Swot – Li Ning

Question 1

|Strengths |Weaknesses |Opportunities |Threats | |Reputation in marketplace |lack of trendy designs |Could be a market leader in |potential substitutes for the | | | |sports |product | |comprehensive distribution |unclear product development |Product innovation |growing buyers bargaining power | |network |directions | | | |Product innovations ongoing |Lack of focus |internationalization of the |Changeable needs from customers | | | |products through sponsorship | |

SWOT Analysis – Strengths

Li-Ning has strong brand image; the reputation of the Li-Ning brand is reliable and trustworthy. As China’s top athletic wear maker, majority of the Chinese people view it as a kind of national brand because of its cooperation with various Chinese National Team, including China National Badminton Team. Li Ning had previously teamed up with the National Basketball Association to sponsor the “NBA Jam Van Tour”. It had also endorsed basketball superstar Shaquille O’Neal (albeit only in China). Li Ning has now sponsored teams from around the world in major sporting events such as the Olympics games. Li Ning currently sponsors China’s national badminton team.

The badminton team became the 5th Chinese team to partner with Li Ning, along with the Chinese National Table Tennis Team, the Chinese National Gymnastics Team, the Chinese National Shooting Team and the Chinese National Diving Team. (http://www.encyclopedia.com/doc/1G1-199363625.html)

Li-Ning has a comprehensive distribution network, from 1990s, the first store opened in Beijing, currently it has more than 7000 stores all over China, besides, Li-Ning established distribution logistic model since 2000s and built up a supplier information database to manage the distribution network more effectively. What is more, Li-Ning is the only one brand which has its own official online shop which could be reached out by world-wide customer base. Li-Ning is banking on badminton as its break-through tool to expand outside China; Southeast Asia. Li-Ning envisioned itself to be the sports brand synonymous with badminton; the popular, prevalent and influential sport in Southeast Asia.

"They understand the Chinese market better than international players, and their prices are lower," said Rui Wu, an analyst at JP Morgan. "Li Ning is definitely the market leader because it started earlier than the others." Analysts say the sportswear sector is a good way for investors to benefit from China's surging consumer boom. Retail sales in the country jumped 17 percent in 2008 to $1.3 trillion as increasingly well-heeled Chinese took an interest in better products and lifestyles. (http://www.reuters.com/article/idUSHKG13709320080221)

Innovation in technology is the third strength for Li-Ning, with its ongoing product innovations taking place aggressively. An example is an illustration on the badminton racquets: high-tech light shock absorption material filled in racket frame improves smash performance and avoids injuries from movements of the wrist. Li Ning has come out with innovations to produce about 600 different shoe styles a year.

Furthermore, it hired key personals over the years in the form of Ned Frederick (a former research director at Nike) and Portsmouth (N.H.)-based Daniel Richard Design, which had worked with Converse and Saucony. An example of new technologies resulted was the ‘Basketball Bow’ which could compete with the Nike Air lineup in terms of technology. (http://www.lining.com/EN/competencies/inside-2_2.html)

SWOT Analysis – Weaknesses

The lack of trendy designs has lost a great deal of customers and as a result, lagging behind major rivals Nike and Adidas even in the Chinese markets. The lack of design for women badminton footwear has lost a great deal of female customers where the color selection of this new series is also limited. As for the footwear especially, the red color is the only choice.

Li Ning has unclear product development directions where they change the advertising themes frequently. The brand lacks clear association as to whether it is a trendy brand for urban teenagers or a bona fide performance shoemaker. The products are wavering between “professional use” and “casual use”. Li Ning has to be firm what it wants people to start associating it with. For example, Nike started off with being a serious athletic footwear maker. They quickly managed to become the world’s leading athletic footwear makers; now Nike brand is also associated as being “cool”.

Li Ning has lost a sizable market share in the first tier cities in China by focusing on University students as well as in the second and third tier cities. The cause was also not helped by underestimating the stronger purchasing power and trend-setting effect of Mega cities and first tier cities. Furthermore, other local brands such as Anta and Double Star are threatening Li Ning’s market share in the second and third tier cities.

Li Ning’s main task should be to try to keep the current market territories in term of market share. Besides that, Li Ning should step forward and break into mega- and first tier cities by extending the market segment it is targeting to the population of young adults ranging from age 25 to 34. Li Ning should also venture into the higher income group and those who are active in sports.

Question 2

|Strengths |Weaknesses |Opportunities |Threats | |Reputation in marketplace |lack of trendy designs |Could be a market leader in |potential substitutes for the | | | |sports |product | |comprehensive distribution |unclear product development |Product innovation |growing buyers bargaining power | |network |directions | | | |Product innovations ongoing |Lack of focus |internationalization of the |Changeable needs from customers | | | |products through sponsorship | |

SWOT Analysis – Opportunity

In China alone, there is an estimate of over 20 million badminton players. This includes professional players and amateurs, where there are various badminton tournaments and competitions to compete in. According to a survey titled "The Most Suitable Olympic Event for the Public" released by the Social Survey Center of China Youth Daily, badminton ranks first among all sports categories with a participation rate of 67.8% (Li-Ning Company Limited and the Chinese National Badminton Team Join Together, 2009).

The statistics depicts a scenario where there is dramatically increasing market demand for badminton equipments in the industry. Li Ning will also be setting up themed stores all over South-East Asia, where badminton is a popular sport. This will provide it with the opportunity to further reach out and grab market shares from competitive rivals such as Nike and Adidas, who do not specialize in badminton products like Li Ning does. Just as Nike and Adidas are famous brands associated with sports such as soccer and basketball, Li Ning can become a market leader in sports such as badminton, table tennis and gymnastics.

Product innovation is one of the opportunities that Li Ning can take advantage of, in order to retain its market share in Chinese market and become a global player. With researchers like Ned Frederick hired, Li Ning can move forward to rival products manufactured by competitors. Li Ning has the home ground advantage in the Chinese markets. It has to reinforce the brand as innovative and high-tech. Product reliability will be core to how product innovation is achieved. According to the Product Life Cycle Curve, the existing badminton equipment brands are moving from the “maturity stage” to the “decline stage”, therefore it is a good time to roll out the new Badminton Series to enter this marketplace.

The cooperation with various sports personalities and sport teams around the world can be regarded as a progress towards internationalization of the products, more importantly, commercialization of the brand name of Li Ning. In basketball, it has sponsored 3 NBA players in Shaquille O’Neal, Baron Davis and Jose Calderon. It also sponsors Spain and Argentina basketball teams. Li Ning has also obtained partnership with ATP and sponsors top tennis players such as Yan Zi and Ivan Ljubicic. In Running / Track and Field category, Li Ning signed up with Elena Isinbayeva, who is the leading pole vault athlete on world stage.

Apart from these global marketing reach, Li Ning is official sponsor to the Chinese National Badminton, Table tennis, Diving, Gymnastics and Shooting teams to maintain the leadership of the China Olympics delegation. Li Ning has further deepened its brand penetration via collaboration with Beijing CSI Fitness Investment Management Limited. Opportunities are galore on home soil as well as on the international platform.

SWOT Analysis – Threats

A segment is unattractive when there are actual or potential substitutes for the product. Substitutes place a limit on prices and on profits. Li Ning has to monitor price trends closely and regularly. With ever advancing technology and increasing competition in sporting goods industries, prices and profits in the segment are falling considerably. As the dominant local brand in China sports market, Li Ning is facing intense competition from its multinational competitors. Li Ning’s growth rate is 23 percent lower than Nike’s and 13 percent lower than Adidas’s. Li Ning has to continuously thrive to push its sporting technology to be better if not on par with the major competitors.

A segment is unattractive if the buyers possess strong or growing bargaining power. The rise of retail giants suggest that the potential profitability of sporting good companies will become curtailed. Buyers’ bargaining power grows when they become more concentrated or organized. Consumer groups such as young adults are organized in a way they are brand conscious. They may feel “lose face” when wearing lesser brands’ sporting goods. It is difficult to persuade these groups of people to switch brands.

Buyers’ bargaining power also grows when the product represents a significant fraction of the buyers’ costs, when the product is undifferentiated, when the buyers’ switching costs are low, when buyers are price sensitive because of many available alternatives, or when buyers can integrate upstream. To protect it-self, Li Ning can select buyers who have the least power to negotiate or switch brands. However, a better defense would be to develop superior products and offers that strong buyers cannot refuse.

Consumer buying power also represents a key threat in this sporting goods industry. The rivalry between the main competitors has produced a slower moving industry in which Li Ning must continuously respond to the changing attitudes and demands of their consumers or face losing market share to the major competitors. Moreover, consumers can easily switch to other sporting goods with little cost or consequence. (http://www.cipd.co.uk/subjects/corpstrtgy/general/swot-analysis.htm)

Changeable needs from customers are threats within this sporting goods industry. There are several factors that affect customers’ buying behaviors, and it is often not easy to predict such changes. The state of the economy plays a major role in the consumers’ purchasing patterns.

A person may be intending to buy a pair of shoes which is the latest in the market from Li Ning store; but when he is retrenched or his job becomes unstable, he may choose a cheaper alternative. That is because Li Ning goods can be seen as luxury goods to many consumers, especially in the lower tier of Chinese market. Whereas in the first tier and major cities, Li Ning goods could be over-looked by purchasers of more internationally famous Nike and Adidas brands.