Its a very good bet that as you read this, youre wearing something manufactured in Asia. And

Itʼs a very good bet that as you read this, youʼre wearing something manufactured in Asia. And if you are, itʼs also a good bet that the Hong Kong company Li & Fung was involved in getting your garment designed, produced, and shipped to your local store. From Leviʼs to Walmart, Li & Fung is a critical conduit from factories around the world to the shopping mall nearest you.

The company was founded in 1906 in Guangzhou, China. According to Victor Fung, the companyʼs chairman, his grandfatherʼs “value  added” was that he spoke English, which allowed him to serve as an interpreter in business deals between Chinese and foreigners. When Maoʼs Communist Party seized control in mainland China, the company moved to Hong Kong. As Hong Kongʼs market economy took off during the 1960s and 1970s, Li & Fung grew as an export broker, bringing together Hong Kong manufacturers and foreign buyers........

QUESTIONS

1. Why do you think it was profitable for Li & Fung to go beyond brokering exports to becoming a supply chain manager, breaking down the production process and sourcing the inputs from various suppliers across many countries? 

2. What principle do you think underlies Li & Fung’s decisions on how to allocate production of a good’s inputs and its final assembly among various countries?

3. Why do you think a retailer prefers to have Li & Fung arrange international production of its jeans rather than purchase them directly from a jeans manufacturer in mainland China? 

4. What is the source of Li & Fung’s success? Is it based on human capital, on ownership of a natural resource, or on ownership of capital?