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