How can Li Ning beat Nike in Europe? Essay Sample
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Introduction of TOPIC
Li Ning Company Limited is one of the leading sports brand companies in China, headquartered in Beijing. In addition to its core Li Ning brand, the Group also manufactures, develops, markets, distributes and/or sells sports products under several other brands. Mr. Li Ning, is the founder of the Li Ning brand and was one of the most outstanding athletes in the 20th century. Li Ning’s main mission is to create a breakthrough through sports, by inspiring people’s desire and power. Li Ning’s vision is to be a leading brand in the sports good industry. Li Ning developed into an established and well-known brand within the Chinese market. As the Chinese sportswear market grows, the board of directors of Li Ning were not very interested in expanding into oversea markets, as there was still a lot of gain within the domestic market. This resulted in a defensive strategy in order to protect the position against competitors from Li Ning within the domestic market. The majority of Li Ning’s market is focused on China.
Li Ning has to start gaining more brand awareness because the Chinese consumers continues to move into larger cities, develop urban lifestyles, and trade up old products for new ones. The competitors are Nike, Adidas, Reebok and Anta. Li Ning is better than the competition because Li Ning is fitted with the knowledge about the Chinese market, this knowledge contains consumer needs, marketing and supplies. Li Ning mainly focuses on sportive people in the second- and third-tier of China. Li Ning changes its brand identity and because of that there’s a growing customer confusion about the target group. Li Ning has a chance against their competitors, because in China there are over 600 million people under the age of 24, this could be a large target group for Li Ning since this is an age group who practices sports a lot. The buying power in Europe has decreased but Li Ning can anticipate on this trend with their cheap product. The Chinese culture is much different than the European culture.
This makes it hard for the Europeans to connect to the brand. Li Nings financial situation is very strong and shows a growth each year, they are even forecasted to hold on to this growth in the coming years. A strength of Li Ning is that they are much cheaper than competitors while still projecting the same trendy image. Li Ning established a franchise system which covers even the most remote regions within China. Due to this channel penetration, that mainly focusses on second and third tier cities, they have a competitive advantage in terms of distribution. Up till now Li Nings international competitors are located only in the bigger cities of China, and are not able to reach out smaller cities. Li Ning products are somewhat more expensive than those of domestic competitors. Nike and Adidas are expanding to smaller cities, Li Ning’s biggest market share they should be aware of that. Li Ning is not clear in where they want to focus on so Li Ning should try to link their brand idea, then it can become a basis for enduring loyalty.
Their products are cheaper so that should be emphasized, because that’s an important buying aspect for the target group. They should establish their quality and create a trendier brand. We think that Li Ning needs to try to expand into a country near to China. There are several reasons for this. First of all, people in the South East part of Asia are familiar with the brand Li Ning so they will be more likely to buy the clothing of them. In addition to this, Li Ning has a lot of knowledge about the Asian culture and this plays an essential role in the buying process of the customers. We need to expand into a country which has a strong economy and which the sport running and/or badminton are popular as these are the main sports for Li Ning. The country which complied with these demands is Indonesia.
The price strategy will remain the same as in China, meaning that Li Ning will operate at the higher end of the segment. They also need to gain more market share in the first tier cities. We believe that they can obtain this by making more advantage of their very impressive distribution network and their knowledge about the Asian culture. They should also build a digital ecosystem to improve traffic through different platforms and to increase the time spend inside the brand channels of communication. Also they should facilitate every interaction with digital channels through links, buttons and Twitter/Facebook connects. There should be no massive invest in event/media like the Superbowl but repetition in leads mind throughout a presence in every channel. It is important to stick to an agreed strategy so that there is 1 use per channel for a greater message clarity.
We are 4 excellence students of the Hogeschool van Amsterdam, and we are going to advice Li Ning. Our mainly goal is to find an answer to this question: How can Li Ning beat Nike in Europe. To answer this question we are going to make a SWOT analysis to gather information about the current strengths and weaknesses of Li Ning. To make a SWOT we are going to make an external analyse, internal analyse. With the outcome of the SWOT we make a recommendation to LI Ning how to beat Nike in Europe.
1 Current situation
1.1 Description Li Ning and Distribution
Li Ning Company Limited is one of the leading sports brand companies in China, mainly providing sporting goods including footwear, apparel, equipment and accessories for professional and leisure purposes primarily under the LI-NING brand. Headquartered in Beijing, the Group has brand marketing, research and development, design, manufacturing, distribution and retail capabilities. It has established an extensive supply chain management system and a retail distribution network in China. In addition to its core LI-NING brand, the Group also manufactures, develops, markets, distributes and/or sells sports products under several other brands, including Double Happiness (table tennis), AIGLE (outdoor sports) and Lotto (sports fashion) which are either self-owned by, licensed to or operated through joint ventures with third parties of, the Group. (Li Ning , 2014)
1.2 Organizational structure
This is Li Ning’s organization structure, with Mr. Li Ning as Executive director.
Mr. LI Ning, aged 51, is the founder of the LI-NING brand and the Group’s Executive Chairman and an executive Director of the Group. Mr. Li is one of the most outstanding athletes in the 20th century. In the 6th World Cup Gymnastics Competition in 1982, Mr. Li unprecedentedly won six gold medals in men’s artistic gymnastics positions with Germanybasedevents and was named the “Prince of Gymnastics” in the PRC. In the 23rd Los Angeles Olympic Games in 1984, Mr. Li won three gold, two silver and one bronze medals, making him the athlete winning the most medals of that Olympic Games.
In 1987, Mr. Li became the only Asian member of the Athlete’s Commission of the International Olympic Committee. From 1993 to 2000, Mr. Li served as a member of the Men’s Artistic Gymnastics Technical Committee of the Federation Internationale De Gymnastique. (Li Ning, 2014) He is currently an honorary member of the Federation Internationale De Gymnastique. In 1999, Mr. Li was voted one of the “World’s Most Excellent Athletes in the 20th Century” by the World Sports Correspondent Association. (Li Ning , 2014)
1.4 Company size
Li Ning Company limited have around 1001-5000 employees, their core branded products are: running, basketball, fitness, tennis, soccer, table tennis and badminton. Li Ning has in more than 1800 cities in China more than 7000 stores. Li Ning’s revenue was in 2008 $983 Million.
Li Ning’s main mission is to create a breakthrough through sports, by inspire people’s desire and power.
Li Ning’s vision is the be a leading brand in the sports good industry
1.7 Core values:
Li Ning attach value on the following points:
– live for dream
– Integrity and commitment
– We culture
– Achieving excellences
– Consumer oriented
Short term: 1 year
Short term: Increase revenue by 555,000,000.
Reduce the amount of business which Li Ning has in China from 98% to 90% Gain 10% market share in Indonesia
Gain 10% market share in China’s first tier cities
Long term: 1-3 years
Increase revenue by RMB 2,000,000,000
From the total amount of business Li Ning has, at least 25% should be abroad Gain at least 35% market share in Indonesia
Gain 30% market share in Beijing and Shanghai
2 Problem definition
Li Ning has experienced growth since it was founded, but only in their domestic market. Li Ning is faced with very important decisions that will need to be made in the coming years in order to continue to grow. Li Ning developed into an established and well-known brand within the Chinese market, moreover it claims to take account for 50% of the Chinese sportswear market sales. As the Chinese sportswear market grow with staggering number on a year bases, the board of directors of Li Ning were not very interested in expanding into oversea markets, as there was still a lot of gain within the domestic market. Besides that, many people within the company were reluctant towards committing its resources to internationalization, as they felt that in order to fight back competition in the Chinese market all resources were required.
This resulted in a defensive strategy in order to protect the position of Li Ning within the domestic market, as companies like Adidas and Nike made successful attempts to expand into the Chinese market. Up until now varies attempts were made to turn Li Ning into an international brand, however these attempts were not made with full support and maximum effort, so have not resulted in a profitable world-wide position. The board of directors will have to decide whether they are ready for big international steps or should they continue to just focus on the Chinese market? Moreover, if they decide to internationalize, how should they do it? (Wikipedia, 2014)
3 External analysis
3.1 Market analysis
The majority of Li Ning’s market is focused on China. This is going to increase because of the growing middle class which has more disposable income. Also the sales number in Africa and the Middle-East are rising. But the growth in the regions Japan, North America and Western-Europe barely grows as much as the overall economy. Li Ning has to take into account whether or not to only aim for the developing countries or also for the developed ones. The sales might have become stagnant, the use of them is on the rise, especially in the running, walking/hiking, swimming, cycling and soccer market. This is an opportunity for Li Ning since their main product categories is running. 3.2 Competitor analysis
Li Ning’s market was mostly focused on the local market. In 2008 99% of their business was done in China. But this started to change when the spending power of middle-class consumers in China and their appetite for foreign brand started to grow. Also their interest in sport started to shift to basketball and football. This shift in the Chinese market attracted overseas companies as Nike and Adidas. Li Ning has to start gaining more brand awareness because the Chinese consumers continue to move into larger cities, develop urban lifestyles, and trade up old products for new ones. Competitor 1: Nike ‘Just do it’ A global marketer of athletic equipment, apparel and footwear. The following brands are also under the company: Converse, Umbro, Hurly and Cole Haan. The majority of the manufacturing of their products happens in Asian countries as China and Vietnam. Besides equipment, apparel and footwear, they also produce swimwear, children’s apparel, training equipment, golf accessories, electronic devices and eyewear. As an organizational unit, China is important for Nikes long-term competitiveness and growth. (Nike, 2014)
tor 2: Adidas ‘Impossible is Nothing’ Adidas is one of the global leaders in the industry of
Why are they better than the competition?
Li Ning is better than the competition because Li Ning is fitted with the knowledge about the Chinese market, the knowledge contains consumer needs, marketing and supplies. With this knowledge Li Ning reinforces their competition position compared to Nike and Adidas.
3.3 Customer analysis
Li Ning mainly focuses on sportive people in the second- and third-tier of China. So that means that their market is segmented geographically. The reason why they don’t focus on the first-tier is because the people in the big cities have a different lifestyle, are relatively younger and are more attracted to brands like Nike and Adidas. They want to develop a youthful look that also appeals to older audiences.
China has changed a lot since the communistic era. It has become more Western and they have profiled themselves as an economic giant. The new generation of this time are old enough to buy their own clothes. So Li Ning is hoping to appeal this post-1990 born generation. But they have to persist the modern brand image. They tried it with slogans like ‘make the change’ but it didn’t excite the target audience and even alienated the older costumers. Because of the changing brand identity, there’s a growing customer confusion about who the target audience is. But they have a chance, because in China there are over 600 million people under the age of 24, this could be a large target group for Li Ning since this is an age group who practices sports a lot.
3.4 Economics analysis
In this paragraph you can find information about trends and developments on the European market. The following trends will be discussed: consumer confidence and buying power There are a few trends where Li Ning can respond to on the European market, to beat Nike. The first trend is the consumer confidence. You can describe consumer confidence as the confidence that the consumer have in economic developments. Consumer confidence corresponds with the buying power of consumers, the more confidence they have, the more willing they are to spend money. If Li Ning looks at the consumer confidence of the past few years, Li Ning can concludes that the consumer confidence is rising at a low rate. The average consumer confidence rate is around -12, 5 %. While the consumer confidence rate now is around -10%. (European commission, 2014) If Li Ning want to enter the European market, they have to think about this trend.
Li Ning also has to focus on the buying power of the European consumers. In the recent years the buying power decreases in the European countries. This does not have to mean that the European citizens spend less money than before, but it is a negative trend for Li Ning in general. (Europa nu, 2012) Li Ning also can anticipate on this trend with their cheap product, to beat Nike. Nike has in general more expensive products.
3.5 Ecological analysis
Corporate social responsibility is a trend of the last 20 years, it’s has it focus on 3 components. The 3 components in this trend are: people, planet and profit. The first p for people will look after the work circumstances of the employees, like human rights, working environment and code of conducts. The second p for planet will take care of the durable trading and activities in the corporation. Collection of waste to separate plastic is an example of durable business activities, or the use of durable resources for the production. The last p of profit contains, not only generating financial profit what is usual for Li Ning, but also the economical outcomes of their actions. A good example is creating work employment, or sponsor activities. If Li Ning wants to enter the European market to beat Nike, they have to improve their CSR policy, otherwise Nike will beat them. (Mkb servicedesk , 2014)
3.6 Technological analysis
Li Ning offers products for basketball, running fitness, football, tennis and general exercise. Due to technological improvements in footwear the last few years, it has become an increasingly important product category. The quality of Li Ning’s products is comparable to western competitors. Technological advancements are important since customers would like to have the best excel
at their sports.
3.7 Demographical analysis
The population of Europe in 2014 is estimated to be about 741.2 million people, Europe is after Asia and Africa the third most populous continent. (Population of Europe 2014, 2014) Population ageing Europe (Hilderink HBM (RIVM), 2014)
Only 7% of the world population lives in the EU but they have around 20% of all the world trades in their hands. About two third of the total EU trade is trade is between EU-countries. (European commission , 2014) (Union, 2011)
There are big differences in incomes between European countries, therefore Li Ning should look at the average incomes of a country before they can introduce their products. Countries with high incomes could have higher demands for quality and that’s something Lining should be aware of. (Dev Data Worldbank, 2014)
3.8 Social analysis
Li Ning is a company where the culture is mainly focused on the Chinese market. (Dalton, Global Branding: Li Ning vs. Nike, 2009) Their brand stands for ‘by China, for China’. (Unknown, Li-ning retail, 2009) The Chinese culture is much different than the European culture. This makes it hard for the Europeans to connect to the brand. They would rather connect to a sport apparel a shoe brand that’s related to their own culture. Besides, the European urban teenagers differ from the Chinese urban teenagers, because of the environment they grow up and the norm and values they have.
Li Ning already tries to compete by using Western athletes for their campaigns. But people need to have a clear view of the value, design and the overall satisfying retail experience. Li Ning is not clear in where they want to focus on. Their problem is rooted is rooted in its lack of confidence as a legitimate sportswear company, thus it has no solid foundation for its identity. (Dalton, Global Branding: Li Ning vs. Nike, 2009) It’s difficult to say whether it’s a trend brand for urban teenagers or a bona fide performance shoemaker. And they won’t clear that up by creating an image of global reach. Li Ning should try to link their brand idea, so it becomes a basis for enduring loyalty.
3.9 Political analysis
The EU had recognized the social value of sport and published a Code of Sports Ethics. (Zhang, 2012) The basic principle of the Code of Sports Ethics is that ethical considerations leading to fair play are integral, and not optional elements, of all sports activity, sports policy and management, and apply to all levels of ability and commitment, including recreational as well as competitive sport. (Unknown, psysical education and sport, 2014) This means that Li Ning is free to access the European market. It gives them the opportunity to compete with big brands like Nike and Adidas. There’s also an increasing shift going on in European countries towards preventative action to reduced diseases and premature death caused by the unhealthy lifestyle. (Zhang, 2012) Because of this political point of view there will be a greater demand for sportswear. It gives Li Ning the chance to respond on that.
4 Internal analysis
4.1 Financial situation
Li Nings financial situation is very strong and shows a growth each year, they are even forecasted to hold on to this growth in the coming years. Li Nings revenue has increased form 1,87,102 U.S dollars to 6,690,073 U.S Dollar over the period 2004-2008, this is a growth of 356,2% in revenue. Li Ning improved its equity ratio of the same period as Total assets in 2008 accounted for 4,336,929 U.S Dollars of which the equity holder’s equity amounted 1,896,413 U.S Dollars, while in 2004 Total assets were just 1481,431 U.S Dollars with an equity holders of 1,010,017. (Datatopics Worldbank, 2014)
4.2 Market position
What is the USP?
The Group adhered to our vision of building a core Li-Ning brand and repositioned our brand value proposition with authenticity and unique marketing assets, in order to achieve the best value-price equilibrium and capture the growing middle-class market. We focused on the integration of sports functionality and design in our products, while enhancing the overall retail experience for Li-Ning consumers. We also leveraged the increasing rate of sports participation in China and moved up the value chain by focusing on the five fastest growing sports categories, namely, basketball, running, badminton, training and sports life. (Fund, 2014)
What makes them special?
Li Ning, Adidas and Nike sells very similar kind of products. Li Ning doesn’t really have a strong point of distinction. The only thing what makes them special is that they have a big market share in China which makes them the market leader. Besides, their products are cheaper than Nikes and Adidas’. (Dev Data Worldbank, 2014)
Li Ning competes with brands like Nike, Adidas en Reebok. Li Ning offers products of the same high quality as their competitors. Li Ning has multiple R&D centres where they develop new and trendy products. Their product lines have a trendy and youthful image, comparable to Nike and Adidas for example. Li Ning differentiates in terms of pricing. They are much cheaper while still projecting the same trendy image.
4.3 Competitive Advantage
The major advantage Li Ning has is years of experience and knowledge of the Chinese Sportswear market. The big cultural differences between the Chinese and Western markets lead to an advantage for Li Ning. In terms of e.g. consumer buying behaviour and sociological factors, Li Ning has a better understanding of the market. Li Ning established a franchise system which covers even the most remote regions within China. Due to this channel penetration, that mainly focusses on second and third tier cities, they have a competitive advantage in terms of distribution. Although these cities have a lower income level, they do have the highest grow potential. Up till now Li Nings international competitors are located only in the bigger cities of China, and are not able to reach out smaller cities. (The company inside, 2014)
Which of the 5P’s are relevant?
Price: For the Chinese average Li Ning’s products are quite expensive. Although when you compare them to their direct competitors they are a lot cheaper. Li Ning strategy in terms of pricing is to offer the same high-quality and trendy products as their competitors do but for a lot less money (The company inside, 2014) Place: Li Ning operates on a franchise base and as of June 2009 it had 6809 retail stores, of which 130 distributers operated in 6464 stores. Li Ning distributes in over 15 provinces all over China. Where the main international competitors only sell in first tier cities like Beijing and Shanghai, Li Ning effectively also sells in second tier and third tier cities. Li Ning has an excellent distribution channel throughout China. Sales made to franchise distributors make up for 88.1% of Li Ning’s revenue, while only 7.8% is made through sales made by stores owned and managed by Li Ning. (Li Ning , 2014)
It reliance on their home market, while they try to create an illusion of being an global player (2) Li Ning doesn’t have a strong brand image for international competition (2) Li Ning products are somewhat more expensive than those of domestic competitors (3)
Li Ning is China’s No. 1 sport good brand (1)
Firm grip of consumers in second- and third-tier cities (3)
Quality of products in on par with those of Adidas, Nike and Reebok, yet the prices are much lower (3) On the domestic market the quality of their products is relatively much higher(s) (2) Is known for making efficient promotions, i.e. Olympic games, sponsoring of individual sports players (1)
Li Ning has little to no market in first tier cities like Beijing and Shanghai (3) Internationalization can lead to becoming one of the 5 biggest
global sporting goods brand by 2018 (3)
Nike and Adidas are expanding to smaller cities, Li Ning’s biggest market share (3) Basketball and Football are firmly in the hands of Nike and Adidas globally (3)
How to beat Nike in Europa
If they want to beat Nike, they should decide what they want to be as a company, being a trendy brand or more a bona fide performance shoemaker. They should make a clearer brand identity so they can see what their real target group is. They need to stop creating a brand that looks similar like Nike and start focusing on what their real Unique Selling Proposition is. Their products are cheaper so that should be emphasized, because that’s an important buying aspect for the target group. They should establish their quality and create a trendier brand. Li Ning also needs the knowledge of the European consumers.
The decision makers of Li Ning have to decide over some very important decisions. The most important decision which Li Ning faced was whether to expand their market towards Europa and the USA or to operate in the Chinese market and in the countries which are located in the South of Asia. We came to the conclusion that Li Ning is doing well in their domestic market. But there is more than just their country. We think that Li Ning needs to try to expand into a country near to China. There are several reasons for this. First of all, people in the South East part of Asia are familiar with the brand Li Ning so they will be more likely to buy the clothing of them. In addition to this, Li Ning has a lot of knowledge about the Asian culture and this plays an essential role in the buying process of the customers. Of course not any country in South East Asia will be successful. We need to expand into a country which has a strong economy and which the sport running and/or badminton are popular as these are the main sports for Li Ning.
The country which complied with these demands is Indonesia. They have a good economy but more important, the number one sport is badminton. There are 228 million people living in Indonesia so this market offers great potential. The price strategy will remain the same as in China, meaning that Li Ning will operate at the higher end of the segment. This will be perceived by the customers in a positive way and they will believe that we offer a higher quality product. Indonesia consist of 20.000 island so it will come in handy to create a joint venture with League. By doing so, Li Ning will have access to a customer base which will make it easier to attract important badminton players which will promote Li Ning clothing. Not only should Li Ning expand to Indonesia, they also need to gain more market share in the first tier cities. We believe that they can obtain this by making more advantage of their very impressive distribution network and their knowledge about the Asian culture.
Nike and Adidas are investing intensively into cities such as Beijing and Shanghai. But Nike and Adidas haven’t been operating in the Chinese market as long as Li Ning has done. Therefore, the knowledge and as started before, the distribution network, should help Li Ning to gain a larger market share in the first tier cities. They should also build a digital ecosystem to improve traffic through different platforms and to increase the time spend inside the brand channels of communication. Also they should facilitate every interaction with digital channels through links, buttons and Twitter/Facebook connects. It would be handful to aggregate information into a database and consolidate them to push personalized offers. There should be no massive invest in event/media like the superbowl but repetition in leads mind throughout a presence in every channel. It is important to stick to an agreed strategy so that there is 1 use per channel for a greater message clarity.
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