Case – Li & Fung (A): Internet Issues

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Case Li Fung (A) Internet Issues

• Li (?) Profit
• Fung (?) Abundance

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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

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Map of China
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Shanghai A Snap Shot
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Case background (Part 2)

• Cast of characters and their roles
• William and Victor Fung
• Corporate Culture
• Soft vs. Hard Goods

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Holistic Supply Chain Management
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The IT architecture of an e-business
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Problem Statement (Case Questions)

• How do the critical success factors for Li and
  Funds 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)

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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?

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Alternative Solutions (Part 1)

• Tripartite Growth Strategy
• Compare and contrast organic growth, acquisition
  and e-commerce (EC).
• Single versus combination?

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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?

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Alternative Solutions (Part 3)

• E-Commerce Model
• B2B? Benefits to SME?
• Chanel conflict?
• Offense versus Defense?

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Criteria to Evaluate Alternatives

• Analyzing Frameworks
• Porters Five Forces Model. EC on Five Forces?
• How to apply the model in this case?
• Pros and cons of each sourcing approach
• E-commerce Models
• Brick-and-mortar
• Click-and-mortar
• Pure EC

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Recommendations and Plan for Actions
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Conclusion

• Lessons Learned (e-commerce as a competitive
  strategy, sourcing strategy, business model)
• Case Update

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Porters five forces Model
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Outsourcing
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E-commerce Models
Adopted from E-commerce Operations Management
by Schniederjans and Cao (2002)
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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?

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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

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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.