Liand Fung Article

1. How is Ling&Fung able to manage margins three times those of the rest of the industry? What are its specific strenghts and how does it differ from more traditional competitors?

To be able to manage margins three times those of the rest of the industry, Ling&Fung pay close attention to margin issues: the company considers the whole cycle manufacturing and shipping to get its margin, the quota restrictions and turnaround time. Specific strenghts of Ling&Fung is that the head of the company is very close of its clients and takes in account complaints and improve itself. The main difference with its more traditional competitors is its own company culture.

3- What are the benefits of the Li&Fung matrix sourcing system ? (exhibit 2)

Li&Fung's outsourcing matrix fits particularly well to its global position and activity:

- Outsourcing teams are first divided in two main product categories: textile and hardgoods. As they "specialized" in a certain kind of good, they develop a certain expertise which is an asset in their discussions with external agents.

- Inside each category, the teams are divided depending of their geographical market. This organization can offer an advantage in meeting specific local needs.

- Connection and communication is fostered between the divisions, that know exactly whom to contact for each particular issue.

Finally, Li&Fung can efficiently master the "4C" and get a competitive advantage thanks to their organizational chart.

5. What are the challenges the company faces going ahead and what issues does it need to address in order to expand ? How and where should it expand ?

The company will have to face several challenges. First of all, we know they establish themselves in East Asia to take profit from the local currency devaluation. The situation evolved and now Li & Fung fears a strong incoming inflation. Furthermore, The increasing protectionism in the U.S.A is a risk for the company to lose their clients because of the raise of prices it could signify. Thus, issues clearly appears : If their main clients are in the U.S.A. and if Asia's economic situation become negative, move to the Latin America could or to the U.S.A could be a solution.

The company should not expand because of too many criteria's and because of the risk. That's another culture the managers don't know. Instead of risking so much costs and most expensive employees, with so uncertain results, the company should risk the Asia's inflation by reducing margins for a few years before increasing them later and keep their influence & their experience safe.