LEVI STRAUSS & COMPANY

1. Does Levi Strauss & Company have a clear social mission in addition to its
business mission?

The LS&C has always maintained a high corporate social responsibility and awareness by
making major financial and non-financial contributions to society. This has been the norm
within the LS&C ever since the founder, Mr Levi Strauss, initiated it into the business
culture. The company has been dully recognised for it contribution to society which is
clearly highlighted in the numerous high profile awards that they have been regularly
receiving. Thus although it is not clearly stated in the mission statement it is well
understood as being part of the culture of LS&C.

What programs and policies has Robert Haas initiated as Levi Strauss &
Company CEO that address issues beyond the company’s competitive strategy?

He has maintained and extended the company’s policy to provide funding to organisations
that addressed critical societal issues like developing awareness to racism and Aids
prevention and care. He was also highly committed to improving the lives of LS&C
employees and has personally taken part in such processes like distributing AIDS leaflets
to employees outside the company cafeteria. He encouraged employees to volunteer time
and raise funds for community projects that was related to their interests. The company
also matched employees’ contributions to all types of non-profit organisations that they
chose.

Robert Haas in his rein as CEO had also maintained and improved the Community
Involvement Teams (CIT) which had established over 100 CIT world-wide by 1999. These
teams consisted of LS&C employees who donated time to projects that looked at projects
such as refurbishing homeless shelters to teaching computer skills to women in prison.

He was instrumental in providing funding to the Levi Strauss Foundation (LSF) which in
turn was responsible for providing grants to international organisations that were dedicated
to issues of social justice, AIDS awareness, youth empowerment, and economic
empowerment. The LSF also funded the program, Project Change, which was an on going
program to combat cultural beliefs and social norms that perpetuated discrimination in
Albuquerque, New Mexico, El Paso, Texas, Valdosta, Georgia, and Knoxville, Tennessee.
The success of this program in promoting social justice and ending institutional racism was
widely recognised and LS&C was awarded the Ron Brown Award for Corporate
Leadership in recognition of Project Change’s effort.

LS&C also funded the social justice program, OCCUR, that enabled the Japanese
Association for the Lesbian and Gay Movement to expand its peer-based telephone
counselling services and begin a media campaign to promote positive images of lesbian
and gay people.

Levi Strauss funded a youth empowerment program that allowed 100 youth from low-
income and racial minority backgrounds to publish short cultural articles in various
Canadian newspapers.
LS&C also funded an organisation in Mexico that consisted of university students and
prostitutes. This funding was used to create AIDS workshops for the prostitutes, their
partners and their clients. This was viewed positively since it empowered the women to
determine how to best stop the spread of HIV in the community.

2. How well have Levi Strauss & Company’s stakeholders fared under the
leadership of Robert Haas? Would you be pleased with the Company’s
performance if you were?

The stakeholders of Levi Strauss all have been affected due the dynamic changes that
Robert Haas had implemented since becoming CEO of LS&C. Most reactions to LS&C
have been negative but there are some groups that may see some benefit in his actions.
Each of the stakeholders will be discussed below.

One of the Haas family shareholders?

Before Robert Haas became CEO of the company when sales & market share was
declining and the company was struggling. The company profits had fallen by over $160
million. When Haas took charge he managed to transform the situation by implementing
radical changes. This had enabled the company to increase sales and profits enabling the
company to regain its market leading position in 1990. Up to 1996 the company
performance was good and the shareholders were content with the business performance
but they were in disagreement with the way the company dividend policy and other
potential uses of its $1 billion cash balance. This sparked discontentment and animosity
towards the management of the company, which was directed to Robert Haas. Thus it
seems that by the end of 1996 the Haas family shareholders were not happy with the way
the business was run and according to the buyout, they were willing to sell their shares.

A displaced worker?

As a displaced work who initially had aspirations of a secure career and especially in the
small towns until retirement, would be very angry at the way the company is going about
the changes. Haas had however ensured that terminated employees would receive above
average severance packages to compensate for their loss and they were still eligible for
the global success sharing plan bonus. These were considered the best in the market.
However some employees felt that it was difficult to find jobs in the small economically
depressed towns where they lived.

A supplier?

Haas took the view that partnerships between the company and suppliers would improve
the overall quality of Levi’s products and allow the company to provide better service to its
customers through more timely deliveries. Haas was also instrumental in developing the
company’s Global Sourcing and Operating guidelines. Using this guideline LS&C could
avoid suppliers and other potential business partners that were located in areas that were
deemed to be high-risk countries were unethical business practices were likely to occur.
From a supplier’s point of view the new policy meant that they had to work under more
controlled factors, which meant increased operational costs. They had to also change
those processes that were not aligned to the LS&C requirements. For the suppliers that
did not meet the criteria they will not be happy about LS&C new policies. For the suppliers
that did strike a partnership with LS&C, they would benefit from this the most. However
due to the declining demand and sales of the Levi products these partnered suppliers were
also being negatively affected. Some of the suppliers had to lay off employees due to the
bad performance of LS&C. This makes them very despondent towards LS&C

A Levi Strauss retailer?

Haas acknowledged the importance of treating the company’s retailers as partners by

providing assistance in point of sale program support and a strong national advertising
program plus other aspects used to improve the inventory management and purchase
ordering process. Many of the retailers though, were frustrated since they were losing
sales due to LS&C not introducing new styles that appealed to teens and young adults. A
number of retailers due to the partnership have depended on LS&C to increase their sales
and profits but due to the decline for Levi apparel they are also feeling the negative effects
due to their committed investment in LS& Company. The retailers are definitely not happy
with this situation and would reconsider the scenario of putting all eggs in one basket when
it comes to the stocking of Levis products.

A non-profit organisation funded by the Company?

The Levis Strauss Foundation funded many of the non-profit organisations. Haas held a
deep personal interest in many social issues and maintained the company’s policy of
providing funding to the organisations. Although the non-profit organisation will be
concerned about the performance of LS&C, since it directly affects the amount of money
received, it has the surety and commitment from Haas that the corporate social
responsibility forms an important part of the LS&C business and this stance will be
maintained.

A merchant in a community scheduled for a plant closing?

Merchants in the community were very discontent and did not believe that any good with
respect to the local economy will come out of the radical changes that were implemented
by Robert Haas. Although the Levi Strauss foundation committed up to $5 million to ease
the social and economic impact of the plant closing the merchants were sceptical of the
success of the financial aid offer. They also believed that the closing of the plant would
reduce the sales of all goods and services in the community.

A leader in one of these communities?

A leader of the communities would definitely show concern towards LS&C approach to
turning the company around as it has direct negative implications on the communities.
LS&C plays a major role in the lives of the people in the community and most of the
community are dependent on LS&C for providing income to sustenance. From the case
study it seems that the small towns have designed themselves around the LS&C plants
and LS&C was the only major support to their local economy. The leader would not
support what LS&C is doing since it is basically taking the life source out of the community.
The result of LS&C turnaround policy would increase the unemployment rate, increase
poverty, decrease the standard of living, and increase crime to mention some of the
effects.
What stakeholder group(s) might demonstrate the greatest approval of Robert Haas
as Levi Strauss & Company CEO? Be prepared to justify and explain your response.

The suppliers of LS&C would give approval to Robert Haas since he was instrumental in
creating the policy of partnership between the company and its suppliers. This means that
they are assured of a constant demand for its supply. They also have the commitment
from LS&C to improve the entire value chain so that everyone benefits.

The non-profit organisations would also support Robert Haas due the long-standing
commitment that he has given to funding and supporting their missions.

3. Is Haas’ vision of corporate social responsibility at odds with LS&C’s long-term

profitability? Why or why not?

Yes, there is a contradiction in the vision of corporate social responsibility and the
actions orchestrated by Haas in turning the company’s position around. Corporate
social responsibility entails the serious considering of the impact of the company
actions on society and requires the company to consider these acts in terms of the
whole social system. By Haas radically closing down a number of its plants he was only
considering the effect with respect to the business and did not adequately evaluate its
impact on the community. After all, in most little towns where these plants were located
the people were highly dependent on the income that they generated being employed
at LS&C.. The long range self-interest view predicates that if a business is to have a
healthy climate in which to exist in the future it must take actions now that will ensure
its long term viability. The company’s social mission and commitment to bettering the
lives of others is highly challenged when compared to its action of laying off thousands
of its employees.

Studies carried out by Lee Preston and Douglas O’ Bannon concluded that there is a
positive association between social and financial performance in large U.S
corporations. Business must be responsive to society’s expectations over the long term
if it is to survive in its present form or in a less restrained form. Thus for LS&C to
ensure long-term profitability it must adequately consider its business actions on the
community and it image as a socially responsible company.

How important is Levi Strauss & company’s corporate responsibility

commitment to its competition position in the apparel industry?

Although LS&C are the world leader and ahead of its competition with respect to
corporate social responsibility it is still showing a decline in sales and market share.
Thus this indicates that being highly committed to social requirements is not the only
factor required for economic success. LS&C have created a distinct capability with
respect to its commitment to support the efforts of the community but it in a way
became too complacent of its competitive position.

Did any company-giving program or company policy contribute to Levi Strauss’s

1998 decline in sales and market share?
 No, when LS&C funding to organisations is compared to its total sales and profits these
amounts or commitments were not big enough to put strain on the company. An
analysis of the decline in sales reveals that the major reason was due to sales being
lost to LS&C competitors. This was largely attributed to their introductions of more
stylish designer brands and some better-priced private-label brands. LS&C failed to
introduce new styles that appealed to the main consumer base; that is, consumers
aged 15 to 24.

Did its aspirations Statement or any of the social justice, AIDS prevention, youth
empowerment, or economic empowerment programs aid the company during its
turnaround of the late 1980’s?

The Aspirations statement was one of the components that helped to promote a
corporate culture that recognised the demands of balancing a job and family. This in a
way contributed to the overall culture a motivation of the employees but it was not
directly linked to the turnaround of the company. Emphasis of the rest of the social
programs was only highlighted after the 80’s and did not directly contribute to the
turnaround.

One of the reasons for the turn around was that blue jeans regained popularity in the
mid to late 1980’s and continued to be among the most frequently worn pants by teens
and young adults in the Unites states and many other parts of the world. The other
reason for the turnaround could be attributed to the radical change that was initiated by
Robert Haas, which introduced good business practices like flattening the
organisational structure and investing in new product development marketing and
process improvements. These all have effects of stimulating growth, innovation and
sales.

4. Are the company’s current competitive weaknesses a result of changes in

consumer preferences, poor economic conditions, or ineffective management?
Is Robert Haas responsible for the company’s unsatisfactory recent
performance? Explain.

It had been identified that there was a revival in the demand for jeans from the mid to the
late 80’s especially among the teenagers and young adults. This benefited LS&C for a
short while. However there was also an inherent change in the styles and fashion trends
which moved away from the conventional Levi’s type jeans and this was prevalent in the
teenager and young adult market. The LS&C competitors identified this and adapted to the
demand. However LS&C was too slow in identifying this change on consumer preference
and thus became complacent of their market leader position. This was highlighted in the
Teenage Research Unlimited survey, which found that only 7% of teens in 1998 viewed
Levis as a “cool brand” and as a brand more suitable for their parents or older siblings than
teens.

Robert Haas also around this time shifted focus to achieving the highest corporate social
responsibility without keeping adequate control and focus on the core business. It
achieved its status as a leader of promoting corporate social responsibility but only with
the expense of its decreased market share and lost sales. This basically filters down to
ineffective corporate management. It was also mentioned that Levis inability to keep its
styles fresh was suggested to be part related to the company’s consensus management
style. It was also highlighted that the management team was narrow minded, paternalistic
and self-satisfied. These characteristics would impede innovation and creative ideas in the
business.

The company has been more focused on its planned strategy and did not make room for a
reactive strategy. The reactive strategy would entail monitoring the external environment
for any changes and for quickly changing the business focus to meet these needs. This
was a major shortfall of the Haas management.

5. What recommendations would you make to Levi Strauss & Company’s four
trustees and other Haas family shareholders to recapture lost market share and
increase corporate sales?

− Management must develop strategies to keep the internal environment responsive and
innovative. Must ensure that the culture promotes innovations and creativity. No use
investing in research if creative ideas are not identified and applied.
− Make more use of the decentralised structure. Allocate more responsibility and allow
lower management and employees to influence the processes.
− Listen to what the employees have to say.
− Keep a close eye on market trends and other cyclic changes in the markets.
− The vision, mission and strategy and objectives of the company must be aligned to
achieve the required output. Indications are that the present strategic decisions are
difficult to make since there is no clear understanding of the company objects.
− Identify a clear target market and allocate appropriate focus on winning market share.
− Continue with the efforts to strengthen and optimise the value chain of the business.
− Keep up the good corporate social responsibility efforts but do not make that the core
focus.
− The company should invest in environmental scanning techniques, which would help it
detect future driving forces early changes in consumer preferences with respect to the
LS&C products.
− The company should carry out and industry competitive analysis to identify potential
threats in the industry.
− The company should carry out a S.W.O.T analysis to identify its strengths,
weaknesses, opportunities and threats in its business.
− The company should make use of strategic group maps to assess the competitive
positions of rival companies.
− Gather competitive intelligence about the strategies that rivals companies is using. This
would also entail identifying who the major players are going to be and predicting the
competitors next move.
− The company would benefit enormously by applying Porter Five Forces Model to carry
out industry competitive analysis.
− Management must see the importance in and develop a broad network of contacts and
sources of information both formally and informally. This will help management to stay
on top of how well things are going.