Levi's case study

Equated Monthly Installment

For MBA-III Sem.

By

CS V.K. Bhatnagar

Levi’s India Offers Jeans at EMIs

In June 2009, apparel manufacturer, Levi’s Strauss India Pvt. Ltd. Offered to sell its well-known Levi’s brand of Jeans and other products on Equated Monthly Installments (EMIs).

Analysts viewed this as a bid by the company to increase sales against the backdrop of the economic downturn.


The offer; launched as a pilot program in Bangalore.

The offer was valid only for consumers who purchased products worth Rs. 1500 and above.

The consumer has to settle the bill in three installment.

The EMIs were on zero percent interest. Levi’s had entered into a tie-up with ICICI

Bank.


In return, the bank received service charges. The company received good response. Sales have surged by 10-15% . Later company introduced same scheme in

eight cities. Company entered into an agreement with the

HDFC and Axis Bank credit cards. And the amount had to be Rs. 5,000 and

above.


Certain Issues from company’s view point:

1. In 2008, only 28 % of affluent Indians have credits cards.

2. Loyalty of customers.

3. Credit worthiness of customers.

4. Lose a few premium customers.

5. Regular payment of Installments.


Certain Issues from customers view point:

1. Quality of the branded products.

2. Minimum spending Rs. 5000 and above

(increased from Rs. 1500 to Rs. 5,000)

3. Credit worthiness of customers.

Questions

What would be the affect on the brand of Levi’s apparel?

How company would compensate loss occur due to non payment by the customer?

Will this strategy work in Indian market in long term?

Credit Information Bureau Indian Limited (CIBIL) CIBIL - India's first credit information bureau-

is a repository (collection) of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its Members in the form of credit information reports.

How does CIBIL function?

For credit grantors to gain a complete picture of the payment history of a credit applicant, they must be able to gain access to the applicant's complete credit record that may be spread over different institutions. CIBIL collects commercial and consumer credit-related data and collates such data to create and distribute credit reports to Members.

Where does CIBIL get the information from?

CIBIL primarily gets information from its Members only and at a subsequent stage will supplement it with public domain information in order to create a truly comprehensive snapshot of an entity’s financial track record.

What is a Credit Information Report?

A Credit Information Report (CIR) is a factual record of a borrower's credit payment history compiled from information received from different credit grantors. Its purpose is to help credit grantors make informed lending decisions - quickly and objectively.

Strategic Management

“Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.”

Strategic formulation

Process I –

Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.

Cont..

Process II –

Concurrent with this assessment, objectives are set. These objectives should be parallel to a time-line; some are in the short-term and others on the long-term. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.

Cont..

Process III-

Objectives of the company should be, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives

Corporate Management

The concept of corporate management has moved through five paradigm:-

1. Adhocism

2. Planned Activity.

3. Environmental-Strategy Interface.

4. Corporate planning.

5. Corporate Management.

Components of Corporate Strategy

Time Frame. Be attainable Be Challenging Be understandable Be measurable and controllable.

Legal Provisions of Credit Cards

The Card Member expressly accepts that if he fails to pay any money when due, or which may be declared due prior to the date when it would otherwise have become due, or commits any default or breach of the Terms and Conditions of the Card, then, the Alliance Partner shall, at its sole discretion, without prejudice, exercise all or any of its rights and remedies available to it in these Terms and Conditions and/or applicable laws.


"EMI" or “Equated Monthly Installment” means the equated monthly installment of amounts payable by the Card Member to Alliance Partner comprising of principal amount, interest and any/ or other charges, if applicable.

“Instant EMI” refers to the conversion into EMI upon request by the Card Member, of transactions performed using the Card at Alliance Partner’s EDC (Electronic Data Capture) terminal and/or for such online transactions, where the option for such conversion is available.

Penal Provisions for non payment The Indian Penal Code contains provisions to check economic

crimes such as Bank Fraud, Insurance fraud, Credit card fraud, stock market manipulation, etc. The local police deal with the IPC crimes falling under the broad categories of ‘Cheating’ (Section 415-424), ‘Counterfeiting’ (Coins & Stamps Section 230-263A and Currency Section 489A-489E) and ‘Criminal Breach of Trust’ (Section 405-409)

Online Credit Card Offence & Indian Law: So far as Indian legal position is concerned, any offence

pertaining to online payment through credit cads will come within the purview of Information Technology Act, 2000 read with relevant provisions of Indian Penal Code, 1860. Section 378 of the Code defines the term “theft” as follows:


Negative entries on your credit report. They might sue you for the balance. They will give it to a collection agency and they will try to harass

you into paying, and they will threaten a lawsuit also. If they go to court and get a judgment against you, it will be a

lien on your house that you would have to pay when you sold your house.

Also, if they get a judgment in court against you, they will be able to freeze your bank accounts without prior notice to you.

If your state allows it, and most do, they might have your wages garnished to pay the debt.

Education

Levi's case study