Case – Li & Fung (A): Internet Issues

1. Case – Li & Fung (A): Internet Issues Li (利): Profit Fung (丰): Abundance

2. Case background (Part 1) • Time Line • 1906 – founded by Mr. Li and Mr. Fung as an export trading company • 1920s & 1930s – expanded to warehousing and handicrafts manufacturing • 1945 – Li sold his shares to Fung Family • 1973 – listed on HKSE • 1988 – privatized, streamlined and incorporated in Bermuda • 1995 – acquiring Inchcape Buying Group • 2000 – 2 billion dollar global trading company

3. Map of China

4. Shanghai – A Snap Shot

5. Case background (Part 2) • Cast of characters and their roles • William and Victor Fung • Corporate Culture • Soft vs. Hard Goods

6. Holistic Supply Chain Management

7. The IT architecture of an e-business

8. Problem Statement (Case Questions) • How do the critical success factors for Li and Fund’s traditional supply chain business compare with those for e-commerce supply chain? As its e-business evolved, what were the critical challenges? (Growth Strategy) • “Bubble In” or “Bubble Out”? (Sourcing Strategy) • What is the viable e-commerce model for new business venture at Li and Fund? (Business Model)

9. Analysis of Problem • Traditional versus Electronic Business • Characteristics? • Disruptive technology? • Selling/Marketing? • Operations? • Corporate Culture • How are long-term employees likely to respond? • Implications for the Fund Brothers? • Separate versus integrate?

10. Alternative Solutions (Part 1) • Tripartite Growth Strategy • Compare and contrast organic growth, acquisition and e-commerce (EC). • Single versus combination?

11. Alternative Solutions (Part 2) • “Bubble In” versus “Bubble Out” • What did they choose? Why? • Will you make the same sourcing decision? Why? Why not? • Bubble In, Bubble Out, or Mixed-Bubble? • Why they decided to choose Castling?

12. Alternative Solutions (Part 3) • E-Commerce Model • B2B? Benefits to SME? • Chanel conflict? • Offense versus Defense?

13. Criteria to Evaluate Alternatives • Analyzing Frameworks • Porter’s Five Forces Model. EC on Five Forces? • How to apply the model in this case? • Pros and cons of each sourcing approach • E-commerce Models • Brick-and-mortar • Click-and-mortar • Pure EC

14. Recommendations and Plan for Actions

15. Conclusion • Lessons Learned (e-commerce as a competitive strategy, sourcing strategy, business model) • Case Update

16. Porter’s five forces Model 26

17. Outsourcing

18. To From Customer Business Government Customer Customer-to-Customer (C2C) Customer-to- Business (C2B) Customer-to-Government (C2G) Business Business-to-Customer (B2C) Business-to-Business (B2B) Business-to-Government (B2G) Government Government-to-Customer (G2C) Government-to-Business (G2B) Government-to-Government (G2G) E-commerce Models* *Adopted from “E-commerce Operations Management” by Schniederjans and Cao (2002)

19. Case Update • Feb. 14, 2001: Test phase – StudioDirect targeted only the SMEs in the United States and focused mainly on “green-grass” products – golf apparel and accessories – distributed through golf clubs and sporting goods stores. • Initially offline  Online transactions • Early Nov. 2001: over 200 users had registered and more than 100 ordered regularly online. • Breakeven – 600 SMEs • Sales for the first half of 2001 – $5 million • Estimated first year loss – $10 million • Reasoning of Loss: Slow Adoption rather than a flawed concept • Interim Remedies – Merging two existing offices in San Fransico and New York • Going Forward – What options for StudioDirect management?

20. Li & Fung Links • Li & Fung Limited homepage • Homepage of Li & Fung Distribution (Management) Limited • Homepage of LF Venture Capital, the venture capital arm of Li & Fung Limited • Annual reports of Li & Fung

21. Disruptive technologies - technologies that improve a product or service in ways that the market does not expect and they are particularly threatening to the leaders of an existing market, because they are competition coming from an unexpected direction. Disruptive Technology