POKHARA UNIVERSI TY

Level: Master Trimester Year : 2011

Programme: MBA Full Marks: 100
Course: Strategic Management Pass Marks: 60
Time : 4hrs.

Candidates are required to give their answers in their own words as far
as practicable.
The figures in the margin indicate full marks.
Attempt all the questions.
1. a) Compare and contrast vision statement with mission statement. List and 8
define the major components of an effective mission statement.
b) Explain the relationship between strategic management and competitive
7
advantage for firms. How can a firm achieve sustained competitive
advantage?
2. Discuss the Porters' Five Forces Framework and explain how they determine 10
an industry’s profit potential. Consider also the implications of five forces
analysis and the key issues. Provide company/industry examples when
explaining the framework.
3. a) Identify an industry (for example car industry or food retailers- yet you 8
can choose another industry) and, by comparing competitors, map out the
main strategic groups in the industry according to key strategic
dimensions.
b) "Politics and Power-play within organizations may help strategic choice". 7
Do you agree with this statement? Why?
OR
Explain how marketing, finance/accounting, R&D and Management 7
Information System managers' involvement in strategy formulation can
enhance strategy implementation.
4. Discuss porter's generic strategies. 10
5 a) Given the information in the table below, develop a BCG Matrix and an 8
IE Matrix:

1
 Division 1 2 3
Profits $10 $15 $25
Sales $100 $50 $100
Relative Market Share 0.2 0.5 0.8
Industry Growth rate +0.20 +0.10 -0.10
IFE Total Weighted Scores 1.6 3.1 2.2
EFE Total Weighted Scores 2.5 1.8 3.3
b) Describe alternative directions for strategic development using Ansoff 7
Matrix and discuss reasons for company diversification. Provide
company examples.
OR
Under what circumstances is a related diversification is superior to 7
unrelated diversification? What are the advantages and disadvantages of
either approach?
6. Discuss the Balance Scorecard. Develop a Balance Scorecard for a local 10
fast-food restaurant.
7. Read the case carefully and answer the questions below: 25
LEVIS: AIMING AT THE ECHO BOOMERS

In 1986, Levi Strauss & Company found that the best way to stay true blue
to its customers was to change its colors. Riding high on the results of a
recent “back to basis” campaign with its flagship 501 brand, Levi's was
enjoying reinvigorated jeans sales. But the good news was followed by bad.
Research showed that baby boomers, the core of the company's customer
franchise, were buying only one or two pairs of jeans annually, compared to
the four to five pairs purchased each year by 15 to 24-year-olds.
Born between 1946 and 1964, the baby boomers had adopted jeans as a
symbol of their break with the tastes and traditions of their parents. They
had, in the words of Steve Goldstein, vice president of marketing and
research for Levi's, helped turn the company into an “international global
colossus” in the apparel industry. Now, however, the baby boomers were
looking for something different. They still wanted clothing that was
comfortable and made from natural fabrics, but fashion had become more

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important. Many worked in environments with relaxed dress codes, so they
sought clothing that combined style and versatility—something appropriate
for both professional and leisure activities.
“We set ourselves out to answer the big question,” Goldstein says. “How
could we keep the baby boomer generation in Levi's brands when they
weren't wearing so many pairs of Levi's jeans? And the answer was
Dockers, something between the jean that they loved and the dress pants that
their parents expected them to wear when they got their first job.”
Dockers created a product category—new casuals. Blue denim was out;
cotton khaki (in brown, green, black, and navy, but mostly traditional tan)
was in. Positioned as more formal than jeans yet more casual than dress
slacks, Docker's satisfied an unfulfilled need. They were the right pants for a
variety of occasions, an unpretentious alternative to dressy, tailored slacks.
The challenge in marketing Dockers was to leverage the Levi's name and
heritage while establishing the independence of the new brand, and to do so
without detracting from Levi's core jeans focus. According to Goldstein, the
company briefly considered not using the Levi's name at all, but realized that
this would be “sort of like trying to put a space shuttle up without any launch
rockets.” So the original theme for Dockers was “Levi's 100 percent cotton
Dockers. If you're not wearing Dockers, you're just wearing pants.”
Response from retailers and from the target market of 25- to 49-year-olds
was everything Levi's hoped for. All the top menswear accounts across the
country placed the new product in their stores, and in only five years,
Dockers became a $1 billion brand. Brand awareness among men 25 and
older was 98 percent, and 70 percent of target consumers had at least one
pair of Dockers in their closets.
With the new brand sailing along smoothly, Levi Strauss & Company began
to dissociate Dockers from the company brand name. In 1993, the Levi's
name and the words “since 1850” were removed from the Dockers logo.
Robert Hanson, vice president of marketing and research for Dockers, claims
the change was needed to “allow the Levi's brand to be focused on the core
teen target because…it's the quintessential icon of youth culture.”
Still following the baby boomer market, Levi's in 1996 brought out Slates,
an extensive line of wool, polyester microfiber, and fine-gauge cotton dress
pants. “We thought there was room in a man's closet for a third brand,” says
Jann Westfall, president of the Slates division. “That's why Slates was
created to [fill the gap] between khakis and suits.” To Levi Strauss &
Company, it seemed a natural evolution—the guy who wore Levi's in the
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'70s and Dockers in the '80s would be ready for Slates in the '90s. Slates
would be the high end of casual, neatly filling the “lunch with client/salary
review with boss” role in the Docker man's wardrobe.
Consumer research told Levi's that consumers found shopping for dress
pants a chore: slacks departments were dreary; finding the right size was
difficult; and getting alterations was frustrating. Consumers wanted cash
and carry, off-the-rack dress pants. So Levi’s devised a carefully crafted
strategy to overcome the typical male distaste for dress pants shopping.
Slates were sold in scientifically tested selling areas consisting of mahogany-
toned circular store displays that allowed easy access to the various styles
and sizes. Levi's also responded with off-the-rack pants that require little
altering. Whereas most dress pants come only in even waist sizes, forcing
alterations for off-size men, Slates also come in odd sizes. All Slates are
hemmed and cuffed and have double pleats in the front. For customers with
larger waist sizes, the pleats are more kindly placed.
Levi’s backed Slates with $20 million in advertising, beginning with
television ads at the opening of the National Football League season. To
charm potential customers, Levi’s agency designed ads such as one showing
a guy springing up from lunch with his partner to tango with his waitress.
“The ads are stylish but they are not over [the market's] heads,” said Nancy
Friedman, vice president of research and development. “The trick is to rein
it back in so it isn't so chi-chi that people can't relate to it.” A year later,
everyone agreed that Slates was a dynamite brand. Levi’s had turned on the
Dockers customer to dress slacks just when “corporate casual” started to
“dress up.” Noted one industry insider, “Slates and other labels have pushed
the envelope. This has created a tremendous consumer awareness for slacks
in general.” Some retailers found that their tailored pants business was up 15
to 20 percent.
However, just like the good news about Levi’s “back to basics” move a
decade earlier, the good news about Slates has been accompanied by bad
news—plummeting market share in the core jeans market. Although Levi
Strauss had 30.9 percent of the U.S. blue jeans business in 1990, it had only
18.7 percent seven years later. Worse yet, Levi's sales to teens, the core blue
jeans buyers, had dropped from 33 percent in 1993 to 26 percent in 1997.
Once the darling of the 15- to 24-year-old buyer, Levi’s now faces
indifference in this segment and an attitude that Levi's are “your dad's
pants.” The bottom-line message: Levi's are uncool. Male teenagers
increasingly prefer brands like Tommy Hilfiger and Old Navy. Even the
young women who have been more inclined buy Levi's are moving toward

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brands such as Calvin Klein, Gap, and Guess. Levi's is being squeezed by
upscale brands like Tommy Hilfiger and Ralph Lauren on one end and
private label or store brands on the other.
It’s a classic marketing goof: Levi's lost sight of the market that launched it
to success. By concentrating on Dockers, and more recently on Slates,
executives were distracted from the threat to the core jeans business. “They
missed all the kids and those are your future buyers,” says Bob Levi, owner
of Dave's Army & Navy Store in New York. “It's very important that you
attract this age group,” says Gordon Hart, vice-president of the Lee brand at
VF Corp. “By the time they're 24, they've adopted brands that they will use
for the rest of their lives.” Moreover, the younger segment sets fashion
trends that influence older shoppers. The mistake has been costly: falling
sales and market share forced Levi’s to lay off 1,000 salaried workers in
February 1997, and to shutter 11 plants and lay off one-third of its North
American workforce in November of that year.
What is Levi's doing to fix the problem? It’s pumping up the Silver Tab
brand, an eight-year-old jeans line considered more stylish among young
consumers. Silver Tab has a baggier fit and uses non-denim fabrics. The
median age of a Silver Tab buyer is 18, compared to 25 for Levi's other
products. Levi's plans to expand the line to include more tops, more trendy
styles, and new khaki pants. The company also plans to boost Silver Tab
promotional spending fivefold for events such as concerts in New York and
San Francisco, for up-and-coming bands playing music known as
Electronica, and for outfitting characters on hot television shows such as
Friends and Beverly Hills 90210.
Levi's is also taking action on the retail front. In 1998, Levi's will introduce
jazzier, more colorful packaging aimed at giving its products a more
exciting, youthful look. It has dropped plans to open 100 new stores in malls
across the country in favor of NikeTown-type stores, which will serve as the
company's flagship outlets in large cities.
Holding nothing sacred in its quest to reposition itself in younger segments,
Levi's is also searching for a new ad agency to replace Foote, Cone and
Belding, which has been the Levi's agency for more than sixty years. And
the company is recruiting more outside managers. “[Levi Strauss &
Company] has always been insular, paternalistic, and, quite frankly, a little
smug” says Isaac Lagnado, president of Tactical Retail Solutions. All that
appears to be changing.
Will the new strategy work? Many industry insiders think that Levi has the

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money and market clout to pull it off. But didn't we just read that some of
those trendy new styles for Silver Tab include khakis? Doesn't that sound
like Dockers? And speaking of Dockers, Levi's may have a problem making
that brand relevant to the next generation of young men. Baby boomers who
are aging out of the Dockers' target market have refused to leave the brand
behind. Consequently, the Dockers brand that has been positioned for
consumers just moving out of their core jeans-wearing years may now be
thought of as “my dad's brand” by the next generation of young men moving
into this segment. Thus, the “dad's brand” problem that hit Levi’s in the blue
jeans segment now threatens the Dockers market. Even as Levi's is working
to get its core jeans business back on track, it will have to contend with a
similar problem with Dockers.

Questions
1. What actors and forces in Levi Strauss & Company's
microenvironment and macroenvironment have affected its
marketing position?
2. Why was Levi's so successful in designing products for the baby
boomers?
3. How and how well has Levi's responded to changes in its marketing
environment?
4. Evaluate Levi's strategy for the Silver Tab brand. Is the strategy
likely to succeed? Does it meet the concerns of younger buyers?
How does Silver Tab compare with the competition?
5. What marketing recommendations would you make to Levi’s
management?