Li & Fung: Internet Issues

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Li & Fung is a Hong-Kong based company that provides value-added services across the entire supply chain. Li & Fung has been operating for about a century. It was founded in Guangzhou, china, in 1906 by Fung Pak-Liu and Li To-Ming. Li & Fung was a family owned business until the 1970s where it transformed into a public company that is professionally managed. The Li & Fung Group is an international group specializing in exports sourcing, distribution, and retailing. In August 2000 Li & Fung invested heavily in the use of internet technologies to support its business, and launched, a business-to-business e-commerce portal. The following write up conducts an analysis of the historic strengths and strategy of Li & Fung, the capabilities of and the risk associated with using the internet technologies.

Li & Fung was able to outperform many of its competitors within the same industry for reasons that stem from its effective management, relationships with suppliers and customers, and operations. First, the management team of Li & Fung is well educated and informed about the market. For instance, William earned his MBA from Harvard Business School and Victor completed his Ph.D. in economics at Harvard University. The knowledge they acquired from their studies helped them to transform the business from a family owned business to a professional one, and helped them to integrate a planning and budgeting system into the business. William and Victor were open-minded and adaptive. For instance, when new technologies are introduced into the market, Li & Fung usually adopts it aggressively to gain advantage over competitors. Second, Li & Fung worked in both hard (such as toys) and soft (such as clothing) market. This diversity helped Li & Fung to avoid the risk associated with functioning in one market. Third, Li & Fung provided value-added services across the entire supply chain in 32 countries around the world. Supply chain customization provided benefits to both Li & Fung and its clients. Li & Fung were able to shorten orders fulfillment time, which reduced inventory costs. Also, it reduced matching and credit risks and offered quality assurance to its customers. In addition, it formed a global sourcing network and obtained economies of scale and therefore offered lower costs and more flexible sourcing than its competitors. Furthermore, Li & Fung provided up-to-date fashion and market trend information to its clients, which made the clients more flexible to changes in their industries. Fourth, Li & Fung controlled and owned strategic links in the chain. For instance, it offered raw material sourcing to some manufacturers, and this ensured greater quality control and brought larger and thus more cost-effective amounts of raw materials. Fifth, Li & Fung was entrepreneurial, allowing and giving senior managers the freedom to run the work as they see fit. Li & Fung had 90 teams worldwide. This decentralized structure "allowed for adaptability and rapid reaction to seasonal fashion." Sixth, Li & Fung had a corporate culture that not only allowed but encouraged diversity, or in Victor's words "keep the culture so that it remains humble, agile, and responsive all the time and keep the people externally focused." Seventh, as an international company that operated for more than 100 years, Li & Fung enjoyed an outstanding reputation. Companies that desire to grow should adopt well studied strategies, and Li & Fung is not an exception. It adopted a combination of organic growth, expansion through acquisition and extension of its supply chain to new markets via the Internet. The organic growth strategy includes "receiving more orders from existing clients, and [securing] new mandates from strategic clients." To achieve this strategy Li & Fung extended and diversified its network around the world and established new offices in countries as diverse as Bangladesh and Manchester, England. In 1996, Li & Fung adopted a "three-year...
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