'Swot Analysis of Li & Fung Ltd\r'

' slice I. Backgrounds Study: Headquartered in Hong Kong, Li & Fung extra’s extensive spherical sourcing entanglement covers more than 80 offices in more than 40 economies most the sphere. The globular craft bon ton supplies extravagantly-volume, m-sensitive consumer experts. start outicularly, garments make up a gigantic ingredient of its blood which also covers the sourcing of big(p) goods such as fashion accessories, furnishings, gifts, handicrafts, home products, promotional merchandise, toys, clean goods and travel goods.Li & Fung plays the map as a offer chain four-in-hand crossways numerous producers and countries, covering over 80 offices and over 13,000 hireees in more than 40 economies across North America, atomic number 63 and Asia. They provide product design and increment, tippy textile and f exerciseory sourcing, production planning and management, feel self-assertion and export documentation to shipping consolidation. work u p analysis is a strategic planning method utilise to tax the Strengths, Weaknesses, Opportunities, and Threats involved in a project in a business bet on. It involves specifying the objective of the business venture or project and identifying the internal and external factors that ar favorable and unfavorable to achieve that objective. Part II. SWOT Analysis Strengths of Li & Fung peculiar(a) Strength is delimitate as the â€Å"characteristics of the business or team that communicate it an prefer over other(a)s in the industry”.The chase part for complicate analyze Li & Fung Ltd’s strengths in s crimson aspects, which be: flexible posements in supply, minimization of production be, expertise in approach control, diversification of risk, complete chain of proceeds, advanced reading system and management, and low breeding follow. 1. Flexible adjustments in supplies Li & Fung Limited (â€Å"Li & Fung” in the following) itself does not involve either production activity, tout ensemble the goods they provided to the nodes ar not produced by them. Instead, they have growing network of early 11,000 external suppliers in more 26 cities and countries well-nigh the world, such as coupled Kingdom, United State, Russia and Mainland mainland chinaware (see fingerbreadth 1). Therefore, it allows Li & Fung Limited to adjust its supplies to meet the frequent changes in world’s invite. Figure 1: Global dispersion of Li & Fung suppliers 2. Minimization of production greet Li & Fung Limited keeps on finding the production firms that offers the last(a) cost. As champion product has m some(prenominal) components, the partnership tries to procure them from variant suppliers.With the help of its spherical distribution of local suppliers, the barter for team of Li & Fung tush displacevass the prices of each required components, and find out the lowest buy price. It allows th e company to minimize the cost (see Figure 2). Figure 2: Global purchase cost control of Li & Fung / components’ supply Even in the same region, which is more economicalally convenient for transporting. Li & Fung also tries to control the purchase cost consort to the development among near suppliers.Take the example of mainland china, rising sensible material and labor costs in chinaware due to inflation and the ingest for a fairer distribution of income, respectively, have inevitably impacted the overall cost of production. The Group had anticipated that the southern and central, coastal manufacturing areas of china would induce more expensive, so it began shifting some of its business to other country, such as India. 3. expertness in cost control Li & Fung Limited has also set up many offices in over 40 countries, in each office, in that respect are a professional team of experts which are well-comprehended the information of the local production f actories.It enables them to search for the high- fibre, efficient sourcing merchandises. more(prenominal)over, once they find the new supplier, the managing team will take time to understand the firm’s operation well and check the product step carefully. Since they have knowledge of the operation of similar or related suppliers, to authoritative degree, it prevents the possibility of having low quality products. 4. Diversification of risk There is a long-familiar saying that â€Å"do not put all your eggs into the same basket”.Li & Fung Limited has intermeshed in export art of many different kinds of both hardgoods and softgoods, such as fashion accessories, furnishings, gifts, handicrafts, toys, sporting goods and traveling goods (see Figure 3). If one of them run shorts unpopular, they give the sack substantially shift their focus on the other goods. Then, it does not regard the company’s win won’t be impacted by the mould in sales or consumer loyalty of one single goods. Figure 3: Diversity in Li & Fung’s multiple brands supply 5. drop off chain of run In the past, Li & Fung used to do simple searching of products.For example, a customer wants product X, and then their task is to find a factory that send packing do that. Now, Li & Fung spread out their business. It provides a complete and one-stop shopping service for customers, that sum from product design and development; through raw material and factory sourcing, production planning and management, quality assurance, and export documentation; to shipping. all(prenominal) the edge is urbane by them and it brings more revenue to them (see Figure 4 at the right). Figure 4 : Supply strand 6. Advanced information system and managementLi & Fung has established sophisticated & net income-based systems to link up all its business partners, including customers, producers, distributors, logistics service providers etc. The app lication of IT aims to provide more value-added services, bowdlerise lead-time, lower cost and upraise flexibility. 7. Low information cost From past to now, Li & Fung has still hide to grow because customers were much easier to identify than suppliers. Usually, Suppliers were large in amount, fragmented, slimer and located in emerging securities industrys. So, Li & Fung serve as a database of these suppliers, it could showtime the goods easier than customers.Li & Fung importantly lowers the information cost of the customers, that’s why the company still grows. Weaknesses of Li & Fung Limited Weakness is the â€Å"characteristics that shopping centre the firm at a disadvantage coition to others”. The following part will analyze Li & Fung Ltd’s weaknesses in four aspects, which are: No self-owned factory, No self-owned shipping port, everywhere dependence on US Market, Vast and perplex supplier network. 1. No self-owned factory Aforementioned, Li & Fung does not own any production firm. There is no doubt that it is good for the company to have a flexible supply of inventory.Nevertheless, the production cost will be passively controlled by other. If the whole price level of a region rise, it takes some times to search a new suppliers. 2. No self-owned shipping port Li & Fung does not own any shipping port. All the goods and materials are transported by other shipping agents. In contrast, one of their main competitors, Hutchison Whampoa, has their private port. It will be more flexible in the shipping inventory and more easy in cost control. 3. Over dependence on US Market accord to turnover report (see Figure 5), from 2006 to 2009, the turnover from regular army and Europe is over 90%.In Contrast, the proportion from China is even less than 1%. In new years, there are many financial problems in USA and Europe, a good example is the subprime mortgage crisis. If the economy of USA and Europe rec over easy, the demand for export service decline, it will ilkly affect the utility of the company. Figure 5 4. Vast and complicated supplier network Li and Fung has the network of almost 11,000 international suppliers in more 26 cities and countries around the world, they were large in amount, fragmented, smaller and located in emerging markets.To manage them, it is very time-consuming and costly. The parade takes many staffs as there is still a lot of valet factor in business relationship. It cannot yet be replaced by technology. It incurs high proletariat cost. Opportunity of Li & Fung Limited Opportunity marrow the â€Å"external chances to make bulkyer sales or profits in the environment”. 1. China market Nowadays, every companies glare at China analogous a tiger eyeing its prey. China, As the world’s second biggest economy and one of the highest potential of wind country in future, it is profitable to set up its own brands and reputation in China. In rule to get more market share, previously, Li & Fung will become a sourcing agent for Li Ning Co. brands in local and foreign markets. They will responsible for sourcing for a icon of products including running, basketball and lifestyle lines. 2. Improvement in IT & Internet Technology is improving at the tremendous accelerate by leaps and bounds. The advanced tele-communication and internet certainly enhance Internal & External Communication. It can consolidate the global network with the â€Å"infinite” suppliers. Also, more works can be progressed by the computer instead of people. It can reduce the labour cost at the same time. . Lower cost in the developing countries The hold on emergence of the developing countries enable Li & Fung to source the new market which offer the lower purchase cost. On the other hand, in these developing countries, wish well India, usually provide a pool of affordable labour. It lowers the labour cost too. Threats of Li & Fung Limited In SWOT model, nemesis refers to the â€Å"external elements in the environment that could cause trouble for the business”. Under the accentuate of post financial crisis time, I consider certain exist trends or argumentation whitethorn potentially threaten Li & Fung Ltd’s future development in the global market. . Rise of trade protectionism around the world In juvenile years, there is a rising trend of trade protectionism, especially in western countries. Increasing amount of tariffs or quotas on the importation of foreign goods and services have been installed by many countries or economic bodies in order to protect domestic interest and local enterprises. The actions of lay sizable tariffs on other countrys major part or even entire line of exports would be regarded as â€Å"highly unusual” at the time before global financial crisis in 2008. However, it is kind of common today.That’s why some even argue and doubt t heir legality under international trade law. These actions will certainly threaten Li & Fung’s global supply duty business, which need to buy and sell goods from one part of the world to another. On the one hand, the extra effort on exploiting newly added legal or regulational psychometric test and approval might slow down the trading and transporting speed; on the other hand, the business cost is likely to increase because more and more tender forces or resources are required to handle problems when trading goods globally. 2. Disputation of currency exchange ratesMoreover, the hot disputation on currency exchange rate can be regarded as another potential threat to Li & Fung’s global trading business. In order to recover fast from the weak and wear down economic status, the US government carried out a quantitative easing approach to maintain its trading competitiveness around the world. In the early November 2010, federal official Reserve Board has just announced QE2. More cheap money for investors to play with suggests a moreover cheapening of the currency of US dollar and high addition prices in other regions, typically those developing countries.Increasing asset prices could be a headache to Li & Fung, since its profit is quite sensitive to the goods purchase costs. Today, the prices of raw materials, make goods and labor forces are no longer that importantly cheap in developing countries or regions like mainland China, India or Latin America, especially in garments industry. Hence, the ups-and-downs of global currency exchange rates may worsen the situation and become another risk to the global expending strategy Li & Fung. 3.Former entered competitors Comparatively speaking, Li & Fung is not the earliest bird who stepped in China market, though it recently emphasizes its strategic turn from US & Europe market to mainland China. Thus in the market of mainland China, Li & Fung Ltd has to face some s trong competitors in the future years, such as Hutchison Whampoa Limited, another abundant international corporation originates from Hong Kong and led by Li Ka-Shing and his business group. Part III. Competitive advantages of Li & Fung LimitedCompetitive advantage is defined as the distinctive edge comes from the geological formation’s core competencies because the organization does something the others cannot do or does it demote than others. In the following, I have considered iii points that give Li & Fung to have Competitive advantages. 1. Li & Fung’s customized service One of the Li & Fung seven principles is customer-centric and respond accordingly to the market demand. Li & Fung will first know the customer’s inescapably comprehensively. Then, the product will be designed and developed. The process will go on until the shipment is completed.It gives the high degree of freedom to customers, as all the process are actually con trolled by them. If they have any problem or opinion, they are free to adjust. Also, the staffs in Li & Fung are well-trained as they know that human capital is the key factor to the growth and gainfulness of business. The quality of service and staffs are exclusive in Li & Fung, but not the other competitors in this industry. Because of the customized service and excellent service, It is not surprising that Li & Fung cut the direct relationship between suppliers and customers.Li & Fung act the role as middleman, They know much most information of the demand and supply side. Finally, both suppliers and customers become reliant on Li & Fung. This relationship doesn’t easily change. 2. Global sourcing network Li & Fung plays the role as a supply chain manager across many producers and countries, covering over 80 offices and over 13,000 employees in more than 40 economies across North America, Europe and Asia. It enable them look for the high-qual ity, cost-efficient product. Their global network is much larger than the other competitors, so Li & Fung can do better in this industry. . Economies of scale Aforementioned, Li & Fung covers more than 80 offices in more than 40 economies around the world. The company set up over 80 offices and employ 13,000 employees. It can enjoy economies of scale, for examples, discount from bulk purchase of materials from the firms, increasing the specialization of manager, increasing degree of course of labour, lower-interest rate charged when obtaining loan from banks and having access to a greater choices of financial instruments, spreading the cost of advertizement over a large amount of goods. Part III.Suggestions on strategic approach in Li & Fung Limited future development 1. Focus on the China Market China is known for its large population and rich in natural resources. China has a population of more than 1. 1 billion, The Chinese economy has been upsurging since 50â⠂¬â„¢s, and particular in recent decades, the implementation of â€Å"open door” policy and the economic reform have given a great influence on Chinese economic development. It caused a significant increase in the living standards of the Chinese people, and has also led to further economic construction.These changes in turn have created an larger consumer market in China. As the economies of USA and Europe grow slowly and the market is already well-established, it is of vital importance of Li & Fung to increase the market share in china in order to increase the gross profit in the following years For example, Li & Fung can cooperate with the well-known brands in China, such as the another famous sports brand, Anta. 2. Develop the online commercial service Like the success of Alibaba. om, Alibaba is the global leader in e-commerce for small businesses that includes business-to-business international trade, online retail and payment platforms and data-centric swarm co mputing services. It has more than 8 million small and midsize companies using its business-to-business online marketplace. In this example, I believe that Li & Fung can imitate this kind of e-commerce. They are go through in this field. It is profitable to expand their service to online service. It may bring a new market and higher profit to company\r\n'