Swot Analysis of Li & Fung Ltd

Part I. Backgrounds Study Headquartered in Hong Kong, Li & Fung throttles extensive global sourcing mesh coers to a greater extent than 80 offices in much(prenominal) than 40 economies around the public. The global work go with supplies high-volume, time-sensitive consumer obedients. Particularly, garments make up a divulgesize part of its chore which also c overs the sourcing of hard goods such as fashion accessories, furnishings, gifts, handicrafts, home products, promotional merchandise, toys, sporting goods and travel goods.Li & Fung plays the role as a supply cosmic string manager crossways m both producers and countries, book binding over 80 offices and over 13,000 employees in more than 40 economies across North America, Europe and Asia. They volunteer product design and bugger offing, raw temporal and f pretendory sourcing, production cooking and management, reference assurance and export documentation to transit consolidation.SWOT analysis is a strategi c planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project in a tune venture. It involves specifying the objective of the employment venture or project and identifying the internal and outer factors that are comfortable and unfavorable to achieve that objective. Part II. SWOT Analysis Strengths of Li & Fung express Strength is defined as the characteristics of the business or team that carry it an advantage over some others in the industry.The following part allow analyze Li & Fung Ltds strengths in seven aspects, which are compromising ad on the buttonments in supply, minimization of production toll, expertise in woo control, diversification of risk, complete chain of serve, modern learning system and management, and low entropy cost. 1. Flexible adjustments in supplies Li & Fung Limited (Li & Fung in the following) itself does non involve any production activity, all the goods they provided to the guests are no t produced by them. Instead, they hand growing interlocking of early 11,000 international suppliers in more 26 cities and countries around the world, such as United Kingdom, United State, Russia and Mainland china (see realise 1). Therefore, it allows Li & Fung Limited to adjust its supplies to meet the frequent changes in worlds train. throw 1 Global statistical distribution of Li & Fung suppliers 2. Minimization of production cost Li & Fung Limited keeps on decision the production loyals that offers the lowest cost. As wiz product has many comp 1nts, the caller-out tries to obtain them from different suppliers.With the help of its global distribution of topical anesthetic suppliers, the purchase team of Li & Fung mass compare the prices of each required components, and go through out the lowest purchase price. It allows the company to minimize the cost (see Figure 2). Figure 2 Global purchase cost control of Li & Fung / components supply Even in the same region, whic h is more economically comfortable for transporting. Li & Fung also tries to control the purchase cost according to the evolution among near suppliers.Take the example of mainland China, rising raw material and assiduity be in China due to inflation and the need for a fairer distribution of income, respectively, have inevitably impacted the overall cost of production. The Group had anticipate that the southern and central, coastal manufacturing areas of China would pop off more expensive, so it began switching some of its business to other country, such as India. 3. Expertise in cost control Li & Fung Limited has also set up many offices in over 40 countries, in each office, at that place are a professional team of experts which are well-comprehended the information of the local anaesthetic production factories.It enables them to search for the high-quality, cost-effective sourcing markets. Moreover, once they find the new supplier, the managing team give take time to und erstand the firms execution well and check the product quality carefully. Since they have knowledge of the action of similar or related suppliers, to certain degree, it prevents the possibility of having low quality products. 4. Diversification of risk There is a well-kn knowledge saying that do not put all your eggs into the same basket.Li & Fung Limited has engaged in export trading of many different kinds of some(prenominal) hardgoods and softgoods, such as fashion accessories, furnishings, gifts, handicrafts, toys, sporting goods and traveling goods (see Figure 3). If one of them becomes unpopular, they mountain easily shift their focus on the other goods. Then, it does not affect the companys profit wont be impacted by the drop in sales or consumer inscription of one single goods. Figure 3 Diversity in Li & Fungs multiple brands supply 5. Complete chain of service In the past, Li & Fung used to do simple searching of products.For example, a customer wants product X, and th en their task is to find a factory that can do that. Now, Li & Fung expand their business. It provides a complete and one-stop shopping service for customers, that means from product design and development through raw material and factory sourcing, production planning and management, quality assurance, and export documentation to shipping. e rattling(prenominal) the process is processed by them and it brings more revenue to them (see Figure 4 at the right). Figure 4 Supply Chain 6. Advanced information system and managementLi & Fung has established sophisticated & network-based systems to link up all its business partners, including customers, producers, distributors, logistics service providers etc. The application of IT aims to provide more value-added services, shorten lead-time, dismount cost and enhance flexibility. 7. Low information cost From past to now, Li & Fung has still overcompensate to grow because customers were much easier to identify than suppliers. Usually, Su ppliers were with child(p) in amount, fragmented, smaller and located in emerging markets. So, Li & Fung serve as a database of these suppliers, it could source the goods easier than customers.Li & Fung significantly lowers the information cost of the customers, thats why the company still grows. Weaknesses of Li & Fung Limited Weakness is the characteristics that place the firm at a disadvantage relative to others. The following part give analyze Li & Fung Ltds weaknesses in four aspects, which are No self-owned factory, No self-owned shipping port, all over dependence on US Market, abundant and complicated supplier network. 1. No self-owned factory Aforementioned, Li & Fung does not own any production firm. There is no distrust that it is good for the company to have a flexible supply of inventory.Nevertheless, the production cost impart 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-owne d 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 schedule and more easy in cost control. 3. Over dependence on US Market According to turnover typography (see Figure 5), from 2006 to 2009, the turnover from USA and Europe is over 90%.In Contrast, the counterpoise from China is even less than 1%. In recent years, in that respect are many financial problems in USA and Europe, a good example is the subprime mortgage crisis. If the economy of USA and Europe acquire slowly, the take up for export service decline, it will likely affect the profit of the company. Figure 5 4. Vast and complicated supplier network Li and Fung has the network of nearly 11,000 international suppliers in more 26 cities and countries around the world, they were large in amount, fragmented, smaller and lo cated in emerging markets.To manage them, it is very time-consuming and costly. The process takes many staffs as there is still a lot of human factor in business kindred. It cannot yet be replaced by technology. It incurs high dig out cost. prospect of Li & Fung Limited Opportunity means the external chances to make greater sales or lucre in the environment. 1. China market Nowadays, every companies glare at China like a tiger eyeing its prey. China, As the worlds second biggest economy and one of the highest potential of leading country in rising, it is profitable to set up its own brands and reputation in China.In tramp 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 accountable for sourcing for a range of products including running, basketball and lifestyle lines. 2. Improvement in IT & Internet Technology is improving at the tremendous speed by leaps and bounds. The advanced tele-c ommunication and internet certainly enhance Internal & External Communication. It can unify the global network with the 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 egression countries The continue emergence of the evolution countries enable Li & Fung to source the new market which offer the lower purchase cost. On the other hand, in these developing countries, like India, usually provide a pool of cheap labour. It lowers the labour cost too. Threats of Li & Fung Limited In SWOT model, scourge refers to the external elements in the environment that could cause trouble for the business. Under the cathode-ray oscilloscope of post financial crisis time, I consider certain exist trends or disputation may potentially jeopardise Li & Fung Ltds future development in the global market. . Rise of trade protectionism around the world In recent 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 putting sizable tariffs on other countrys major part or even entire line of exports would be regarded as highly peculiar at the time before global financial crisis in 2008. However, it is quite an common today.Thats why some even argue and doubt their legality under international trade law. These actions will certainly threaten Li & Fungs global supply trading business, which need to spoil and sell goods from one part of the world to another. On the one hand, the plain effort on processing newly added legal or regulational trial and approval might slow down the trading and transporting speed on the other hand, the business cost is likely to make up because more and more human forces or resources are requ ired to handle problems when trading goods globally. 2. line of currency permutation ratesMoreover, the hot disputation on currency exchange rate can be regarded as another potential threat to Li & Fungs global trading business. In order to recover fast from the weak and weary economic status, the US government carried out a quantitative easing approach to maintain its trading battle around the world. In the early November 2010, Federal Reserve Board has just announced QE2. More cheap money for investors to play with suggests a farther cheapening of the currency of US dollar and higher asset 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, manufactured goods and labor forces are no longer that significantly cheap in developing countries or regions like mainland China, India or Latin America, especially in garmen ts 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. consequently in the market of mainland China, Li & Fung Ltd has to face some strong competitors in the future years, such as Hutchison Whampoa Limited, another huge international great deal 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 organizations core competencies because the organization does something the others cannot do or does it better than others. In the following, I have considered three points that give Li & Fung to have Competitive advantages. 1. Li & Fungs customized service One of the Li & Fung seven principles is customer-centric and respond wherefore to the market demand. Li & Fung will first know the customers needs 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 controlled 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 profitability 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 about information of the demand and supply side. Finally, both suppliers and cus tomers become reliant on Li & Fung. This relationship doesnt 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-quality, cost-effective 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 division of labour, lower-interest rate aerated when obtaining loan from banks and having access to a greater choices of financial instruments, spreading the cost of advertisement 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 world and rich in natural resources. China has a population of more than 1. 1 billion, The Chinese economy has been upsurging since 50s, and particular in recent decades, the implementation of open door policy and the economic reform have given a great influence on Chinese economic development. It caused a significant maturation 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 a s the another illustrious sports brand, Anta. 2. Develop the online commercial service Like the success of Alibaba. om, Alibaba is the global attracter in e-commerce for small businesses that includes business-to-business international trade, online retail and payment platforms and data-centric cloud reason 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 experient in this field. It is profitable to expand their service to online service. It may bring a new market and higher profit to company