International Marketing Case Study: Li & Fung

TEAM MEMBERS: SALLY LEONG () PREMELA (U3031617) SIEW MEEI HWAN (U3055281) TAN SEOK KWAN (U3055214)

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1) Consider Li & Fungs weakness in the European market. In doing so, you might want to take a closer look at Spains Inditex, owner of retailer Zara. Inditex is well-known as a rapid-response retailer, changing over its fashion items very quickly, with short lead times. But it does so by owning much of and keeping tight control over its supply chain, choosing to supply its stores from its own production facilities close to its headquarters in Spain. This ownership and tight control approach is, of course, directly opposed to Li & Fungs nonownership and loose control approach. a) Might differences in the business environment in Asia and Europe have something to do with these differences between Li & Fung and Inditex? What differences do you think might be important?

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b) What would you recommend for Li & Fung in terms of increasing its competitiveness in Europe?

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2. Li & Fung has recently moved in a couple of new strategic directions by working for more licensed or sub-brands (LL Cool J at Sears, Metro7 at Wal-Mart), by working directly with more brand owners rather than retailers (Liz Claibornes Lucky Jeans and Juicy Couture, Levis Signature and Red Tab), and by creating its own brands, often through acquisition. a) Given what you know of Li & Fung, is this a good move for the company? What is required of a firm as it alters a distribution channel or its place in a distribution channel? What is required of a firm in managing a consumer brand? Does Li & Fung have the necessary skills to succeed in these areas?

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b) What other actions might Li & Fung take in order to ensure it stays strong in US market?

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3) In recent years, we have seen global recession that severely lowered consumer spending in many of the markets served by Li & Fung. What are the implications of such changes in the economic environment of overseas markets?

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In general, when such changes occur, consumers buy lesser

which reduce the demand for the products. When demand is reduced, manufactures produce lesser as a result. Hence lesser profit is made to boost the countrys economy.
Relating to the case of Li & Fung, due to manufactures

producing lesser, it will not be able to enjoy the benefits of economies of scale as it currently does. It might have a difficulty identifying factories that produce at a lower cost and still preserve the quality and reliability of the product. Most probably, these factories will choose to get its raw materials at a lower cost and quality to cover for its production costs. Hence quality is compromised for quantity.

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Li & Fung has lost a number of its clients, including Mervyns

and KB Toys due to the economic downturn.

Thou Li & Fung has started to be a seller to major distributors

such as Wal-Mart and Target in the US Market, these firms prefer to control the sourcing of their national/store brands to themselves. In addition, both these firms, will therefore takeover a bigger role and shares of the US market as compared to Li & Fung.
Hence, this could get Li & Fung to lose their core competency

of their business which is outsourcing for its clients.