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Case Was Released in 2007 and Story Start from 2006 Backward.

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Case was released in 2007 and story start from 2006 backward.

“The company has changed dramatically in terms of scale but our fundamental philosophy really has not changed. Our three-year planning process is second nature to all Li & Fung companies. The ideas and culture that were developed over a decade ago have if anything been totally reinforced with experience. We have not found it necessary to radically change anything, but rather we are applying our philosophy with more sophistication and more depth. We are great believers in the drumbeat theory of management. This doesnt mean that we dont react to crisisbut we follow a steady course.”

 Victor Fung, Chairman, Li & Fung Group

“Drumbeat Theroy” is theory of keep on repeat doing something contantly for one certain period. In Li&Fung case, author opinion imply that management keep growing company from generation to generation and transfer to be business culture which inherit from father to sons. From centennial of Li&Fung history. Founder generation already pave walking path for business and second genaration to continue sourcing business in many regions of China.

The case start with financial result on mid 2006, the company revenue will reach 10 billion in 2007. Fundamental strategies and three years planning play big part on the result of past decade. Li&Fung group start to be global sourcing business of sourcing, retail and distribution.

There are 2 primary plans to help propel Li&Fung growth.

  1. Committed to its philosophy of not owning any piece of supply chain. The company focus on optimizing the pricing structure of each segment of the global supply chain. squeezing more efficiency from supply chain in between factory and consumer from cost saving including logistics, shipping and customs.
  2. Continued acquisition of competitors as growth strategies. Since 1999, Li&Fung had made 22 acquistions. Swire Pacific Ltd.-Swire & Maclaine and Cambery-together with the acquistion of Colbe Group Holdings are sample.

(Note: the key of success is planning and keep doing constantly like drumbeat theory.)

(Challenge : to maintain growth, market fluctuation, new acquistition especially onshore market strategy in USA.)

Company history

1906, Li&Fung was found in Guangzhou, China by grandfather of William and Victor. Fung Pak-Liu with partner Li To-ming. Start to trade porcelain and silk then expand to bamboo, rattan ware, jade, ivory, handicrafts and fireworks. Firework is still existing as special part of company history.

1937, Li&Fung was established in Hong Kong formally. Business stop during world war II and start again in 1943, Fung Hon-Chu take over the business and still remain the name because of good meaning (Profit and Abundance)

1949, Hong Kong economy is rising accoring to refugees from mainland China, Li&Fung expand goods of export range to toys, electronics and plastic flower and become Hong Kong largest exporters.

Expand beyond Hongkong.

Third generation and grandsons of founder, Victor and William were study Havard Business School in USA. They are observe chance in sourcing industry and decide to change the way to conduct the company business.

April 1973, they brought the company to public and listed in Hongkong Stock Exchange and face hardtime for submitting subscription.

1979, China was started to opening up and Li&Fung took this advantage to establish network by investing in sourcing and supply for relocated factory in southern China and other part of Asia and become regional

1985, Li&Fung expand business to retail market. Circle K convenience store and toy shop Toys “R” Us established for retail group.

1989, Victor and William brought out company to private and separate company to two core areas, export trading and retail

1992, Export trading was relisted to HKSE again but retail still keep as private.

Mergers and acquisition spur growth.

Li&Fung merge with Dodwell to expan power of sourcing network into European, Mediterranean, Asia and Caribbean after company had made successed acquistition with Swire subsididary company make Li&Fung have established stronger network.

Li&Fung take over Colby Group Holding Limited and 2002 Janco Overseas Limite. Next target is Indian subcontinent. Northern America and Europe is target market.

1999, Li&Fung diversify to distribution market. (It seem like business model was changed.)

2004, Li&Fung distribution was reorganized to form the Integrated Distribution Service (IDS) and listed in HKSE

(Note: Li&Fung start from core business type as souring for industrial product and expand area of geological network then take advantage from strong network to explore further to new sourcing market.)

The Export-Trading Business

Traditional Supply Chain Services

The ultimate middleman: Li&Fung increase customer in the same geological network by supply through sourcing network. Increase goods type to supply. Company supply to over 10,000 customers in both hard and soft goods. 8,000-10,000 supplier with sourcing network of over 70 offices in over 40 countries. Trading business was divided into seven operating groups focus in U.S. onshore business. Soft-goods are garment and apparel. Hard-goods are fashion and accessorries, toys, travel goods, gift items, fireworks, stationary, furniture, shoes. Soft-goods has large scale of product. Li&Fung give 3 teams to operate in Soft-goods category. One team focus on superstore retailer. Another team focus on specialty store that have specific range of merchandise and the last team focus on brand.

(Note: Dedicate to every market and segment then go deeper into each groups.)

Business strategy-disciplined entrepreneurship

Li&Fung was divided into 170 entrepreneurial profit centers that maintained customer centric focus. To reinforce this customer culture. Three years business planning is Li&Fung culture for creation of discipline entrepreneurships, create process that make manager accountable for their goal If goals were unmet, the process provided the mean to measure and analyzed why they failed. Three year business planning also use for test and evaluate business theory for maintain or start all over again when three years dued.

We understand about business downturn and manager can do poorly for a few years. Value of loyalty is concerned so, poor result manager will be moved around when working result is too serious and repeated.

(Note: Li&Fung expand survices area, and go deeper to service on hand area by increasing goods range also divide organization to support growth of each kind of product. Trial and error to explore then maintain the good plan and people.)

Transforming the customer experience

Provide good services to customer by giving flexibility on customizing and modify goods before start next process start production. That’s mean Li&Fung can keep store fresh and retailer need to squeez manufactoring process. Li&Fung also expertise in collecting up-to-date information on how best manufacture a product for a customer.

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