Strategic Marketing

Planning

CHAPTER OBJECTIVES

After reading this chapter, you should be able to:

Explain company-wide strategic planning and its principal steps,
Describe how companies develop mission statements and objectives.
Explain how companies evaluate and develop their business
portfolios.
Explain marketing's role in strategic planning.
Describe the marketing management process and the brand plan.
Show how marketing organizations are changing.

Preview Case
Levi's Strategic Marketing and Planning
Bavarian immigrant to America, Levi-Strauss, carted a load of heavy fabric
to California to make tents during the gold rush. He found that the gold
seekers needed trousers more than tents, so he used the fabric to make
canvas trousers. His blue jeans are now a worldwide institution. Levi-Stranss
&Co. still dominates the jeans industry. From the 1950s to the 1970s, as the
baby boom caused an explosion in the number of young people, Levi-Strauss
& Co. and other jeans makers experienced heady 10-15 per cent annual
sales growth, with little or no strategic or marketing planning effort. Selling
jeans was easy - Levi concentrated on simply trying to make enough jeans
to satisfy a seemingly insatiable market. However, by the early 1980s, demo-
graphics had caught up with the jeans industry. Its best customers, the

81 •
82 • Chapter 3 Strategic Marketing Planning

baby-boomers, were ageing, and their tastes were changing with their waist-
lines- they bought fewer jeans and wore them longer. Meanwhile, tine IS-to
24-year-old segment, the group traditionally most likely to buy jeans, was
shrinking. Thus Levi found itself fighting for share in a lading jeans market.
At first, despite the declining market, Levi-Strauss & do. stuck closely to
its basic jeans business. It sought growth through mass-marketing strategies,
substantially increasing its advertising and selling through mass retailers
like Sears and J.C. Penney. When these tactics failed and profits continued
to plummet, Levi tried diversification into faster-growing fashion and
speciality apparel businesses. It hastily added more than 75 new lines,
including Ralph Lauren's Polo line (high fashion); the David Hunter line
(classic men's sportswear): the Perry Ellis Collection (men's, women's and
children's casual sportswear); Tourage SSE (fashionable men's wear); Frank
Shorter Sportswear (athletic wear); and many others. By 1984 Levi had
diversified into a muddled array of businesses ranging from its true olue
jeans to men's hats, ski-wear and even denim maternity wear. As one analyst
reported at the time in Inc. magazine:

For years, Levi prospered with one strategy: chase the demand for blue
jeans. Then came die designer jeans craze - and Levi became
unstitched. The company diversified into fashion. It slapped its
famous name on everything from running suits to women's polyester
pants. The results were disastrous: profits collapsed by 79 per cent
last year, and the company slashed about 5,000 jobs.

In 1985, in an effort to turn around an ailing Levi-Strauss it Co., new

management implemented a bold new strategic plan, beginning with a drastic
reorganization. It sold most of the ill-fated fashion and speciality apparel
businesses and took the company back to what it had always done best -
making and selling jeans. For starters, Levi rejuvenated its flagship product,
the classic button-fly, shrink-to-fit 501 jeans. It invested $38 million in the
now-classic 501 blues' advertising campaign, a series of hip, documentary-
 Preview Case: Lew's Strategic Marketing and Planning • S3

style reality ads. Never before had a company spent so much on a single item
of clothing. At the time, many analysts questioned this strategy. As one put
it: 'That's just too much to spend on one lousy pair of jeans.' However, the
501 blues campaign spoke for all of the company's products. It reminded
consumers of Levi's strong tradition and refocused the company on its basic,
blue jeans heritage. During the next six years, the campaign would more than
double the sales of 501s.
Building on this solid-blue base, Levi began to add new products. For
example, it successfully added prewashed, stonewashed and brightly
coloured jeans to its basic line. In late 1986, Levi introduced Dockers, casual
and comfortable cotton trousers targeted at the ageing male baby-boomers.
A natural extension of the jeans business, the new line had even broader
appeal than anticipated. Not only did adults buy Dockers, so did their chil-
dren. In the few years since its introduction, the Dockers line has become a
Si billion-a-year success, Le\i's has continued to develop now products for the
ageing boomers. In 1992 it introduced 550 and 560 loose-fitting jeans - 'a
loose interpretation of the original' - for men who have outgrown the
company's slimmer-cut 501s.
In addition to introducing new products, Levi-Strauss & Co. also
stepped up its efforts to develop new markets. In 1991, for example, it devel-
oped jeans designed especially for women and launched an innovative five-
month, S12 million 'Jeans for Women' advertising campaign, featuring
renderings of the female form in blue jeans by four female artists.
But Levi's most dramatic turnaround has been in its international
markets. In 1985 Levi almost sold its then stumbling and unprofitable
foreign operations. Since then, however, the company has turned what was
a patchwork of foreign licensees into a well-co-ordinated team of worldwide
subsidiaries. Levi is now a truly global apparel maker. Its strategy is to 'think
globally, act locally'. It operates a closely co-ordinated worldwide marketing,
manufacturing rind distribution system. Twice a year, Levi brings together
managers from around the world to share product and advertising ideas, and
to search for those that have global appeal. For example, the Doekers line
originated in Argentina, but has now become a worldwide best seller.
However, within its global strategy, Levi encourages local units to tailor
products and programmes to their home markets. For example, in Brazil, it
developed the Feminina line of eurvaceously cut jeans that provide the
ultralight fit that Brazilian women favour. Levi's European Docker division
now plans to conquer Europe from its Swedish base. In doing so it has
created the world's biggest advertisement, a 480 square metre banner hung
on Stockholm's up-market NK department store,
In most markets abroad, Levi-Strauss & Co. boldly plays up its deep
American roots. For example, James Dean is a central figure in almost all
Levi advertising in Japan. Indonesian ads show Levi-clad teenagers driving
around Dubuque, Iowa, in 1960s convertibles. And almost all foreign ads
feature English-language dialogue. However, whereas Americans usually
think of their Lcvis as basic knockaround wear, most European and Asian
consumers view them as up-market fashion statements. The prices match
the snob appeal - a pair of Levi 501 jeans selling for S30 in the United States
costs $63 in Tokyo and $88 in Paris, creating lush profit margins.
Levi's aggressive and innovative global marketing efforts have produced
stunning results. As the domestic market continues to shrink, foreign sales
have accounted for most of Levi's growth. Overseas markets now yield 39
per cent of the company's total revenues and 60 per cent of its profits.
Perhaps more impressive, its foreign business is growing at 32 per cent per
84 • Chapter 3 Strategic Marketing Planning

year, five times the growth rate of its domestic business. Levi continues to
look for new international market opportunities. For example, the first
Romanian shop officially to sell Levi's jeans recently opened to large crowds,
and Levi is now racing competitors to reach jeans-starved consumers in
eastern Europe and the former Soviet republics. Dramatic strategic and
marketing planning actions have transformed Levi-Strauss into a vigorous
and profitable company, one better matched to its changing market oppor-
tunities. Since its 1985 turnaround, Levi's sales have grown more than 31
per cent and its profits have increased fivefold. Thus, by building a strong
base in its core jeans business, coupled with well-planned product and
market development, Levi has found ways to grow profitably despite the
decline in the domestic jeans market. As one company observer suggests,
Levi has learned that 'with the right mix of persistence and smarts, [plan-
ning new products and] cracking new markets can seem as effortless as
breaking in a new pair of Levi's stonewashed jeans', 1

QUESTIONS
1. What stimulated Levi to diversify away from its homeland in the
American blue jeans market?
2. With its focus on the global blue jeans market, is Levi likely to face the
same pressure for diversification again?
3. Conduct a SWOT (strengths, weaknesses, opportunities and threats)
analysis of Levi and comment upon its implications for the company.
4. Use the 'product/market expansion grid' to plot the moves made by
Levi during the case. In which quadrants was Levi least successful and
why? In which was it most successful and why?
5. Suggest a 'mission statement' for Levi that would help the company
focus on its strengths.
6. Considering Levi's international subsidiaries as 'strategic business
units', what do you imagine Levi's 'BCG growth-share matrix' to look
like? What global strategies does the matrix suggest?

Introduction

All companies need strategies to meet changing markets. No one strategy is best
for all companies. Each company must find the way that makes most sense, given
its situation, opportunities, ohjeetives and resources. Marketing plays an import-
ant role in strategic planning. It provides information and other inputs to help
prepare the strategic plan. Strategic planning is also the first stage of marketing
planning and defines marketing's role in the organization. The strategic plan
guides marketing, which must work with other departments in the organization to
achieve strategic objectives.
Here we look at the three stages of strategic market planning: first, the
strategic plan and its implications for marketing; secondly, the marketing process;
and thirdly, ways of putting the plan into action.