Levi Looks to Cut Its Cloth Differently by Rewarding Responsible Suppliers

Dr. Eshra MAN371
Must submit typed homework through Blackboard by due date
No e-mail submissions/hard copies will be accepted
Name:______________________________ Ch. 1&2—Homework
Part I: Answer the following questions:
Q1: What is a multinational corporation? Why would a company want to be a multinational
corporation?
A multinational corporation can be defined as a business corporation incorporated in one
nation that has sales and production operations in other nations (Detomasi, 2007). They are
also called to be as a vehicle of foreign direct investment. A company wants to be a
multinational corporation because of rising of emerging markets and globalization. With
expansion top global level, the company can earn more amount of profits, long-term
partnership, and credibility of brand name can be increased.
Q2: How has NAFTA affected the economies of North America?
A number of economic development have occurred by NAFTA such as –
Removal of tariffs as well as export and import quotas, rise in opportunity to make
investment in each other nations, the opening of government procurement markets to
organizations in the other two countries, elimination of barriers relating to auto parts,
agricultural products and energy goods, travelling ease between the nations (Aspinwall,
2009).
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Dr. Eshra MAN371
Must submit typed homework through Blackboard by due date
No e-mail submissions/hard copies will be accepted
Q3: What does the term "European Union" mean? Has the European Union been successful?
What is the European Union's ultimate objective? Why has the creation of the European Union
encouraged more North American and Pacific Rim companies to establish operations in Europe?
There are 27 countries in European nations (Kelessidis & Stasinakis, 2012) where its main
objective was to eliminate trade barriers such as issue of price, export and import thrift among
nations and created a uniform currency such as “Euro”. Many more Pacific Rim nations and
North Americans were encouraged by the creation of European Union with establishment of
operations in Europe as product being sold in those nations considering all have same pricing
and currency and need to endure same regulations related to export.
Q4: Describe the Foreign Corrupt Practices Act. What were the objectives of the FCPA?
The Foreign Corrupt Practices Act of 1977 makes it is unlawful for individuals and business
to make payment to officials of foreign government in order to seek or retain business
(Thomas, 2009). FCPA ensure that all organizations with securities in US must meet the
accounting transparency requirements.
Q5: How does political risk affect global business?
Political risk result from various aspects that can negatively impact organisation revenue
such as high-interest rates, social issues, contract frustrations, blocking of dividend,
government intervention, economic recession or depression, failure of specific local
infrastructure and various others unexpected changes (Jensen, 2008).
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Dr. Eshra MAN371
Must submit typed homework through Blackboard by due date
No e-mail submissions/hard copies will be accepted
Part II: Case Study 2: Levi Looks to Cut Its Cloth Differently by Rewarding Responsible
Suppliers
Read Case Study 2 at the end of chapter 2 and answer the questions that follow:
Case Study
Levi Looks to Cut Its Cloth Differently by
Rewarding Responsible Suppliers
Shawn Donnan, Financial Times [London (UK)] November 5, 2014, p. 1
Calling all hipsters: you may just have a new reason to feel better about your
skinny jeans.
In a bid to bolster its ethical credentials and meet the demands of
increasingly fussy millennial consumers, Levi Strauss & Co is offering a new
financial incentive to suppliers as far away as Bangladesh and China to meet
environmental, labour, and safety standards.
The San Francisco–based jeans maker said yesterday that it would begin
providing lower-cost working capital to those of its 550 suppliers that do best
on those measures.
The financing, which is being arranged with the World Bank’s private sector
arm, the International Finance Corporation, will operate on a sliding scale. As
suppliers improve their environmental performance and conditions for
workers, they will be rewarded with lower interest rates on working capital
provided through a special IFC facility.
The project sprang out of conversations started at the IFC following the 2013
Rana Plaza factory collapse in Bangladesh, which left more than 1,100
people dead and prompted new scrutiny of fashion brands’ supply chains.
Through the IFC, Levi Strauss suppliers will have access to cheaper capital
than they would otherwise in their home countries. However, Olaf Schmidt,
who heads the IFC’s global retail practice, said that those suppliers that did
best on labour and other standards would receive a further discount of up to
50 basis points on the interest charged.
The initiative comes at a time when consumers are becoming increasingly
interested in the conditions in which their clothes are made. Multinational
companies are responding by tightening their bonds with suppliers and using
new tools to manage them.
Michael Kobori, Levi Strauss’s vice president of sustainability, said that the
company told contractors about the scheme last week and had already
received expressions of interest. If the pilot with the IFC worked, Mr Kobori
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