LI & FUNG: GROWTH FOR A SUPPLY CHAIN SPECIALIST

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1 CASE SYNOPSIS

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This case highlights the journey of Hong Kong-based trading company Li & Fung Group which was a trading company renowned for skillful management of its supply chain. With the global economic downturn in 2009 following the collapse of the American housing and credit markets, and with the fashion industry expected to be severely affected, how could Li & Fung continue to grow its business and achieve the target of doubling its turnover to US$20 billion for the period 2008-2010?

2 CASE BACKGROUN

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BRIEF CASE BACKGROUND Hong Kong-based Li & Fung Group was a trading company

renowned for skillful management of its supply chain with 80 offices in 40 different countries.

The bulk of its business came from the trading of soft goods, which comprised garments and apparel, with the remainder consisting of hard goods such as furniture, fireworks and promotional items. Its major market was the US, followed by Europe, which contributed about one-quarter of its turnover.

1906: Establishment

1937:moved headquarters to Hong Kong

1949:Transformed to garment trading

3 KEY ISSUE

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IN THE ENVIRONMENT UNCERTAINITY DUE TO GLOBAL ECONOMIC DOWNTURN OF 2008 HOW COULD LI & FUNG CONTINUE TO GROW ITS BUSINESS & ACHIEVE ITS TARGET OF DOUBLING TURNOVER TO US$20 BILLION FOR PERIOD 2008-2009?

4 INFERENCES

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52002 2003 2004 2005 2006 2007 2008

0

50000000

100000000

150000000

200000000

250000000

300000000

350000000

400000000

450000000

PROFITS(US$)

SITUATION ANALYSIS (EXHIBIT 1)

The EPS has declined from US$ 4400 in 2002 to US $ 8900 in 2008

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SALES

69%

31%

Sales

Soft goods

Hard goods , health and cosmetic products

65%

26%

9%

Sales

US Europe Others

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VALUE ADDED ACTIVITIES IN SUPPLY CHAINSupport

Trends Information

Design

Sourcing material from extensive network

Coordination of sourcing activities

Material Outsourc

ing

Quality control

Prototype testing

Manufacturing

Consolidation of goods

Custom clearence

Shipping

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CRITICAL SUCCESS FACTORS Extensive network of

suppliers- buying office in about 40 countries, with most no. of offices in European &Mediterranean countries

Acquisition strategy & Venture Capital to expand the market

Customer centric organizational Structure – ensured no bureaucracy

Diversified Products & Services-Hard goods, soft goods , health and cosmetics products, Sourcing

Onshore Business-Services such as design, product development quality control and distribution.

5 suggestions

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1.More Stress on Europe markets2.Use of US$ 100 million for acquisition

to be utilized to expand in Asian countries which were less affected by 2008 down turn.

3.Sticking to diversification into health and cosmetics.

4.Leveraging its supplier relationship into performing sound trade overseas.

5.Avoid cases like KB toys

THANK YOU!Anjali Mehta Traya Roy

Chowdhury