Going Global & Inclusion Analysis 1

Going Global & Inclusion Analysis

4ward Consulting Group

OGL355: Leading Organizational Innovation and Change

Dr. B

22 April 2020

Arizona State University

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Going Global & Inclusion Analysis for Levi Strauss & Co

4ward Consulting Group has done an analysis on Levi’s inclusive global market of Japan.

We will discuss the mode of entry used to approach this market. We will be introducing the

political and economic issues the company faces while expanding, and the cultural differences

between the US and Japan that tie into these difficulties. Further, we will offer an in-depth

analysis on some actions Levi’s can take to ensure inclusion and offer insight on the attitudes and

communication necessary to ensure strong global partnerships.

Japan

Levi's, a multinational corporation, has a long history with Japan. Levi's services its

customers through its global infrastructure, developing, sourcing, and marketing its products

around the world. Japan was one of the first countries outside of America where Levi's

trademarked their famous two-horse patch in 1905, "just 19 years after we first trademarked it in

the United States" (Panek, 2015, p.3). It was Levi's that lit the fuse for American fashion in

Japan.

However, Levi's did not start exporting to Japan until after World War II in 1945 through

various third party retailers. "In fact, to some degree, all American influence on Japanese fashion

can be traced back to one specific item: Levi's 501 jeans" (Christian, 2018, para.13). Levi’s

jeans have become a collector's item. Today, a pair from the 1940s can sell for over $3,000 in

Japan. “Japanese collectors now own 70% of America's vintage denim, and Levis in particular is

a standout brand,” (Jamshed, 2017, para. 18). Japan’s growing interest and demand for raw

denim presents an ideal opportunity for Levi’s to grow their Asia geographical market. In 2017,
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Levi's demonstrated their geocentric attitude by opening their first flagship store in Osaka, Japan.

"The epicenter of youth culture in the city of 19 million inhabitants, the locale is fittingly known

as 'Amerikamura' which translates as 'American Village,'" (Staff, 2017, para.1)—making Japan a

prime international market to expand, supplement, and strengthen its domestic growth.

Mode of Entry

To further strengthen their global strategies, Levi’s will need to rely on international

exports as their mode of entry into Japan. Its operations are grouped into three geographic

regions: the Americas, Europe, and Asia (which includes the Middle East and Africa). Levi's net

revenues for the Asian segment in the fiscal year 2019 were only 16% of net revenues, compared

to 17% in the fiscal year 2015 (Levi Strauss & Co, 2019, p. 31). Compared to the other regions,

Asia is falling behind in their net revenue. However, their net revenue has continued to grow

year after year. Direct to consumer channels have seen growth, especially in the

company-operated retail stores who “generated 27%, 26% and 25% of our net revenues in fiscal

years 2019, 2018 and 2017, respectively”(Levi Strauss & Co, 2019, p. 37). With minor local

product modifications, the momentum from their first flagship store opening in Osaka, Japan will

allow Levi's to achieve new sales and profits in this geographic segment.

Increasing exports to Japan will also satisfy Levi's global customer satisfaction "who

demand the same product, service, and quality at various locations around the world," (Lynch,

2014, p. 29). Levi's entered the public markets with their initial public offering (IPO) on the New

York Stock Exchange on March 25, 2019. Expanding its international operations to Japan may

allow Levi's to regain shares from its Japanese affiliate Levi Strauss K.K., who hold a
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noncontrolling 16.4% minority interest (Levi Strauss & Co, 2019, p. 120). Additionally, the

population in North and South America is significantly less than the population of Asia, yet the

net revenue made from that region is the smallest of the three geographical groups. By focusing

on Japan, Levi's will achieve benefits of economies of scale even further than in other geographic

segments and become a stronger competitor in the apparel industry.

Political and Economic Issues

There are many hardships that any industry will encounter when entering into a new

global market. Levi’s sees a few of these hardships in terms of the political and economic

turbulences they must balance when they branch out. Levi’s initiatives to expand into Japan have

brought to light the importance of integrating and respecting different countries' political

practices. To initiate exchanges, Japan brought in political consultants and distribution experts.

Developers had to determine if Levi’s would make the globalization cut to sell their product in

Japan and successfully profit. Japan is a country keen on selling local products as opposed to

buying from importers. Wholesalers have been a dominant part of the Japanese marketing system

for several hundred years. For American manufacturers, these wholesalers generated hurdles and

made it difficult for businesses to produce and sell merchandise. Fortunately, Levis Strauss &

Co. bypassed wholesalers in Japan and dealt directly with retail stores (Stripp, 2012, para. 8).

After the many challenges the company faced, Levi’s established themselves in Japan and built

their first distribution center in 1971. Thus, beginning domestic production of jeans in their first

Asian marketplace.
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Along with attention on the political aspects Levi’s aligns with, there is also a necessity

to evaluate the current climate of Japan’s economy. Trend changes are never ending in the

apparel industry. One of the biggest challenges for Levi’s in the global market was the switch

from priority on premium priced high fashion clothing choices to the low- cost fast fashion

initiatives (Levi Strauss & CO, 2019, pg. 43). Levi’s has had to reevaluate the brand as it applied

to the Japanese market to capture their audience while not compromising on what makes their

products unique; their quality. Levi’s inability to make these changes could lead to having an

increased amount of unsold products that they would be forced to sell at discounted rates (Levi

Strauss & CO, 2009, pg. 48). Selling at discounted rates would lead to Levi’s losing more profits

than if they made the shift to sell their products at a lower cost without losing their premium.

Levi’s must also consider how their expanding markets will compare in currency.

Fluctuations of the U.S. Dollar against Japanese currency will impact their financial

results, affecting translation, and revenue, operating margins and net income (Levi Strauss &

CO, 2019, pg.45). This is where Levi’s will have to continue monitoring the uncertainty of the

current political environment to ensure they are continuing to gain profits. One way Levi’s has

levied this in Japan is by mitigating the minority interest rates of third parties they had been

incurring. In January of 2020, Levi’s worked with their Japanese market representatives to offer

an acquisition that would remove this 16.4% interest by making “Levi Strauss Japan a wholly

owned subsidiary” (Levi Strauss & CO, 2019, pg.57). The initiation of this strategy allows for

the Levi’s brand to hold value, while adapting to the economic constraints of Japan.

Key Cultural Differences Between the U.S. and Japan

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Levi Strauss & Co was founded in 1853 in San Francisco, CA, USA. Being a business

based in the United States comes with a tremendous amount of differences when compared to the

expansion country of Japan. National cultural differences include gender differentiation through

workplace attire, cross-cultural leadership behaviors through supervisor involvement, individual

vs. group achievement, and comradery after work hours.

Workplace attire is a huge cultural difference among the U.S. and Japan because the U.S.

focuses on “business- casual”, while Japan focuses on formal wear. In fact, there is a huge

gender divide as to what is considered appropriate attire for both Japanese men and women.

Japanese businessmen usually wear gray, navy, or black suits with a tie while businesswomen

wear either a navy or black blazer with a matching skirt, a white button down blouse, pantyhose,

and black kitten heels with their hair tied back in a ponytail (Sara, 2018, para.1). Japanese

business people dress in formal attire because it is considered to be disrespectful otherwise. Even

wearing patterns and bright colors is frowned upon, but in the U.S. it is adored and considered to

be of unique greatness and creativity.

Cross-cultural leadership behaviors through that of supervisor involvement is another key

cultural difference among the U.S. and Japan. In Japan, employees live by the mantra,

“ho-ren-so” which translates to report, contact, and consult (Sara, 2018, para.3). This means that

all employees are required to get supervisor approval on any decision whether big or small.

Japanese employees thrive on authority and a hierarchical workforce structure while American

workers tend to be more autonomous and often find micromanaging from their supervisors

unnecessary .
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Another key cultural difference among the U.S. and Japan are individual vs. group

achievements. American managers are capable of teamwork and corporate spirit, but they value

individual freedom and their first interest is furthering their own career (Sara, 2018, para.7). East

Asian countries, like Japan, believe that group work is sacred and leaders are seen as benevolent.

In essence, the title of a leader in Japan is earned and respected while an American leader may be

given the title rather than earning it through the respect and trust from a group.

Finally, the last major cultural difference between these two countries is the expectation

of comradery after work hours. Japanese workers are socially expected to hang out in a group

after work, while American workers generally do not. A lot of the time, the way Japanese

workers conduct business is through building trust and respect with their employees outside

work- related activities. Therefore, work and personal life in Japan is constantly intermingled

with one another, while American workers nearly always keep work and life separated.

Actions for Inclusion

Practicing inclusion in the workplace environment is pertinent to the success of team

collaboration in that new global market, which has been a commendable aspect of Levi Strauss

& Co.’s previous global partnerships. Culture is a key indicator of what decisions or changes

need to be made to practice ethical codes of conduct. Cultural differences range from

demographics, religions, languages and values. As an organization, Levi’s will need to focus on

their advertising, target market, and cultural understanding to work effectively alongside

Japanese structures.
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Inclusive Do’s Inclusive Don'ts

Align advertisements with the culture of Treat economy the same as USA
Japan

Expand Japanese worker rights via cultural View Japanese employees as individuals, but
values as an interconnected network group

Follow guidelines for Japanese labor laws Overlook nonverbal communication set by
senior leadership

Finding the right trading export mode of entry Fail to use employee feedback surveys

Before Levi Strauss & Co. can move their market to Japan, they will have to analyze

Japan’s advertisement culture. Japanese advertisements, compared to American advertisements,

are the standard of eccentricity, while being regarded on a more mature level in America. “The

elements that push Japanese advertisements are cuteness, silliness, detachment from reality and

most importantly, amusement” (Ólafsson, 2014, p. 9). Portraying their merchandise in a more

fantasy related and “cute” aesthetic will allow their audience to feel culturally comfortable to

branch out and purchase said merchandise.

Another important aspect that Levi’s must consider is the same workers’ rights they hold

in regards to their current employees, but also the cultural differences that their new Japanese

employees will need. America is one of the only countries that does not guarantee paid time off,

whereas Japan guarantees all of their employees to gain paid time off. New labor laws in Japan

require workers to take at least 5 days of their paid time off, which means “​the employer needs to

specify the days for annual leave so that the employee will actually take those days off,”
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(Tanaka, 2019, para. 10). It is necessary to understand the labor laws for Levi Strauss & Co. to

make sure that all of their new employees are in legal accordance with Japan.

In a new target market, it is essential to ensure a proper leadership technique that is

culturally attuned with the new employees. The leadership technique must be the glue that keeps

employees together while working through the project plan for the new marketing breach.

“People with different lifestyles and different backgrounds challenge each other more. Diversity

creates dissent, which is needed for a successful workforce Without it, you’re not going to get

any deep inquiry or breakthroughs” (Duong, 2016, para. 8). By creating a diverse board of

leaders, the organization will create a manifestation of cultural benefits to help merchandise

become prosperous.

Another factor that Levi Strauss & Co. needs to be careful of is failure to use employee

feedback for the new working conditions. Levi’s is a strong believer in the components of

“principled culture by holding leaders accountable for delivering results, developing our

employees and exemplifying our core values of empathy, originality, integrity and courage”

(Levis, 2019, p. 44). To develop these new employees, Levi’s will have to create a strong

communication platform to allow for a freedom of thoughts and ideas, even if it is anonymous.

By practicing these in accordance with a code of ethics, Levi’s will be able to grow a strong

leadership team to apprehend success and prosperity in a new employee environment.

Attitudes

Communication is the key to success, and some forms of communication can postpone

the business process if communication is mainly shared in written words. That is why business
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etiquette is necessary to grow a reliable relationship with Japan. Employees will need to enforce

these attitudes and rituals to ensure that all employees feel respected, therefore creating a sense

of trustworthy business partnerships will not be tarnished.

Attitude of Employees : Do’s Attitude of Employees : Don’ts

Instill a practice of proper greetings Confrontational negotiation

Proper presentation conduct Present yourself conspicuously

Recognize achievement through accepted gift Communicate mainly through written words
exchange

Communicate through applicable systems Disregard Japanese meeting etiquette

Nonverbal first impressions are important to Japanese business partners, which is why it

is imperative to use logical and proper greetings. When meeting with Japanese partners, Levi’s

will have to understand that their greetings are ritualized and regarded as a form of respectful

praise. Levi’s must not introduce themselves, but rather wait to be introduced. While shaking

hands is normal in most countries, it is rude to shake a hand and rather you should bow. The

duration of one’s bow shows how much respect they have for the other member. “​They often

trust non-verbal messages more than the spoken word as words can have several meanings,”

which is why it is important to use proper facial and body expressions (Commisceo, 2020, para.

12). ​Upon arriving, ensure there is proper distance among the Japanese business partners because

they do not fully trust new partnerships right away. If everyone is getting along, in future

meetings the distance might change a lot as the partnership builds.

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To maintain successful communication, employees must make sure that business contact

information is exchanged properly. Business cards, or known as Meishi in Japan, are an

influential aspect to the Japanese, and are designed meticulously and exchanged with care

(Business, 2018 para. 6). “The design, and the information on the card provide the very first look

into your attention to detail and care for your business,” (Business, 2018, para. 7). ​When working

internationally, it is beneficial to be able to communicate through faster platforms to achieve the

final products in a timely manner. With technology nowadays, Levi’s is able to communicate

more efficiently through platforms like Zoom, Skype, etc. If a business partner mainly

communicates through writing, it can prolong the work to be done due to having to wait for one

to respond. Business colleagues do not use the same platforms that are used in America,

“​LinkedIn is not very widely used in Japan, so people might ask to connect via Facebook,”

(Business, 2018, para. 26).

Time management is also very important, by preparing effective presentations and

making sure to send documents or relevant data in advance to show the quality of reliability.

Reliable qualities will respect their time by being prepared. “​Make sure the time schedule allows

for questions and remember, the Japanese do not always raise their hands and will often look

directly at you instead. It is up to the presenter to be aware and to politely ask if they wish to ask

a question,” (Commisceo, 2020, para. 19). After a proper introduction, information exchange,

and the meeting has been presented, the organization should be able to have a more in depth

understanding of Japanese cultural rituals. Having a better insight on the culture and the people

will allow for better business practices towards a mending of countries.

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Conclusion

4ward Consulting Group has completed an analysis on Levi’s inclusive globalization

strategy into Japan. Exporting, as our mode of entry was used to approach and analyze this new

international market. We have introduced the political and economic issues related to conducting

business in a foregin market and revealed key cultural differences among the U.S. and Japan.

Finally, our analysis includes insight into how Levi’s will incorporate differentiating attitudes

and communication techniques to strengthen the partnerships between the two countries.
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References

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_V2-(1).pdf

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http://www.global-strategy.net/what-is-global-strategy/

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Software​, 2016,

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April 2019: Are You Prepared?” ​Littler Mendelson P.C.,​ 13 Feb. 2019,

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