LI & FUNG : INTERNET ISSUES

Prepared by: Vaibhav Rokade Sonny Laskar Mandeep Bhullar Gaurav Minocha S. Ravisankar Vemuri

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LI & FUNG BACKGROUND

A $2 billion global export trading company
3,600 staff worldwide Sourcing and managing the global supply chain for High-volume, time-sensitive consumer goods

Product mix hard and soft goods

Soft goods apparel, including woven and knit garments Hard goods fashion accessories, festive or holiday products, furnishings,

giftware, handicrafts, home products, furnishing, home products, fireworks, sporting goods, toys, and travel goods

STRATEGY OF THE COMPANY

Holistic Supply Chain Management
Provided value-added services across the entire supply chain Li & Fung does not own any of the components in the supply chain but

manage and orchestrate it

Holistic conception of the value chain

Growth Strategy of the company

Organic growth Expansion through acquisition Extension of its supply chain to new markets via the Internet (E-commerce)

SWOT

Strength
Faster turnaround reduce inventory costs Reduced matching and credit risks Lower cost and flexible sourcing Provided up-to-date fashion and market trend information

Weakness
Worldwide separate and individual management teams SME orders were small & lacked economies of scale

Opportunity
Flexibility to the customers for designing their own goods. SMEs get chance to earn smaller rate commission Ability to set up a business plan to build up markets

Threats
Fear from old economy retail customers online companies acquiring an old economy trading company, offline companies partner with a dot-com

E-COMMERCE
IT division started with a team of 60 Software development outsourced The building blocks of Li & Fungs e-commerce

solution:

1995: Intranet

Link the groups global offices and manufacturing sites Customized sites for large customers Streamline and synchronize orders

1997: Extranet

E-COMMERCE STRATEGY
To counter threat from newly emerging dot com companies, they

decided to start an online Portal: lifung.com

Bubble In: Entire development to be done in-house. No

outsourcing.
Ensure company wide adoption of new technology

Reduce risk

Castling Group: Helped old companies step into online markets

Both Castling and Li & Fung wanted to enter online B2B market Strategic Partnership: Both invested in lifung.com Castlings Technology and Li & Fungs Supply Chain muscle

E-COMMERCE STRATEGY
Market Research
Differentiating factor:

Balance of Old and New economy mindsets

Market Research

Market STP
Old Economy Ideas Focus group Discussions

absolutely essential, not done by new dot coms

Focus group research to

identify retailers needs

Result: Better

understanding the retailer

B TO b: The world of SMEs

Market research: Potential market of $54 billion, all SMEs.
Overlooked by most suppliers Were offered limited range of options High importer margins Scattered market, individual order size small, below factory minimum

Li & Fungs answer through lifung.com:

Aggregate orders of all SMEs Offer limited customization (colour, pockets, labels, etc.) Charge less import commission Allowed SMEs to respond quickly to market trends

IMPLEMENTATION
Lifung.com (2000) E-commerce platform matching buyers & sellers Hardware Sun Micro systems Online configuration Selectica Database Oracle Transaction system Broadvision SI Anderson consultants In-house development eSO (2001) Electronic Stock Offer Aggregates suppliers to post surplus inventory

Seconds purchasing platform

LIFUNG.COM: EXPECTED EARNINGS

First 2 years: Minimal earnings
Operating margin : Approx. 6%

By 2004
$2 billion in sales 1/3rd of the groups revenue Operating margin: Approx. 7- 8%

Groups attention focused on lifung.com s bottom line

Competitive advantages
Back-end logistics infrastructure
Reliable procurement Market knowledge

Brand reputation
Product differentiation

NUMBERS TELL THE GROWTH STORY

FY 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 PAT (HKS$ thousands) 195793 552709 216693 296945 374131 454673 577223 860092 712744 1080696 1211014 1529289 1932763
0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 FY PAT (HKS$ thousands) 500000 2000000 1500000 1000000 2500000

Li & Fung Fin Performance

NON STOP JOURNEY.

Business Intelligence Centre FUNG academy Continuing M&A s . Continuing public listings Indian presence investor and partner of Future supply chains

IT STRATEGY
Vision of the top management Continuous updation of IT skills through internal trainings IT Strategy should be in synergy with the Business Strategy Impact on revenues in short run and long run Segregation of channels/Key account management IT Strategy is an enabler to support the business model

THANK YOU