Li & Fung: Internet Issues
Written Case #1
Li & Fung: Internet Issues
Li & Fung is a Hong-Kong based import-export trading company that provides value-added services across the entire supply chain in a borderless manufacturing environment. The growth strategies for the company are a combination of an organic model, acquisitions, and use of E-Commerce technologies to extend the supply chain to new markets. Li & Fung hopes to offer its supply chain services to the small and medium-sized enterprise (SME) market by developing an Internet portal. In the prevailing business environment, it has not been cost effective to trade with SMEs since orders were small and below the factory minimums for production. Through a proposed Internet portal, Li & Fung hopes to aggregate orders across multiple SMEs to capture the necessary economies of scale. The company is ready to beta-test the portal, but is now worried whether the SMEs will adopt the new model, and whether this new Internet portal would weaken the existing trader-based organizations that serve the large corporate customers.
1. Li & Fung (A): Internet Issues (pp. 1 - 20)
1.1 Li & Fung Company Background (pp. 3 - 5)
Founded in 1906.
$2 billion dollar company (At the time of the case), listed under HKG on the Hong Kong Stock Exchange.
Comprised of a global network of partners and clients.
69% of total sales from the U.S.
Products include a mix of hard goods (quality controlled products such as toys and sporting goods) and soft goods (clothing and apparel).
Profit margin for soft goods was between 6% - 8%.
Profit margin for hard goods was between 10% - 30%.
1.1.1 Holistic Supply Chain Management (SCM) (pp. 5 - 6)
Li & Fung is an SCM chain in itself, producing finished products from raw materials.
Provides a number of value-added services within its global supply chain.
Value-added services include:
Reduced turnaround time.
Reduced matching and credit risks.
Greater quality assurance.
Lower cost and more
Li & Fung: Internet Issues
Li & Fung is a Hong-Kong based import-export trading company that provides value-added services across the entire supply chain in a borderless manufacturing environment. The growth strategies for the company are a combination of an organic model, acquisitions, and use of E-Commerce technologies to extend the supply chain to new markets. Li & Fung hopes to offer its supply chain services to the small and medium-sized enterprise (SME) market by developing an Internet portal. In the prevailing business environment, it has not been cost effective to trade with SMEs since orders were small and below the factory minimums for production. Through a proposed Internet portal, Li & Fung hopes to aggregate orders across multiple SMEs to capture the necessary economies of scale. The company is ready to beta-test the portal, but is now worried whether the SMEs will adopt the new model, and whether this new Internet portal would weaken the existing trader-based organizations that serve the large corporate customers.
1. Li & Fung (A): Internet Issues (pp. 1 - 20)
1.1 Li & Fung Company Background (pp. 3 - 5)
Founded in 1906.
$2 billion dollar company (At the time of the case), listed under HKG on the Hong Kong Stock Exchange.
Comprised of a global network of partners and clients.
69% of total sales from the U.S.
Products include a mix of hard goods (quality controlled products such as toys and sporting goods) and soft goods (clothing and apparel).
Profit margin for soft goods was between 6% - 8%.
Profit margin for hard goods was between 10% - 30%.
1.1.1 Holistic Supply Chain Management (SCM) (pp. 5 - 6)
Li & Fung is an SCM chain in itself, producing finished products from raw materials.
Provides a number of value-added services within its global supply chain.
Value-added services include:
Reduced turnaround time.
Reduced matching and credit risks.
Greater quality assurance.
Lower cost and more