The Case Study of Li & Fung – the Global Value Chain Configurator

In order for a firm to create competitive advantage, it needs to create a set of activites that can deliver value to the specific product and services it offers to its customers. To start talking about my life as a “value chain”, I may need to compare it to a specific product”. This is going to take precedence both in my personal life and professional life.

The value chain, made by Michael Porter, is really important to see how a company structure is created. The value chain is constituted by two parts: support activities (firm infrastructure, human resource management, technology development, procurement) and primary activities (inbound logistic, operations, outbound logistic, marketing and sales, service). (Johnson et al. 2011, p.97-99)

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.

The value chain is one of the critical elements of a company’s strategy in today’s competitive world, because company’s profit depends on how the successful and efficient it runs its operations and how the end product appeals to the customers at a price that covers all the expenses of the company.

The 21st century has come with big changes to production processes within Global Value Chains (GVC) as different stages of production are being conducted in a variety of different countries. Businesses have been locating their operations internationally in the past few decades through outsourcing and offshoring value chain activities such as production, marketing, design and distribution. (Global Value Chains, 2015) The purpose of this report is to clearly define the concept of Global Value Chains. I will contextualise this information through two businesses of which I will provide examples of the GVC in action. For each of these businesses, I will discuss two different examples of the element ‘value’.

This organization has adopted a cost leadership strategy whereby all of their products and services have a lower cost for purchasers in comparison to their competitors. To accomplish this, Amazon has utilized economies of scope, which involves having a wide variety of products available for customers to buy and reducing their profit margin so as to capture a greater market share, hence gain a competitive advantage over other e-retailers. They have provided high quality products and services for their customers as well as made their online selling platform very user friendly; allowing anyone to use their website quickly and efficiently. Strategic acquisitions have been a general strength for the organization as they

SWOT analysis consists of data analysis with both internal and external factors within a business. The management tool consists of four different factors that include: strengths, weaknesses, opportunities and threats. Analysing these components allows businesses to make important management decisions to improve their business. Elements such as strengths and weaknesses are internal factors that are taken into consideration whilst being compared with other competitors (Fong, 2007). The strengths that M&S have within their competitors is their diversity of quality products and services and that they are an international company operating in many countries. Similarly they are in diverse locations within the country such as having stores across high streets and out of town retail parks (Corporate.marksandspencer.com, 2014). Having the ability to use management

1. Describe the competitive environment of ECCO and determine how well ECCO is positioned (vis-à-vis the competitors) to take advantage of changes in the industry.

“The value chain identifies where the value is added in an organization and links the process with the main functional

Successful companies are successful because of their ability manage the intrinsic concept which develops and evolves their value chain and competitive advantage. The purpose of this paper is to provide the reader with a compelling argument as to why an effective value chain creates competitive advantage. The author will also discuss and provide an analysis of the following: three critical concepts when thinking about how a value chain creates competitive advantage in relation to the value chain, competitive advantage, and customer delight. The

Michael Porters (1998) value chain model addresses activities that create, deliver and support a company’s product or service and thus its overall position and competitive strength in the market for global competition shown in Fig. 1.

industry. The paper critically evaluates the existing supply chain of the company against its current performance and

Li & Fung strategy is to accelerate the growth through acquisitions on buying rival sourcing companies. In addition to organic growth, which further strengthen company leadership position as global supply chain management in soft & hard goods by diversified sourcing capabilities and product portfolio enhance knowledge and knowhow in the new segment. Between 90’ and 2000’ era company had made over 70 acquisitions and became a multinational company:

A useful technique that most multinational organisations use to asses their strengths and weaknesses is the Value Chain, which was developed by Harvard Business School Professor Michael Porter. The value chain is a breakdown of activities within a MNE’s important activities – production, marketing, human resources management.

In today’s competitive business world, to increase global business,consumer demands as well as expands market size offshore outsourcing has become a common movement. Due to forceful competition, diminution product life cycle, changing consumer taste, preferences and sensitivity, progressing new knowledge, innovation, learning and technology and stakeholder’s enthusiasm companies, at present, continuously need to revamp their value chain (Bertrand, 2011). In this scenario, many multinational companies are refurbishing their value chain which is happening in doing business internationally (Doh, 2005; Holm, Eriksson & Johanson, 1996). This has helped for providing them to access to