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Strategic and Organisational Analysis of Li Ning Co. Ltd.
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Dec 16th, 2019

Strategic and Organisational Analysis of Li Ning Co. Ltd.

Introduction

Li Ning Co. Ltd., one of China’s leading sports-apparel makers was founded from a family business by the well-known Olympic gymnastics gold medallist, Li Ning (Meuer and DiVito, 2010).

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With the reputation of its founder, the extension of its product range, some influential sponsorships and the success of penetrating second- and third- tier cities in the Chinese market, Li Ning has gained the popularity and high brand awareness in China, also a high market share. However, when the international companies began to value and target at the growing Chinese sportswear market, Li Ning gradually faced an intensified competition from international firm like Nike and Adidas in Chinese market, as well as from few local rivals in terms of the price, such as Anta and Peak. Li Ning firm has made some internationalization efforts in recent years like export activities, building its R&D centres abroad and other attempts, but it remains overwhelmingly China focused and all the actions aim to establish a global brand in Chinese consumers’ eyes. Besides, those internationalization attempts did not bring any considerable revenue. The purpose of this paper is to summarize the challenges which Li Ning may face in the process of establishing its global brands and put forward the feasible international brand strategy and the foreign market entry strategy by referring to some theories of international marketing.

The paper proceeds first by discussing some problems associated with Li Ning trying to be a global brand respectively and rational recommendations will be raised during the discussion. Second, the suggestion about the market choice and a foreign market entry strategy will be illustrated in terms of three aspects: the choice criteria for the entry market, the selection of entry mode and some key marketing communication strategies.

1. Examine the problems associated with Li Ning trying to become a global brand. From a marketing perspective, what do you think Li Ning should do to address those challenges?

Facing the fierce competition from international and local rivals, the company reaches an agreement to build its international strategy and its global brand apart from protecting the domestic market. However, Li Ning has to take some potential problems into account in the process of internationalization and seven related considerations will be illustrated in this part.

1.1 The competition with local and international rivals in domestic market

It can be seen that some well-known international brand such as Nike and Adidas possess relatively high market revenue in Chinese sportswear industry, as well as Li Ning and Anta, two top domestic brands (appendix 1). As far as Li Ning concerned, how to block international brands and also successfully retain the local market is one of the key points to become a global brand. Looking at the entire Chinese market, Li Ning positions itself as a competitive rival in providing price-quality bargains product and penetrates different levels of Chinese markets through its extensive network of distributors, sub-distributors and retail stores, especially in second- and third-tier cities where about 76% of Li Ning’s stores are located (Meuer and DiVito, 2010). However, temporarily leading position may be weakened when global brands gradually shift their focus to less developed regions in China where incomes are rising and consumers’ brand loyalties and shopping preferences have not been established (Burkitt, 2010).

With regard to global sportswear marketers, Nike and Adidas have both aimed at China as their second largest market in the world and put a lot of efforts in first-tier cities of China, like Beijing, Shanghai and Guangzhou. They set up their own retail channels like flagship stores or brand centres respectively in Beijing to create strong brand and retail experience (Meuer and DiVito, 2010). With higher brand positioning and name recognition, international brands are more effective in capturing market share in major cities where Li Ning has not paid more attentions. In order to become a global brand, Li Ning realizes that more emphasis should be put on the market of top- tier cities, but the reality is that Li Ning may have to use lower prices to distinguish its brand in this stiff competition with international firms (Burkitt, 2010). Thus, Li Ning needs to rethink its brand positioning both in local and international markets rather than only rely on price-quality bargains and utilize marketing communications to boost its brand awareness which will be discussed in the later paragraph.

1.2 Country of origin (COO) effects and the brand image

In the eyes of most Chinese consumers, Li Ning’s brand identity is always associated with its founder, a national sport hero, so it is easier for Chinese consumers to understand and recognize Li Ning’s logo design, ‘flying red flag and initials of its founder’. Taking consumer ethnocentrism into consideration, domestic consumers may have more favourable attitudes to this brand because of the company’s history and culture. ‘Consumer ethnocentrism’ which was introduced by Shimp and Sharma (1987), refers to the consumer prefers domestic goods due to strong nationalistic beliefs and feelings. As the chief executive of Li Ning Co. said, ‘we want people to look at our brand and feel proud that they are part of something- proud of China’s growth’ (Burkitt, 2010). In addition, with the potential growth and importance of younger segments, Li ning has moved its sight towards them However, using consumer ethnocentrism to affect the purchase decision of young urban Chinese may not work, because Javalgi and White (2002, p. 568) summarized that ‘younger, better-educated and high-income consumers seem to be less ethnocentrism to foreign goods and services’, as well as people who are more open to foreign cultures. Besides, country of origin (COO) also has a negative impact on product and brand evaluation among young Chinese consumers. Many Chinese young consumers, especially teenagers, are keen on the American culture and other western cultures, such as freedom, risky spirit and personality, so they are more likely to choose a global brand which originated from western countries.

While in the eyes of international consumers, it is hard for them to make any resonance with Li Ning without related cultural background, and they may perceive its logo as being similar or a copy of Nike swoosh. Similarly, think of the effect of COO, international consumers will use COO cues when they meet the unfamiliar brand and the bias against products generally from developing countries, so some country-image stereotypes, such as low price or low quality may hurt Li Ning’s brand image. Thus, in order to weaken the negative COO perception, Li Ning should alter the consumer attitude towards the product and brand through marketing communication and give its brand a unique identity. Thinking of Nike and Adidas, they both have their unique global identities which are created and preserved by variety communications such as advertising, celebrity endorsement and marketing campaigns. Therefore, there is still a big gap between Li Ning and global brands in terms of brand awareness and brand image. In order to attract the younger generation worldwide, Li Ning need to find out and build its unique brand image through redesign a more differentiated brand logo and slogan, strengthen the product range and design, and also create more targeted marketing campaigns.

1.3 The product portfolio and R&D

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