Porters 5 Forces:

We are using porters 5 forces to analysis Li & Fung Co. They are bargaining power of suppliers, bargaining power of customers, competitors, partners and technology.

Bargaining power of suppliers:

Li & Fung has a Global SOURCING Network of 67 Offices in 40 Countries. For example: North Asia, Southern Africa, and North America. So the suppliers have strong bargaining power due to sizable volume of sourcing contracts it places with manufacturers.

Bargaining power of customers:

Consumers' bargaining power is large due to our target customers are SME (small and medium-sized enterprise). There are 20,000 retailers and 2,800 wholesalers in United States. Then consumers are becoming more value-focused because the economy is becoming worst.

Competitors:
The main competitors of Li & Fung are Inchcape Buying Services (a 100 year-old company) and Swire & Maclaine and Camberley (The next two largest Hong Kongbased competitors).

Acquisitions: The strategy of Li & Fung is buying rival sourcing companies for example, in 1995 Li & Fung acquired Inchcape Buying Services, a 100 year-old company roughly the same size as Li & Fung and its closest competitor. Also in 1999, Swire & Maclaine and Camberley which were Li & Fungs next largest Hong Kong-based competitor were acquired by Li & Fung.

Advantages: The advantages of acquisitions include gaining new client account, integrating their operation and eventually bringing the operating margins. Second it gain new links in the value-chain. It has expanded five times the size of its two closest local competitors, by August 2000. Bringing the operating margins (increased from 0.8% to 3%.). Li & Fung become the only listed supply chain management company in HK, knowledge base to subSaharan Africa, Eastern Europe, and Caribbean provide up-to-date fashion and market trend information to clients. In 1999 offer virtual manufacturing, or product design services

Partners:
The purpose of partnership is use Internet to both defend the offline, old economy companies against online companies. In December 1999 Hsieh joined Castlings board and LF International invested in Castling. And CEO of Castling Group is an Internet start-up company so that CEO can bring their experience to Li & Fung that how to extend their online business. The second purpose of enter castling is to success bubble in strategy. As Li & Fung say that e-commerce strategy should come from within the company. It created a risky dependency on outsiders, particularly if future design changes were required, and also provided outsiders with proprietary information, strategy, and the entire business model. With the partnership, 20% of lifung.coms initial staff came from Castling amount to an in house E-commerce incubation team that success bubble in strategy.

Technology:
Li & Fung are using three technologies to operate their business. They are Intranet, Extranet and B2B portal.

Intranet: In 1995, Li & Fung launched an Intranet to link the Groups offices and manufacturing sites around the world, thereby expediting and simplifying internal communications.

Advantages of intranet: The progress of orders and shipments could be tracked in real time. Digital imagery allows for online inspection and troubleshooting. For example, past quality problem with Bangladeshi production would require on-site Li & Fung inspector to send physical samples to Hong Kong by express mail, whereas the Intranet now allowed a high resolution digital photo to be sent via the Intranet for real time response and remedy.

Extranet: In 1997, Li & Fung launched secure extranet sites. Each site linked the company directly to a key customer and was customized to that customers individual needs. Furthermore, its also link between manufacturers and retailers, the extranet provided a platform for two to interface thus streamline communications as the order moved through the supply chain. The advantages of extranet: Li & Fung

could carry out online product development as well as order tracking, obviating much of the cost and time necessary to send hard copies of docuements back and forth. So the non-value added activities can be eliminated Furthermore, it provides a platform for Retailers and Manufacturer to interface that it can promoted quick response manufacturing. For example, customer can change the color until the fabrics was dyed. It also can satisfy key customers individual needs. Example: Customer could track an order online just as it was possible to track a UPS delivery.