Li Fung Case Analysis

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Introduction

Li and Fung, a Chinese company founded in 1906 has been experiencing high growth rates due to a series of acquisitions and the offer of a wide range of services in the whole elements of the supply chain (from raw material till finished goods). Recently the question its managers have to deal is how to face the challenges posed by the internet, more specifically, its lifung.com (after was renamed studiodirect.com) internet site. This company was an extension of its brick and mortar operations allowing the company to enter the SME (Small and Medium Enterprises) market.

What capabilities of Li and Fung does StudioDirect.com leverage?

Because, in the end, the company keeps its traditional mentality by just adding a new mean of making business, studiodirect.com can take advantage of the Li & Fung traditional business and become a success. Several factors would contribute to this:

• Li and Fung Brand name – Li and Fung reputation is widely know and to demystify any possible fears of using the internet from potential customers it is extremely important that they rely on a well know player in the industry with an history of success.

• Share Li & Fung corporate Values – Although lifung.com is a new company it belongs to the Li & Fung group and therefore shares its culture. Company's historic values are, for example, pragmatism aligned with innovation. Moreover the company encourages diversity and communication among the group divisions. Also, a spirit of autonomy and entrepreneurship is part of the decentralized corporate company's structure. Finally meritocracy is shown through a performance-based promotion and compensation system. This set of values if, correctly apprehended by the new venture, would serve as a strong...

... middle of paper ...

...ive price putting the company's internet strategy in risk.

• Demand uncertainty might raise volume inefficiencies – The Company's objective is to create a B2B portal that integrates several customers' orders. Two problems can occur if demand forecasting for this segment is not accurately estimated. In the case demand turns to be too high the company can have problems in the short run to satisfy its customer's on a timely basis which would increase the products lead time and generate higher inventory levels. This happens if customers respond to this uncertainty ordering more units in higher time intervals causing high inventory costs and leading to customer dissatisfaction. On the other hand, if demand is too low the company is not able to generate enough economies of scale in its factories (or in theirs outsourced suppliers) in order to generate a profitable segment.

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