HKUST Business School Magazine

Re-Skilling Re-Education Change Resilience Diversification Top Five Tips on Managing Change Realize that not changing something is also a Decision. Understand that a good way to deal with change is Diversification and building Resilience over time. Always have a Long-Term View. You can’t stop technological progress, so you need to adjust your employees to cope with changes and their job parameters instead. Investing in Re-education and Re-skilling is always wise. Realize that the biggest skill you need to develop is how to manage Change. Biz@HKUST Biz@HKUST 6 7 // Cover // Thought Leader But Fung says that the geopolitical tensions were not unforeseen. Even before the breakdown of Sino-US relations, the international trade order was slowly morphing. “The multilateral trade order built up over decades by the WTO was changing. Trade relations like Free Trade Agreements (FTAs) were turning more bilateral,” he explains. “The multilateral institutions and the framework that served us so well for so many years became unwieldy and less welcomed by trading countries, and global trade was blamed for unemployment and non-equitable distribution of income.” Competitive advantage Fung says this has more to do with the market driven capitalistic system than the multilateral frameworks themselves. More benefits were going to the exporting countries with lower labor costs than to the developed countries that rely on imports. One of the main beneficiaries of global trade was China. As the world slowly began to shift towards more bilateral systems of trade relationships, it was easy to see how the biggest importer and biggest exporter would eventually confront each other over issues such as jobs. Fung saw it coming early, noting that the current US- China tension is an example of the theory of comparative advantage playing out. “It’s just much more serious than purely economics now. The trade war is turning into a technology war, and this has further developed into a competitive scenario about dominance, and who is the ‘top dog’ in the world,” he says. This geopolitical event really rocked the boat for supply chains when high punitive tariffs were placed on a large segment of China’s exports by the US. However, Fung says many companies have been able to adjust to these changes because of rules about “Country of Origin” – where something is determined to have been made. Country of origin Fung says that the rules surrounding Country of Origin are archaic at best. “It’s not based on simple concepts like value-added, but is a byzantine arrangement that is primarily based on ‘major transformation’ and requires detailed knowledge of production processes, to determine a product’s Country of Origin”, he says. Under such rules of origin, raw materials and parts can be exported to another country for final assembly so that the Country of Origin is said to be in the country where the item was produced or assembled, rather than where the raw materials or parts came from. “All you need is a system that can manage this process, so China, rather than exporting to America, is now exporting a lot of components and raw materials to Southeast Asia,” Fung says. Everyone in the business is doing the same because “we are forced to do that,” he says. For this reason, Li & Fung’s sheer size and global presence in over 50 countries has worked to its advantage in the current geopolitical storm. Again, Fung attributes this to the company’s comprehensive networks and its historical experience of having to constantly shift its production chain to cater to changing global economics and trade restrictions. “We never dismantled our network because we saw this shift, this moveable feast idea,” he says. “We are coping with this geopolitical situation well because of our history of dealing with such shifts in production. Due to our experience around ever-changing trade rules, we kept our network big, and that is now serving us in good stead,” he says. Li & Fung is no stranger to change, and the latest geopolitical developments are but one of many storms it will have weathered, Fung says. Ultimately, Fung says, the secret of survival is always about managing change.