Li Fung
Li & Fung (A): Internet Issues
What has been the historic strength and strategy of Li and Fung?
100 years of history
Publicly traded family company
Both William & Victor educated at HBS
Victor earned Ph.D. & taught there for 4 years
1972 Returned to Hong Kong to modernize company management
Hong Kong Based
Trading Company – by 2000
69% sales USA
27% sales Europe
Major retailers (the Limited, Gymboree, American Eagle, etc)
Global sourcing network
Holistic Supply Chain Management
48 offices in 32 countries
Value-added services through entire supply chain – borderless-manufacturing –next slide
Outsource manufacturing which requires less capital
Entrepreneurial structure – teams of product specialists in 90 separate, individual companies
Meritocracy – compensation performance based
What capabilities of Li and Fung does Studio-Direct.com leverage?
IT in 2000
10 secure customer Extranet sites (launched 1997)
Customized to needs of key customers
Online product development, order tracking
Customers could change order as it progressed
60 IT staff in Hong Kong– development outsourced
Outsourced Intranet/Extranet
Preferred narrow/deep connections to customers
But saw how internet could transform industry studiodirect.com (gone by 2007)
80 staff Based in San Francisco
Target:
Retailers under $100 M (20,000)
Wholesalers under $50 M (2,800)
What are the risks of this strategy?
Costs to develop project could exceed budget – Hong Kong too far from California
Danger of feature creep in specifications which may raise development costs
Backlash from import agents who could slash their fees enough to make project unprofitable.
Risks during diffusion of technology to new firms that could make rollout more costly.
Could try pilot project first
Could damage Li & Fung’s reputation because they cannot provide all the goods to this set of customers
Existing customers may resent addition of smaller competitors who will benefit from
What has been the historic strength and strategy of Li and Fung?
100 years of history
Publicly traded family company
Both William & Victor educated at HBS
Victor earned Ph.D. & taught there for 4 years
1972 Returned to Hong Kong to modernize company management
Hong Kong Based
Trading Company – by 2000
69% sales USA
27% sales Europe
Major retailers (the Limited, Gymboree, American Eagle, etc)
Global sourcing network
Holistic Supply Chain Management
48 offices in 32 countries
Value-added services through entire supply chain – borderless-manufacturing –next slide
Outsource manufacturing which requires less capital
Entrepreneurial structure – teams of product specialists in 90 separate, individual companies
Meritocracy – compensation performance based
What capabilities of Li and Fung does Studio-Direct.com leverage?
IT in 2000
10 secure customer Extranet sites (launched 1997)
Customized to needs of key customers
Online product development, order tracking
Customers could change order as it progressed
60 IT staff in Hong Kong– development outsourced
Outsourced Intranet/Extranet
Preferred narrow/deep connections to customers
But saw how internet could transform industry studiodirect.com (gone by 2007)
80 staff Based in San Francisco
Target:
Retailers under $100 M (20,000)
Wholesalers under $50 M (2,800)
What are the risks of this strategy?
Costs to develop project could exceed budget – Hong Kong too far from California
Danger of feature creep in specifications which may raise development costs
Backlash from import agents who could slash their fees enough to make project unprofitable.
Risks during diffusion of technology to new firms that could make rollout more costly.
Could try pilot project first
Could damage Li & Fung’s reputation because they cannot provide all the goods to this set of customers
Existing customers may resent addition of smaller competitors who will benefit from