Li&Fung Case Study Analysis

In China the company has the advantage of the product itself being made according to the Chinese standards for quality, however, the big challenge is facing liabilities of foreignness and outsidership.

The Chinese already buy more cars than people in other countries: 13.5 million last year, compared to 11.6 million of Americans. China is on track to become the largest market for luxury goods.

In a time of global commerce, new business ventures can take on many forms. What used to be local or even national companies have become world-wide. International growth of a business can be extremely beneficial but is not without its challenges. Different countries have different peoples and different cultures - different ways of doing business altogether. If a venture is to be successful, these differences must be well understood.

Conditions have changed. Global trade has rapidly increased in both volume and value, reaching nowadays more than $4 trillion in 1997 (Daniels J.D., Radebaugh, 1998, pg. 529). Competition is fierce from all corners of the world. Failure at the global level can backfire and may consume existing brands and business relationships. At the same time, global opportunities have emerged that offer possibilities for growth, profit, and an improvement in worldwide standards of living.

Li & Fung is a long-standing Hong Kong based company that that has evolved from an export trading company to a coordinator of value-added services across the entire supply chain in a global, open manufacturing environment. They assess the clients’ product and delivery needs and orchestrate supply, manufacture and delivery in a very tailored and specialized way (Claremont Conversation Online, 2008). In the prevailing business environment, it has not been cost effective to trade with SMEs since production orders were below the factory minimums. Through the implementation of an internet portal, they have secured their position with the SME market while maintaining economies of scale.

Chindia can pose many threats to surrounding nations and competitors. China is taking dominance as becoming the world exporter. With all of their products they are able to offer lower prices and beating out many other industries. India is able to produce products at cheaper costs and provide cheap labor. Their textile industry is a prime example. Many of the products needed for their textile industry are produced in their own country so little is imported. They are able to produce products faster because the materials are local and there is no need to wait for imports. The products are produce cheaper because of cheap labor, and there is no need for storage costs because very few goods are imported. When it comes to producing goods cheaper, offering lower prices to the consumers, and becoming a world exporter, Chindia is the leader.

China is facing difficulties both inside and outside. Since China cannot regain its advantages, the only choice is transiting away from low-end manufacturing. The days of cheap, endless labor is limited, but has not ended. China still has time to invest in research, design and development and train skilled workers to create China’s own high-tech products and brands. If China could relax the One-Child Policy and invest more on children’s education, Chinese manufacturers could have more skilled workers to innovate and produce their high-tech products. China’s manufacturing is at a

International trade and subdued investment combined conspired to the slowest world growth since 2009. World bank economic growth is expected to rise to 2.7% in 2017 from 2.3% last year. Throughout Europe and Japan, monetary support and fiscal policies should help support economy activity this year. In China, growth is projected around 6.5% which reflects certain factors like uncertainty about global trade, and private investments. China accounts for about one-tenth of all global imports and exports, and roughly one fifth of investment accounts but has slowed from 21% to 10% in the last few years. With the recovery in certain commodity prices, like oil, the divergence is expected to narrow heavily. The environment the world is in right is a difficult one, negative interest rates constrict monetary policies and may warrant more fiscal policies. What needs to be done is to initiate more useful policies to include human capital, investment, global technology transfer, and heavily promoting trade in order to obtain at least some level of positive

Based on the population issue, the Chinese government enforced the birth control policy from the late twentieth century until now, so the total fertility rate of China is lower than the total fertility rate of the U.S. In the labor market, China plays an important role of the labor export. Large population emerges more workers, so the labors are cheaper in China. After the cold war in the 1990s, the global economic cooperation made the connection between countries was more close and complex. Many international companies invent and possess their core technologies in the U.S or other developed countries, but they found their manufacturing factories in China. They already aimed at the Chinese large cheap labor market could reduce the cost in their entire business. Consequently, people can find different kind of stuff labeled as “made in China” easily and frequently—it is a good explanation for the fact of half of my clothes were “made in China”. Many small factories which produce clothes and accessories are located in small towns in southeast of China, especially Zhejiang, Fujian, and Guangdong Provinces. Most of workers in those factories are wide range-age women who from rural areas with lower level education. Their working conditions are depended on the conditions of the factories.

The majority of the Chinese producers specifically design their products for export purposes due to the presence of higher international demand as compared to the local market.

both the U.S. and international markets. China represents one of the fastest growing countries for

From April to June 2005, India’s GDP grew at 8.1 per cent, compared with 7.6 per cent in the same period the year before. More impressively, India is achieving this result with just half of China’s level of domestic investment in new factories and equipment, and only 10 per cent of China’s foreign direct investment…

Another alternative is to focus all of the attention on the expansion of the existing cliental in the global markets. Shanghai Tang’s major consumer base is made up of loyal American and European customers. The market is already well established, they know what the consumers will and will not buy and the demographic of people are already in every major market. 30% of the Mainland China market is made up of American/European consumers. While, not surprisingly, 77% of the US market is made up of the same client profile. What is interesting is that only 12% of the US customer profile is comprised of Asian

Due to the fact that the industry is growing, other countries are now being emerged

For any company going out for the foreign market is because of any one out of globalization, reducing tariff all over the world, to increase the market share, saturation of the local market, for getting the economies of scale of production, to use their excess capacity and use the resources where it is available at law cost.