Case Analysis Li Fung
Case Analysis Li Fung
University of the Philippines VisayasCollege of Management[pic 2]Li & Fung: Global Value Chain Configurator(A Case Study)In Partial Fulfillment of the Requirements in Mgt. 190: Strategic ManagementSubmitted to:Prof. Evelyn BellezaSubmitted by:Lovely De la TorreSTATEMENT OF THE PROBLEMHow could Li & Fung increase sales thereby increasing the annual growth rate of its revenues?POINT OF VIEWThe case study is done through the point of view of Victor Fung, the Group Non-Executive Chairman and William Fung, the Group Managing Director of Li & Fung. TIME PERIOD        2005OBJECTIVESTo speed up revenues and net profit growthTo expand market and geographic reachTo reduce over dependence on US market and open up revenue opportunitiesTo maintain its position as a premier global trading companyAREAS OF CONSIDERATIONBackground (History)Li & Fung was founded in 1906 by Fung Pak-Liu and Li To-ming making it the oldest trading company in Hong Kong. They began exporting porcelain and silk and later added up bamboo, jade, ivory, rattan, ware, fireworks, and handicrafts. In 1990s, language barrier between Chinese and U.S. buyers led them to be the top trading company as mediators are essential.However, they ceased trading for some years due to the disruption of World War II during the early 1940s. Pak-Liu’s son Fung Hon-chu restarted trading operations in 1949 which had come under British control. Trading business was at its peak during the mid 1900s transforming China into a manufacturing economy. Li & Fung began exporting garments, electronics, plastic flowers and toys and was soon Hong Kong’s biggest exporter.In early 1970s, trading business began to struggle because of stiff competition from other manufacturing economies in Asia. Trading margin went down by 3%. Hon-chu called his sons William and Victor who are both from Harvard. They modernized and rebuilt Li & Fung into a well-structured organization. With the opening up of Chinese economy in 1979 brought about the relocation of manufacturing factories from Hong Kong to Southern China, and the industrialization of underdeveloped Asian countries. The company then established a regional network of sourcing offices in Asian countries.
In 1989, trading margins decreased further, thus Li & Fung made the company private again and restructured into a diversified group with export trading and retail as its core businesses. It continued to expand its business and established sourcing offices across the world.By the 20th century, it was a premier global trading company with its revenues coming from North America, Europe, East Asia and the South Hemisphere. Export trading remained its major business but was also involved in retailing and distribution, venture capital, investment holding, and property investments.Li & Fung’s Major Subsidiaries and Associated CompaniesHeld DirectlyPlace of Incorporation and OperationIssued and Fully Paid Share CapitalPrincipal ActivitiesLi & Fung (B.V.I.)LimitedBritish Virgin IslandsUS$400,010Marketing services and investment holdingBasic & More fashion LimitedHong KongHK$1,000,000Export tradingBlack cat Fireworks LimitedEnglandGBP1,200,000WholesalingCumberley Enterprises LimitedHong KongHK$250,000Apparel exportingCivati LimitedHong KongUS$450,000Export tradingColby International LimitedHong KongHK$1,500,000Exporting of garments and sundry goodsColby Tekstil ve Dis Tiearet Limited SirketiTurkeyTL50,000,000,000Export tradingCS International LimitedHong KongHK$1,000,000Provision of export assistance serviceDodwell (Mauritius) LimitedHong KongHK$500,000Export tradingGolden Gate Fireworks Inc.U.S.A.US$600,000Commission agent and investment holdingGSCM (HK) LimitedHong KongHK$140,000Export tradingHillung Enterprises LimitedHong KongHK$300,000Export tradingInternational Sourcing Group, LLCU.S.AUS$300,000Trading of apparelJanco Overseas LimitedHong KongHK$760,000Buying agentKariya Industries LimitedHong KongHK$1,000,000Manufacturing and tradingLF Maclaine (Thailand) LimitedThailandBaht4,000,000Export tradingLi & Fung Agencia De Compras em Portugal, LimitadoPortugalPTE20,000,000Export tradingLi & Fung (Exports) LimitedHong KongHK$8,610,000Export tradingLi & Fung (Fashion Accessories) limitedHong KongHK$600,000Export tradingLi & Fung (India)IndiaRupees64,000,200Export tradingLi & Fung (Italia)ItalyLire90,000,000Export tradingLi & Fung (Korea) LimitedKoreaWon200,000,000Export tradingLi & Fung (Korea) LimitedMauritiusRupees1,250,000Export tradingLi & Fung Mumes sillik, Pazarlama LimitedTurkeyTL25,000,000,000Export tradingLi & Fung (Philippines) Inc.The PhilippinesPeso500,000Export tradingLi & Fung (Properties) LimitedHong KongHK$1,000,000Property investmentLi & Fung Taiwan Holdings LimitedTaiwanNT$287,996,000Investment holdingLi & Fung Taiwan Investments LimitedBritish Virgin IslandsUS$4,912,180Investment holdingLi & fug (Taiwan) LimitedTaiwanNT$63,000,000Export tradingLi & Fung (Thailand) LimitedThailandBaht6,000,000Export tradingLi & Fung (Trading) LimitedHong KongHK$10,000,200Export trading and investment holdingLi & Fung Trading (Shanghai) LimitedThe People’s Republic of ChinaRMB50,000,000Export tradingLi & Fung (Zhamiang) LimitedThe People’s Republic of ChinaUS$1,999,055PackagingLloyd Textile Trading LimitedHong KongHK$1,000,000Export tradingMaclaim LimitedHong KongHK$5,570,150Export tradingPerfect Trading Inc.EgyptLE2,480,000Export tradingShin Fung Fireworks Company LimitedHong KongHK$1,200,000Export tradingThe Millwork Trading Co., Ltd. U.S.A.US$1,331,000Distribution and wholesaling Toy Island Manufacturing Company LimitedHong KongHK$62,000,000Design and marketingVerity Enterprises LimitedHong KongHK$2,000,000Export tradingWS Trading LimitedHong KongHK$1,000,000Export trading