Case Analysis Li Fung
By: rainbowlau423 • Dissertation • 3,585 Words • March 7, 2015 • 982 Views
Case Analysis Li Fung
University of the Philippines Visayas
College of Management[pic 2]
Li & Fung: Global Value Chain Configurator
(A Case Study)
In Partial Fulfillment of the Requirements in Mgt. 190: Strategic Management
Submitted to:
Prof. Evelyn Belleza
Submitted by:
Lovely De la Torre
STATEMENT OF THE PROBLEM
How could Li & Fung increase sales thereby increasing the annual growth rate of its revenues?
POINT OF VIEW
The case study is done through the point of view of Victor Fung, the Group Non-Executive Chairman and William Fung, the Group Managing Director of Li & Fung.
TIME PERIOD
2005
OBJECTIVES
- To speed up revenues and net profit growth
- To expand market and geographic reach
- To reduce over dependence on US market and open up revenue opportunities
- To maintain its position as a premier global trading company
AREAS OF CONSIDERATION
- Background
- (History)
Li & Fung was founded in 1906 by Fung Pak-Liu and Li To-ming making it the oldest trading company in Hong Kong. They began exporting porcelain and silk and later added up bamboo, jade, ivory, rattan, ware, fireworks, and handicrafts. In 1990s, language barrier between Chinese and U.S. buyers led them to be the top trading company as mediators are essential.
However, they ceased trading for some years due to the disruption of World War II during the early 1940s. Pak-Liu’s son Fung Hon-chu restarted trading operations in 1949 which had come under British control. Trading business was at its peak during the mid 1900s transforming China into a manufacturing economy. Li & Fung began exporting garments, electronics, plastic flowers and toys and was soon Hong Kong’s biggest exporter.
In early 1970s, trading business began to struggle because of stiff competition from other manufacturing economies in Asia. Trading margin went down by 3%. Hon-chu called his sons William and Victor who are both from Harvard. They modernized and rebuilt Li & Fung into a well-structured organization. With the opening up of Chinese economy in 1979 brought about the relocation of manufacturing factories from Hong Kong to Southern China, and the industrialization of underdeveloped Asian countries. The company then established a regional network of sourcing offices in Asian countries.
In 1989, trading margins decreased further, thus Li & Fung made the company private again and restructured into a diversified group with export trading and retail as its core businesses. It continued to expand its business and established sourcing offices across the world.
By the 20th century, it was a premier global trading company with its revenues coming from North America, Europe, East Asia and the South Hemisphere. Export trading remained its major business but was also involved in retailing and distribution, venture capital, investment holding, and property investments.
- Li & Fung’s Major Subsidiaries and Associated Companies
Held Directly | Place of Incorporation and Operation | Issued and Fully Paid Share Capital | Principal Activities |
Li & Fung (B.V.I.)Limited | British Virgin Islands | US$400,010 | Marketing services and investment holding |
Basic & More fashion Limited | Hong Kong | HK$1,000,000 | Export trading |
Black cat Fireworks Limited | England | GBP1,200,000 | Wholesaling |
Cumberley Enterprises Limited | Hong Kong | HK$250,000 | Apparel exporting |
Civati Limited | Hong Kong | US$450,000 | Export trading |
Colby International Limited | Hong Kong | HK$1,500,000 | Exporting of garments and sundry goods |
Colby Tekstil ve Dis Tiearet Limited Sirketi | Turkey | TL50,000,000,000 | Export trading |
CS International Limited | Hong Kong | HK$1,000,000 | Provision of export assistance service |
Dodwell (Mauritius) Limited | Hong Kong | HK$500,000 | Export trading |
Golden Gate Fireworks Inc. | U.S.A. | US$600,000 | Commission agent and investment holding |
GSCM (HK) Limited | Hong Kong | HK$140,000 | Export trading |
Hillung Enterprises Limited | Hong Kong | HK$300,000 | Export trading |
International Sourcing Group, LLC | U.S.A | US$300,000 | Trading of apparel |
Janco Overseas Limited | Hong Kong | HK$760,000 | Buying agent |
Kariya Industries Limited | Hong Kong | HK$1,000,000 | Manufacturing and trading |
LF Maclaine (Thailand) Limited | Thailand | Baht4,000,000 | Export trading |
Li & Fung Agencia De Compras em Portugal, Limitado | Portugal | PTE20,000,000 | Export trading |
Li & Fung (Exports) Limited | Hong Kong | HK$8,610,000 | Export trading |
Li & Fung (Fashion Accessories) limited | Hong Kong | HK$600,000 | Export trading |
Li & Fung (India) | India | Rupees64,000,200 | Export trading |
Li & Fung (Italia) | Italy | Lire90,000,000 | Export trading |
Li & Fung (Korea) Limited | Korea | Won200,000,000 | Export trading |
Li & Fung (Korea) Limited | Mauritius | Rupees1,250,000 | Export trading |
Li & Fung Mumes sillik, Pazarlama Limited | Turkey | TL25,000,000,000 | Export trading |
Li & Fung (Philippines) Inc. | The Philippines | Peso500,000 | Export trading |
Li & Fung (Properties) Limited | Hong Kong | HK$1,000,000 | Property investment |
Li & Fung Taiwan Holdings Limited | Taiwan | NT$287,996,000 | Investment holding |
Li & Fung Taiwan Investments Limited | British Virgin Islands | US$4,912,180 | Investment holding |
Li & fug (Taiwan) Limited | Taiwan | NT$63,000,000 | Export trading |
Li & Fung (Thailand) Limited | Thailand | Baht6,000,000 | Export trading |
Li & Fung (Trading) Limited | Hong Kong | HK$10,000,200 | Export trading and investment holding |
Li & Fung Trading (Shanghai) Limited | The People’s Republic of China | RMB50,000,000 | Export trading |
Li & Fung (Zhamiang) Limited | The People’s Republic of China | US$1,999,055 | Packaging |
Lloyd Textile Trading Limited | Hong Kong | HK$1,000,000 | Export trading |
Maclaim Limited | Hong Kong | HK$5,570,150 | Export trading |
Perfect Trading Inc. | Egypt | LE2,480,000 | Export trading |
Shin Fung Fireworks Company Limited | Hong Kong | HK$1,200,000 | Export trading |
The Millwork Trading Co., Ltd. | U.S.A. | US$1,331,000 | Distribution and wholesaling |
Toy Island Manufacturing Company Limited | Hong Kong | HK$62,000,000 | Design and marketing |
Verity Enterprises Limited | Hong Kong | HK$2,000,000 | Export trading |
WS Trading Limited | Hong Kong | HK$1,000,000 | Export trading |