Levi Strauss, as an example of a TNC with impacts on both the Host and Origin nation

 Levi’s is an American based TNC that produces and sells clothing in 110 countries worldwide. It is headquartered in the US with a number of regional offices in Europe, Asia, Africa and the Middle East. It has production operations in 39 countries (according to the publicly accessible list found on their website) and the majority of their operations are in LEDCs, with the most suppliers being found in China and India. They do however have some suppliers in the US and continental europe.

 

Global Marketing:

Levis recently began using global marketing for the first time in it’s nearly 140 year history. They have utilised Facebook to create a campaign showing the lives of those who wear Levis jeans. It ran in 24 countries in 19 different languages simultaneously.


Impacts on the origin country:

 

Social:

  • Provides employment for 4700 people in the US.
  • Employees are allowed to play pivotal roles in the company’s plans, for instance the US headquarters (Levis Plaza), in Sans Francisco was built with input from employees who were able to submit designs.
  • Managerial jobs tend to be given to US citizens, this provides residents with the opportunity to move up in the organisation and have greater responsibility.
  • Structural unemployment has occurred as a result of Levis stopping production in the US after 150 years. Some employees at the Valencia Street factory in San Francisco had been working for the company for their entire working life had only had skills in textiles.

 

Economic:

  • The majority of the company’s shareholders are US citizens, companies and pension funds. Profits earned from sales overseas and excess profit from exploiting the economies of scale etc benefits the US economy and increases the country’s GNI.
  • It is estimated that the deal with Wipro to move IT and customer service jobs to low cost areas of the world will lead to 500 americans losing their jobs.


Environmental:

  • Project WET aims to teach western customers more about the environmental impact that goes into the creation of their jeans. Currently US customers wash their jeans after 2 washes on average while Chinese customers wash theirs after 6 washes. Part of WETs aims are to lower the frequency of washing and to wash at a lower temperature to lessen the environmental impact.

 


Impacts on the Host Country: 

Social:

  • Focus funding on strengthening workers rights and living conditions. They were the first TNC to introduce a supplier code of conduct and regularly inspect their suppliers to ensure they complied with this. This included preventing child labour, excess working hours and discrimination. The Levi Strauss foundation is a charity funded by the organisation which also works to stamp out these practices in the entire industry.
  • Focus on corporate responsibility the company introduced the “worker well being” project in a number of LEDCs such as Bangladesh, Haiti and Egypt. This is aimed at improving the living conditions of those who are making Levis products. It was first introduced in 2011 and is currently being expanded to more countries. 20,000 employees have been helped as a result of this scheme. It only operates in LEDCs.
  • They are transparent and publish a list of all their suppliers on their website allowing journalists access to ensure that their manufacturers are adhering to their code of conduct.

 

Economic:

 

  • Deal with Wipro to handle all IT and customer services for 5 years in exchange for $143million dollars. Wipro is a Bangalore based TNC, this money will help to employ more local people to their call centres and back office functions. As the demand for local labour rises so will wages, furthermore their incomes will have a multiplier effect on local firms who will benefit from increased consumption of their goods.
  • Many of the suppliers of Levis jeans are locally owned firms meaning that the profit made by these companies may stay in the host country. It may be saved in local banks who may have access to more funds to loan out to local businesses.
  • Firms build up a reliance on the firm, the firm could choose to end their contracts with their manufacturers with very short notice.  This could mean that Levis can dictate price and force these firms into not making profits sizeable enough to support the entrepreneur and the area.


Environmental:

  • Levis are actively carrying out research into the environmental impacts of their production process. The process from growing cotton to dying the jeans uses approximately 3,500 litres of water. In the world 1 in 10 people do not have access to clean water, this is therefore a significant use of water.
  • To reduce this impact the company are planning on buying cotton 100% of cotton from sustainable sources or recycled by 2020.
  • Working with the WWF to examine production locations to find areas where production may be leading to a drying out of the groundwater. In these areas the firm are planning on looking into solutions to rectify these problems. These include the construction of a water management plant which can allow 75% of water used to be reused, this has happened in mexico. Since 1995 they have assessed sites before using them for manufacturing to assess for potential impacts on the drainage basin and local ecosystems.