Li & Fung Internet Issue

Li & Fung is a one of the most successful trading company in Hong Kong. It creates value to its clients by providing total supply chain solution services from raw materials to finished products. The organic growth and acquiring industry rivals strategy have contributed to Li & Fung’s success in the past. The disruptive e-Commerce phenomenon forces Li & Fung to review its business strategy. With the combination of the new e-Commerce challenge and its core historical strengths, Li & Fung saw the opportunities from small and medium-sized enterprise (SMEs). It had not been cost effective for Li & Fung to trade with SMEs since orders were small and often below factory minimums. By aggregating the smaller orders via a B2B portal, Li & Fung hopes to utilize the economies of scale, thus expands the market-base. However, it leaves Li & Fung to an ambiguous situation that the new e-Commerce model may defeat its existing business model which serve the large corporate customers and disintermediate its intermediate role in the industry. The comprehensive sourcing network, decades-old relationship with the manufacturing enterprise and the dynamic company structure are the strengths of Li & Fung. The ability of own financing, well-educated management team and “no-inventory” model allows Li & Fung reacts quickly to the external environment. The dominant buying power allows Li & Fung to have large bargain power against its segregated suppliers. The decentralized management model is backed up by its centralized IT, financial and administrative support. This structure allowed for adaptability and rapid reaction to the dynamic market. All core competences of Li & Fung differentiate itself from a typical internet portal company. The raise of e-Commerce forces Li & Fung responses to the trend and keeps its competitiveness. During the dot.com era, typical internet startups can finance shortly and acquires an existing trading firm and become Li & Fung’s competitor