case study 2 globalization at levi strauss

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The CEO of Levi Strauss on Leading an Iconic Brand Back to Growth

The company needed a new strategy and a significant culture change.

When the author was tapped to join Levi Strauss, in 2011, the company’s financial performance had been erratic for a decade. He went on a listening tour, conversing with each of the top 60 executives, asking them what three things absolutely must change and what three things must not. He wasn’t surprised to discover that a clear strategy was lacking. But he also saw that a lack of urgency, of financial discipline, and of data discipline permeated the culture.

After six months on the job, Bergh and his team rolled out a plan consisting of four key pieces: (1) Build our profitable core (80% of profits come from men’s jeans and Dockers); (2) Expand for more (seize the opportunity in women’s clothing); (3) Become a leading omnichannel retailer (grow sales in the company’s own stores and online); (4) Achieve operational excellence (cut costs, drive cash flow, become more data driven and financially disciplined).

The new strategy provided funds for investment in the company’s Eureka Innovation Lab, which had been colocated with a factory in Turkey. In 2013 a new facility was opened four blocks from headquarters in San Francisco. Its biggest success has been a revamped women’s denim line. A second big investment was the purchase of naming rights for the San Francisco 49ers’ new stadium—a 20-year, $220 million deal. Bergh saw that as an opportunity to put the Levi’s brand back at the center of the cultural conversation.

I’m a brand guy. I spent 28 years at Procter & Gamble in brand management. I led the integration of P&G’s $57 billion acquisition of Gillette, and then I ran that division—one of P&G’s most profitable—for six years. It was a high-visibility assignment, so I started to get calls about CEO jobs. Most of them weren’t very interesting. Then, in late 2010, I was at a hotel in Beijing for a quarterly meeting of our leadership team. A headhunter I knew called. She said, “I have something you may be interested in.” I rolled my eyes—how many times had I heard that before? “OK, what is it?” I asked. “Levi Strauss,” she replied. My one-word response: “Wow.”

• CB Chip Bergh is the CEO of Levi Strauss & Co.

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Case Study: Levi Strauss & Co.

The textile, apparel, and footwear industry serves as a global engine for growth, generating jobs for more than 60 million people, including many women in emerging markets. But the sector can exact a heavy toll on the environment. Both cotton growing and dyeing use large amounts of water, while the production of synthetic fibers such as polyester generates high levels of greenhouse gases. Globally, the textile industry accounts for up to 8 percent of greenhouse gas emissions and is a major source of industrial water pollution from the treatment and dyeing of textiles.

A Global Engine for Growth

Levi strauss & co. | an ifc manufacturing case study.

As one of the world’s largest brand-name apparel companies, Levi Strauss & Co., known as LS&Co., has a significant impact on environmental and labor conditions around the world. Besides its 14,000-plus employees worldwide, it contracts out production of its jeans, casual wear, and accessories to independent manufacturers in some 30 countries employing 300,000 workers. It has adopted new technologies and production methods that limit pollution, energy and water use, partnering with IFC to help meet its ambitious global sustainability goals.

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The 2022 Levi Strauss & Co. Sustainability Goals & Progress Update showcases our 16 people- and planet-first goals and our commitment to action on our key sustainability pillars of climate, consumption and community

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The resources on this website contain forward-looking statements, including statements related to our sustainability strategies, initiatives and targets. We based these forward-looking statements on our current assumptions, expectations and projections. These forward-looking statements are estimates and involve a number of risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in our filings with the U.S. Securities and Exchange Commission, including our Forms 10-K and may be updated from time to time via additional filings on Forms 10-Q or 8-K. Other unknown or unpredictable factors also could have material effects on our future results, performance or achievements. All information contained in the resources on this website was current only as of the date originally presented and we disclaim any obligation to update this information.

Levi is now manufacturing in South Africa, but what of currency decline and material production problems?

The South African operations of US family-owned apparel manufacturer Levi Strauss underline some of the difficulties that need to be overcome in investing in greenfield operations in new countries.

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As local managing director Alan Head puts it: “We are manufacturing denim pants for the domestic market. Our raw materials are practically all imported, as adequate quality cannot be sourced locally.”

In common with many foreign companies concerned about sanctions, Levi Strauss was understandably reluctant to enter South Africa until apartheid was crushed and it was clear the country’s post-apartheid economy was on a sound footing. In 1996, two years after the country’s first majority government had been inaugurated, Levi Strauss set up its Cape Town factory.

Location & investment

Cape Town has long been a centre of South Africa’s garment manufacturing industry, particularly for fashion goods. But that does not appear to have been a compelling factor in Levi Strauss’s investment and location decisions.

The company employs approximately 275 people in Cape Town. But, as Mr Head puts it: “We tend not to hire people with clothing manufacturing skills. We prefer to recruit people who may not have previous skills but who do have the appropriate mindset for the job.”

“We do an vast amount of training. It is easier to train an operative from scratch than to retrain people whose working methods may not be ours.”

As many other companies that have established themselves in the Western Cape have found, the region’s workforce is the best educated in South Africa. There is a history of better labour stability, of less militancy than is found in other industrial centres.

South Africa’s textile manufacturers seem unable to produce material for the fashion clothing industries in sufficient quantities, quality and varieties. Nor do they seem capable of making timely changes to supply. This complaint is not something that affects Levi Strauss alone; it is regularly heard from fashion clothing makers throughout the country.

Local textile manufacturers are tied to old equipment, so they are largely incapable of quick turn-around times as differing cloths are demanded.

The need to modernise

Levi Strauss has tried to alter the supply situation, but its prospective domestic suppliers of fabric were either unable or unwilling to invest in the necessary capital equipment needed for a modern plant. In contrast, Levi Strauss itself imported most of its own cutting, sewing and trimming equipment. It needed to do so to ensure that its quality matched that from its plants elsewhere in the world.

Modern equipment was also needed to provide the manufacturing flexibility for the range, finishes and fabrics derived from the basic Levi jeans.

For the present, manufacturing is entirely for South Africa’s domestic market. And though Mr Head does not say so, there seems little likelihood of exports to the US in the immediate future. Gaining favoured access to the US apparel market is governed by the Africa Growth and Opportunities Act (Agoa), which permits low-tariff imports of African-made garments into the US provided the cloth used is American or African.

At present, Levi Strauss sources its cloth for its South African factory from qualified mills in countries such as Turkey or Italy, with only some coming from the US, so opportunities for benefiting in terms of Agoa are limited. The material used has to be from mills whose quality is approved by Levi Strauss. And manufacturing quality approval applies equally to the products made in Cape Town.

The rand in decline

The rand has fallen from about R6 to $1 early in 1999 to R9.4 to $1 at present. Is this decline against major currencies an advantage?

“Not necessarily,” says Mr Head. “Imports of cloth are paid in hard currencies.” And Levi Strauss is not yet exporting to benefit from comparatively low labour costs. But the rand’s weakness may be a factor when the parent company decides from which of its non-US plants it will source its garments. The lower the cost, the better.

Mr Head is reluctant to disclose how much Levi has invested in South Africa. However, its factory is large enough to accommodate production increases for export. This may also depend on the availability of benefits under South Africa’s duty credit certificate programme, which offers duty rebates to exporters.

In a country with unemployment running between 30% and 50%, depending on how it is calculated, job creation is a priority. That, Mr Head believes, will depend on incentives.

Whether South Africa will ever be a major garment exporter is debatable. The country’s garment industry has been heavily unionised for decades. But, with a comparatively non-militant employee pool in the Western Cape, export prospects for branded goods manufacturers seem better than for the garment industry as a whole.

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WU Globalization at Levi Strauss Corporate Market & Overseeing Workers Discussion

User Generated

Walden University

Description

The purpose of this assignment is two-fold.

First, is for you to submit a paper in proper APA format (6th Edition) using the tools I have posted in the Announcement titled "Proper APA Formatting" as this is the paper where I will provide you with significant instructor feedback on this deliverable to help you with you next written assignment. A properly APA formatted paper enhances the readability and credibility of the work you submit. I suggest that if you have not written in APA before, that you use the provided template and read through the example docs. All submissions must be in Times New Roman 12 point font. Take advantage of the feedback you receive, ask questions where you may not understand, and incorporate recommendations so your Jung Typology paper (due in Week 13) has strong APA formatting and point earning potential. Read the course syllabus and the rubric for the rest of the deliverables for your written work.

Secondly, this is a great jumping off point for you to start performing high quality academic research. Read the short case on pages 60 about Levi Strauss' difficult financial and human resource impacted decision to globalize its manufacturing and answer the four case questions. You must have a specific number of quality sources in each written assignment so ensure they are academic in nature (no blogs, wikis, Prezi's made by other students, etc).

CASE STUDY 2: GLOBALIZATION AT LEVI STRAUSS

Blue jeans are a legendary component of American culture. They were created in the United States in 1873, when Levi Strauss patented the riveted denim jeans that proved so successful among customers that they launched an entire industry. Yet, the one company that has perhaps been most synonymous with blue jeans—Levi Strauss—doesn’t actually make its blue jeans in the United States.

In the late 1990s and early part of the 2000s, Levi Strauss undertook a substantial shift in the location of its manufacturing operations. In 1997, the company closed 11 plants and laid off 7,400 employees to cut excess production. In 1999, Levi’s announced a large-scale layoff of almost 6,000 jobs and the closing of more factories in Georgia, North Carolina, Virginia, Texas, Tennessee, and Arkansas in an effort to move production to foreign facilities. Over time, the layoffs and the closings continued. Once a mainstay of U.S. manufacturing, plants in areas such as San Antonio, San Francisco, El Paso, and Brownsville were closed, and by 2004, Levi Strauss had shut its domestic operations and moved production facilities to foreign countries such as Mexico and China. Costs were a major factor for this decision. What might cost $6.67 to make in the United States costs about $3.00 in Mexico and $1.50 in China. While Levi Strauss was reluctant to move these jobs, it faced a competitive market operating with lower costs and lower prices.

Discussion Questions

• How did the four environmental factors discussed in this chapter influence Levi’s decision to move its manufacturing outside the United States? Which environmental factor do you think had the strongest impact on Levi’s?
• How would you evaluate this decision from a business perspective? What about from an ethical perspective?
• Assume that you are an employee working for Levi Strauss and are assigned to the management team in one of the manufacturing facilities in Mexico. What differences would you anticipate in terms of how you manage your Mexican employees versus how you manage employees located in the United States?
• Why do you think those differences exist?

Explanation & Answer

Attached. Please let me know if you have any questions or need revisions. Running head: GLOBALIZATION AT LEVI STRAUSS Globalization at Levi Strauss Institution Tutor March 2, 2020 GLOBALIZATION AT LEVI STRAUSS 2 Globalization at Levi Strauss Qn1 Environmental factors play a crucial role in the corporate market where different industries and businesses operate. Some of the environmental factors that enabled Levi to move outside the US included cheap labor force trends, technology, ethics, and social responsibility. Technology plays a critical role in the production and manufacturing sector where Levi is in the industry. Technology changes how laborers communicate and how organizations ran. It might have had a little to do with the decision to move abroad. It is currently simpler for colleagues to collaborate through the web than it was already. Organizations are going to things like social media platforms to give individuals access to separate areas, have a gathering, and still see one another. It might have settled on the choice simpler, realizing that your representatives who stay state-side will want to speak with the ones abroad, making it simple to run the US's organization. Globalization is organizations contending universally to sell their item, which I think had a significant impact on moving manufacturing plants abroad. To remain serious, Levi would have severe costs both in assembling and offering to customers (Wagner, 2001). If they can move a creation plant abroad and cut their expense down the middle to make their item, they will do it. The less expensive they make the item; the more benefit they will make when offering buyers (Wagner, 2001). The labor force is another environmental factor that entails some input the company requires for the workers' production process in a given surrounding. These entail race, age, gender, and labor cost that impa...

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