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?