Li Ning Company Limited

Question 1

Li Ning Company Limited is considered as one of the leading companies in the sports brand industry that have successfully climbed out of the local market and emerged as a strong competitor in the international sportswear market. Its ongoing success as well as its existing weaknesses may contribute to its ability in the successful expansion of their brand successfully in the overseas market.

One of Li Ning's core strength lies in its leadership and management team. With a founder who himself holds an impressive record of 106 gold medals in international competitions and was once voted as one of the “World's Most Excellent Athletes in the 20th Century” by the World Sports Correspondent Association, Li Ning holds a reputation and credibility to the sportswear that the company is producing, both in the local and overseas setting. Furthermore, the seat of directors consists of many talents that contribute to the understanding of consumer markets, such as Mr. ZHANG Zhi Yong, as well as managing directors of private equity investment firms that deal with investment profiles and operations in emerging markets countries like Singapore, Japan, Taiwan, Australia, Philippines, India and Hong Kong. One of its non-executive members, Mr. CHU Wah Hui, also holds an impressive record as a chairman to PepsiCo and has had a history of management positions in U.S. multinational companies such as, Quaker Oats, HJ Heinz, Whirlpool and Monsanto. With this impressive pool of both local and overseas talent, Li Ning has primed itself to be fully capable in expanding its brand internationally to various countries.

Li Ning has dedicated its resources into research and development as part of their growing industry in sportswear. Its R&D centres, located in different parts of the world (China, Hong Kong, and US), demonstrated the company's diversity in gaining both local and foreign expertise in continually developing its sportswear products. This diversity of talent is one of the company's strengths as it allows for continual turnover of new and improved creative design and development for its products that are current to the growing market of consumers in different regions of the world. Their R&D achievements to date include anti- shock technology footwear and improved moisture-absorption and ventilation apparel. One of its more promising R&D developments is in its basketball shoes, where its design was named the “Most Successful Product Design” by the prestigious and internationally acclaimed Fortune Magazine, and was awarded as “China Innovative Design Red Star Award”. This achievement marks a milestone in the company's successful advancement in its growing expansion into the overseas market. Furthermore, the ability of Li Ning to manufacture high quality sportswear items using low cost resources, adds a distinct advantage over international sportswear companies such as Nike or Adidas.

In recent years, Li Ning was able to establish collaborations with overseas sports companies AIGLE International S.A. and Lotto Sport Italian, giving Li Ning exclusive rights to manufacture, market, distribute and sell their products in China. These partnerships add to the international profile of the the Li Ning brand in both local and overseas markets. Furthermore, with Li Ning's track record in attaining collaborations with international companies, it is expected that the company will be successful in attaining similar collaborations with other international sportwear companies. With Li Ning's ability in successfully producing, marketing and selling other international sportwear brands in China, the company is able to build its reputation of reliabilty and efficiency in meeting the standards and recognition in the international market. Furthermore, Li Ning is now well-positioned in securing the overseas markets via its international collaborations in these countries.

As Li Ning is focused on producing different types of sportswear goods, it may have a tendency to operate as a multifunctional sports warehouse, where its main resources are spread too thinly with too many different product profiles to manage and manufacture. As such, Li Ning should strive to avoid being perceived in the international markets as a low-cost multipurpose sportswear shop, such as Kmart and Wal-Mart in the USA. Instead of focusing all of its recourses into producing as many sportswear products as possible, Li Ning should try to channel their resources in refining or improving existing products that are the most marketable in the local and international markets. This will give Li Ning products a distinctive and unique identity on which they may better compete with its overseas competitors.

There is a lack of brand recognition of Li Ning products in the sports industry, both on the level of consumers as well as professional sportsmen. For example, consumers worldwide are able to associate sports brand Adidas to David Beckham (soccer products) and Nike to Roger Federer (tennis products). However, to date, Li Ning still lacks the ability to advertise its products to any particular international celebrity sportsperson to makes its products easily identifiable to the international communities. Since celebrity status helps to create consumers' familiarity with a product [6], Li Ning should try to invest part of its resources in acquiring popular or rising sportsperson to advertise its products; this in turn will help to market their products in its overseas expansion.

Li Ning seems to lack specific directional advertising strategies to cater to its international consumers. The company has focused its marketing mainly in its homeland country. For example, Li Ning was a major sponsor for China's ping-pong players, divers, gymnasts and sharpshooters at the Beijing Olympics Games. However, as these sponsorships were mainly for local sportspersons, it does not expose Li Ning's products to the consumers worldwide. Another example can be seen in the celebrity basketball star Shaquille O'Neal, who agreed to endorse Li Ning shoes, as long as the shoes can be worn without its company logo in the US. Such weak attempts to advertise Li Ning products to the international consumers can be perceived as ineffective and a waste of money. Furthermore, it downgrades the reputation of the Li Ning brand to its consumers.

Question 2

External environment analysis comprises of both opportunities and threats faced by a company. Opportunities are the external conditions which help to reach the objective while threats are the external conditions which do damage to the objective. Both are affected by macroenvironmental and microenvironmental forces. Examples of macroenvironmental forces are politico-legal, environmental, social-cultural and technological factors while microenvironmental forcers include competitors, customers and dealers. (Kolter, P. et al, 2009, Pg 56)

Li Ning managed to obtain opportunities to go into joint ventures with Italian sports fashion brand, Lotto and French sports brand, AIGLE. By these joint ventures, it leverages on Lotto's and AIGLE's marketing efforts to break into both the European and Chinese markets. AIGLE operates worldwide, mainly focusing on France itself, Europe and Asia. Its products are mainly for extreme sports and thus the durability is assured. Joining forces with these two brands of different backgrounds, Li Ning is able to portray a stronger image and let the Europe market accept it more easily. From there, Li Ning would have built a stronger background and reputation allowing it to break into the American market as well. Furthermore, Li Ning is able to exchange expertise with these foreign brands and learn how these foreign companies portray their image to the markets worldwide.

Li Ning itself is still developing its market. With the help and accessibility of the internet, Li Ning has become more globally exposed to customers looking for products which fit the criteria Li Ning possesses. With a few websites set up, it caters to the different needs of consumers or dealers. Users of internet can find additional information they need about Li Ning's products and get to know Li Ning better. In addition, Li Ning caters to the convenience of these consumers in making comparisons of their products online.

Li Ning also manages to outsource its manufacturing operations and distribution to franchised agents and at the same time, manages its own retail stores selling exclusively Li Ning products. Without having to stretch over limited capital and manpower by outsourcing to other companies, Li Ning can focus on its Research & Development as well as managing the sales in its retail stores. Another advantage of outsourcing is that these franchised companies offer free ‘advertising' for Li Ning. These companies would need to ensure they themselves are also earning profits. Thus, they will also need to push further to obtain better sales of the products.

Despite all these opportunities, threats can still bring down Li Ning. One of the threats Li Ning face is the constant threat of new entrants in the market worldwide. New and upcoming brands will toughen the competition and eat into the market of already existing brands. As the market size is limited, Li Ning has to constantly innovate and find new ways to attract and retain more loyal customers.

Recently there is a slump in the economy due to economic crisis. People's spending power or disposable income might be affected and they might purchase less recreational products. This is especially so in the US because the US markets has been greatly hit and unemployment rate has increased dramatically. The recovery from the economic crisis is still uncertain. By going global during this period, Li Ning will be taking a risk and will need to carefully decide on their strategies. For example, Li Ning needs to monitor the varying spending power of people in different countries and regions before settling on opening a retail store in a particular city. The annual gross income and standard of living of the city people also needs to be taken into consideration.

Consumers worldwide had been instilled with the mindset that Chinese products are of substandard quality and outdated as compared to American brands. This is because China is infamous for producing imitation goods. Thus, consumers do not have the confidence that a Chinese brand can outdo an American Nike or a German Adidas brand. Furthermore, the quality and durability of Li Ning products are unknown as not many people in the US own a Li Ning product. Thus, it is essential for Li Ning to further market their products to more consumers.

Question 3

The possible cultural, social and personal factors that will influence consumer buying behaviour for sports goods are (i) spokesman, (ii) healthy lifestyle, (iii) upcoming sales and promotion, (iv) the brand and (v) quality of the product.

One of the influencing social factors involves the spokesperson of Li Ning. As a spokesperson for the brand, he or she should be an artiste who can contribute a celebrity status towards the products and also exert an influence over the consumers. On a personal front, fans of the artiste will eagerly purchase the products in order to emulate their idol. An example of a spokesperson for Li Ning is Shaquille O'Neal of the Cleveland Cavaliers Basketball Team in the NBA. Singaporean fans of Shaquille O'Neal, who also have an interest in playing basketball, may consider purchasing Li Ning products after observing their favourite basketball star.

Another consideration to note would be healthy lifestyle. Government policies on promoting a healthy lifestyle of the citizens constitute a cultural factor in the design of a marketing program. For example, under the Health Promotion Board, the Government embarks on programmes to promote physical activities for a healthy lifestyle. The personal factor is that different people of different age groups will have different healthy lifestyle profiles. Li Ning will need to have different products to cater to these different age groups.

Thirdly, in upcoming sales and promotion in the marketing program, a cultural factor to take note is that different social classes will have different budgets in purchasing products. It is also a culture for Singaporeans to be ‘kiasu' as they do not want to lose out. Thus, no matter which social classes people belong to, they will look for upcoming special deals. On a personal factor, women are usually the ones looking for sales, and they buy products ranging from kids to men as they purchase mostly for their families. Therefore, Li Ning can consider discounts when designing a marketing program for Singapore.

Next, Singaporeans prefer branded goods. The upper social class would also rather purchase a much higher better quality of branded goods. This will link to social factors as a top executive in Singapore might not be proud to own Li Ning products, as compared to his counterpart in China, as the brand name is well known and familiar to the market there. Apart from that, the personal factor of these high-positioned people is their image consciousness. They would very likely not consider Li Ning when shopping for sports products.

Lastly, the quality of product does have a social impact on people as they would only be willing to pay more for products of good quality. As Li Ning can offer quality goods at a cheaper rate, this will undoubtedly attract people from all walks of life. The durability of Li Ning's products also means that it will be a brand known for its lasting products. Therefore, it is important for Li Ning to study the needs and wants of the locals before embarking on the market in Singapore.

Question 4

The first and foremost recommendation to the senior management of Li Ning to penetrate the global sports goods market is that Li Ning should participate in global events such as World Cup Soccer and sponsor a reputable team of players which stand a good chance of winning. This is to allow Li Ning to gain global exposure and bring up its brand name. Additionally, by the means of national or worldwide telecasts of the event, soccer fans will better associate the brand name to soccer. Such major events will undoubtedly grab worldwide attention and recognition. Thus, if Li Ning can successfully implement such a strategy, it will then have the chance to compete with other well-established brand names like Nike and Adidas and become a global brand name itself.

Before Li Ning can successfully penetrate the global sports goods markets, it has to create brand awareness in the markets where it is keen to penetrate. Li Ning might want to consider holding contests in those markets. For example, Li Ning may hold design contests for Li Ning apparel, and the winner from each and every market will get to see his/her work manufactured under the Li Ning brand. Meanwhile, Li Ning can co-sponsor a fashion show, and at the final stage of the fashion show, get people from all walks of life (from the young to the elderly) to showcase Li Ning apparel (short listed pieces from the contest), and get the audience to vote the winning piece. Those winning entries will then be manufactured as limited edition products, and will only be available for sale in the winner's market. (E.g. if the winner is from Sweden, then his/her design will only be marketed in Sweden). Winners of the contest may also be rewarded with a free one year supply of Li Ning apparel, and all participants of the contest will be given 20% discount voucher. At the same time, Li Ning can also scout for potential design talent and employ them. Another option would be to hold marketing events to present an athlete's lifestyle. In the case of Shaquille O'Neal, for example, Li Ning can use his celebrity status to go global in spreading the word on the game of basketball, and how his lifestyle revolves around basketball. For example, in Singapore, they can hold friendly basketball matches at Velocity and invite O' Neal to play. Li Ning can offer its own products as prizes. By this strategy, Li Ning can successfully create brand awareness and also get consumers to try its products.

Another recommendation is that Li Ning set up its own online retail store. Currently, Li Ning has two main websites, one of which focuses on introducing the brand, the partnerships with other foreign companies and the stock market situation. The other website is a catalogue of its products for consumers to browse through. However, the pictures are small and prices are not listed. It is recommended that Li Ning revamp this website to look more professionally and attractive so as to introduce online shopping to users. The availability of online shopping has its many inherent advantages. Firstly, internet users worldwide can easily access the page and buy items that they need and want. Secondly, exporting the product is usually not an issue. Usually, online shoppers are willing to pay for the shipping fees as the products they want are unavailable in their region and they like the uniqueness of owning such products. Thirdly, the website is already available, so instead of letting the website remain the way it is, it should revamp itself into an online shop that brings in revenue as well as traffic. To reach even more people worldwide, the website should also be made available in multiple languages. Fourthly, instead of outsourcing some of its products to other companies, Li Ning can sell directly to customers and thus, earn higher profits. Furthermore, Li Ning can also advertise on popular social networking websites such as ‘Facebook' or ‘Twitter'. Last, but not least, selling online requires less capital. Selling online allows Li Ning's products to be readily available worldwide, and this also lets it evaluate the market needs. They can also include a feedback option to ask shoppers about their thoughts and opinions on the products and also the process of buying online. They can also analyse which country their shoppers are usually from through the data obtained and consider these countries as a priority when expanding their business overseas.

Using a cautious approach, Li Ning should also consider expanding regionally before going global because of the lower risks involved and it also provides an opportunity for its staff to gain the relevant experience. It will be a boost if Li Ning is able to get the support from the Chinese government to provide it with the financial assistance to sustain its international operations. To gain market share overseas, Li Ning should export its products through international agents as these agents are familiar with their local practices and Li Ning need not have to worry about the cultural clashes and language barriers. The purpose of exporting is to establish a brand identity in overseas markets and not earn foreign currency. By exporting, Li Ning is also provided with the opportunity to understand consumer behavior. Once Li Ning has the confidence, it can try exporting directly to gain firsthand experience. With the experiences gained over the years, Li Ning should now consider setting up plants in the regional area and take this opportunity to train managers who will later be sent to plants located in different parts of the world to oversee operations. Employees play a part too in the success of a business. Li Ning should acknowledge the importance of having a local team to run its business (i.e. Americans to manage the US office), as they would have better understanding of their own markets and practices. After having established operations in the regional area, Li Ning can start to penetrate the markets in other regions. As such, Li Ning might want to build research and development centers, marketing and sales centers, manufacturing plants in Europe/US. By having a local manufacturing plant, Li Ning can avoid tariffs and save on transportation costs (cost of transporting goods from China). It is also important to have centers both domestically and internationally because of the consumers' changeable needs. And also what works well in one market might not work in another. So Li Ning has to be able to cater to the needs of the different markets efficiently. Li Ning should also grab the opportunities to merge or acquire other companies should there be any. Through mergers and acquisitions, Li Ning might gain valuable assets - technology, talents, and distribution channels which may aid its penetration in global markets.


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