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Li & Fung 2006
Li & Fung 2006
Value Equation
V-P
Profits
P-C
Maximize profits
Changes that they made to deal with the sweeping changes in their client industries
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Expanded its range of product (1937) Offices beyond Hong Kong ( 1979) Family owned business to professionaly managed company Mergers and acquisitions 3- Yr. business planning
( eg cyclical fashion industry)
Experience and expertise-dedicated team, just in Time Coordination, timely information (to keep stores fresh) Including IT ( Customer Centric) Moving up in the value chain Eating into soft $ 3 Onshore US supply chain strategy
Business Model
Geographic Markets
Europe was Fragmented and less homogenous than US. European Retailers were not used to sophistication. Retailers had own offices, difficult to garner business. Multiple agents and supply chains, business was smaller Buyers opted to diversify so they had more no of vendors.
Product/Services
Longer lead time & more labor intensive Hard goods Customer price less in comparison to soft goods. Garmented industry crowded and less opportunity for growth, whereas it is possible in hard goods.
Value Proposition
Key Parameters for tapping Potential Value
Reduced Markdown Quality Lead time Optimum Pricing
Product Portfolio
Li & Fung Trading Operating Groups S.No. 1 2 3 4 5 Operating Group Soft goods / Apparel Soft goods / Apparel Soft goods / Apparel Soft goods / Apparel Hard goods Including but not limited to: Automobile accessories Bedding goods Fashion accessories Fireworks Footwear Furnishings Gifts Handicrafts Home Products Kitchenwear Promotion Merchandise Toys Stationery / Paper crafts Sporting Goods Travel Goods U.S. Onshore Strategy Region United States + Non-Europe United States + Non-Europe United States + Non-Europe Europe All Regions Scope/Channel Brands Specialty Stores Big Box Stores All Retaliers Brand/Specialty Stores Big Box Stores
U.S
All Retaliers
Product Focus
Issues
Global Saturation of demand for Soft Goods
Focus
Hard goods need to be diffused primarily Target Large Hard Goods Companies also
Eg: Nike, Tommy Hilfiger etc..
Geographic Resolution
Issues
European market is highly fragmented Outsourcing is not preferred in European markets
Resolution
Focus on Global Players majorly dealing with markets like India, China and the like. Location advantage also inherent in above places
Recommendations
Go for forward and backward integration. Capture markets in growing economies. From consumers to industrial products also. Start an onshore in Europe taking the learning from the US market.
Comparison
Financials
50 40
Percentage
30
20
10
0 1993 1994 1995 1996 1997 1998 1999 Year 2000 2001 2002 2003 2004 2005
1993 3.64
Thank You!