Levi Strauss

1
Levi Strauss Co

• Session 13

2
The Situation

• Should LSCo continue sourcing and purchasing
  fabric in China
• Should the company make direct investments in
  marketing and manufacturing venues in China

3
Background

• LSCo 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

4
Backround (Contd)

• In the 90s-Shifted from being a just a
  manufacturer to a marketer
• Jeans epitomized much of American cultures
  freedom, originality, youthfulness

5
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 LSCo jeans
  were sold

6
Internal Context (Contd)

• 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

7
Internal Context

• Faced increased scrutiny from employees and
  customers
• Was the company doing the right thing?

8
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

9
Core Values

• Core values- How we do things around here
• Values were use to align the firms 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

10
Core Values (contd)

• 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

11
The Saipan Incident

• What was it?
• What was the impact?

12
Business Partner Engagement

• What?
• Why?

13
The China Situation

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