Li-Ning Sporting Goods Company

Team 1: Andrea Plotts, Doug Teixeira, and Shawn Rembecky Team 2: Kristina Allegretta, Lauren Speirs, and Evan Surgan MKT440 International Marketing April 14, 2011 Agenda

1. Li-Ning, Humble Beginnings 2. Industry Structure 3. Competition 4. Company Structure 5. Case Data 6. Problems and Opportunities 7. Conclusion

2 Li Ning b. September 8, 1963 in Liuzhou, Guangxi Industry Structure Industry Structure

Industry: Sporting Goods (sports footwear, sports apparel and sports equipment.

Product Category Segment • Sports Shoes • Badminton • Sportswear • Tennis • Fitness Equipment • Outdoor Sports • Other Sports Goods • Skiing • Bicycle • Fishing • Basketball • Diving • Football • Golf 5 Industry Structure Market Share

¥ Market Share in 2008 – Nike and Adidas – 28.8% – Li Ning – 9.5%

¥ In 2010, the scale of the Chinese Sporting Goods market reached 106.1 billion

¥ Market Share in 2010 – Li Ning – 8.3%

6 Industry Structure Brands

Brands – Li-Ning – Double Happiness – Lotto brand – Aigle – Z-Do – Kason • In 2009, the five brands contributed revenue to Li Ning but were still inferior to the brand “Li Ning”.

7 Industry Structure Geographical Coverage

• USA = $118,996M • China – Eastern Region = $3.3B – Northern Region = $3.7B – Southern Region = $1.6B • Total Unit Sales = $8.73B

• Distinctive Brands sold in other countries: – Lotto: Italy – AIGLE: France

8 Competition Competition

Competing Firms and their respective brands • Nike, Inc • Adidas Group – Brands – Reebok – Adidas – Taylor Made • PUMA

10 Competition

Firms and Brands (cont.) • Amer Sports – Brands – Salomon – Wilson – Suunto – Atomic – Precor – Arcteryx – Mavic • Callaway Golf Company

11 Competition

Firms and Brands (cont.) ¥ New Balance – Brands: – New Balance – Aravon – Brine – Dunham – PF-Flyers – Warrior ¥ Lululemon Athletica, Inc ¥ Asics America ¥ Fila USA 12 Competition

Competitor Sales

Unit Sales ($$$) Nike 20.17 Billion Adidas 17.31 Billion AmerSports 2.51 Billion Callaway Golf Company 967.66 Million Li-Ning Sports Company 77.29 Million

13 Company Structure Company Structure

Segments • Footwear • Apparel • Equipment • Accessories for sport and leisure

15 Company Structure

Industry Codes ¥ SIC code 3949: Sporting and athletic goods ¥ SIC code 3149: Footwear ¥ Sic code 3944: Games, Toys, and Children's Vehicles ¥ SIC code 2329: Men’s and boys’ clothing ¥ SIC code 2339: Women’s, juniors’, and misses’ clothing ¥ SIC code 2389: Apparel and accessories

16 Company Structure

Product Divisions ¥ BD Doom Footwear ¥ Baron Davis Limited Edition Vinyl Toy ¥ BD “Beardman” Varsity Jacket ¥ BD Graphic “Beardman” T-Shirt ¥ Lin Dan Pro Series Badminton Racquet ¥ Badminton Men’s & Women’s shoe ¥ Table Tennis Men’s & Women’s Shirt ¥ Table Tennis Men’s + Women’s Footwear

17 Company Structure

Brands ¥ LI-NING: core brand ¥ Double Happiness: brand through a subsidiary in which the Group has a 57.5% interest ¥ Lotto: Italian sports fashion brand that develops, manufactures, markets, distributes ¥ Z-DO: distributes sports products under its brand via hypermarket channel ¥ AIGLE: French brand that manufactures, markets, distributes and sells outdoor sports products and sells the licensed products ¥ Kason: engages in the research and development, manufacture and sale of professional badminton equipment 18 Company Structure

Revenue ¥ $983 Million in 2008 ¥ Solid growth for six consecutive years

19 Case Data Case Data

The Scenario • Li Ning: China’s best known gymnast • Won 3 gold medals at 1984 Olympics • No opportunity to wear Chinese sportswear • Solution: Started Li-Ning Sporting Goods Company

21 Case Data

Company • Largest sports goods company in China: turnover = 3,180 million Chinese Yuan (RMB) (US$411 million) • Extensive distribution / retail network: 4,297 stores • Joint venture w/ AIGLE: exclusive rights to manufacture, market & distribute in China for 50 years

22 Case Data

Chinese Market Environment • China joined the WTO, opened market to the west – Competition from Nike, Adidas, Reebok • 15% of Chinese age 15-35 play sport – Trend of obsession with leisure and sport – Boom in # of fitness centers / sports clubs • 50% of US age 15-35 play sport

23 Case Data

Establishing an International Strategy • Li Ning exports to Europe – Spain, France, Greece, etc... • More sophisticated domestic product offering: – Improved product design, European / South Korean designs, more innovative products • Low international pricing • International efforts supported by domestic sales: a plan to double prices in the short term future

24 Case Data

Brand Building: Become the ‘cool’ brand for sporting youngsters • Chinese ad campaign: expenditure 8x previous level • Sponsorship deals for Russian / French teams, Argentina National Basketball teams, Swedish Olympic delegation, Spanish national men’s basketball team • 2008 Beijing Olympics: 1 of 33 companies that signed on to use logo • 2 year CCTV National Sports TV Channel sponsorship • Endorsements: Cleveland Cavaliers’ guard Damon Jones and Miami Heat’s center Shaquille O’Neal 25 Problems and Opportunities Problems and Opportunities

Task 1: Problems for Li-Ning • How to segment the local market • Which segment should be targeted • How to develop positioning strategy for competitive advantage • Sectors already dominated • Will consumers be willing to pay higher prices • Without competing globally with big players Li Ning will be vulnerable in China

27 Problems and Opportunities

Task 1: Environmental Influences • Differences in culture regarding sports – Find a niche: Decide what products to implement and where • Managing contracts – Both teams and individual athletes globally • Dealing with international companies within Chinese market – World Trade Organization: tariffs and trade barriers reduced – Sell at premium in China but offer lower international price – Avoid becoming vulnerable in own market • 15% in China vs. 50% in U.S.

28 Problems and Opportunities

Task 1: Solutions • Specialize in specific sporting niche – Gain expertise – Develop recognition and trust in brand name à expand to varying sports • Brand name beats low prices internationally – American and Europe (sign of status) • Learn from example of big players – Not an innovator – Must follow the lead of successful brands

29 Problems and Opportunities

Task 1: Solutions • 4 year contracts covering China and London Olympics – Sweden, Argentina – Opportunity to create brand awareness to consumers globally • Chinese developed new national obsession with sports and leisure activities – Fuel the fire – Keeping excitement about sports – Sign deal with famous athlete in China

30 Problems and Opportunities

Task 2: Big Opportunity ¥ 2008 Beijing Olympics offered a great opportunity for Li-Ning to sponsor Olympic athletes and teams ¥ Having been held on Chinese soil, the company was able to – Further appeal to its domestic market – While attracting a broader, international audience

31 Problems and Opportunities

Task 2: Basketball ¥ Basketball’s popularity is growing rapidly in China – Basketball is already a popular sport in North America and Europe ¥ It may be a while until Li-Ning becomes an international competitor in basketball – The company can benefit from targeting Chinese youth whose interest in the sport is growing

32 Problems and Opportunities

Task 2: Tennis ¥ Tennis is another sport whose popularity is growing in China ¥ With the exception of female tennis players Li Na and Zheng Jie, China does not have any international stars – This has not hindered China’s growing interest in closely following international play – China has established numerous tennis clinics ¥ Like basketball, Li-Ning can benefit from targeting Chinese youth whose interest in tennis is growing

33 Problems and Opportunities

Task 2: Ping Pong (Table Tennis) ¥ Ping Pong has strong roots in Chinese culture ¥ Many of the world’s elite players have come from China – Their dominance has even triggered international rule changes in order to level the playing field in international competition ¥ Considering China has had so much success in this sport, Li-Ning can take advantage of the opportunity by positioning themselves as the superior sponsor of the sport – Similar to how Nike has basketball, Adidas has running, and Under Armour has football 34 Problems and Opportunities

Task 2: Gymnastics ¥ Gymnastics is also an established popular sport in China – The sport’s great history is led by Mr. Li Ning ¥ Similar to Ping Pong, no one company has positioned themselves as the superior sponsor of the sport – Given Mr. Li Ning’s experience in the field, Li-Ning has the opportunity to be the global sponsor of Gymnastics

35 Problems and Opportunities

Task 3 Social Cultural Viewed as an exercise/leisure activity Practices Trading Consumer Sports has historically been a major part of US culture

US has a huge trade deficit

(USD$837 billion) Behavior Behavior Barriers Mix Moving towards a “Go Green” initiative; reduce carbon footprint

Great technological advances in sporting goods industry

Technological Legal 36 Problems and Opportunities

Task 3 Social Cultural US looking toward exports to Practices help their economy grow Trading Purchases based on how they Consumer participate in their respective sport

2005: 27.5% tariff on imports from China Behavior Barriers Mix

Tough competition: Nike, Reebok, Adidas

USD$1 = CNY ¥6.53

Technological Legal 37 Problems and Opportunities

Task 3 Social Cultural

Sporting equipment, athletic Practices Industry typically offers expensive footwear, and athletic apparel Trading pricing

Consumer Behavior Behavior Barriers Mix

Solo athlete and sports team sponsorships dominate advertising in the industry Sporting goods stores, such as Dick’s and Sports Authority Technological Legal 38 Problems and Opportunities

Task 3 Social Cultural Sponsor US athletes who feature Practices Li-Ning’s sporting equipment. Trading The sporting equipment will Consumer incorporate superior technological advancements, compared to its competitors, as well as acknowledging

how the equipment adheres Behavior Behavior to US’s “Go Green” initiative Barriers Mix

Technological Legal 39 Problems and Opportunities

Task 4: Developing the Segment ¥ Marketing campaign using their big name athletes – Establish brand name as the product Shaq and Pau wear! – Superstar status for Americans to associate with ¥ Continue work with internet entrepreneurs (Danny Toe) – Niche Marketing – Tracking shopping habits and internet traffic to learn trends – Trying to attract youngsters

40 Problems and Opportunities

Task 4: Developing the Segment ¥ Continued collaboration with NBA, ATP, CUBA, and CUFL – Build upon relationship with NBA: potential of market – Expand to other leagues ¥ Capitalize on innovation of products : Li-Ning Bow.9 (shock tech), Flying Armor (basketball) , and Flying feather (running) – Large potential in American market with stylish innovation: Nike Shock, Reebok Zig, K-Swiss Tubes

41 Problems and Opportunities

Task 4: Challenge ¥ Li Ning must establish themselves as a premier brand rather than one with second tier products in order to have success internationally – Following leaders can be effective – Must avoid being viewed as B brand – Avoid shadow of Nike, Adidas, other big players

42 Problems and Opportunities

Task 4: Solution ¥ Target most popular sport in each country – Start in niche → expand product and consumer base with success – Soccer in Europe – Popular demand in China ¥ American superstars are international superstars – Recognition of celebrity representing brand – Exploit celebrity status to promote: will enter new niche and continue to grow

43 Contributions and Conclusions Conclusion

‘Li-Ning’ towards a Bright Future ¥ Li-Ning poised to be a major force in the sporting goods industry ¥ China’s numerous achievements at the 2008 Beijing Olympics provided a strong platform for Li-Ning’s future success in international sports ¥ Mirroring China’s growth, proper advertising and appropriate sponsorships will help Li-Ning reach international markets

45 Thank you