MNE Researched: Levi Strauss & Co
Industry Category: Textiles
I. Introduction & Basic Information
Definition of Globalization & Business Context
In the recent centuries, the world has witnessed increased integration in terms of economics, political ideologies, and social affairs. Some of the key factors that have led to this integration are the advancement in communication and transport technologies which has made it possible for people to easily move across territories and at the same time share information. This integration has come to be referred by many scholars as globalization. This paper intends to look at how globalization has affected the markets with special focus on Multinational Enterprises (MNE’s). Though globalization has increased the availability of products by allowing multinational enterprises to market their products across different territories, it has also been subjected from economists due to a couple of factors. First of all, globalization has caused many multinational enterprises to relocate abroad to look for business environments that would reduce the cost of production.
Some of the factors that been known to cause this offshore outsourcing include high operation taxes and the presence of stringent environmental regulations that make it expensive for companies to operate. The recurrent trend that has been established regarding off-shore outsourcing shows that most companies tend to relocate their manufacturing businesses from the developed to the developing world because the latter tends of have lesser stringent environmental regulation which creates a business friendly environment. The second effect of globalization of the labor markets with regards to Multinational enterprises is the fact that the shift from a human labor economy to the use of The MNE that has been selected for the purposes of this assignment is the use of machinery has led to the reduction of manual laborers. This means the globalization is one of the factors leading to increased unemployment. Third, globalization has been criticized of increasing the income gap between skilled and unskilled workers. This is because the increased use of technology in industries has increased the demand of skilled workers meaning that unskilled workers often end up unemployed or are forced to occupy low paying jobs. Based on these effects of globalization on labor markets, this paper looks at how these factors influenced the productivity and the competitiveness of the Levi Strauss & Co which has been in business over a century. This paper also seeks to explain how the impacts of globalization have influenced the human resource management function in the MNE and how this shapes the company’s internal business strategies. Finally, this paper explains how the IHRM function in the company could do in order to increase productivity and competitiveness.
II. Brief description of the enterprise
The Industry
The Levi Strauss & Co was founded in 1853 in San Francisco, California. The founder of this Multinational Enterprise was named Levi Strauss and hence the name of the company. Over the years this MNE expanded in terms of its operation such that today they are branches of the company in almost all the continents in the world. This means that this company has a global market and therefore has been subject to the radical changes in the clothing industry that have been brought about by the advancement of technology due to globalization. Currently, the Levi Strauss & Co has three major divisions that control the sales of the company. These divisions include the Levi Strauss Americas division (LSA) which has its headquarters in San Francisco California. This is the largest of the three divisions owing to the fact that Levi Strauss Company begun its operations in the United States before expanding to other parts of the word. The second division of this company is the Levi Strauss Europe, Middle East, and Africa wing. (LSEMA). This division serves the European continent, countries in the Middle East and African nations. The headquarters of this wing are located in Brussels, Belgium (McPherson, 2007, p.5). The third division of the Levi Strauss company is the Asia-Pacific Wing which serves the Asian and Euro-Asian countries. The headquarters of this company are located in Singapore (Downey, 2007, p.125).
Products & Sales
The Levi Strauss Company produces denim jeans, casual wear, and other street fashions. Some key jean war brands that the Levi Strauss Company produces include Denim jeans (denizen TM), LevisR, DockersR, and Signature by Levi Strauss & Co.TM (Steele, 2010, p.479). These jean brands have been in the market for over a century but remains popular in the consumer market. One important thing to realize is that though economic meltdowns tend to reduce the sales made by many companies, Levi Strauss is not adversely affected because consumers continue to purchase casual wear despite economic challenges. In addition Denim jeans are one of the types of clothing that is used by many blue-collar workers in the United States. This means that despite the financial challenges that people face Levi Strauss has over the year continued to have a constant market for its products. The Levi Strauss 201 Annual Report shows that, in the year 2010, the Levis Strauss Company made net total revenue of $4.4 billion, which was a 7% increase from 2009.
Size, number of employees and location
Considering that the Levi Strauss Company has been in the market for more than a century, it is important to understand that the company has a large capital base which has allowed it to expand to other countries and various cities in the United States. Currently, the Levi Strauss has over 471 stores in over 26 countries in the world (Mogi, 2011, p.1).This shows that the Levi Strauss Company is able to sell its products across different cultures across the world. It is essential to realize that the culture of casual wear is practiced in many cultures around the world. This means that Levi products are not affected by the differences in culture in its bid to boost its sales in various locations. In terms of the number of employees that the Levi Strauss & Co has, it is fundamental to realize that the company has subsidiaries and affiliate manufacturing companies which would be considers as being part of the company. Considering this in mind, the Levi Strauss has about 16,300 employees globally (Mogi, 2011, p.2). One thing that is important to note is that the number of employees have over the years reduced due to the fact that machinery has slowly substituted manual laborers in the performing of manufacturing jobs. In addition, most of the employees working for the Levi Strauss & Co today are skilled workers. This means that most people who are unskilled in terms of their level of education and familiarity to the evolving technology are not able to secure a job in the company
III. Impact of globalization, cultures, and labor markets on the human resource management function of Levi Strauss & Co.
It is essential to realize that though the Levi Strauss Company has over the years expanded its operations, the number of employees employed by this company has not increased proportionally to this expansion. Some of the factors that have caused the number of employees in this company not to increase are the fact that the company has embraced more technology and machinery in its production process. This means that there is a low demand for human labor within the company. In addition, the use of technology with the company has created a situation whereby there is a high demand for employees who have the skills to operate the machinery involved in the manufacturing process. This means that those employees that do not have the necessary skills to operate the new machinery often lose their jobs. It is also essential to note that technology has affected the human resource management function because the existing work force in the Levi Strauss has to constantly increase their skills. Failure to increase their skills in terms of technological skills is likely to make the skills of the existing work force obsolete.
Another important factor to bear in mind is the fact that employees with the same positions but in different countries earn different amounts of income. Employees in Levi Strauss branches located in the developing world like in Africa are paid lesser money that those working in similar stores in the United States. This poses the question of whether territorial location should affect the amount of income that a given employee should earn. One fundamental thing to note is that most of the Multi-national enterprises like Levi Strauss offshore their manufacturing jobs to the developing world so as to reduce labor costs. This is because the work force in the developing world is willing to work for a lower pay compared to the work force in the developed world.
IV. International business strategy of Levi Strauss, human resources requirements, &n recommendations of how to improve the IHRM function in terms of productivity and Competitiveness.
The Levi Strauss Company receives competition from other multinational enterprise that produces the same kind of products. Some of the companies that provide competition for the Levi Strauss & Co include the Breton Group which is located in Treviso, Italy. The second competitor is the Fruit of Loom Inc., which is situated in Kentucky, and the Guess Inc., located in Los Angeles California (Hoover's Inc, 2010, p.1). In order to be able to handle to competition posed by these competitors, who also have a global market, the Levi Strauss has changed its business strategy such that instead of only doing the manufacturing process of its products, the company has found it important to also do retail its own products. This means that the Levi Strauss & Co has opened more retail stores so as to better control its products. The control of the manufacturing and the retailing of its own products allow the Levi Strauss to ensure that the products going to the consumer market are of high quality. This helps the company to maintain a high quality of products being released into the market so as to favorably compete with other companies.
The Levi Strauss is also in the process of expanding its market abroad. This will ensure that the company looks for a newer consumer markets that other companies have not been able to reach. For instance, the Levi Strauss is in the process of opening more stores in Europe. The Company is targeting to double its total expenditure to about $166m to meet this goal (Hall, 2010, p.1). Increasing the number of retail stores in Europe will be able to increase the availability of the company’s products in the continent thereby causing more competition to other companies supplying similar products.
In order to increase the productivity and competiveness of the company, the Levi Strauss should seek more markets in other continents where other competitors have to venture into. In addition, unlike other corporate agencies, Levi Strauss has been known to support environment protection legislation. For instance, the Levi Strauss supported the passing of the California Global Warming Act of 2006 “which set California’s 2020 greenhouse gas emission reduction targets into law” (Robert, 2010, p.1). The support of environmental legislation is one of the factors that increase more attraction of consumers to the company. In addition, in order to create a better business environment, the Levi Strauss should increase the amount of funds for lobbying purposes. This would allow the company to be in position to lobby the government to produce a better business environment in terms of taxes and regulations.
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