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Challenges Faced by Li and Fung

Overview:

Li & Fung is business to business company, working as an authorized or middle men between stores and suppliers or manufacturers. The business has been operating successfully in the forex market since its establishment in 1906. Li & Fung was began as a collaboration enterprise in China and was called an export trading company with abroad merchants as main customers. Later Li & Fung also inserted in to the business of warehousing and manufacturing. The company was shifted from being a family had business to detailed company by the 3rd generation of the family.

The company discounts in both smooth and hard goods, but concentrates more on hard goods as they feature higher margins when compared with soft goods. The company was working on the old traditional model of physical offline existence. But the arrival of internet technology has relatively changed the circumstance and has raised serious concerns about the profitable company's procedure. There's been a tendency that the online competitors of nearly every business are outclassing their offline rival organizations and companies.

Li & Fung has been also worried about the introduction of different online business to business companies which can reduce the company's market talk about and success. The management of the business wants different ways and strategies in order to deal up with this threat. It's important for almost every company to improve and modify their business and operations matching to changing contexts and situations otherwise the company will never be in a position to operate profitability.

The management of Li & Fung comprehends this fact and is also always prepared to combine new technology into the business operations. The business is seeking to get a protective and offensive strategy at exactly the same time and is producing online operations along with offline functions. This will not only defend the business's position against the online business to business companies but will also give competition to them because of good and high trustworthiness of the business.

Problems Facing the business:

The different problems experienced by Li & Fung are listed below to be able of priority or importance:

  • The increasing tendency of internet technology and online companies and business has posed a significant menace to the competitiveness of the traditional offline companies.
  • The online business unit of Li & Fung which has been proven with the name of lifung. com can result in cannibalization of the business's offline services and business.
  • The uncertainty of the success of web business model created by Li & Fung focusing on small and medium sized companies (SMEs).
  • The possibility of other strong competition to copy the web business design of the company.
  • The expertise required for the successful handling of web business model.
  • The employees' level of resistance to installation and consumption of new technology and business models and ideas.

Discussion:

The problem which has been encountered by Li & Fung is the risk of losing success and market share due to emergence of business to online business companies. With an increase of and much more companies using internet technology as well as increasing volume of online businesses coming up have posed a significant risk to the competitiveness of the original offline companies. Because companies can operate at a lower cost and can reach more customers across the world by using internet, therefore with less investment and concentrating on more customers in more market segments, it has become one of the major hazards for Li & Fung.

Also because Li & Fung has been majorly reselling its products usually as an offline company therefore as the company has started its web business device as well with the name of lifung. com it can hurt the center competency of the business through which it was generating revenue. And this can outclass or cannibalize the company's traditional way or functions and business. Besides this, one of the main distinguishing features of Li & Fung was that it was centering more on traditional solutions to sell the products however, this focus in addition has been altered and it would change the overall organizational culture and its strategies. Besides this, employees would need to learn new methods and new ways to do the business enterprise and they have to be trained again. So it might create a mess for the employees and the management of the company. Thus, new challenges would be encountered by the business and this new challenging situation can be considered a threat for the company as it could injured its customer bottom and its current service quality.

Besides this, the other menace faced by Li & Fung is the fact that the company has started out their online business to cope up with the industry style however, the success of web business model created by the business is uncertain as it is targeting small and mid-sized businesses (SMEs). As the company has not been involved in conducting business online therefore Li & Fung doesn't have the expertise and people to control this rising industry trend and therefore the future of the company is a huge question make.

Strategic Organizational Alternatives:

The possible strategic organizational alternatives which can be thought for as formulating beneficial and profitable future strategies are:

  • The company can convert its offline business to the online business.
  • The company can operate with both business models i. e. traditional offline model and new idea of online business that may complement one another.
  • Another proper option is the fact company offers different business models for different focus on markets according with their needs and requirements.
  • The company can require employees in the change process and can execute learning and training programs in order to make the procedure of change clean.

The first three strategies are mutually exclusive and company must decide on any one of it. If company decides to convert its offline business to the online business you can find possibility of huge cost chopping and large profit margins but the company has to work on building an completely new image in your brain of consumers. At the moment the company is being positioned and named a normal old business model company.

The second strategy foster that online business can match the offline business of the company this again provides an opportunity to compete with the business enterprise to business online companies but this can result in increasing costs of operations.

The third strategy of presenting different business models for different focus on markets can help the company to develop and boost the market size and business but this can result in cannibalization of the company's traditional offline business model.

The fourth strategy is not mutually exclusive and company will have to incorporate this strategy will any strategy it decides to implement.

Scenarios:

The different environmental and organizational cases that can be faced by the business are:

  • The business to online business companies outclass the business's offline services. You can find very little probability of probability of this event to occur because of the efficiency and competitive advantage Li & Fung has generated on the market.
  • The inability of the online venture of the business with the name of lifung. com. This scenario also has little or no possibility because the company did proper research about this decision.
  • The failure or collapse of the tech support team and basis required for starting web business. There's a possibility of this event because the company has joined into deal with Castling group for the complex knowledge and the staff of Li & Fung is untrained. If at any later stage you can find problem or issues in the agreement or the agreement is terminated the business will be facing problem on part of technical expertise.

Conclusion:

It is necessary and mandatory for companies to change and adjust themselves in line with the changing conditions and circumstances. Same is the situation with Li & Fung, the business is successfully operating corresponding to its traditional old business design but the introduction of new internet technology has posed serious risk to the competitiveness of the business.

In order to operate profitability and remain competitive on the market the company must incorporate the new technology into its businesses and have to formulate not only protective but also offensive strategies to wthhold the market position and increase the market talk about.

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