Swot Analysis of Li & Fung Ltd

Topics: Supply and demand, International trade, Good Pages: 9 (2642 words) Published: November 22, 2012
Part I. Backgrounds Study:
Headquartered in Hong Kong, Li & Fung Limited’s extensive global sourcing network covers more than 80 offices in more than 40 economies around the world. The global trading company supplies high-volume, time-sensitive consumer goods. Particularly, garments make up a large part of its business which also covers the sourcing of hard goods such as fashion accessories, furnishings, gifts, handicrafts, home products, promotional merchandise, toys, sporting goods and travel goods.

Li & Fung plays the role as a supply chain manager across many producers and countries, covering over 80 offices and over 13,000 employees in more than 40 economies across North America, Europe and Asia. They provide product design and development, raw material and factory sourcing, production planning and management, quality assurance and export documentation to shipping consolidation.

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective.

Part II. SWOT Analysis
Strengths of Li & Fung Limited
Strength is defined as the “characteristics of the business or team that give it an advantage over others in the industry”. The following part will analyze Li & Fung Ltd’s strengths in seven aspects, which are: flexible adjustments in supply, minimization of production cost, expertise in cost control, diversification of risk, complete chain of service, advanced information system and management, and low information cost.

1. Flexible adjustments in supplies
Li & Fung Limited (“Li & Fung” in the following) itself does not involve any production activity, all the goods they provided to the customers are not produced by them. Instead, they have growing network of nearly 11,000 international suppliers in more 26 cities and countries around the world, such as United Kingdom, United State, Russia and Mainland China (see Figure 1). Therefore, it allows Li & Fung Limited to adjust its supplies to meet the frequent changes in world’s demand.

Figure 1: Global distribution of Li & Fung suppliers

2. Minimization of production cost
Li & Fung Limited keeps on finding the production firms that offers the lowest cost. As one product has many components, the company tries to purchase them from different suppliers. With the help of its global distribution of local suppliers, the purchase team of Li & Fung can compare the prices of each required components, and find out the lowest purchase price. It allows the company to minimize the cost (see Figure 2). Figure 2: Global purchase cost control of Li & Fung / components’ supply

Even in the same region, which is more economically convenient for transporting. Li & Fung also tries to control the purchase cost according to the development among near suppliers. Take the example of mainland China, rising raw material and labor costs in China due to inflation and the need for a fairer distribution of income, respectively, have inevitably impacted the overall cost of production. The Group had anticipated that the southern and central, coastal manufacturing areas of China would become more expensive, so it began shifting some of its business to other country, such as India.

3. Expertise in cost control
Li & Fung Limited has also set up many offices in over 40 countries, in each office, there are a professional team of experts which are well-comprehended the information of the local production factories. It enables them to search for the high-quality, cost-effective sourcing markets. Moreover, once they find the new supplier, the managing team will take time to understand the firm’s operation well and check the product quality carefully. Since they have knowledge of the operation of similar or...
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