Ask fund managers covering the Hong Kong market about smart technology plays in these days of crashing dot-coms and you’re likely to hear one company name repeated often. Li & Fung has become the firm to watch for post-frenzy investors. Stock pickers say the trading firm’s strategy to use the Internet to improve efficiency and cater to new customers is a clear winner. Group managing director William K.L. Fung (MBA ’72) understands that e-commerce is revolutionary. “But it won’t change what our business is,” he insists. “We’re very clear about our core competence.”

Li & Fung’s forte is speedily sourcing garments and apparel for customers in the West. Its solid reputation is based on its ability to meet required specifications at a competitive price. Fung believes his company’s levelheaded approach to the IT revolution is a model for other “old economy” enterprises trying to get a handle on how to succeed in the new economy. “We look at how the Internet can enhance our business by improving communication with both our customers and our network of suppliers around the world,” he explains. A quality-control problem at a factory in Bangladesh can be solved quickly, for example, when managers are able to e-mail a digital picture of any questionable item to Hong Kong for an instant assessment.

But it is Li & Fung’s StudioDirect service that has investors buzzing. For a long time, the company has built a solid reputation among big multinational buyers and retailers who need private-label manufacturing of quality products. “Up to now, we haven’t been able to service the small customers, such as country clubs, in a cost-effective way,” says Fung. But with the Internet, the company can provide “limited customization,” aggregating several small orders into one large production run, while still allowing each of the customers some choice in fabric type, color, and logo embroidery. This capability has opened a new, fast-growing market segment for Li & Fung.

Innovation in management is something that company shareholders have come to expect from Fung and his elder brother, Victor, a former HBS faculty member who is currently the group’s chairman. Both recently cooperated with HBS faculty and researchers on a case study that was taught during the School’s joint executive education program with Tsinghua University (see sidebar on page 37). William attended the session. “I sat there listening to the discussion, and it helped me,” Fung relates. “We benefit a lot from sharing our ideas. It reminded me of the good old days when I was a student.” But this time, it was Fung who had something to teach about how an Asian company can become an e-commerce leader.

Post a Comment