Li and Fung Case March 5 09
Transcript of Li and Fung Case March 5 09
Case – Li & Fung (A): Internet Issues
Li ( 利 ): ProfitFung ( 丰 ): Abundance
Case background (Part 1)
Time Line 1906 – founded by Mr. Li and Mr. Fung as an
export trading company 1920s & 1930s – expanded to warehousing and
handicrafts manufacturing 1945 – Li sold his shares to Fung Family 1973 – listed on HKSE 1988 – privatized, streamlined and incorporated
in Bermuda 1995 – acquiring Inchcape Buying Group 2000 – 2 billion dollar global trading company
Map of China
Shanghai – A Snap Shot
Case background (Part 2)
Cast of characters and their roles William and Victor Fung
Corporate Culture Soft vs. Hard Goods
Holistic Supply Chain Management
The IT architecture of an e-business
Problem Statement (Case Questions) How do the critical success factors for Li
and Fund’s traditional supply chain business compare with those for e-commerce supply chain? As its e-business evolved, what were the critical challenges? (Growth Strategy)
“Bubble In” or “Bubble Out”? (Sourcing Strategy)
What is the viable e-commerce model for new business venture at Li and Fund? (Business Model)
Analysis of Problem
Traditional versus Electronic Business Characteristics? Disruptive technology? Selling/Marketing? Operations? Corporate Culture How are long-term employees likely to
respond? Implications for the Fund Brothers? Separate versus integrate?
Alternative Solutions (Part 1)
Tripartite Growth Strategy Compare and contrast organic growth,
acquisition and e-commerce (EC). Single versus combination?
Alternative Solutions (Part 2)
“Bubble In” versus “Bubble Out” What did they choose? Why? Will you make the same sourcing decision?
Why? Why not? Bubble In, Bubble Out, or Mixed-Bubble? Why they decided to choose Castling?
Alternative Solutions (Part 3)
E-Commerce Model B2B? Benefits to SME? Chanel conflict? Offense versus Defense?
Criteria to Evaluate Alternatives Analyzing Frameworks
Porter’s Five Forces Model. EC on Five Forces?
How to apply the model in this case? Pros and cons of each sourcing appro
ach E-commerce Models
Brick-and-mortar Click-and-mortar Pure EC
Recommendations and Plan for Actions
Conclusion
Lessons Learned (e-commerce as a competitive strategy, sourcing strategy, business model)
Case Update
Porter’s five forces Model
26
Outsourcing
E-commerce Models*
To
From
Customer
Business
Government
Customer Customer-to-Customer (C2C)
Customer-to- Business (C2B)
Customer-to-Government (C2G)
Business Business-to-Customer (B2C)
Business-to-Business (B2B)
Business-to-Government (B2G)
Government Government-to-Customer (G2C)
Government-to-Business (G2B)
Government-to-Government (G2G)
*Adopted from “E-commerce Operations Management” by Schniederjans and Cao (2002)
Case Update
Feb. 14, 2001: Test phase – StudioDirect targeted only the SMEs in the United States and focused mainly on “green-grass” products – golf apparel and accessories – distributed through golf clubs and sporting goods stores. Initially offline Online transactions
Early Nov. 2001: over 200 users had registered and more than 100 ordered regularly online. Breakeven – 600 SMEs Sales for the first half of 2001 – $5 million Estimated first year loss – $10 million
Reasoning of Loss: Slow Adoption rather than a flawed concept
Interim Remedies – Merging two existing offices in San Fransico and New York
Going Forward – What options for StudioDirect management?
Li & Fung Links
Li & Fung Limited homepage Homepage of Li & Fung Distribution
(Management) Limited Homepage of LF Venture Capital, the
venture capital arm of Li & Fung Limited
Annual reports of Li & Fung
Disruptive Technology Disruptive technologies - technologies that improve a product or service in ways that the market does not expect and they are particularly threatening to the leaders of an existing market, because they are competition coming from an unexpected direction.