Levi strauss tries to blend profits with social activism



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LEVI STRAUSS TRIES TO BLEND PROFITS WITH SOCIAL ACTIVISM

THE GOALS OF THE CORPORATION 19

Levi Strauss & Company has been around for

nearly 150 years. Well known for its Dockers and

501 jeans, the firm has also been recognized for its

commitment to social values. Indeed, when Levi

Strauss first issued stock to the public in 1971, it took the unusual

step of warning potential investors that the company’s

dedication to social activism was so deep that it might compromise

corporate profits.
Levi Strauss’ words and actions continually reflect this

strong devotion to social causes. In 1987, CEO Bob Haas developed

the company’s Mission and Aspiration Statement,

which highlighted an emphasis on diversity, teamwork, and integrity.

A few years later, the company created a 10-day

course for employees that focused on ethical decision making.

As one of the course developers put it: “It was about asking,

‘How do I find meaning in the workplace?’ It was about seeing

that work is noble, that we’re more than getting pants out

the door.”


Moreover, the company’s philosophy had a profound effect

on its business decisions. For example, it withdrew its investments

in China to protest human rights violations. This action

contrasted sharply with those of most other companies, which

continued making investments in China in order to enhance

shareholder value.

Levi Strauss has received considerable praise and numerous

awards for its vision, and until recently, the company was able

to practice social activism while maintaining strong profitability.

However, the company’s profitability has fallen recently,

causing many to argue that it must rethink its vision if it is to

survive. In the face of huge losses, it is not surprising that tension

has arisen between the conflicting goals of social activism

and profitability. Peter Jacobi, who recently retired as president

of Levi Strauss, summarized this tension when he was quoted in

a recent Fortune magazine article:


The problem is [that] some people thought the values were

an end in themselves. You have some people who say, “Our

objective is to be the most enlightened work environment in

the world.” And then you have others that say, “Our objective

is to make a lot of money.” The value-based [socially

oriented] people look at the commercial folks as heathens;

the commercial people look at the values people as wusses

getting in the way.


Despite these concerns, Levi Strauss’ recent problems may

not be solely or even predominantly attributed to its social activism.

The company has been slow to respond to fashion trends

and to changing distribution system technology. Despite large

investments, the company is still way behind its competitors in

managing inventory and getting product to market.


To be sure, all is not completely bleak for Levi Strauss. The

company still has a very strong brand name, and it still continues

to generate a lot of cash. For example, in 1998, the company generated

cash flow of $1.1 billion, more than either Gap or Nike.

One factor that makes Levi Strauss unique is its ownership

structure. The Haas family has long controlled the company.

Moreover, after completing a leveraged buyout in 1996, the

company is once again privately held. As part of the buyout

agreement, investors who wanted to maintain their ownership

stake had to grant complete power for 15 years to four family

members led by Bob Haas.
This ownership structure has enabled

Levi Strauss to pursue its social objectives without facing the

types of pressure that a more shareholder-oriented company

would face. Arguably, however, the lack of external pressure

helps explain why the company has been so slow to adapt to

changing technology and market conditions.



SOURCE: “How Levi’s Trashed a Great American Brand,” Fortune, April 12, 1999,

82–90.


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