Marketing Analysis of Li-Ning

LI-NING limited company was found in 1980. At the beginning of its establishment, it cooperated with Olympic team of China to push the development of sports goods. At the same time, LI-NING spared no effort to sponsor all kinds of matches. In 1995, it became the leading sports brand of China. Through exploration over 20 years, it gradually becomes a famous international sports brand representing China. In this report, it makes a marketing plan for the next three years according to detailed analyse of internal and external environment of LI-NING, which is based on the model of Benchmarking, Product Lifecycle and PESTEL. At the same time, it finds the key issues of LI-NING facing through news. Afterwards, according to the key issues, build the feasible objectives. And then it detailed recommend target market segment, positioning and marketing mix and critical factors for LI-NING limited company. Introduction Li-Ning Company Limited is one of the leading sports brand enterprises in the PRC, possessing brand marketing, research and development, design, manufacturing, distribution and retail capabilities. In addition, the mission of the company is that through sports to inspire people the desire and power to make breakthroughs. The vision is to be a world’s leading brand in the sports goods industry. At the same time, Breakthrough is the core values of LI-NING (LI-NING, 2010). There are a great number of products in LI-NING. However, Shoes of LI-NING is the aim of research in the report. Audit and analysis A marketing audit is a comprehensive systematic, periodic evaluation of a company’s marketing capabilities. The audit examines the goals, policies, and strategies of the marketing function. Marketing audits are performed on a regular basis by an unbiased, independent company and are used to improve a company’s overall marketing performance or to establish new marketing plans. An effective audit include these six points, they are marketing environment audit; marketing strategy audit; marketing organisation audit; marketing systems audit; marketing productivity audit and the marketing functions audit. (Kotler, et al, 2009) Audit is divided into two parts to analyse including internal and external analysis. Firstly, internal analysis onsists of two important points: the performance and determinates of strategic options. And two models will be adopted to make internal analysis, which are benchmarking process and product life cycle. In the performance, it is financial and marketing measures of past and current performance. Benchmarking process Researching and looking for the best practices in leading companies, it could compare with own enterprise, so that improving t o catch up the leading enterprise to enter and create a virtuous cycle of good performance. The key is learning from the best enterprise in the industry. In addition, through the study, the firm could rethink and improve the practices of business management, and then it could create their own best practice. Benchmarking focuses on practical experience and emphasis on specific links, interfaces and processes. (Kotler, et al, 2009) LI-NING regards NIKE and ADIDAS as its main competitors. At the same time, LI-NING is the leading sports brand in PRC. Actually, the product of LI-NING has advantage in the respect of sale, source and price. If it keeps remaining the advantage, it will have a good market share. If it loses the price advantage, although the advantage of brand and development of products still exist, the market share of LI-NING shoes will be decrease. At present, the main gap between LI-NING shoes and NIKE shoes is brand value. As for LI-NING, it is important to improve the value of shoes brand, so that it has the chance to increase market share, even catch up with NIKE and ADIDAS. Advantages and disadvantages of benchmarking Benchmarking is an effective management tool because it overcomes ‘paradigm blindness’. It gives firms a new method, idea and tool to improve their effectiveness. The major limitation is that it remains inadequateness to measure the whole effectiveness of such metrics. Product life cycle The product life cycle is defined as the period that starting with initial product design, such as research and development, and ending with the withdrawal of the products from the marketplace. It is a series of stages, including introduction, growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix. LI-NING shoes are currently in the growth stage. On the one hand, LI-NING always wants to catch up with the sales of NIKE shoes in china. LI-NING continually research and develop new technologic shoes for young people interested in sport. At the moment, the demand of their new technological shoes is increasing. On the other hand, LI-NING is well known for providing sports products in china and lots of people like to purchase their shoes. Advantages of disadvantages of Product Life cycle Product Life cycle is an applicable method for the internal analysis. It is convenient for marketing manager to apply different marketing mix strategy based on the different stages. In addition, it is easy to observe due to the two variables, which are time and sales. There are 3 key points to describe the limitation of product life cycle. Firstly, there are no clear classification criteria of starting and ending point. Secondly, not all of product cycle curve is standard s-type; also there are many special product life cycle curves. Thirdly, the decline of product does not mean that it cannot regenerate. If it improved through appropriate ways, it could recreate a new product life cycle. External analysis It is determinants of strategic options refer to past and current strategies, strategic problems, organisational capabilities and constraints, financial resources and constraints, strengths and weaknesses. On the other hand, micro environment and macro environment are the key factors to analyse. Customers and competitors usually are considered as the micro environment factors. Any company cannot serve every customer in markets, only through effective market segmentation and then choose their own target market, so that companies can get market shares. Based on a few of professional marketing research, the customer of LI-NING shoes actually is higher than their excepted. The core customer is 14- 45. However, as for sports industry, the ideal age should be young people from 14-25 years old. However, because of the influence force of brand, budget of spread, market position and price strategy, the enterprise of sports products often focus on the second and third city. However, in the primary city, they cannot catch up with the international enterprise. So, LI-NING counts NIKE and ADIDAS as its main competitors. In the new competition time, LI-NING developed hi-technology and youthful products to compete with NIKE and ADIDAS. For instance, LI-NING developed the new technology called ‘gong’ as if the some shoes of NIKE put air in shoes, which is used in shoes to improve the bounce of people. PESTEL PESTEL is the main method to analyze the macro-environment, consisting of political, economic, social, technological, environmental and legal. Political Johnson (2008) indicates that political is about business activities of organisation and the potential impact by political power, relevant policies laws and regulation. As for LI-NING, there is a stable political environment, and the main market in domestic which is supported by nation. On the other aspect, the policy will not change rules for controlling the organisation or collecting more tax, this helps LI-NING to compete with mighty foreign sports brand to occupy the market share of nation. Economic Johnson (2008) suggest that it is the economic structure of external organisation, industry distribution, resources situation, the level of economic development and the trend of economy in the future. China's increasing quickly economy is obviously known by people in the whole world. In 2010, the GDP is ?3405. 07 billion, which increased by 9. 1%. Based on the exchange rate of the end of year 2010, it is approximate 4986. 8 billion dollar which is rank of number three in the world. Therefore, the level of customer purchasing capacity enhance continually. Social Johnson (2008) suggests that it is about cultural change, expectations, demographics and family change. For the company of LI-NING, firstly, the language barrier does not seem an actual problem for foreign products in market. Secondly, because of the increase continually GDP of PRC, customer have consumption capacity to purchase ideal shoes. Technology Johnson (2008) indicate that technology include new technology of product, new design, new material, development trend and application prospects. As for LI-NING, the first is that the technology can reduce the cost of products and services, and increase the quality. Secondly, the improved technology can make it more convenient for customers to purchase products. For instance, customer can purchase product and pay money through internet bank. Thirdly, changing the way of sale by improving technology, LI-NING can sell shoes in network shop. Finally, technology improves a new way for LI-NING to communicate with customers. For example, customer can communicate with the company on the internet. Environment Johnson (2008) indicates that it is about an activities, product or services of organisation that can interact with the environment factors. As for LI-NING, it is the most famous brand in sports industry in PRC. However, it has a big gap to the world famous brand. Regarding as the leading enterprise in China, it has some influences on the other sports firms. On the other aspect, to produce LI-NING shoes is not dangerous for environment and it can be cyclic utilization. Legal Johnson (2008) indicates that it is the laws, regulations and judicial status of external organisation and the legal awareness of integrated system consisting of citizens. As for LI-NING, it has registered trade mark. Also it is not against law for the organisation to produce or to sell shoes. Advantages and disadvantages of PESTEL PESTLE can effectively analyse the macro-environment of LI-NING. As for the disadvantages of PESTEL, there is a rapid change in society and the effect of analysis will not last for a long time. In addition, PESTEL only refers to the external environment and sometime it needs to be considered in connect with other factors such as the organisation itself, competitors and the industry that it is operating. Key issues There are 5 key issues faced by LI-NING are below: 1) American marketing research organization, sporting goods intelligent (SGI), the beginning of January 2008 had shown the rank of market value for the whole world sporting goods companies. LI-NING beyond the Asics of Japan in the comprehensive world sporting goods companies. Arranging after NIKE, ADIDAS and PUMA, it is number four. The market value of NIKE is 32. 039 billion dollar, ADIDAS is 15. 364 billion dollar, puma is 6. 4 billion dollar and LI-NING is 3. 86 billion dollar. However, there is a big distance to catch up NIKE and ADIDAS. (bin 2008) 2) There is a wide gap between LI-NING and NIKE or ADIDAS. The days of sales of inventory of NIKE are 84 days, and ADIDAS is 64 days, but LI-NING is 161 days. It means the inventory of LI-NING occupied a large capital, which influence the cash flow and Return on Capital Employed. (song 2010) 3) The shoes of LI-NING are not professional in the aspect of sports shoes as NIKE and ADIDAS. The professional shoes of LI-NING remain keeping the level of the protection for athletes in competition. (song 2010) 4) Compared with the advertisement star of NIKE and ADIDAS, the spreading strategy of LI-NING cannot attract the eyes of customer. Because of the lack of super star, the popularity of LI-NING is lower than the other two competitors. ) Both of the two companies NIKE and ADIDAS have developed over 40 years, and the popularity of shoes is considerable bigger than shoes of LI-NING. Therefore, LI-NING could lost a number of customer who is aim to purchase the famous brand shoes. (CTEI 2009) Objectives The objective is the starting point of the marketing plan. The objectives can find after analysis the environment of market. In addition, the objecti ves should use SMART criteria. The SMART criteria are consisted of specific, measurable, achievable, relevant and time bound. Specific means that the objective should state exactly what is to be obtained. For example, it might set an objective of getting ten hundreds new customers. Measurable means that an objective should be capable of measurement, so that it can be determined whether it has been obtained. Achievable means that the objectives should be realistic given circumstances in which it is set and the resources available to the business. Relevant means that objective should be relevant to the people responsible for achieving them. Time bound means that objectives should be set a deadline. To set up marketing objectives, there are two parts of objectives including marketing and financial. Doyle (2006) indicates that in the marketing goals that the marketing plan should have a clear sales goal. The primary market objectives are sales and share. In the financial goals, profits, return on investment and cash flow should be the primary financial objectives. For the LI-NING limited company, there are six objectives. Financial objectives: 1) Earn an annual rate of return on investment of 20% during the next three years after taxes. Compared with the data of year 2009, it should increase a little from 18% in 2009 to 20% during the next three years. 2) Achieve average net profits of ?23. million in China over the next three years period. Because the profits in 2009 is ?15. 6 million and the new series of professional sports shoes for target customers will coming in China market, and then the net profits will increase 50% at ?23. 4 million in the next year. 3) Achieve average cash flow of ?37. 9 million in China over the next three years period. Because of there will be a good sales in future, the inventory will reduce. Therefore, the cash flow will increase 40% to ?37. 9 million. Marketing objectives: 1) Increase the market share from 17% to 20% or 22% in china during the next three years. Due to the arrival of new sports series, it will attract a number of attentions from young person. Therefore, the market share will increase 3% to 5%. 2) Increase customer awareness of the professional sports shoes of LI-NING brand from 15% to 30% over the next three years period. The information of professional sports shoes could deliver to young customers interested in through all kinds of advertisement. Therefore, it will attract a large number of customers’ attention. Target market segments Market segmentation Before deciding the target market segment, it should make market segmentation. Doyle (2006) indicates that a market is divided into different homogeneous groups of consumers. They have different benefits wants, the amount they are able or willing to pay, the media they see and the quantities they buy. A market segment is a customer group with one or more characteristics that cause them to demand similar product. In most markets the need of for segmented offering is obvious because a single product will not meet all the customers. Segmentation has two variable types: needs and profilers. Customer needs are the basic criteria for segmentation of market. As for profilers, these are descriptive, measurable customer characteristics such as geographic location, nationality, age and income. Doyle (2006) states that ‘consumer and industrial markets generally differ in their sets of need and profiler variables’. Commonly, consumer market segmentation is divided by four main parts, Geographic, Demographic, Psychographic and Behavioural. Organisational market segmentation could consist of seven parts. They are industry of end user, organisational type, size of organisation, geographic location, application, usage and purchasing organisation. In addition, the strategy of choosing target market segment is important, and it has three ways to choose. 1) Undifferentiated marketing It means that enterprise regard the whole market as own target market. Stern (2006) indicates that enterprise ignores actual or potential differences among segments, and targets one offer to the whole market. 2) Differentiated marketing The strategy of differentiated marketing is divided the whole market into a number of different market. According to the different market, it develops different product considers the different marketing strategy to meet the needs of different customer. ) Focused marketing Stern (2006) indicates that firm does not aim to compete in the majority of the market, but rather specialises in one segment, or a small parts of segments. Therefore, the firm can exert the advantage in the minority market and improve the occupancy of market. Choosing target market segment However, the most important point is to choose target marke t segments. There are five factors govern the attractiveness of the segment, including segment size, segment growth, profitability of the segment, current and potential competition and capabilities of the business. LI-NING is a leading sports brand enterprises in the PRC, and their shoes product should have a right direction. There are three key points to describe the target market of LI-NING, including brand positioning, target market and target customer group. The selection of LI-NING target market: Brand positioning: young, fashion and professional sports shoes. The reason is that the market consumption capacity of young people has enhanced and people have the tendency to buy high-end products. Target market: relatively quite wealthy city. The reason is that LI-NING as a leading brand of sports industry is quite expensive for low income group. Because of LI-NING is aim to produce good quality and functional shoes, the cost could higher than normal shoes. Therefore, it is suitable for relatively quite wealthy city to purchase. Target customer group: 14-35 years old, athlete, young person, people who love sports. And the most of middle-end market and the less of high-end and low-end market and The reason is that the shoes of LI-NING are quite suitable for young person and athlete. Additionally, it has the function to protect foot when people putted on shoes. On the other respect, according to produce some high quality to improve the image of product, for instances the product suitable to play golf. On the other hand, to produce the low-end product, it is aim to reduce the interference from the other low-end brand. However, the core market is the middle-end market. In the market, it can follow the original brand, which is aim at ages around 24 to 35 years old that they have quite good income and consumption capacity, and also they are the main customers of LI-NING. Market positioning To make a market positioning, it should choose a strategy to position it and apply a suitable tool to analyse. Firstly, market positioning has been shown how a business can offer superior value by strategies that add value or reduce costs. Marketing positioning also called product positioning, which is according to the position of the existing product of competitors in the market segment to create a new product which is different with competitors’ to give customer different feeling, so that the product possess the capacity to compete. Doyle and Stern, 2006) On the other hand, before making market positioning, it should analyse the situation of market, and then to choose an appropriate tool to find the answer of market positioning. There are two tools to analyse it, including perceptual mapping and the pane mapping. Compared with pane mapping, the perceptual mapping is quite usual in normal analysis. It is a visualization statement of customer for products or brand perception and preference. The aim is to attempt to deliver the view of customer or potential customer using a clear and visual map. The chart has shown the information about LI-NING, NIKE and PUMA. Both of NIKE and PUMA have high quality. And then, the shoes of LI-NING have the gap to them in the quality. On the other hand, compared with NIKE and PUMA, LI-NING has the advantage of price. LI-NING can apply the price advantage to expand stores in the most of city, so that people who have low income and cannot afford to buy the product of NIKE and PUMA could purchase the shoes of LI-NING which is also a famous sports brand in the world. In addition, according to a new positioning in market, LI-NING has another advantage, which is possessed the approximate function and fashion design to attract more customers of young person. Meanwhile, to choose an appropriate strategy to position product, it is possible to beat competitors. Therefore, the strategy of market positioning is a kind of strategy of competition, which means that according to the characteristic of product and the awareness of customer for product determine the competition relationship between own product and competitors’. There are three ways for enterprises to position market. * Avoiding powerful enterprises positioning It means that avoiding powerful enterprises to find a place which is belong to self. The advantage is avoiding the directly competition with powerful firm, and build an own image in customer’s mind. Because of the way of position has a quite low risk, and has a high success rate. Usually, it is adopt by the most firms. * Competitive positioning The aim of the way is to compete with powerful competitors, so that it can achieve a great market advantage once beat powerful competitors. However, there is high risk for firm. * Repositioning It is to change characterise of product, and then changed the image in customers’ mind. The aim is for target customer having a new understanding for the new image of product. Wilson and Gilligan 2005) LI-NING should adopt the way of repositioning. The reason is that from 2006 to 2007, LI-NING has researched the main customer group, and it has big gap between actual customer group and target customer group. The age of actual customer group is around 35 to 40, so that a number of young person feel that LI-NING is inferior t o international brands on the cool and fashion. It is unsustainable for LI-NING in the future. To catch up the new objectives which love and focus by a great number of young person, LI-NING should adopt the way to change the old image in customer’s mind. At the same time, according to change the technology and design of shoes, it is possible loved by more and more young person. Marketing mix Marketing mix is the sort of marketing decisions, which management makes to apply its positioning strategy and reach its objectives. There are four parts in marketing mix including product, price, promotion, and place. Product decisions include product variety, product performance, product features, product design, packaging, sizes and brand name. Price consists of discounts, allowances, geographical pricing, payment terms and credit terms. As for promotion, it includes sales force, public relations, customer promotion, advertising, trade promotion and direct marketing. Place refer to distribution selection, density of distribution and dealer support. (Doyle ;Stern, 2006) Product As for LI-NING, it is facing a strong challenge from NIKE and ADIDAS in the future. To keep the shoes of specialization, technological innovation is the key point. LI-NING should keep researching and developing the shoes which is good for young person more professional and fashion. The price should suits the level of young person and lowers than NIKE and ADIDAS, so that a number of customers choose the shoes of LI-NING. According to the value principal, even though the price of LI-NING shoes is lower than the other competitors such as NIKE and ADIDAS, the degree of satisfaction and comfort is quite high. Promotion There are three key points. Firstly, to find the suitable sports match to sponsor, it attracts a large number of attentions for LI-NING shoes. Secondly, it should make an accurate advertisement positioning. ‘Make the change’ is the slogan of LI-NING. The aim is to give customers an impression that they could change everything when they putted on shoes of LI-NING. Finally, it should choose a suitable media to spread advertisement such as TV, newspaper, internet and broadcast. Place The place should distribute with two methods including traditional and new distribution. In traditional distribution LI-NING has its own stores where consumers could purchase it. Also LI-NING could use intermediaries to sell its shoes. On the other hand, in the new distribution it could sell shoes on the internet through the online store. Critical factors Critical factors refer to the detailed implement and control of marketing plan for companies. It helps companies to achieve expected objectives. Firstly, marketing implementation is a strategy, which means that it is the process from marketing plan to action and task. Also, it make sure the task is been completed. For the other point, marketing control is a working system to make sure firms run according to expected objectives. (Kotler, 2000) As for LI-NING, there are five critical factors in the implement and control of marketing plan. ) The strength and direction of advertisement. Advertisement is a method of promotion. Efficient implementation of advertisement can increase the popularity of LI-NING shoes, and then a large number of customers will concentrate on it. 2) The quantity and quality of raw materials. Possessing enough raw materials can help the firm to produce enough shoes to meet the needs of customers. Additionally, because of high quality of raw mater ials, LI-NING can produce the high quality shoes. 3) The depth of researching and developing technology. Technology is a key point for LI-NING to positioning. Developing the professional sports shoes through deeply researching on technology can help LI-NING to reach objectives smoothly. 4) The grasp of the professional sports technology knowledge for dealers and salesmen. It increases the impression of LI-NING for customer. Because dealers and salesmen can detailed describe the functions of shoes to increase the impression of LI-NING shoes which is the product of high technology. 5) The monitoring level of manager. For instance, in the process of marketing implementation, the effective monitoring on each step from manager can help LI-NING to immediately find the existing problems and solve them. Recommendation The shoes of LI-NING are in the growth stage of the Product Lifecycle, there are many methods can keep it increasing. A few suggestions mentioned below to help LI-NING. 1)The direction of advertisement should aim at target customer group. Since the customers between 15 and 29 years old are quite like watching basketball and football matches in china, LI-NING should sponsor these matches to attract the attention of young customers. 2)The LI-NING shoes are the marketing leader in the sports brand in china. Therefore, it should try and introduce new series products to take more market share. The brand loyal customers will also buy the new series products to try. 3)LI-NING should offer a sale of bundle on selling shoes. For instance, on the purchase of a pair of shoes, the price of accessory such as stocks and shoelace is discounted or is a presentation. 4)Product differentiation of LI-NING shoes is a key factor. The LI-NING shoes have different series for different situation to wear. Therefore, it should to describe the different shoes on advertisement, websites, and retailer, helping customers to choose the right one for them. )As for the shoes of ultralight series, it is positioned as racing shoes. However, there is a same type product existing called marathon. Therefore, it is better to change the ultralight to the kind of performance training that could be a new product and will be concerned. 6) Allow customers to try shoes is another way for LI-NING to effectively sell shoes. When new shoes arrival in store, it should allow customers to try the shoes within 60 days. If they not satisfy the shoes, customers can send back their shoes. 7)Enhance training salesmen. They should improve politeness and professional knowledge to communicate with customers better. Conclusion. In a word, this report adopts relevant models to analyse the internal environment and external environment of LI-NING. It finds the key issues through news. Based on the analysis of key issues, the feasible objectives are drawn up for the company. In addition, the marketing management action suggests are given to reach the objectives. The marketing management action includes target market segment, positioning and marketing mix and critical factors in implementation and control. Finally, there are some recommendations given to LI-NING shoes. ;