Li & Fung Talks About the World Economy

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Simplicity seems to be a winning solution in a progressively complex world.

There is probably no single entity in the world that is more important to the toy industry than Hong Kong based Li & Fung.  As their website puts it, they are:  "…a leading consumer goods design, development, sourcing, and logistics company serving major retailers and brands around the world."  The company drives revenue of $18 plus billion US, are in 40 countries and 60% of their business is driven by the U.S.

Li & Fung is more than likely responsible for funneling consumer goods to just about any retailer you can imagine and that includes WalMart and Target.  And they are by no means only involved in toys.  Li & Fung may be an even bigger factor in clothing along with home furnishings and just about anything else you can imagine.

It is for that reason that I paid attention when I saw this Forbes headline: "Billionaire Brothers See No Turnaround For The Global Economy." The Fung brothers have seen their company go into a slight decline since a peek in 2011. As the article by Robert Olsen puts it:  The supplier of apparel and toys to retailers like Wal-Mart and Kohl's KSS -0.17% said its net profit fell 4.6% to $421 million in 2015, after reporting a drop of 11.8% the year before. The Hong Kong-based company said its revenue fell 2.4% to $18.8 billion."

Why is Li & Fung struggling and why are the concerned about global markets?  Well, for one thing, they say the global economy is going to continue to struggle in 2016.  In addition, the Fungs describe a retail environment that is undergoing major changes due to the rise of a Millennial generation that has different purchasing habits and the rise of cloud based shopping and mobile devices.

We don't have to worry about Li & Fung.  

They are smart and are reacting  by simplifying their business structure.  They have sold off their brand management and licensing business and are focusing on their core supply chain function.

That makes a great deal of sense to me.  Simplicity seems to be a winning solution in a progressively complex world.  It doesn't mean that you don't take on new initiatives but you make sure that they all augment the company's core strengths and serve the business model.  

We all would probably do well  to consider whether our business's have become too complex for the times.  

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