Case Li & Fung (A): Internet Issues

Li (): Profit Fung (): Abundance

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

Map of China

Shanghai A Snap Shot

Case background (Part 2)

Cast of characters and their roles

William and Victor Fung

Corporate Culture Soft vs. Hard Goods

Holistic Supply Chain Management

The IT architecture of an e-business

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)

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?

Alternative Solutions (Part 1)

Tripartite Growth Strategy

Compare and contrast organic growth, acquisition and ecommerce (EC). Single versus combination?

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?

Alternative Solutions (Part 3)

E-Commerce Model

B2B? Benefits to SME? Chanel conflict? Offense versus Defense?

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

Recommendations and Plan for Actions

Conclusion

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

Porters five forces Model

26

Outsourcing

E-commerce Models*
To Customer From Customer Customer-toCustomer (C2C) Customer-toBusiness (C2B) Customer-toGovernment (C2G) Business Government

Business

Business-toCustomer (B2C)

Business-toBusiness (B2B)

Business-toGovernment (B2G)

Government

Government-toCustomer (G2C)

Government-toBusiness (G2B)

Government-toGovernment (G2G)

*Adopted from E-commerce Operations Management by Schniederjans and Cao (2002)

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?

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

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.