By: Kenneth Connell BUS 550 June 3 rd 2013. The Origins Founded in 1906 Export Trading Co. to over...
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Transcript of By: Kenneth Connell BUS 550 June 3 rd 2013. The Origins Founded in 1906 Export Trading Co. to over...
![Page 1: By: Kenneth Connell BUS 550 June 3 rd 2013. The Origins Founded in 1906 Export Trading Co. to over seas merchants. Warehousing and Manufacturing of Handicrafts.](https://reader035.fdocuments.in/reader035/viewer/2022062321/56649e705503460f94b6ec75/html5/thumbnails/1.jpg)
By: Kenneth ConnellBUS 550June 3rd 2013
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The Origins
• Founded in 1906
• Export Trading Co. to over seas merchants.
• Warehousing and Manufacturing of Handicrafts
• Li- Profit• Fung- Abundance
• Relocated to Hong Kong
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The Prodigal Sons Return
William Fung MBA (HBS)Managing Director“Money Maker”
Victor Fung PhD Economics (HBS)Chairman of the Board“Deep Thinker”
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Stellar Growth
Family Run Business Professionally Managed Firm
• Planning & Budgeting
• Li&Fung Holding Company
• Expansion Throughout Asia
• Acquisitions
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By The Year 2000
• 3600 Employees
• 48 Offices
• 32 Countries
• $2B in Revenue
• 69% of Sales in US
• 27% of Sales in Europe
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Drivers of Growth
• Organic Growth• Expansion Through Acquisition• E-Commerce
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Organic Growth
The 3 Year Plan
• 1st Plan: Filling the MosaicFocused on Filling Gaps in the Network of Offices
• 2nd Plan: Margin ExpansionFocused on Improving Margins
• 3rd Plan: Double ProfitsDoubling Profits every 3 Years.Achieving $3B in sales
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Acquisitions
• Buy Rival Sourcing Companies
• Bought Closest Competitor
• Bought Export Trading Companies
By 2000 They were nearly 5 times the size of closest competitor
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E-Commerce“We need to think through e-commerce properly to formulate a proper Response”- Victor Fung
Channel Conflict?Market Reaction?Transformation of the Business?
B2B Relationships were:• “A Molecule thick and a Mile wide”• Lacked Focus and Depth
Victor had a profound understanding of what the internet meant to their business.
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‘Bubble In’ not ‘Bubble Out’
Outsourcing:• Risky Dependency on Outsiders• Access to proprietary information• Create Less Value for the Firm
The Solution?The Castling Group.• Internet Startup that helped defend old economy
businesses against their online counterparts
Old Economy Vs New Economy
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LiFung.com
Castling Group + Li & Fung Corporation = LiFung.com• Financing • Expertise• Staff
The Three Stages of an Online Venture.• The Business Strategy• The Design-Build-Test Phase• Execution
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The New Economy?
Although the group is developing along the lines of a new economy, we’re still using an old economy mindset.”
-William Fung
“The Key is to have Old Economy know how and yet be open to new economy ideas.”
- William Fung
• Top Down Market Research• Bottom up Focus Group research
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Business ModelTarget SME’s Retailers with <$100M in Sales
Wholesalers with < $50M in Sales
“The Guys who work with The Gap and The Limited”
• Aggregate Smaller SME orders• Limited Mass Customization• 10%-15% Commission• No Order Minimum
B2B Platforms were no threat.
NO VALUE ADDED
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The Outlook
“Beta means never having to say that you’re sorry.”
Would Li&Fung’s entire operation migrate online?
What of Channel Conflict?
Would a copy-cat mimic their business model?
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Question and Answer
1) What were two of the ways the Fung Brothers transformed the company from Family owned to a Professional Firm?
a) Cut Staffb) Planning and Budgetingc) Acquisitionsd) Divestments of business sectors
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2) The 3 year plan was part of which growth strategy?
a) Acquisitionsb) Organic Growthc) E-Commerce
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3) What was the main advantage LiFung.com had over other B2B sites?
a) Mass Customizationb) Lower Commissionsc) No Minimum order quantityd) All of the Above.