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LI & FUNG FIVE ELEMENTS OF DIAMOND STRATEGY
Transcript of LI & FUNG FIVE ELEMENTS OF DIAMOND STRATEGY
LI & FUNG FIVE ELEMENTS OF DIAMOND STRATEGY
STAGING & PACING
WHAT IS ARENAS?
WHAT IS VEHICLES?
WHAT IS DIFFERENTIATORS?
WHAT IS STAGING
SPEED OF EXPANSION
WHAT IS ECONOMIC LOGIC?
Means by which a firm will earn a profit by implementing a strategy.
That is, how the firm will
over and above
its cost of capital.
Arenas are areas in which a firm will be active.
Decisions about a firm’s arenas may encompass its
products, services, distribution channels, market segments, geographic areas, technologies, and even stages of the value-creation process
Unlike vision statements, which tend to be fairly general, the identification of arenas must be very specific.
It clearly tells managers what the firm should and should not do.
In addition, because firms can contract with outside parties for everything from employees to manufacturing services, the choice of arenas can be fairly narrowly defined for some firms.
"How will we get to the arenas"
Vehicles are the means for participating in targeted arenas.
The possible vehicles entering a new arena includes
acquisitions , alliances, organic investment and growth.
Li & Fung devised an acquisition strategy to strengthen its position in the global trading market.
In 1995, Li & Fung acquired Inchcape Buying Service (Dodwell), The acquisiton nearly doubled the size and geographic reach of Li & Fung and brought with it at vast European customer base.
December 1999, Li & Fung acquired Swire & Maclaine and Camberley Enterprises, the trading businesses of the Hong Kong- based group for HK$ 450 mn.
In November 2000, They also acquired Colby Group Holding Limited; a Hong Kong based leading consumer goods trading company for HK$ 2.2 bn
During 2000s, Li & Fung focused on expanding its customer base in non-US markets to balance the group's overall portfolio.
They acquire Japan as a potential market, entered into alliance with Nichimen Corporation
In 2013, Li & Fung acquired the sourcing business of the Hong Kong-based Firstworld Garments Limited and the US-based International Porcelain Inc. for US $27 mn. These two companies would together operate under the name "International Sources".
Li & Fung company
"Powered by our people"
Our sustainability initiatives focus on four key pillars
Our leaders live the values that drive our business.
features and attributes of a company’s product or service that help it beat its competitors in the marketplace.
what drive potential customers to choose one firm’s offerings over those of competitors.
The earlier and more consistent the firm is at driving these differentiators, the greater the likelihood that customers will recognize them.
Li & Fung wants to create an image of a diverse global multinational company that are humble, creative, and innovative who cares about their customers, stakeholders, and community needs and wants.
Li & Fung teams of experts work closely with customers, assessing their needs and using market research, retail and fashion trend forecasts, and innovative technology to design the right supply chains to deliver their products. Whether customers come to them with a specific direction or need their help in conceptualizing products, their creative teams are there every step of the way.
Not just about moving things from one place to another.
-Analyze each customer’s needs
-Anticipate challenges, Design options and Set up contingency plans
Employ both analytical tools and models
Develop business continuity and disaster recovery plans to manage anticipated risks.
Their best-in-class IT systems provide efficiency and tracking visibility.
Between brainstorming, designing and prototyping, Li & Fung make sure their vision becomes reality. Li & fung also innovate in designing the best supply chain solutions to optimize pricing, quality, quantity and delivery of products, enhancing speed to market.
Li & Fung’s business style selects suppliers worldwide to maximize the value of order for customers in terms of quality and time to service at the lowest cost. For example, the firm will design a detailed supply chain program for its customers to meet a particular fashion season, and customers can modify their orders through information technology.
Because Li & Fung has many target markets the pricing strategy for each target market will be different, for the lower income segment the price will be low and for the high income segment of the market Li & fung will charge premium price for their high end products. Although they have different pricing on each segments they work on competitive pricing through creative supply chain solutions on sourcing, manufacturing and logistics.
It refers to the
timing and speed, or pace,
of strategic moves.
It usually ask questions like
“What will be our speed and sequence move?”.
1906: Founded by
Fung Pak Liu
Li To Ming
port garments, toys, electronics and
plastic flowers -->
Hong Kong’s biggest exporters in dollar terms.
1979: Expanded its business --> Southern China
1980s: Branched out into the area of retail
1990s: Acquired 50% shares in Circle K convenience stores and Toys ‘R’ Us chains in Hong Kong.
1990s: well established with 900 suppliers in the East Asia region in countries that included Indonesia, Singapore, South Korea, Taiwan and Thailand.
Li & Fung Turnover Growth was
declining in 2000-2002, but since
2003 it shows a stable growth to
Li & Fung Profitability Growth
shows a major decline in 2000 -
2001, but strikes back in 2002,
had a slight declining in 2003 but
able to maintain its stability since
2003 - 2007.
Financial Performance 2014
For the six months ended 30 June 2014, the Trading Network accounted for 96% of the Group’s turnover and 92% of core operating profit. Softgoods and hardgoods accounted for 64% and 36% of the Trading Network’s turnover respectively.
Li & Fung relies on a strong and stable cash flow conversion business to fund its working capital, dividends, interest expenses and capital expenditures.
STRATEGY IN ACTION
Li & Fung Strategy for 2014 will be:
Strengthen its organic growth initiatives by focusing on gaining new customers and developing additional business with existing customers.
They broadened their geographic in Asia and other countries.
Support and upgrade vendor base
Value Creation For Shareholders Strategy
Li & Fung important goal of the strategies and initiatives that they are undertaking is to create sustainable value for their Shareholders by focusing on the three key priorities:
Lower working capital requirement
Decrease payments for acquisition payable
Via organic growth & prioritizing investments
Maintain a high dividend payout policy
Sequence of Initiatives
Li & Fung's initiatives are to enhance supply chain sustainability focus on partnering with their customers and suppliers to add value along their supply chains by:
They work closely with their customers to meet their individual needs
They develop products and customize services for our customers
They source great products from suppliers around the world
They have a hands-on approach to managing every aspect of the supply chain from concept to completion
Their logistics network operates around the clock to get products where they need to be
In November 2011, Li and Fung Retailing announced they have entered into a joint venture agreement for the Toys“R”Us® business in Southeast Asia and Greater China.