Presented ByGroup 10 :

Aakash KholiaRavi RamchandaniVenkatesh GMithil MehtaNikita Singla Ricky Sundrani

Li Fung Trading Case Solution – Manufacturing Strategy

Q.1 How does Li Fung create Value for its Customers and Suppliers? How international

differences in labour costs play into this value?

Value Added Services

Production control & QA

Sourcing

Raw material and component offering

Customized services

• Most of the products are labor intensive and main focus is to cut labor costs at the same time satisfying customer standards

• Search for manufacturing site where the cost of production is minimum

• Cost of labour is different on multiple countries and their knowledge is needed for superiority• Through knowledge and expertise, they efficiently matched suppliers

with customers.• They themselves monitor the whole process of production to meet

desired quality and on-time delivery.• Functional expects to visit the suppliers at least 4 times during the

production process.• Often found advising suppliers on how to obtain raw materials at a

quality & price that suite each customer’s preferences.Always work with customers through the whole process of product development & design.

Q2.Should Charles Ho (HX Div. Manager) send Classique’s order to Quindao, China or the Phillipines?

Giving order to Manilla instead of Qingdon is suggested.

Factors to be considered:

Deploying staff in that area would again increase their expenditure.

Furthermore, Qingdon has never worked for Classique before. So, they have not much understanding about the quality that Classique would be expecting.

Quota system: The Chinese government has not yet confirmed the quota for Qingdon. In case of Manilla, there is no problem.

Qingdao of China, offered at US$ 7.50 per piece whereas the other bidder is Manila of Philippines who could produce the same at US$ 8 per piece.

Q3. If he sends the Order to China, should he ask the HV Division to supervise it?

They will have to ask HV division to supervise the project

The reasons being are as follows:

There is no staff working for Li & Fung in that area. Therefore, deploying staff in that area would again increase their expenditure.

There is no quality control manager in Qingdon.

They have to send engineers at least twice which would cost $ 10,500 extra.

Apart from this they have to send experts 4 times as recommended.

Q4. If he sends it to China and has his own staff supervises it, how many visits should they make to the Factory –two, three or four? Consider the Divisional Manager’s Personal Interests, as well as those of Customer and Li Fung.

The engineers have to be sent atleast twice.

This would increase their cost by an additional $10500

They also have to send expert 4 times as recommended.

Q5. Assess Li Fung’s International Structure, including its organizational Structure and the ways in which it motivates its employees. How does it align employees ‘interests with both Customer Satisfaction and LiFung’s Financial Performance?

Structure: The management team is guided by the chairman, Victor Fung, followed by the managing Director, William Fung.

Under them are the two executive directors Danny Lau and Henry Chan who control several other managers such as Country managers, Division managers, Hard and Soft goods managers, Chief Financial Officers, Product managers, Branch managers, etc. 

Align employees’ interest with both customers’ satisfaction & financial performance:

Customers’ satisfaction: Most of the branches have its own staff and in most of the branches, the staff was native born. So, they could easily identify best factories in the area and form good relationship with them.

To satisfy customers, each of its branches was independent, and so they acted like different companies and they compete with each other’s to get customers and businesses for their countries. Those who just wanted to visit their suppliers were set free to do so and they did not even have to come to the office.

Q5. Assess Li Fung’s International Structure, including its organizational Structure and the ways in which it motivates its employees. How does it align employees ‘interests with both Customer Satisfaction and LiFung’s Financial Performance?

Financial performance: Li & Fung did not calculate profit and loss for each branch and they did not evaluate managers by profitability. The absence of this pressure encouraged branch office

Managers to advice division managers impartially about their countries ability to handle each order effectively and as per the need of their customers.

To satisfy their staff, they would distribute bonuses equally among its entire staff on the basis of the revenue that the branch has collected.

To satisfy the customer was their main objective and to do so, they would not even hesitate to handle the task to some other branches.

Q6. How do Business to Business Services differ from Business to Individual Consumer Services?

Business to Business Services• Manufacturers

design a product that is mass appealing

• The product would meet only few of the needs of customers

• The business tries to understand the other business unit’s needs and tries to target the majority of the population

Business to Individual Services

• Product would be designed to meet a particular specification for a particular individual.

• The individual has a well-defined set of needs. Hence, the business unit works with the customer, understands the feasibility and designs accordingly.

• These products are not produced in large numbers but only for that particular person.

Thank You