Choose China In International Business example essay topic

The Problem: In the past thirty years saturated markets as well as growth potential have caused many corporations to seek out international ventures. These ventures are certainly logical from the corporate standpoint. They have a huge growth potential, maximize profits, and allow businesses to enter different, usually unsaturated markets. But these gains do not come without a cost. These costs are not financial but must still be examined. In the past international businesses, especially businesses in the manufacturing sector have been criticized by many labor, political, human rights, and environmental organizations as being, to say the least, unethical.

Many of these businesses, weather they realize it or not, have exploited workers, polluted the environment, and aided corrupt governments. These facts have forced international businesses to reexamine their priorities. More often than not priorities involving profits become more important than ethical business practices. In 1992 one such company involved in the reexamining process was Levi-Strauss. This company was unsure about there future manufacturing commitment in The Peoples Republic of China. Levi's, a company that prides itself on ethical business practices, was unsure if China was a country that meshed with their companies' ethical background.

Levi's is caught in a "Catch -- 22". On one hand they have the future growth, and profitability that manufacturing in China would bring, but on the other hand manufacturing in China risks there hard earned reputation, bad publicity, patent infringement, and loss of assets due to unclear business laws. Basically Levi's must decide what is more important, profits or people. Why Choose China In International Business? 1) Huge Growth potential: China is one of the major "Up and Coming" nations of the world.

They were in an economic boom (1992), recording annual growth rates of ten percent. The U.S. Treasury Department predicted that China will soon have the second largest economy in the world. 2) Huge Unsaturated Market Capabilities: The sheer size and population of China, along with the fact that until recently these markets were "Untapped", makes China very attractive to international businesses. 3) Huge Population: China is home for more than one million people.

China accounts for one sixth of the world's population, an obvious incentive for international businesses. 4) Cheap Labor: Inexpensive labor increases the company's profit margins an obvious goal for an international business. Levi's Options: In examining this case it was made clear that Levi's had many different paths that it could take; all with many advantages and disadvantages. 1) Do nothing and stick with their current level of involvement 2) Pull all operations out of China 3) Begin partially pulling out of China 4) Increase corporate involvement in China 5) Stay the same, or increase involvement, but strictly enforce ethical philosophy Option # Pro's Con's Do nothing and stick with their current level of involvement 1) Remain in China's Market 2) Allows company to establish its nitche in a growing economy 3) Better Competition with other apparel companies manufacturing in China 4) Better Distribution Channels 5) Cheap Labor 1) Receive criticism for human rights violations 2) Risk Loosing Assets bc. of vague business laws 3) Lack of Patent Security 4) May tarnish reputation 5) China Violates all criteria for Brand Image, Health and Safety, Human Rights, Legal Requirements, and Political and Social stability set forth in Levi's Guidelines for Country Selection 6) Remain in China's Market Pull all operations out of China 1) Good For company Image 2) Supports Mission Statement 3) Supports Guidelines for Country Selection 4) Increases patent security 5) Punishes China's economy 6) Sets Example for proper business ethics in International Manufacturing 1) Takes company out of an emerging economy, and huge market 2) Competitors manufacturing in China are at an advantage 3) Forces production to a different country Begin partially pulling out of China 1) Remain in China's Market 2) Distribution Channels Remain 3) Cheap Labor 4) Punishes China's economy 5) Increases patent security 1) Remain in China's Market 2) China Violates all criteria for Brand Image, Health and Safety, Human Rights, Legal Requirements, and Political and Social stability set forth in Levi's Guidelines for Country Selection 3) May tarnish reputation 4) Lack of Patent Security 5) Risk Loosing Assets bc. of vague business laws 6) Better for company image 7) Receive criticism for human rights violations 8) Competitors manufacturing in China are at more of an advantage 9) Forces production to a different country Increase corporate involvement in China 1) Remain in China's Market 2) Allows company to establish its nitche in a growing economy 3) Better Competition with other apparel companies manufacturing in China 4) Better Distribution Channels 5) Cheap Labor 6) Increase involvement in an emerging economy 1) Receive criticism for human rights violations 2) Risk Loosing Assets bc. of vague business laws 3) Lack of Patent Security 4) May tarnish reputation 5) China Violates all criteria for Brand Image, Health and Safety, Human Rights, Legal Requirements, and Political and Social stability set forth in Levi's Guidelines for Country Selection 6) Remain in China's Market Stay the same, or increase involvement, but strictly enforce ethical philosophy 1) Remain in China's Market 2) Allows company to establish its niche in a growing economy 3) Better Competition with other apparel companies manufacturing in China 4) Better Distribution Channels 5) Cheap Labor 6) Increase involvement in an emerging economy 7) Attempting to support guidelines 1) Receive criticism for human rights violations 2) Risk Loosing Assets bc. of vague business laws 3) Lack of Patent Security 4) May tarnish reputation 5) China Violates all criteria for Brand Image, Health and Safety, Human Rights, Legal Requirements, and Political and Social stability set forth in Levi's Guidelines for Country Selection 6) Remain in China's Market 7) Extremely hard to enforce ethical philosophy Some Criteria: I personally feel that there are many different criteria that could be used in order to make the best decision in how to go about doing business in China. I feel the first criteria that would come to mind for a business would be overall profit potential. Under these criteria, China would be a very attractive place for conducting business.

Another criteria that could be used are ethics. Under this criteria China is a much less attractive place to do business. Doing business in China often forces a company to promote unethical business practices such as forced labor, population control, and unsafe working conditions. A business with a strong ethical background would do business elsewhere. Another criteria that could be used is degree of risk. Business in China is extremely risky.

This comes as a result of vague business laws, unpredictable governmental practices, hardly any patent protection, and a corrupt legal system. These monetary risks are not the only risks associated with business in China. A business also is at risk of tarnishing the most important intangible asset, their brand name. Another Criteria that can be used is company policy. If business in China "meshes" with your companies' business policies than it is a good venture, if not, than it is a poor option.

A company could also use a legal criteria in order to decide on involvement in China. If the companies' presents in China would break any laws than it is not a good venture. There are innumerable criteria that Levi's could use in order to decide if China is a country to continue doing business. I feel that because of Levi's reputation as an ethical company, as well as the fact that the company has written guidelines countries must adhere to in order to receive Levi's business, leads me to choose the criteria of company policy as well as the criteria of ethics in order to judge China's attractiveness.

Recommended Coarse of Action: Under the criteria of ethics and company policy I feel that Levi's should pull all manufacturing operations out of China. Levi's has a reputation as an extremely ethical business. Continuing business in China could ruin this reputation. Doing business in China legally forces Levi's to violate basic human rights. China is no place for a company that values ethical business practices, and employees as much as Levi's does. Levi's company policy also supports my recommendation.

Continuing operations violates ALL of their ethical values set forth by the company's code of ethics, ALL their Ethical Principles, (Honesty, Promise Keeping, Fairness, Respect For Others, Compassion, and Integrity), All the guidelines for selecting a country, and even Levi's Mission Statement (Our work environment will be safe and productive and characterized by fair treatment, teamwork, open communication, personal accountability and opportunities for growth and development). Under these criteria it's clear that China is not a great country for Levi's international manufacturing. Implementation: In order to implement this recommendation I feel that Levi's should liquidate all manufacturing infrastructure and invest in a country that better fits their company policy and ethical principals. If in time China fixes it's political, legal, and human rights problem than investment can begin again.

Until that time Levi's manufacturing should occur in countries where facilities respect the ethical practices of Levi's and also can be easily monitored to ensure cooperation. After all, people are always more important than profits. Appendix: I feel that globalization has everything to do with the problems faced by Levi's. Corporations are always looking for the low cost, efficient producer.

More often than not, this efficiency comes at the expense of human resources. At the same time globalization also has many positive effects on developing countries. Globalization pumps huge dollars (F.D. I) into developing nations, develops industry, and boosts GDP. This economic boom brings about better schools, infrastructure, and raises the standard of living. As a whole it is obvious that globalization's "Pro's", outweigh its "Con's", except in extreme cases. I feel that China's textile and apparel manufacturers are an example of one such extreme and corporations should take it upon themselves to produce elsewhere..