Introduction
Levi Strauss & Company is a firm that is widely known across the world. Its production of Jeanswear that is common among blue collar workers has expanded the popularity of this company across the globe. It is therefore important to have a brief profile how the company has over the years increased in size to become what it is today. First of all, Levi Strauss Company was established in 1853(Weidt, 1990, p.113). The company was founded by Levi Strauss who was an immigrant in the United States. The favorable business environment made it possible for Strauss to begin his first business unit in San Francisco environment. Considering the fact that the industrial revolution was in its onset at this time, the toughness of Denim jeans produced by the company was highly attract to blue collar workers who need garment that could not wear faster as a result of the rough working conditions that they faced in various factory setting. Though Levi Strauss Company’s products have continued to venture in the market for a long time, the fact remains that the company has continued to face competition from other emergent companies that produce the same goods. This paper seeks to critically analyze the innovation and intellectual property strategy of Levi Strauss Company.
Structure of Company
As a result of the forces of globalization, many companies have found it a rational strategy to expand their consumer base by taking some of their operations abroad. Levi Strauss is one of the companies that have offshored some of its manufacturing plants to other nations. It is worth noting that the high taxation on large corporations has forced many firms to relocate to the developing countries that are in need of foreign investment. Companies such as Levi Strauss have provided millions of jobs for many workers overseas who work for their affiliate companies.
In terms of the company structure, efficiency has been a one of the key business and innovation strategies that has been adopted by this company. The Levi Strauss Company is hierarchically organized such that it has three major wings that enhance its operations across the different territories of the world. The first wing of the Levi Strauss Company is the Levi Strauss Americas (LSA). This wing is headquartered in San Francisco (Peterson, 2003, p.62). San Francisco also acts as prime headquarter of all the operations of the Levi Strauss Company. The second operations wing in the Levi Strauss Company is the Levi Strauss Europe, Middle East and Africa (LSEMA). The headquarters of this wing is located in Brussels, Belgium. The third important wing in the operations of the Levi Strauss Company is the Asia Pacific Division (Riggs, 2007, p.33).This wing of the company serves countries in Asia and the Pacific region. The presence of various wings that cover different regions allows the company to favorably compete with other similar companies at a global scale. The global scale of operations exhibited by the Levi Strauss Company allows the company to understand the preferences and diverse taste of products across different world culture. Understanding cultural tastes and preferences is important because companies are able to adjust how to modify and adopt new kinds of products that meet the needs of the local consumers in a given area.
Company Profile
In order to understand the operations of the Levi Strauss Company, it is important to look at some of the indicators of the representative company’s economic status today. First of all, it is worthwhile to discuss the products that are produced and retailed by the company. Levi Strauss & Co produces many types of Jeanswear and other casual and other forms of wears that are considered as being casual street fashions. Some of the key Jeanswear that are produced by the Levi Strauss & Co include Denim jeans, denizenTM, LevisR, Dockers, and Levi Strauss & CoTM(Nathan, 2003, p.79).These products have been in the market since the inception of the company in 1853. In terms of sales, Levi Strauss & Co made net total revenue of $ 4.4 billion, which about 7.5 increases from the sales made in 2009(McPherson, 2007, p.36).The Levi Strauss has more than 17,000 employees across the globe. This number has been as a result of the mechanization of the company(Steinway, 1998, p.124).The adoption of an industrial economy has led to the entrenchment of large numbers of manual laborers who worked in the company. As of 2011, the Levi Strauss Company had over 470 stores around the world (Katz, 1994, p.44). As an innovation strategy to expand its market, the company has expressed interest in wanting to increase the number of stores in European nations. The company as of 2011 set aside $166 million so as to achieve the goal of expanding its markets to Europe (Henry, 1990, p.62). The flourishing of retail stores selling Levi Strauss products has been a key driver that has led the company to adopt this innovation.
Business strategy
One of the traditional sectors that the Levi Strauss Company has invested is cloth manufacturing. However, due to the competition that the company has received from rival companies the company has decided to open more retail stores so that the companies can both manufacturer and retail its own products. This reduces the amount of money that ends up in the hands of middlemen. Another important innovation strategy that has been adopted by the Levi Strauss is investing in lobbying (Downey, 2007, p.48). In 2007, the Levi Strauss spent a total of $34, 291.10 in lobbying. This high investment in lobbying is meant to protect the innovation interests of the company so that the company can have a favorably business environment to compete.
Globalization and Labor Market
Globalization is a term that has been widely used today both at a micro-economic and a macro-economic level. At the micro-economic level, globalization has been used to refer to the expansion of the financial markets of small businesses from a domestic scale to an international scale. On the other hand, globalization on a macro-economic level has been used to refer to the “denationalization of national markets, politics and legal systems to come up with what scholars refer to as a global economy.”(McIntosh, 2001, p.13). Different scholars view globalization differently. There are those scholars who claim that the world was as globalized a century ago in the same way that it is today. However, it is clear that there have been tremendous technological advancements over the past century thereby making trade and capital flows across the world easier and quicker due to improved transport and communication. Though globalization has increased capital flows across the world, its outcome is linked to the growing inequalities between nation-states in terms of the profits reaped from the integration of national economies, and the growing level of unemployment in different countries across the world. This paper intends to argue that globalization affects the labor market in five important ways. The first way is through the de-localization of labor from the developed countries to the developing world so as to minimize the cost of production. The second way in which globalization has affected the labor market is through the increase of technology within the production process thereby reducing the number of workers in the production chains. Third, the production of goods and services by nation-states within the world financial markets depends on comparative advantage. Nation-states produce what they can produce best. This has resulted to more demand for skilled workers in the sectors that a given nation-state best. The demand of skilled workers has increased the income gap within nations between skilled and unskilled workers in that most unskilled workers remain unemployed. Fourth, globalization has exposed domestic goods to competition from foreign goods often leading some domestic companies to either close down or reduce the number of their workers. Finally, labor inequalities in the global labor market. This is because different countries pay to their workforce different amounts of income for the production of the same goods. This has led to massive immigration of people from low-wage countries to high wage -countries for example in the case of Mexico and the United States.
Moving to the second argument, globalization has resulted in the increased use of technology in companies. The adoption of technologies in companies is aimed at increasing productivity, efficiency and speed. The increased of use of technology in companies have resulted in phenomenon whereby manual labor is substituted by machines and other forms of technology. When manual labor is substituted for machinery, it means that fewer people are employed in manufacturing companies thereby resulting in increased unemployment rates. The increased use of technology also leads to job specialization such that only workers who are conversant with the use of technology are able to secure jobs in manufacturing companies. Unskilled workers remain unemployed or they take up alternative jobs that are low paying in that their lack of skill cannot permit them to take up other jobs that are high paying. In addition, skilled workers are also faced with the lack job security due to the continued technological changes and advances. Since technology is changing, workers are forced to keep up with the current technological skills if there are to retain their jobs. However, some workers do not have adequate resources to keep up with the rapid changes in technology and therefore their skills become obsolete over time, putting them at risk of losing their jobs.
Looking at the third argument, globalization has resulted in phenomena whereby nation-states produce goods and services in which they have comparative advantage compared to other actors in the global financial market. According to the comparative advantage theory, markets are more rewarding to producers who produce their goods more efficiently. Due to the idea of comparative advantage, players in the global financial market concentrate on the production of goods that they can produce easily and effectively. The concentration of nation states to goods in which they have comparative advantage compared to other nation states leads to a situation whereby there is more demand for skilled workers who can work in the sectors where countries have comparative advantage. The demand for skilled workers in these sectors leads to a scenario whereby there is a less demand for unskilled workers thereby causing them to either remain unemployed or they occupy jobs that are low paying. This results in the increase of the income gap between skilled workers and unskilled workers.
Shifting gears to the fourth argument, globalization has led to the exposure of domestic industries to competition from foreign goods. This is because the reduction of barriers between players in the global financial markets has allowed the free flow of goods and services across boundaries of different nation-states. This has resulted in an increased availability of goods, causing consumers to have a wide range of good to choose from. Though the increased availability of goods is a positive trend in terms of meeting the tastes and preferences of consumers, it is important to note that the reduction of trade barriers between actors in the global market causes foreign goods to reach the domestic consumer at a lower price.
Effect of Globalization on Levi Strauss and other MNE’s
Focusing on the idea that globalization causes the relocation of jobs to other countries, it is important to note that the goal of any company is to maximize its gains. One of the ways to increase profit margins is by reducing production costs. Since globalization reduces trade barriers like tariffs that initially hindered trade between different nation states, multinational companies are now able to move their operations into different countries. Most manufacturing jobs especially in developed nations, such as the United States, are moving to the developing world. This is because companies are looking for workers that are willing to work for them for low wages. By paying low wages to workers in developing countries, multinational companies are able to increase their profit margins. Another important reason as to why multinational companies opt to relocate their manufacturing jobs to developing countries is due to the fact that they experience lesser problems with workers’ union compared to developed countries. In addition, multinational corporations opt to relocate their manufacturing jobs to developing countries in that there are less stringent labor and environmental regulations. The presence of labor laws and environmental regulations in the developed world make it difficult for multinational corporations to operate in that they have to measure up to the set standards if they are to continue being in business. The fact that multinational corporations opt to relocate their manufacturing jobs to developing countries in order to avoid the adherence to labor and environmental regulations have led to public criticism of globalization.
Critics of globalization argue that globalization is likely to exploit workers in the developing world because multinational companies do not extend the same workers’ rights to them as they do to the workers in the developed world. The relocation of manufacturing jobs from developed nations to developing nations causes the scarcity of high pay-paying jobs for unskilled workers. This is because it is difficult for unskilled workers in the developed world to fit in other high paying jobs due to the lack of necessary skills. The scarcity of high paying job opportunities leaves unskilled workers in developed countries with no other option than occupying low paying jobs so that they can be able to meet their daily needs. The scarcity of high paying jobs for unskilled workers in developed countries increases the income gap between skilled and unskilled workers. This is because high skilled workers receiver high incomes as most of the unskilled workers occupy low paying jobs or in some cases remain unemployed.
Reference List
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