Li Ning's "Three Focuses" at the Cutting Edge National Brand Space is Still Huge

As Li Ning, the "gymnastics prince", ignited the Olympic flame in the 08 Beijing Olympic Games, Li Ning, the sports brand he founded, became the hottest brand at the time. Li Ning himself emphasized in the company that the sacred fire only served him personally. He insisted that the company could not use this matter to carry out any form of commercial propaganda. In fact, Li Ning did not use this matter to carry out any propaganda.

However, the "Ignition of the Flame" award still has a huge brand and commercial effect. In that year, Li Ning's revenue increased by 54% over the previous year to RMB 6.7 billion, and the return on equity investment was about 40%, all since 2004. New high since listing. At that time, Li Ning appeared to be full of confidence. Although it was not an official sponsor of the 2008 Olympics, but with the “ignition” and the sponsorship of the CCTV Sports Channel, Li Ning was like an official sponsor of the Olympic sports.

Four years have passed and the London Summer Games have ended. Li Ning’s performance at this Olympic Games is still outstanding. It has sponsored and provided the China Gymnastics, Shooting, Diving, Table Tennis, and Badminton 5 "Dream Team". The number of gold medals is approximately 60% of the total number of China's total gold medals.

However, China's sporting goods industry is facing huge challenges at this time. As a leading company in local sports brands, Li Ning is in a difficult position. Following the first year-on-year drop in revenue since its listing in 2011, revenue in the first half of the year dropped by another 10% year-on-year. In the first half of the year, the company also shut down more than a thousand inefficient retail stores.

The market value of the company has fallen by more than 70% compared with four years ago. In January of this year, Li Ning introduced TPG Capital, a strategic investor in the US private equity fund; in July, Zhang Zhiyong, the chief executive of Li Ning who had worked for 23 years, left; at the same time, he joined the Texas Pacific Group as a partner in 2006. Kim Jin-goon airborne company Li Ning, served as executive vice president, and Li Ning in charge of the company. Prior to the departure of Zhang Zhiyong, Li Ning had already left several senior managers.

Recently, Li Ning said in an interview with Fortune (Chinese version) that he decided to make adjustments to the company last year, and real adjustment began in the second half of last year. He also stressed: "Adjustment is not always a bad thing. It is an opportunity to a great extent. I hope that everyone will see the benefits of corporate restructuring and see that this is a necessary process for the development of a company. A competitive company has competition. Force's brand is derived from constant adjustment, combination, and even reorganization."

Not to mention whether Li Ning can be adjusted to become a competitive brand. Let's take a look at how the plight of Li Ning Company and China's sports goods industry came about. First, a large number of local sporting goods companies received capital support after 2008, leading to intense competition in the industry.

A few years ago, a Hong Kong friend of the author went to the mainland department store to stroll around, a variety of sports brands really surprised her. Before 2008, only two Chinese sporting goods companies successfully obtained support from the capital market and became listed companies. (In addition to Li Ning’s listing in Hong Kong in 2004, Hongxing Erke was listed on the Singapore market, which is not familiar to Chinese in 2005) .

However, within a short span of two or three years, five Chinese sporting goods companies were listed in Hong Kong. If it was not because of trademark infringement disputes, we could have ushered in the eighth listed sporting goods company in the Chinese mainland securities market.

In addition to local brands, there are also two international sporting goods brand companies with strong capabilities in the Chinese market for many years. Therefore, in the past few years, China's sporting goods market is really a match. Second, in addition to the deterioration of the external competitive environment, Li Ning has a lot of internal problems.

A former Li Ning executive (according to his own request for anonymity) told the journal that for a long time in the past, Li Ning’s strategy had problems, mainly reflected in the company’s management’s swing in product orientation in both fashion and sports, and management. Promote multi-brand strategy.

Although Li Ning himself is a firm advocate of taking the sports professional route, his own intentions appear to be biased when implemented. Second, he believes that the original board of directors of Li Ning Company is a good old man who was ineffective in supervising the implementation of the strategy and did not manage it in time. Errors in the layers are corrected. They are responsible for the passive situation of the company today. In the end, it is an obvious strategic mistake that the management level up the Li Ning brand and directly compete with the two leading international brands in the market.

Long before 2008, there was a tendency for the company to raise its own brand. However, at that time, the Li Ning brand did not have the corresponding brand strength. After 2008, with the Li Ning brand greatly enhancing the brand image with the Olympic Games, management really put this desire into practice.

The company voluntarily gave up the low-end market, which objectively gave a lot of space for the development of local brands taking the low-cost route. The executive thinks that as before 2008, it is possible to motivate the company's employees by competing with the top international sports brands, but if you really think that Li Ning has been able to compete with these top international brands on equal footing, it is an obvious advance and fall.

Two overdrafts with three focuses

Regarding the company’s external concerns over the past few years, Li Ning himself obviously has long been aware of it. For industry issues, he comes down to two overdrafts: “One is the overdraft for investment, and the other is the overdraft for growth. In the past few years, a large number of investors who wanted to make sporting goods come in to promote the rapid development of this industry. This is a good one. The other side is the vicious competition, the supply exceeds demand, and this kind of competition is also relatively elementary: First, the business is growing rapidly through simple wholesale and channel expansion.This method is far from the brand-building path, it is very basic; The so-called sporting goods industry should be the sale of sports or sports-related products, but we now have a lot of concepts for leisure in domestic companies."

Therefore, when Li Ning returned to the company's management, he proposed the "three focuses" strategy, focusing on the core brand Li Ning, focusing on core business return to the essence of sports, and focusing on the core market of the Chinese mainland market. Li Ning said in an interview with this magazine: "I think every day, how to make this company have a better structure, a better platform, grasp the market opportunities, and achieve our ideals." And he put forward this "three "Focus" really reflects the depth of his thinking, because all three focuses are at the heart of the matter.

Many years ago, when Zhang Zhiyong, former CEO of Li Ning Company, was interviewed by this magazine, he mentioned the competition for corporate resources that was generated by multiple brands. Li Ning revealed that after focusing on the core brand Li Ning, the company will not immediately stop operating other brands, but will take external resources to develop those non-core brands. In fact, starting from last year, the company has begun to sort out its brands, some of which shortened the operating period, while others decided to terminate operations.

In addition to Li Ning, Li Ning also owns or operates sports brands such as Z-Do (New), Double Happiness, Lotto, AIGLE, and Kason.

Among them, Lotto, which started operations in 2009, is positioned in fashion sports. This was once a very popular market segment for sports brands. In recent years, however, the market performance has been unsatisfactory. Li Ning has managed Lotto for three years and its performance has not yet reached the standard. The company has made adjustments in the first half of this year. On the one hand, the agency period has been reduced from 20 years to 10 years. On the other hand, the business model has changed from production to merchandising to profit-oriented.

Z-Do, the original management team, launched a low-end sports brand targeted at hypermarkets. It was halted last year and is currently in inventory clearance.

AIGLE is Li Ning's exclusive French outdoor sports brand in China. The brand has developed smoothly under the management of Li Ning. It has grown by nearly 50% in the first half of this year and should have achieved profitability. Double Happiness and Kason are local brands that Li Ning had acquired in the past. The former is a strong brand in the field of table tennis, and the latter is Li Ning’s acquisition of badminton for the core sports business.

Focus on the core business, that is, return to the essence of sports. Specifically, companies need to integrate brands with some important sports. Currently, three leading sports are identified, namely basketball, running and badminton.

A few years ago, the company reached a cooperation with the Chinese national badminton team, and the national team's sports achievements in recent years are obvious to all. The London Olympic Games took all five gold medals, and star athlete Lin Dan became the first defending Olympic champion of the world's badminton.

Running is a very popular mass sport. Li Ning and the China Association of Sports Organizations have organized a number of mass sports events. The company also sponsors some of the top international track and field athletes. Li Ning told the journal that for the first time this year, the Chinese brand, the Li Ning brand sports shoes worn by the Zimbabwe runner and long jumper Markusha, will appear on the 100-meter track of the London Olympics.

“This is a professional and it is not possible to take a pair of shoes to run (Olympic 100 meters) casually. Li Ning said with pride that this professionalism is the goal pursued by “returning to the essence of sports”. On June 11th, the company signed a five-year equipment sponsor cooperation agreement with CBA. According to industry speculations, the sponsorship fee is at least several times that of the previous sponsorship (it is understood that the previous CBA sponsorship cost was about RMB 20-40 million).

Basketball has become the most popular sport for Chinese young people. The China Basketball Professional League is also the most successful professional event in China. It is reasonable for the company to combine this sport with the largest number of participants. The question is whether the sponsorship price is right.

Focus on the core business return to nature

Focusing on the core business strategy also has an important function. The company hopes that by closely integrating with a certain sport, it will eat the high, medium and low-end markets of the sport, that is, the low price that the company will give up before it gets back through this strategy. market. Li Ning said: "Branding is not simply saying that I only do high-priced or low-cost products, but fight a cost-effective. High-priced products have high price-performance ratio, low-cost products have a low price-performance ratio."

In focusing on the core market strategy, the company has closed some overseas retail stores, but if this strategy is only interpreted as Li Ning from doing business only in the Chinese market is too simple.

Li Ning said that the meaning of this strategy is: Companies must compete in the Chinese market and improve their operational capabilities. As a FMCG company, he believes that operational capabilities will become an important part of the business model and a source of competitiveness. The company has begun to adjust and restructure operational capabilities including product planning, design and development, product procurement, supply chain, channel, and retail management.

“Operating capacity cannot be completed in one day and it takes time,” said Li Ning. According to him, the company has hired new product planning leaders and supply chain managers, the latter being from the Dell company known for its efficient supply chain. The operating capability is also a link in the industry to Li Ning's more serious flaws. The former Li Ning executive mentioned earlier: “Li Ning’s high product cost is notorious for the industry.” Therefore, the company’s investment in this area can be described as the right remedy.