Marketing Plan For Li-Ning Product Expansion In - IERI: Information ...

2012 International Conference on Future Information Technology and Management Science & Engineering
Lecture Notes in Information Technology, Vol.14
Marketing Plan for Li-Ning Product Expansion in UK
Xin Zhang
Dept. of Sports Economics & Management, Wuhan Inst. of P.E . Wuhan, China
Keywords: marketing Plan; expansion; Li-Ning Company
Abstract. Through the analysis of UK market situation for Li-Ning Company. This paper makes a
marketing strategy for Li-Ning product expansion in UK and also includes the financial forecast,
evaluation and control.
Introduction
Li-Ning Company Limited is a major Chinese athletic company which makes athletic shoes and
sporting goods. Li-Ning branded products are targeted for consumers play in sports such as running,
basketball, badminton, football, tennis, and fitness. Li-Ning counts Nike and Adidas as its main
competitors which endorses a number of athletes and teams, both domestic and abroad. In 2005,
Li-Ning created a joint-venture with French sports apparel company, AIGLE, which was given the
exclusive right to be the distributor of AIGLE's products in China for 50 years. His Company directly
owns some of the retail stores while others are franchised. On January 2010, Li-Ning opened its U.S.
headquarters and flagship store in Portland, Oregon.
Market Summary
Sports participation and general apparel are both fragmented markets, but sportswear features a more
concentrated structure, centered on a small number of key companies and brands. These are led, at
both UK and global level, by Nike and Adidas Group.
Macro-environmental Analysis. PESTEL framework:A macro-environmental PESTEL stands
for Political, Economic, Sociological, Technological, Legal, and Environmental. PESTEL analysis is
in effect an audit of an organization’s environmental influences with the purpose of using this
information to guide strategic decision-making (Shank, 2009). The key issues are summarized below:
Politics: the EU has recognized the social value of sport and published a Code of Sports Ethics.
Public sports strategies are increasingly linked to the activities of the departments of health.
Healthcare strategy is increasingly shifting towards preventative action to reduce diseases and
premature death caused by the unhealthy lifestyle.
Economic: economic decisions on sports must always be implemented at a local level and take
regional and local issues into account, with impacts on the local or even the national economy. The
Olympics 2012 win for London brought this issue into focus, with predicted claiming that the Games
could bring in a national income of up to £3bn.
Purchasing power affected by the global economic slowdown recently.
Sociological: Sport as an entertainment developed out of the move to professionalism with
important social impacts.
Technological: use of modern technology in functional products, fashionable sportswear is often
sold in 'retro' styles because these are so firmly established in the consumer consciousness.
Environmental: the company is consistently complying with environment laws to protect
environment, like waste disposal, energy consumption or carbon footprint and becoming a green
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efficient customer.
Mico-environmental Analysis
Market Size/ Growth. Evaluated by the terms of direct consumer spending in sports market, the
overall market was worth exactly £10bn in 2008, and is provisionally estimated to have fallen to
£9.85bn in 2009 as the recession took hold and trends continued away from formal, competitive
sports and `equipped' sports.
The basic reasons for relatively low consumer spending are twofold: the ability to follow
professional sport in the media (mainly television) at a low cost to the consumer; and the government
subsidy provided for sports participation in terms of local facilities. Furthermore, the trend to `pure'
fitness activity such as road running or aerobics classes, away from competitive, `equipped' sports,
has reduced spending on equipment, at least in relative terms.
Market Demographics. A socio-demographic analysis by age shows that buying sports clothing
is important through to the early 40s, but then dwindles in the 45 to 54 age group. The class
breakdown shows that the propensity to wear `sporty' garments increases with status, but peaks in the
group for both men and women.
Geographic market segmentation. There are a number of different factors to consider with
regards to the geographic scope of the market. The major retailers are national chains, whose pricing
is generally determined on a national level. The larger cities and shopping centers, for example, will
generally sell a greater amount and a greater range of products.
With the increasing use of the internet, consumers are able purchase products from a wide number
of competing sources, both on a national or possibly even international level.
Consumer Markets. Sportswear can easily be the largest individual market, but this includes
purchasing of sportswear to use as leisurewear or casual clothing (e.g. multi-purpose trainers as
casual shoes). It is now impossible to distinguish between the `fashion or function' markets.
Functional items are extremely diverse, with some important niche markets being running shoes,
fleece tops for outdoor pursuits. The sportswear market is driven by strong branding and globalised
manufacturing, led by two giant brands which are Nike and Adidas.
Competitor Analysis. Competitor analysis in marketing and strategic management is an
assessment of the strengths and weaknesses of current and potential competitors. This analysis
provides both an offensive and defensive strategic context through which to identify opportunities
and threats (Fleisher, 2003).
Competitor analysis can instruct Li-Ning to understanding of competitors' past, present and most
importantly the future strategies, and understanding their advantages or disadvantages relative to
competitors (Fleisher, 2003). With this competitor analysis, Li-Ning also can forecast the returns that
may be made from future investments.
Direct competition. Li-Ning has to face the direct competition from those global sports brands
which already existed in UK sportswear market, such as Nike, Adidas, Puma and and also private
quoted companies locally in UK, such as, Pentland Group and Hi-Tec Sports. .
Indirect competition. The indirect competition to Li-Ning's sportswear come from leisure
clothing and footwear retailers which can instead of household clothing and footwear budgets. Sports
equipment or travel may also threaten the consumption on sportswear.
SWOT Analysis. One of the basic tools in the environmental analysis is called the SOWT analysis.
This form of analysis is used to examine an organization's strategic positions, from the inside to the
outside (Hoye, 2009). A detailed SWOT analysis of Li-Ning is provided in Appendix 8.2.1 and the
key issues are summarized below:
Strengths:Being well-established distribution channels, a powerful R&D team and broad brand
awareness in the China market.
Targeting to the population of age 25 to 34, to the portion that has a higher income and is also
active in sports.
Brand positioning and put international feeling over oriental theme.
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Hugely successful in maintaining its brand image and sales growth in China.
Weaknesses:Mainly focus on Chinese market rather than the UK market.
Language may be a barrier to market entry.
Lack of the information in new market and the new brand needs a long time to be accepted by
customers.
May weaken its core business in Chinese market while it expands new market at UK.
Opportunities:Adopts a multi-brand business development strategy and distributes products
underZ-DO brand via hypermarket channel.
Cooperates with AIGLE and LOTT and sells the products under both two European brands.
Completed acquisition of Kason and partly acquisition of Double Happiness and become more
power in the racket sports markets.
Investing intensely R&D Center of Li-Ning and specializing in sports biodynamic, mechanical
testing of footwear products and foot-shoe relationship development.
Cooperates with Michelin and other reputable education institutions or professional bodies in
order to develop more products.
Represents a mystery culture in the oriental country.
Spons of the 2012 London Olympic Games.
Threats:Facing intense competition from its multinational competitors.
Contradiction between internationalization and localization for Li-Ning's decision.
Marketing Objective
Marketing objectives are short term tactical objectives, which is narrow focused, detailed in terms of
schedules, costs and actions required to achieve the stated objectives. The successful implementation
of appropriate action will bring the organisation closer to its long term coporate objectives.
Li-Ning first can follows a market development strategy use its current products in new UK
market. Utilized the new slogan as “make the change" to establish the brand image. The specific
short-term marketing objectives are:
(1) Open two retail stores first year in London to increase brand awareness by the customer base,
especially in young people around the London area.
Generate increased sales revenues to break-even.
(2) In the second year, develop Li-Ning's e-marketing brand through its online retail store in
Manchester and Edinburgh
Increase brand awareness in whole UK marketing.
Promote UK e-marketing sales by increase 5%in the first year.
(3) To establish own-brand awareness in first five years.
(4) Establish new online stores and cooperate with other relevant parties in the first ten years.
For the long-term corporate objective, Li-Ning need to develop both a product development and
diversification strategy for launching some new products to the UK sports market to sale. At the same
time, defectively and cost-efficiently promote sales in the Li-Ning stores and online Li-Ning store in
terms of providing a wide range of choice and prices for customers in various levels.
Marketing Strategies
The objectives have been set. Strategies have to be built to achieve these objectives.
Growth Strategy.
Ansoff Matrix:
Market Penetration: opening more retail outlets (increasing market penetration).
Product Development: continuing to invest in new product development especially focusing on
anti-shock footwear products.
Market Development: 1) enter new markets or segments with existing products. 2) Enter oversea
market. But marker development also involves moderate risk. There is a lack of familiarity with
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customers but at least the product is familiar. So market development in UK will require changes to
marketing strategy in China.
Diversification: develop different sport products, such as sports equipment or sport cars.
Competitive Strategies.
Figure 1 Ansoff matrix (http://www.franteractive.net/Matrix-Ansoff.html, 2011)
Focus: In order to be more appealing to China’s trendy urban youth market, Li-Ning has set about
creating itself an international identity (business week, 2008). It has started sponsoring international
teams and athletes (Liu & Hang, 2007).This is in addition to a range of Chinese teams who wore the
Li-Ning logo at the Beijing Olympics.
Differentiation: 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 (Business
Week, 2008). 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 (The Economist, 2008).
Implementing the Marketing Mix
The marketers craft strategies regarding the 4Ps and relationship management to achieve plan
objectives regarding the offer (product), value (price), distribution (place) and communication
(promotion) (Strauss,, Ansary and Frost, 2006).
Product. Provide a high quality choice for customer even in the online marketing.
Offer clear online information about the products and its specification customers know about what
they get.
Offer a wider range of consumer choice through its "make the change" image in UK sports shops
and
Conduct a comprehensive visual or audio advertisement special for the UK market, and try to
reach broad range of attentions.
Price. Use a dynamic pricing strategy which applies different price levels for different customers
or situations.
Allow customers to bid for the latest products online during a limited period.
Promotion. Banner advertising is to cooperate with those popular Internet portals, such as
google.com, BBC.com, and twitter.com. Not only products' pictures and keywords
Display in the spotlight of Website, the color of website should also conform to Li-Ning's
red-based branding.
Electronic context for word of mouth, namely viral marketing, has appeared, because more and
more people rely on the Internet. This strategy facilitates targeting sales growth as well as brand
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awareness.
Web Public Relations (WPR), which means to create goodwill among a number of different
publics via online activities by place those newsworthy stories about its products on the official
company website.
Place. Open around the place like Chinatown where there are large Chinese people.
Furthermore, increase the purchasing by local people.
Increase online sale and establish an official website for special online shopping by Li-Ning
Company Ltd for UK market.
Improve the whole design to the every detail of the website.
Open online shops in the website and also authorize other clothing online sellers to sell the Li-Ning
sports products.
Sell the products to those retailers and wholesalers through the online shopping with the low cost
for transactions process and bilateral communication.
Financial Forecasts
For entering the new market, Li-Ning needs a different new financial forecast, which may
consolidated all the information, including: Li-Ning Company's domestic budgetary situation in 2011;
the budgets apart by Nike and Adidas in the UK market; Li-Ning as a new product enter UK sports
market; UK market's situation such as purchasing power situation and inflation risk (Watt, 2003). In
addition, Li-Ning also needs to aim to break-even initially through the expansion of its retail stores
and online stores. The breakeven point can be calculated by the follow formula.
Fixed Costs
= Breakeven point.
Contributi on per Unit
(Blackwood, 2003)
London retail stores Year 1: £330,000/ £15= 22,000 Units
Online stores Year 2: £355,000/ £18= 19,723 Units
Evaluations and Control
In the final stage of the Sport Marketing Framework is to implement and control the sport marketing
strategy (Hoye, 2009). With the implementation of this plan should support with Li-Ning UK
marketing plan's objectives, it should also fit within the broader boundaries of ethical behavior. Ethics
in sport marketing typically refers to whether the traditional 4Ps of the marketing mix are deployed
within a moral and professional code (Hoye, 2009).
In the next few years, Li-Ning should put the performance measure into action by evaluating
performance before and after the short-term and long-term marketing strategy has been implemented.
That should include:
For the London retail stores: Brand awareness increase or not; Sales revenue increase or not;
Marketing activity (includes number of community events, number of adverts, brand awareness or
recall. etc.); Footfall through the store; Monthly and yearly revenue; Monthly and yearly costs;
Monthly and yearly profits; Identify consumer behaviors (includes gender, age, taste, etc.); Customer
satisfaction surveys and mystery shopper visits.
For the online stores: Increase brand awareness over by the last year; Increase online sales revenue
by monthly; Monitored online stores' web traffic; Customer satisfaction surveys can be included for
consumers who originate from the UK; Website hits from the UK consumers including the method of
entry to the site - monthly data supplied; Parcel delivery data (time and accuracy) for purchases and
returns; Marketing activity (includes number of community events, number of adverts, brand
awareness or recall. etc.).
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