Li Ning Company Limited Case Study Essay Example

Li Ning Company Limited Case Study Essay Li Ning is one of the world’s most profitable and biggest selling sports goods companies, yet it remains almost unknown outside China. Few sports enthusiasts or business analysts in Europe, or North America are familiar with the brand[i]. Li Ning takes its name from the company’s Chairman, a triple gold medal winning Olympic gymnast, who founded the sports goods company in 1989[ii]. It has a manufacturing near Beijing, a registered office in the Cayman Islands and since 2004 has been listed on the Hong Kong stock exchange. Li Ning specialises in sports shoe and apparel manufacture for what it sees as its five key sports: Basketball, tennis, running, football and fitness. It sells exclusively in The Peoples Republic of China but in 2008, China’s Olympic year, it is trying hard to develop an international identity. In 2007, 97. 6 per cent of sales were made using the Li Ning brand with Z-Do, an economy brand selling primarily via hypermarkets and Aigle (a joint venture with the French outdoor brand) making up the other 2. 4 per cent of sales. In 2007 it acquired a controlling interest in the Chinese table tennis company Double Happiness. We will write a custom essay sample on Li Ning Company Limited Case Study specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Li Ning Company Limited Case Study specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Li Ning Company Limited Case Study specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Company Performance Li Ning’s financial performance is very strong. For the year ending 31st December 2007, revenue was up 37 per cent, profits attributable to equity holders were up by 60 per cent on the previous year[iii]. Unsurprisingly with figures like these shares perform very well on the Hong Kong stock exchange[iv]. However, Li Ning has a problem. It is being out sold by its two big international competitors, Nike and Adidas in China and popularity among young Chinese consumers in the big cities is if anything in decline. Chinese students studying in the UK, (a great source of information when discussing this case) would much prefer to be seen wearing Nike, Adidas or Puma the top three international sports goods brands rather than Li Ning. Yet Li Ning sells large volumes of sports goods, especially in Northern and Western China and smaller urban centres, where value for money may be more important to consumers than international brand associations. Adidas and Nike are both making big efforts to grow their business in China in view of a predicted 71 per cent growth in demand for sporting goods (between 2007 and 2011)[v]. Both companies have opened branded stores in many Chinese cities, they have sponsored Chinese athletes and Chinese teams competing in the Olympics and both are trying to incorporate Chinese influences into designs of products aimed at the expanding Chinese market. Marketing Strategy In order to be more appealing to China’s trendy urban youth market, Li Ning has set about creating itself an international identity[vi]. To this end it has started sponsoring international teams and athletes[vii]. The present list includes: The Spanish and Swedish Olympic team uniforms, the American table tennis team, tennis player Ivan Ljubicic, pole vaulter, Yelena Isinbayeva and Shaquille O’Neal, one of America’s top Basketball players. This is in addition to a range of Chinese teams who wore the Li Ning logo at the Beijing Olympics. The other strategic intentions identified in the 2007 Annual Report are to continue developing new brand identities, opening more retail outlets (increasing market penetration) and continuing to invest in new product development especially focusing on anti-shock footwear products. The multi-brand identity strategy is a potentially interesting development and could see Li Ning following the same route to international growth taken by Lenovo, the Chinese PC and consumer electronics company that acquired the IBM personal computer business and Think Pad brand and Chinese car manufacturers who have acquired Rover and MG car brands. On the other hand it could be emulating Adidas, which owns Reebok and Taylor Made sporting brands and Nike, which owns Converse and Umbro. Some UK and US business analysts are intrigued by the idea of Li Ning using the Beijing Olympics as a trigger for an international expansion[viii]. Li Ning did not signal any international expansion plans in the 2007 Annual Report, however in January 2008, they opened a US based design centre. Questions Li Ning is trying to make itself more attractive to China’s trendy young urban consumers. Do you think their strategies will work? Why do you think the sports goods industry uses multiple brands? Do you think Li Ning is right to sponsor international teams and international sports stars in order to develop their home market? International Marketing: How would you expand Li Ning sales in international markets? New Product Development: Nike and Adidas are trying to be more Chinese, Li Ning is designing new products in the US. Why do you think this is? [i] Sporting Goods Business (2006) Brand Power, 39,7:14-20 [ii] China. org. cn 12/09/03 Li Ning Anything is Possible, available on line at http://www. china. org. n/English/ (accessed 19/06/08) [iii] Li Ning Company Limited (2008) Annual Report 2007 available on line at http://www. lining. com/EN/investors/inside-4_2. html (accessed 17/06/08) [iv] Financial Times 28/06/04 Li Ning Shares surge 13% in debut in Hong Kong, available on line at http://www. FT. com (accessed 17/06/08) [v] Market Watch (09/09/08) Shoe makers gunning for Olympian Feet, available online at http://marketwatch. com (accessed 19/06/08) [vi] Business Week (01 /05/08) China’s Li Ning Toe to toe against Nike and Adidas, available on line at http://businessweek. om (accessed 17/06/08) [vii] For an in-depth look at sports celebrity endorsements see: Liu M, HangY amd Minghua L (2007) Relations among attractiveness of endorsers, match-up and purchase intention in sport marketing in China, Journal of Consumer Marketing, 24,6: 358-365 and Summers J and Morgan M (2008) More than just media, considering the role of public relations in the creation of sporting celebrity and the management of fan expectations, Public Relations Review, 34,2:176-182 [viii] The Economist (2008) Chery Picking, available online at http://www. economist. com/theworldin/china/ (accessed 20/06/08)