Li & Fung 2006

What factors contributed to Li & Fung’s

success in the past?
• Intense planning & scrutiny of core sourcing business

Two Primary plans

Not owning any piece of the supply chain Acquisition of competitors

1. Cost Savings from the efficiencies 1. Broadened customer base
2. Sophisticated value-added services 2. Better management team
3. Enhanced product Offerings

4. Portfolio balance
 Value Equation

V-P

Profits P-C Maximize profits

C
Changes that they made to deal with the
sweeping changes in their client industries
1. Expanded its range of product (1937)
2. Offices beyond Hong Kong ( 1979)
3. Family owned business to professionaly managed company
4. Mergers and acquisitions
5. 3- Yr. business planning ( eg cyclical fashion industry)
6. Experience and expertise-dedicated team, just in Time
Coordination, timely information (to keep stores “fresh)
7. Including IT ( Customer Centric)
8. Moving up in the value chain
9. Eating into soft $ 3
10. 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.
Issues & Recommendations
• Major Issues

– Overreliance on US Market

– Diversified European Market

– Global Saturation of demand for soft goods

– Unbalanced Portfolio
Value Proposition
• Key Parameters for tapping Potential Value
– Reduced Markdown
– Quality
– Lead time
– Optimum Pricing

• Brand Management (Three Pronged Strategy for Value Addition)

• Propel Virtual JIT Coordination Concept

• Customer Centric Focus

– IT Advantage
– Customized Supply Chain Consulting
Product Portfolio
Li & Fung Trading Operating Groups

S.No. Operating Group Region Scope/Channel

1 Soft goods / Apparel United States + Non-Europe Brands
2 Soft goods / Apparel United States + Non-Europe Specialty Stores
3 Soft goods / Apparel United States + Non-Europe Big Box Stores
4 Soft goods / Apparel Europe All Retaliers
5 Hard goods All Regions Brand/Specialty Stores
Including but not limited to: Big Box Stores
Automobile accessories
Bedding goods
Fashion accessories
Fireworks
Footwear
Furnishings
Gifts
Handicrafts
Home Products
Kitchenwear
Promotion Merchandise
Toys
Stationery / Paper crafts
Sporting Goods
Travel Goods
7 U.S. Onshore Strategy 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
Profit/Sales
Growth in sales YOY

20

10

0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Profit %age 3.64 9.02 2.35 2.37 2.8 3.18 3.54 3.44 2.16 2.9 2.84 3.24 3.22

Growth in sales   13.8 50.45 35.78 6.64 7.24 13.86 53.35 31.80 13.17 14.34 10.65 17.9
Thank You!