called Dockers by Levi Strauss.

* did not change its basic Lee Rider style; * did not change its basic Lee Rider style; neglected to notice the advantage of new apparel trends. neglected to notice the advantage of new apparel trends.