Global Forces of Change and Industry Dynamics
Li & Fung: Beyond “Filling in the Mosaic,” 1995 – 1998
In early 1998, William and Victor Fung had to review their business, the Li & Fung Group, to plan for the next three years. Examine strategic and organizational issues including company culture, international expansion, and venture capital projects.
1. How is Li & Fung able to maintain margins three times those of the rest of the industry? What are its specific strengths and how does it differ from more traditional competitors? 2. What attributes of Chinese business culture does the company exhibit? Are these strengths for the company? 3. What are the benefits of the Li & Fung matrix sourcing system? 4. What are the challenges the company faces going ahead and what issues does it need to address in order to expand? How and where should it expand? Turn in your answers for Q1, Q2, and Q3 (italicized) for the 1-page short submission. Prepare Q4 for class discussion.
Class 15, Monday, March 19th
Global Expansion & Foreign Market Entry
The Plant Location Puzzle
The Eldora Company (EDC) is a leading U.S. bicycle maker. They have been extremely successful but their current market is approaching saturation. They want to explore options for the future, specifically, expansion in foreign markets. What is the next move? Should they go to China? With what products and what operations expansion strategy?
1. Should EDC proceed with the Asian market opportunity?
2. If they are going to proceed with the Asian opportunity, where should they locate and why? 3. Which part of their business (marketing, production, design/engineering) should be located at their new location? 4. Describe an implementation plan over the next few years to successfully exploit the Asian growth opportunity. Turn in your answers for Q1, Q2, and Q3 (italicized) for the 1-page short submission. Prepare Q4 for class discussion.
Class 17, Monday, March 26th
Tax Factors and Global Site Selection
Renault’s Logan Car: Managing Custom Duties for a Global Product
Operations network design is about where to locate your supply sources and manufacturing and distribution operations, as well as the deployment of such operations, i.e., who should be supplying whom. With the emergence of global supply and manufacturing sources and the global market, such a design will increasingly have to span multiple regions. In the design, we have to capture the quantitative impacts of such factors like fixed and variable costs of production or distribution facilities, inventory, freight, and other logistics costs. The global network requires explicit treatment of taxes, customs and duties. Discussion Questions:
1. What are the complexities involved in factoring out the effect of customs and duties in designing the supply network of Logan (i.e., where to build the CKD parts and CBU, and what market to serve from what sites)? Should Renault build all CKDs in Romania, or should they source CKDs locally? 2. In general, what are the quantifiable and non-quantifiable factors that one should consider in designing a supply network? 3. One of the benefits of Renault’s alliance with Nissan was supposedly the potential created by Renault using more of Nissan’s parts in their products. What are the factors that would consider in determining whether a Nissan part should be designed to Logan? 4. For Logan, what new opportunities were created by Romania entering the European Union in 2007? 5. The emergence of the South African market offers an opportunity for Renault to build CBUs in South Africa. a. Based on the data from the case, as well as your best assumptions, compare the freight, customs and inventory costs for the three alternatives: (i) shipping CKDs from Romania and building CBUs in South...