Levi Strauss & Co

Session 13

The Situation

• Should LS&Co continue sourcing and purchasing fabric in China

• Should the company make direct investments in marketing and manufacturing venues in China

Background

• LS&Co traced its roots to 1850s• Early success producing and selling canvas

trousers to miners during the gold rush• Strong brand identity-synomous with jeans• Company went public in 1971• Experienced a difficult times in ‘80s• Executed a LBO in the 1985, by 1993, 95% of

shares were owned by the descendants and certain non-family members

Backround (Cont’d)

• In the ’90s-Shifted from being a just a manufacturer to a marketer

• Jeans epitomized much of American cultures: freedom, originality, youthfulness

Internal Context

• Marketed its clothes in more than 60 countries

• Production and distribution in more than 20 countries

• Enjoyed a market cap of $5.5B in 1993• Strong international sales in the ‘80s and early

‘90s• Market leader in every country where LS&Co

jeans were sold

Internal Context (Cont’d)

• By 1993-Shifted from companied owned manufacturing to about a half of its production outsourced and offshored

• Faced significant criticism for closing U.S. plants and offshoring and outsourcing

• With changing customer tastes-sought to speed the introduction of new products and shorten the customer service supply chain

Internal Context

• Faced increased scrutiny from employees and customers

• Was the company doing the right thing?

External Context

• Trade Issues were source of significant concern in America

• Trade friction with Japan was at its most serious point ever

• Media and unions were increasingly raising concerns about working conditions in Asia

Core Values

• Core values- How we do things around here• Values were use to align the firm’s strategy,

people, and resources• Focused on creating a culture that employees

and customers could be proud of• Wanted employees to bring their whole self• Responsible “commercial success”• Moved to principles-based code of ethics and

statement of social responsibility

Core Values (cont’d)

• Adopted the “principled reasoning approach”– Define the problem– Agree on the principles to be satisfied– High-impact and high influence stakeholders– Brainstorm possible solutions– Test the consequences– Develop an ethical process for implementation

• Linked compensation to the new way of doing things

The Saipan Incident

• What was it?• What was the impact?

Business Partner Engagement

• What?

• Why?

The China Situation

• Opportunity• Challenges– Human Rights– Intellectual Property– MFN– Engage or Withdraw?