Li & Fung: Growth for a Supply-Chain Specialist SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Li & Fung: Growth for a Supply-Chain Specialist
Hong Kong-based Li & Fung Group was a trading company renowned for skillful management of its supply chain. The bulk of its business came from the trading of soft goods, which comprised garments and apparel, with the remainder consisting of hard goods such as furniture, fireworks and promotional items. Its major market was the US, followed by Europe, which contributed about one-quarter of its turnover. With the global economic downturn in 2009 following the collapse of the American housing and credit markets, and with the fashion industry expected to be severely affected, how could Li & Fung continue to grow its business and achieve the target of doubling its turnover to US$20 billion for the period 2008-2010?
Swot Analysis of "Li & Fung: Growth for a Supply-Chain Specialist" written by Stephen Ko, Grace Loo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fung Li facing as an external strategic factors. Some of the topics covered in Li & Fung: Growth for a Supply-Chain Specialist case study are - Strategic Management Strategies, Economics, Growth strategy, Manufacturing, Supply chain and Global Business.
Some of the macro environment factors that can be used to understand the Li & Fung: Growth for a Supply-Chain Specialist casestudy better are - – digital marketing is dominated by two big players Facebook and Google, increasing energy prices, technology disruption, increasing transportation and logistics costs, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation,
there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Li & Fung: Growth for a Supply-Chain Specialist
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Li & Fung: Growth for a Supply-Chain Specialist case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fung Li, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fung Li 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: Growth for a Supply-Chain Specialist can be done for the following purposes –
1. Strategic planning using facts provided in Li & Fung: Growth for a Supply-Chain Specialist case study
2. Improving business portfolio management of Fung Li
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fung Li
Strengths Li & Fung: Growth for a Supply-Chain Specialist | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fung Li in Li & Fung: Growth for a Supply-Chain Specialist Harvard Business Review case study are -
Innovation driven organization
– Fung Li is one of the most innovative firm in sector. Manager in Li & Fung: Growth for a Supply-Chain Specialist Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Global Business field
– Fung Li 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 Fung Li in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Fung Li in the sector have low bargaining power. Li & Fung: Growth for a Supply-Chain Specialist has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fung Li to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Fung Li
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fung Li does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Fung Li is present in almost all the verticals within the industry. This has provided firm in Li & Fung: Growth for a Supply-Chain Specialist 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.
Effective Research and Development (R&D)
– Fung Li 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: Growth for a Supply-Chain Specialist - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Fung Li is one of the leading recruiters in the industry. Managers in the Li & Fung: Growth for a Supply-Chain Specialist are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Fung Li 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: Growth for a Supply-Chain Specialist HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Li & Fung: Growth for a Supply-Chain Specialist Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Successful track record of launching new products
– Fung Li has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fung Li 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.
High switching costs
– The high switching costs that Fung Li has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Training and development
– Fung Li has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Li & Fung: Growth for a Supply-Chain Specialist 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.
Weaknesses Li & Fung: Growth for a Supply-Chain Specialist | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Li & Fung: Growth for a Supply-Chain Specialist are -
Need for greater diversity
– Fung Li has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Li & Fung: Growth for a Supply-Chain Specialist HBR case study mentions - Fung Li 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Fung Li needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High operating costs
– Compare to the competitors, firm in the HBR case study Li & Fung: Growth for a Supply-Chain Specialist has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Fung Li 's lucrative customers.
High cash cycle compare to competitors
Fung Li has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Li & Fung: Growth for a Supply-Chain Specialist HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Fung Li has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Fung Li, firm in the HBR case study Li & Fung: Growth for a Supply-Chain Specialist 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, Fung Li is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Li & Fung: Growth for a Supply-Chain Specialist can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Fung Li supply chain. Even after few cautionary changes mentioned in the HBR case study - Li & Fung: Growth for a Supply-Chain Specialist, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fung Li vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Li & Fung: Growth for a Supply-Chain Specialist, is just above the industry average. Fung Li needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Skills based hiring
– The stress on hiring functional specialists at Fung Li has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities Li & Fung: Growth for a Supply-Chain Specialist | 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: Growth for a Supply-Chain Specialist are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fung Li 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. Fung Li 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.
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 Fung Li 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fung Li 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: Growth for a Supply-Chain Specialist, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Fung Li to increase its market reach. Fung Li will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Using analytics as competitive advantage
– Fung Li has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Li & Fung: Growth for a Supply-Chain Specialist - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fung Li to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fung Li in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fung Li can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fung Li to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Fung Li to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Fung Li can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Li & Fung: Growth for a Supply-Chain Specialist 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fung Li can use these opportunities to build new business models that can help the communities that Fung Li operates in. Secondly it can use opportunities from government spending in Global Business sector.
Building a culture of innovation
– managers at Fung Li 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 Global Business segment.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Fung Li in the consumer business. Now Fung Li can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fung Li can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Li & Fung: Growth for a Supply-Chain Specialist 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: Growth for a Supply-Chain Specialist are -
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Fung Li can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fung Li 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: Growth for a Supply-Chain Specialist .
Technology acceleration in Forth Industrial Revolution
– Fung Li has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Fung Li needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing wage structure of Fung Li
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Fung Li.
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 Fung Li business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fung Li in the Global Business industry. The Global Business 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 dependence on third party suppliers
– Fung Li 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.
Environmental challenges
– Fung Li 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. Fung Li can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Stagnating economy with rate increase
– Fung Li 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.
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 Fung Li in the Global Business sector and impact the bottomline of the organization.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth 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: Growth for a Supply-Chain Specialist, Fung Li may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Fung Li.
Weighted SWOT Analysis of Li & Fung: Growth for a Supply-Chain Specialist 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: Growth for a Supply-Chain Specialist 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: Growth for a Supply-Chain Specialist 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: Growth for a Supply-Chain Specialist 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: Growth for a Supply-Chain Specialist 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 Fung Li needs to make to build a sustainable competitive advantage.