Case Study Description of Li & Fung (Trading) Ltd.
Li & Fung, one of the largest export trading companies in Asia, works primarily as an agent to connect U.S. and European manufacturers and retailers of nondurable, mass-market consumer goods with suppliers located all over East Asia who manufacture products according customer designs. Li & Fung's network of 2,000 suppliers in over a dozen countries is one of its most important competitive assets. This network consists of relationships with suppliers and knowledge of their capabilities and strengths. The network provides a number of benefits to customers, the most important being a wide variety of manufacturing options that differ by price, quality, and delivery time. Li & Fung's trading operations are organized into largely-independent, customer-focused divisions aided by regional branch offices. Its internal structure and incentives (especially compensation) are designed to motivate staff to customize service to each customer and to use the entire network to place each customer order with the supplier that most closely fits customer requirements. This design is especially important because of trading's low margins.
Swot Analysis of "Li & Fung (Trading) Ltd." written by Gary W. Loveman, Jamie O'Connell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Li Fung's facing as an external strategic factors. Some of the topics covered in Li & Fung (Trading) Ltd. case study are - Strategic Management Strategies, Human resource management, Networking, Organizational structure, Supply chain and Technology & Operations.
Some of the macro environment factors that can be used to understand the Li & Fung (Trading) Ltd. casestudy better are - – wage bills are increasing, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, cloud computing is disrupting traditional business models,
customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Li & Fung (Trading) Ltd.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Li & Fung (Trading) Ltd. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Li Fung's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Li Fung's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Li & Fung (Trading) Ltd. can be done for the following purposes –
1. Strategic planning using facts provided in Li & Fung (Trading) Ltd. case study
2. Improving business portfolio management of Li Fung's
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Li Fung's
Strengths Li & Fung (Trading) Ltd. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Li Fung's in Li & Fung (Trading) Ltd. Harvard Business Review case study are -
Successful track record of launching new products
– Li Fung's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Li Fung's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Li Fung's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Li & Fung (Trading) Ltd. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Technology & Operations field
– Li Fung's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Li Fung's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Li Fung's is present in almost all the verticals within the industry. This has provided firm in Li & Fung (Trading) Ltd. case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Li Fung's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Li Fung's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Li & Fung (Trading) Ltd. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High brand equity
– Li Fung's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Li Fung's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Li Fung's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Li & Fung (Trading) Ltd. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Li Fung's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Li & Fung (Trading) Ltd. Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Organizational Resilience of Li Fung's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Li Fung's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Li Fung's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Li Fung's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Cross disciplinary teams
– Horizontal connected teams at the Li Fung's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Li Fung's is one of the leading recruiters in the industry. Managers in the Li & Fung (Trading) Ltd. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Li & Fung (Trading) Ltd. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Li & Fung (Trading) Ltd. are -
Lack of clear differentiation of Li Fung's products
– To increase the profitability and margins on the products, Li Fung's needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Gary W. Loveman, Jamie O'Connell suggests that, Li Fung's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Low market penetration in new markets
– Outside its home market of Li Fung's, firm in the HBR case study Li & Fung (Trading) Ltd. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Li Fung's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Li & Fung (Trading) Ltd. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Li Fung's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Li & Fung (Trading) Ltd. should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Li & Fung (Trading) Ltd. HBR case study mentions - Li Fung's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Aligning sales with marketing
– It come across in the case study Li & Fung (Trading) Ltd. that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Li & Fung (Trading) Ltd. can leverage the sales team experience to cultivate customer relationships as Li Fung's is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Li & Fung (Trading) Ltd., it seems that the employees of Li Fung's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Li Fung's is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Li Fung's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Li Fung's to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Li & Fung (Trading) Ltd., it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Capital Spending Reduction
– Even during the low interest decade, Li Fung's has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities Li & Fung (Trading) Ltd. | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Li & Fung (Trading) Ltd. are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Li Fung's is facing challenges because of the dominance of functional experts in the organization. Li & Fung (Trading) Ltd. case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Li Fung's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Li & Fung (Trading) Ltd. suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at Li Fung's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Learning at scale
– Online learning technologies has now opened space for Li Fung's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Li Fung's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Li & Fung (Trading) Ltd., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Li Fung's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Li Fung's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Creating value in data economy
– The success of analytics program of Li Fung's has opened avenues for new revenue streams for the organization in the industry. This can help Li Fung's to build a more holistic ecosystem as suggested in the Li & Fung (Trading) Ltd. case study. Li Fung's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Li Fung's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Manufacturing automation
– Li Fung's can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Li Fung's can use these opportunities to build new business models that can help the communities that Li Fung's operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Developing new processes and practices
– Li Fung's can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Li Fung's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Li Fung's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Li & Fung (Trading) Ltd. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Li & Fung (Trading) Ltd. are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Li Fung's business can come under increasing regulations regarding data privacy, data security, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Li Fung's in the Technology & Operations sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Li & Fung (Trading) Ltd., Li Fung's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Regulatory challenges
– Li Fung's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
High dependence on third party suppliers
– Li Fung's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Li Fung's can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Li & Fung (Trading) Ltd. .
Shortening product life cycle
– it is one of the major threat that Li Fung's is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Li Fung's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Environmental challenges
– Li Fung's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Li Fung's can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Li Fung's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Li Fung's in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Li Fung's needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Li Fung's can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Li & Fung (Trading) Ltd. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Li & Fung (Trading) Ltd. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Li & Fung (Trading) Ltd. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Li & Fung (Trading) Ltd. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Li & Fung (Trading) Ltd. is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Li Fung's needs to make to build a sustainable competitive advantage.
