Case Study: Levi Strauss & Co. China

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Introduction

Levi Strauss and Co. China was established in the United States in the year 1873. Since its start, the company has enjoyed enormous growth and extended its operations to overseas markets in the 1940s. In the year 1977, it became one of the largest clothing producers in the world. The company has also been recommended as a leader in recognizing community and business ethics. Due to its strict adherence to ethical values, the company was forced to relocate to Latin America and lay off many of its workers. This made the company receive a lot of criticisms.

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Summary of the Facts Presented

Levi Strauss & Co. China is a company that has strict guidelines and honours its ethical values. Due to the honour of its high ethical values, it considered closing down Dockers’ plant, Texas, and transferred its production to a more competitive Latin America. This led to many workers being laid off, a process that received a lot of criticisms.

In 1992, the company designed guidelines to help them in global sourcing such as the ‘‘business partner terms of engagement’’ in trying to balance environmental issues, workers health and business ethics and abolish both child and prison labor. The company decided to desist from doing any business with companies, which fail to meet the stipulated rules and ethical practices in place.

There is a challenge in implementing these practices since China is known to be one of the major violators of these practices, especially the child labor and arbitrary arrest. Since the Chinese government has a standing rule that all prisoners must work, this puts question as to the applicability of some ethical rules like the one prohibiting prison labor, this would mean that it goes contrary to the government’s authority. Some other drawbacks to the implementation of ethical practices include; forced family planning, monitoring of women pregnancy at place of work and limited personal privacy.

Analysis of the Problem

The greatest problem met by the company is during the implementation stage. This is because strong supporters like the government and the law acts as major impediments to its policies and business practices. The Chinese government limits privacy of an individual and communications, including emails and telephone conversations are greatly scrutinized. This goes against the privacy ethics which entitle every employee to his or her own privacy.

There is also a law of the Chinese government that requires employers to give pregnancy records of the employees; this is also regarded as a breach of privacy ethics. People and their premises are also subjected to search without any prior warning, this presents a major problem because such practices are unethical and they impede the company’s operations.

China’s leaders have also refused to approve ten guidelines which prohibit the use of forced labor for money-making purposes proposed by the ‘International Labor Organization Convention (ILOC).

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The booming local economy has also encouraged child labor especially in the local areas where children drop out of schools and get involved in income generating activities. This has been a major problem in enforcing the child labor law because it is difficult to keep monitoring these individuals and find out the exact places where child labor is being practiced. At the time of LS &Co’s inception there were poor safety conditions and no minimum wages. Because of the labor conditions and government practices, it became a problem for LS & Co. to operate in China.

The greatest problem experienced by LS&Co. was during the decision to move out of China because of the far-reaching objectionable conditions. By moving out of China, the company stands losing millions while at the same time this would mean disregard to employees’ conditions since many will be rendered jobless (Scott, 2011).

Recommendations for Solutions to the Problem

The company should leave China since the conditions and government support do not allow its operations and adherence to the company’s guidelines on where to conduct business. By continuing to produce in China, there would be a damaging effect on the company’s reputation thus risking its valued brand image. This would mean that the company will stand losing a lot of sales from across the globe once its goodwill is lost. The company would rather lose China market, but safeguard international markets especially the western countries which support its policies. The company would gain more by staying loyal to its thoughts than operating in China.

Leaders should be sensitized, on the importance of safeguarding human rights and workers’ health. It appears that the leaders in China have not given enough support to LS &Co. because they are not moved by its decision to move out of China (Levering, 1994). This shows how there is little support for this company that contributes greatly into the China’s economy. The management should hold continuous meetings with business government leaders and try to sensitize them on the importance of protecting human rights.

LS& Co. should also make its consumers aware of the reasons which have prompted them to move and cease operations in China. This will help to maintain customer loyalty and ensure that the customers continue to buy the company’s products, even if they stop producing in China. When customers and the public are sensitized, they will know their rights and put into practice, ethical practices in the companies where they work. This can greatly improve the work conditions in China and even revolutionize the entire process. People empowerment is the greatest asset in revolution.

Implications of Recommendations on Operations of the Company

Short term implications

The company will be free from labor conditions and practices in China which it deem harmful or contradicting to its laws. LS&CO. will also be free from government pressure, thus enjoying a free business environment where the policies can be implemented without any impediment from the authority or government officials. Any future policies will thus be passed by the company without any major blow.

The company stands losing millions because of its decision to stop operating in China. This is one of the major challenges the company faces because it will leave an already established market in search for a new market which its market value is still not yet established. To fight this challenge, the company must put a lot of effort in marketing than it used to do. This will help in safeguarding future market and ensure the company remains in China’s market.

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If the company finds condition not favourable in the new market, it risks rejection since China will not be willing to accept it back after voluntarily ceasing its operations. The company should thus come up with a lasting solution to prevent this scenario once and for all. It means that, any future branches of the company should be established in areas where ethical values are supported (Downey, 2007).

There are some difficulties when it comes to dominating the market again. Once the company leaves, the competitors on the ground will establish themselves and take the market share originally owned by Levi Strauss & Co, this will mean that, it will be very difficult to make a comeback and defeat the competitors who are on the ground. To avoid losing millions of customers, the company must change its operations and start targeting certain market niche since it cannot now dominate the entire market. The company should specialize in its business operations in China (Fraedrich & Ferrel, 2010).

Long term implications

The company will have to bear the burden of high tariffs when it exports its products to China. Because of the high tariffs, the company will be forced to revise its prices to cater for the changes and cover extra costs. This will mean that, consumers will end up buying the companies products at a higher fee than what they were used to pay. This has the effect of reducing the number of customers who are money sensitive. It would also imply that, the competitors will be charging cheap prices compared to LS & Co. The company will thus lose its customers to its competitors. According to the law of demand, when prices go up, demand reduces.

With time, the company will pick up and regain its status once the consumers and the general public become aware of the reasons behind the company’s decisions. The company will have successfully safeguarded its image and integrity. This means that, it will stand with its policies regardless of the obstacles. The goodwill has an effect of increasing sales for the company across international markets. In fact, the sales from international markets are greater than those lost in China alone.

References

  1. Downey, L. (2007). “Levi Strauss & Company.” Images of America. New York, NY: Arcadia publishers.
  2. Fraedrich, J., & Ferrel, O. C. (2010).Business ethics: Ethical Decision Making and Cases (8th Ed.). Boston: South-Western College Publishers.
  3. Levering, R. (1994).The 100 Best Companies to Work For In America (3rd Ed.). New York, NY: Plume Publishers.
  4. Scott, S. (2011). Fierce Leadership: A Bold Alternative to the Worst “Best” Practices of Business Today. United Kingdom, UK: Crown Business Publishers.

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BusinessEssay. (2022) 'Case Study: Levi Strauss & Co. China'. 10 January.

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BusinessEssay. 2022. "Case Study: Levi Strauss & Co. China." January 10, 2022. https://business-essay.com/case-study-levi-strauss-and-amp-co-china/.

1. BusinessEssay. "Case Study: Levi Strauss & Co. China." January 10, 2022. https://business-essay.com/case-study-levi-strauss-and-amp-co-china/.


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BusinessEssay. "Case Study: Levi Strauss & Co. China." January 10, 2022. https://business-essay.com/case-study-levi-strauss-and-amp-co-china/.