Lifeng

1. Key questions A. Rising cost of labor and raw materials One of the Li & Fung’s strategies is low cost sourcing. However, the cost of raw materials as well as labor has increased significantly in China. In this situation, manufacturing enterprises have been left with no other option, but to pass on price rise to customers. It is in dilemma about the price rise, it had really become a foregone conclusion. Retailers are not sure what can be passed on to consumers and what can’t be. Managing Director of Li & Fung Group William Fung said that increased competition in China's labor sector had led to wage increases by about 20 percent in 2011. Due to rising labor cost, China is on the verge of losing the edge in the world economy. So, China’s rising labor costs has prompted Li & Fung to shift its production of clothing and other labor-intensive goods to countries such as Bangladesh, Vietnam and Indonesia where cheap labor is available. B. Developing countries cannot use the lifung.com business strategy. Rising cost of labor and raw materials and increasing the purchasing power of developing countries cause that Li & Fung needs to consider other developing countries for their business. To deal with these problems, they have to expand their business area. However, the developing countries may not be able to follow the lifung.com business strategy because of the condition of the internet environment. Although the internet environment is getting improving, there are still some countries have not developed yet. The strategies which are related to online can be the one of the factors that Li & Fung succeed. Yet, they have to find other solutions and make new strategies for off-line to control all of companies located in developing countries which provide poor condition of the internet.

2. Suggestions/Strategies for the future. (How to overcome the problems) C. Changing the strategy from a “low cost” strategy to a