Ethical Dilemma 2: Should Levi Strauss Go into Business with Wal-Mart? Scenario:

Question

Ethical Dilemma 2: Should Levi Strauss Go into Business with Wal-Mart?

Scenario:

For years, the words jeans and Levi’s were synonymous. Levi Strauss, the founder of the company that carries his name, invented blue jeans in 1850 for sale to prospectors in the gold fields of California. Company sales peaked at $7 billion in 1996 but then plummeted to $4 billion by 2003. Management has admitted that the company must reverse this downward trend if it hopes to retain the support of its twelve thousand employees, operate its remaining U.S. factories, and continue its tradition of corporate-responsibility initiatives. At this point, Wal-Mart made an attractive offer: Levi Strauss could develop a low-cost brand of jeans for sale at Wal-Mart. The decision, however, isn’t as simple as it may seem: Wal-Mart’s relentless pressure to offer “everyday low prices” can have wide-ranging ramifications for its suppliers’ stakeholders—in this case, Levi Strauss’s shareholders, employees, and customers, as well as the beneficiaries of its various social-responsibility programs. Assume that, as the CEO of Levi Strauss, you have to decide whether to accept Wal-Mart’s offer. Again, ignore any decision already made by your real-life counterpart, and instead work toward an independent recommendation.

Before you analyze this dilemma, go to the Fast Company Web site (http://www.fastcompany.com/magazine/77/walmart.html (Links to an external site.)Links to an external site.) and read the article “The Wal-Mart You Don’t Know.”

Explanation / Answer

As the CEO of Levi Strauss, I would like to venture and accept Wal-Mart's offer to develop low-cost brand of jeans for sale at Wal-Mart. I know in case Wal-Mart offer is rejected then there exists opportunity for others/ competitors to join hands with Wal-Mart, which may results in adverse implications for future growth of Levi Strauss. Further low-cost brand of jeans may add new market segments and may be today's customers of low-cost brand may upgrade to high price brands keeping in view the quality differences.

After all Levi Strauss is interested in increasing the market size for all types of jeans for varying characteristics of customers including poor ones and or large number of customers loyal to Wal-Mart. Pressure from Wal-Mart may result in new thinking in the Levi Strauss to cut down the unnecessary expenditures.

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