Moreover, most resources are utilized for operations and production. Jim Thompson needs to consider these factors before venturing into multiple markets and product segments.
Single brand company
Another major challenge will be to leverage the Jim Thompson brand name and potentially introduce new brands in the market. Till now, Jim Thomp- son has been a single brand company. Going ahead, the challenge will be to cautiously leverage the brand equity through brand or line extensions to explore new opportunities, either by introducing new brands to cater to new segments or venturing into new product categories. Jim Thompson must be cautious in carrying out this exercise as it might result in a possible dilution of brand equity as a result of brand stretch. Finding the right balance between expansion and protecting the brand equity from dilution will prove to be a considerable challenge.
CASE 2
Although Li Ning was the domestic market leader in its industry for some time, recently it lost the leadership position to Nike and lost the 2008 Olympics sponsorship to Adidas, which won it with a US$80 million bid.11 Moreover, Li Ning’s patriotic and nationalistic appeal lost out to the “cool”
factor of Nike. By spending almost 10 percent (US$12.08 million) of its US$120 million revenues on marketing and branding in 2003, Li Ning has surely realized the importance of building a strong brand based on a unique identity and personality.12But in terms of market share, it still needs to fight it out with Adidas for the second position behind the market leader Nike.
For the last five years, the turnover of the Li Ning Group has been growing at a rate of more than 45 percent on average and in 2004 it had sales of US$226.9 million (47.2 percent increase year on year) and a net profit of US$16.12 million (42 percent increase year on year).13
More importantly, Li Ning needs to understand that customers’ purchase decisions are not always based on rational factors. This in turn means that Li Ning, like any other brand, should strive to create excitement around the brand by making it relevant to its target customers, and build proper associa- tions related to lifestyle so that the brand resonates with its target customers.
Background
Li Ning Sports Company was started in 1990 by Li Ning, an Olympic gymnast who became the most honored athlete in the 23rd Olympic Games at Los Angeles in 1984. Having won seven out of the eight gold medals in the men’s category, in the Sixth World Cup Gymnastic competition in 1982, he became an instant sporting icon in China. After retiring from profes- sional gymnastics, he channeled his passion for sports into setting up a professional sports goods company producing footwear, clothing and other accessory products for a range of sports from basketball, football and tennis to swimming, fitness and sports fashion.
For Li, the defining moment of his life was not when he stood at the Olympic podium to receive his medals. Instead, it was in July 1989, when, in nationwide advertisements, he announced to the Chinese public that he was founding his own company and requested help for a logo. By August, he had received more than 20,000 entries from peasants, workers and many others. Despite this, he had to hire artists to develop the fox-tail-like logo derived from his initials L and N. Even when Li Ning travels today, people still come to him and say they participated in the contest back in 1989.14
Almost 15 years since its inception, Li Ning has emerged as one of the more promising brands from the Chinese landscape. It was proven with the successful listing of Li Ning on the Hong Kong stock exchange in early June 2004, through which it raised around US$67.9 million for its further expansion.15
One of the key success factors of Li Ning in China to date has been the charisma and iconicity of its founder Li Ning and the company has lever- aged this fact to the full, although he is now becoming a little passé for the younger customers. Furthermore, Li Ning, following the footsteps of Nike and Adidas, began sponsoring sporting events from quite early on, despite the fact that only around 15 percent of Chinese aged 15–35 actively play any sport, compared to America’s 50 percent, as academic achievement and commercial success are still the main factors that drive Chinese people.16
Li Ning’s success so far has been based on four major factors: Li Ning’s personal charisma and popularity giving the brand its initial credibility and acceptability; a strong distribution network covering many of the remote Chinese cities; sponsorships of some key sporting events involving Chinese sports stars; and finally the luring value proposition of providing shoes of quality on a par with those of Nike, but half the price of Nike and similar foreign brands. These factors have boosted Li Ning’s growth till now. But Nike’s resurgence in 2003 poses a strong threat to Li Ning and highlights the importance of having the right branding practices in place for these Chinese companies that aspire to challenge the experienced global brands.
Brand philosophy
Unlike most of the leading brands in the sports product category like Nike, Adidas and Reebok, Li Ning’s success is not because of its brand management practices, although in the last two years, Li Ning has been doing the right things toward building a brand. So much so that Li Ning topped the list of China’s own cool brands along with Haier and Lenovo, with a 49 percent backing in a survey.17 Li Ning has been able to grow into a market leader in its category because of the four non-brand factors mentioned earlier.
One of the strongest advantages that the Li Ning sports company had when it started in 1990 was the brand equity of its founder, the star gymnast, Li Ning. Having scaled great heights both in the World Cup gymnastic competition and in the Olympic Games, Li Ning had become a
Aspiring Asian brand cases
171national sports icon in China. This popularity and the national pride were translated into the Li Ning Company. This association not only made it easy for the company to gain high levels of awareness in the marketplace, but also brought in high levels of acceptance from its target market. This was Li Ning’s first major differentiating factor.
In a country like China, where there is a huge imbalance between urban and rural cities, in terms of infrastructure, employment, income and spend- ing levels, one of the major challenges is to reach the far-flung areas that have huge chunks of population. Most of the global brands like Nike and Adidas have traditionally concentrated on the urban cities like Shanghai, Beijing and Guangzhou, where people have considerable disposable income.
In contrast, from the beginning Li Ning recognized the importance of reach- Li Ning’s store front in Wuhan, China
Courtesy Li Ning Company
ing those people in the far-flung rural pockets. With a strong local know- ledge, established contacts and relationships with people at ground level, Li Ning has been able to set up stores and distribution networks through- out China. In the absence of a single distributor with a national presence, these established channels of distribution work as a competitive advan- tage. This has been another major factor contributing to Li Ning’s success to date.
Taking a page out of Nike and Adidas’s branding activities, Li Ning, quite early on, adopted sports sponsorship as an important part of its over- all marketing activities. Both Nike and Li Ning were pitted against each other when they sponsored national teams in the 2004 Olympics with Nike backing the Chinese national team and Li Ning the Spanish team in basket- ball.18Apart from sponsoring the national teams in many events like diving and gymnastics, Li Ning has also sponsored international teams like the French national gymnastic team, the Spanish national men’s and women’s basketball teams and Russian delegations at 2001 and 2003 Universiade and has been a partner and sponsor to the national Chinese Olympic teams for a number of years. Although this has helped Li Ning, there is a catch here. While Li Ning sponsors all these events, the events that resonate the most amongst consumers are the NBA and the English Premier League and Li Ning has not been a major sponsor of these events like Nike and Adidas.19This pushes Li Ning to re-examine its sponsorship strategies.
But in January 2005, Li Ning became a strategic marketing partner of NBA in China.20
The other major factor that has contributed to Li Ning’s success is its value proposition. Li Ning has conveyed a value proposition to its customers that is a combination of quality comparable to Nike’s products and a price that is close to half of that of Nike’s. This has been a winning formula for Li Ning until recently. Nike and Adidas have traditionally priced their products quite high and have targeted the urban rich in cities like Shanghai, Beijing and Guangzhou. Against this, Li Ning, by combining its strengths in the distribution network, the popularity of its founder, refer- ences to patriotism and finally with this value proposition, has been able to capture a much larger market.
Given this potent combination of factors, Li Ning has managed to carve out a niche for itself in the intensely competitive Chinese market. But as the events of the past two years show, these factors alone cannot sustain its initial success. With Nike recapturing its market leadership from Li Ning,
Aspiring Asian brand cases
173and Adidas having bagged the sponsorship for the 2008 Chinese Olympics, it is time that Li Ning gave a fresh look to its overall branding strategies.
Brand communication
Li Ning has used sports sponsorships and mass media television advertising as its two main communication channels to reach the Chinese public. With China’s CCTV reaching a majority of the population, it is a powerful chan- nel for any brand to connect with its customers.
In its television advertising, Li Ning has projected the national pride, patriotism and made-in-China themes quite forcefully. Li Ning with its ad agency Leo Burnett has come up with television commercials which high- light the country of origin to provoke a sense of national pride among its customers.21With this strategy, Li Ning is not only differentiating itself from the other global brands by implicitly saying that it knows the Chinese market much better, but is also knocking on its customers’
emotional reservoirs to associate the brand with the country. Especially with the Olympic Games to be held in China in 2008, this strategy could prove successful. But, on the way, Li Ning seems to have overlooked one crucial factor that propelled Nike into the leadership position: the hunger among the Chinese people for Western gear and the growing sense of indi- vidualism. Even though Li Ning has redirected its focus toward highlight- ing individualistic and cool characters – sponsoring sports like basketball, running and soccer – it should have a fully fledged revisit of the brand communications strategy.22
On the other hand, in the sponsorship channel, Li Ning is not only spon- soring Chinese national teams, but also other international teams like the French team at the Sydney games. By doing this Li Ning plans to gain inter- national exposure and wider acceptance of the brand.
Thus, Li Ning is cashing in on the Olympics craze to evoke national pride and oneness among customers to bond with the brand. Although this strategy might seem perfect at the outset, it does come with its own set of baggage.
Future challenges
Creating a distinct brand personality
Li Ning has not been able to create a strong brand personality for its prod- ucts as successfully as Nike or Adidas. It is common knowledge that
providing good functional benefits in today’s market is the cost of entry.
What makes a company and its products resonate with its customers is a strong identity and personality. Li Ning lags behind in this respect. For many years it has played the ‘founder’s-charisma’ card to entice the customers. But given the current crop of sports stars, this proposition seems to be losing steam. By trying to do all things for all people, Li Ning has not been successful in communicating its personality to its consumer base properly. With Nike and Adidas catching up on the distribution network on one hand and deciding to venture into the mass market beyond the urban cities on the other, they are threatening Li Ning’s position.
Therefore, Li Ning needs to establish and build more emotional bonds by creating a strong brand personality which could prove to be a strong source of sustainable competitive advantage.
Overemphasis on patriotism and national pride
With the Bejing Olympic Games in 2008 round the corner, Li Ning has concentrated on projecting Chinese national pride and patriotism in its mass communications. But a recent survey, conducted by WPP Group’s Ogilvy
& Mather Worldwide and the research firm Synovate, showed that customers are less concerned about the origin of the brand than the brand itself. The survey results showed that the consumers did not see any direct relationship between patriotism and buying national brands over interna- tional ones.23 Given this, Li Ning needs to find a fine balance between projecting patriotism and being relevant to its target market. Li Ning cannot afford to do one thing, when in fact the research and facts on ground suggest something totally different. Maintaining this fine balance will be a huge challenge for Li Ning because it has by default created a pseudo personality in the minds of its customers by projecting the made-in-China tag line so aggressively.
Clear positioning
Positioning seems to be the biggest challenge for Li Ning as the company has positioned itself in a confusing manner between sports and leisure. One of the fundamental steps toward building a strong brand is to have a strong positioning in the marketplace. With a price point that is close to half of that of Nike, it wants to project the value-for-money concept. But with high-
Aspiring Asian brand cases
175profile sponsorships, extension of product lines and competing with the likes of Nike and Adidas, it also aims to project the premium concept. This creates confusion. Li Ning has to sort this out by deciding on a clear posi- tioning strategy. Moreover, with the current generation of customers prefer- ring Western brands amidst a growing sense of individualism, and Li Ning still not able to match up the quality and technological innovations of Nike, Reebok or Adidas, it has an enormous task of doing its homework right and coming out with a resonating positioning.
Li Ning has enjoyed success by combining some crucial factors which at once proved to be a competitive advantage. With the decades-long investment of Nike and Adidas paying off, those factors have ceased to provide any competitive advantage to Li Ning. Now it seems that Nike and Adidas have the advantage, with their strong brand names that resonate well with Chinese customers. If Li Ning is to recapture its leadership posi- tion, it should start on a targeted brand building journey. By combining its unique history and legacy with clear positioning and relevant sponsor- ships, Li Ning surely stands a chance of reclaiming its leadership position in the Chinese market.