Lining: Winning The Local Champion In 4 Years

Get rid of the cracks, China's most international sporting goods manufacturer.

In all Chinese companies committed to building global brands, apparel products

Now, Chinese athletes are trying to fill this lesson in various ways.

The list of these practitioners includes: Lining,

The office of Lining, chairman of China's former gymnastic Prince and Li Ning Co Ltd (2331.HK), is furnished with very simple furnishings, with coloured lights on the bronze tiles, and empty shelves on the Chinese shelves.

The most notable ones are those of Lining's personal photos. They recorded the most important characters and moments of Lining's life at the age of 47: his wife, son, the master of Buddhism in the Buddhist world, the moment of lighting the 2008 Olympic torch and the listing certificate of Li Ning Co in 2004.

Obviously, Lining himself does not often appear here.

"I don't like to sit in an office."

Lining told reporters.

This seems to further corroborate the impression of Lining himself for a long time: as the creator of China's largest sporting goods manufacturer named after his name, he had little experience in the specific operation and had let the professional managers team manage.

For the younger generation of consumers, Lining's name only means a brand symbol.

But in fact, he is still the soul of Li Ning Co. His determination and influence still influence the fate of the company.

One day last year, at the first meeting of Li Ning Co to replace the brand logo, each participant chose his favorite design, including Li Ning Co CEO Zhang Zhiyong.

When people cast their eyes on Lining, he stretched out his aching waist. For the training cost of lighting the 2008 Olympic torch, he said, "can I not choose?"

Since the start of the bid change project in May 2008, Lining has participated in all the proposals.

The final LOGO pattern was officially announced in June 30th this year. The new brand proposition reflects the core brand connotation of Lining's company that he owns: the sportsmanship, that is, return to professional sports itself.

This ended an internal debate of Li Ning Co since 2003: is it more professional or more fashionable? At one point, this strategic swing made Lining miss the opportunity of development, and its Chinese market share has been surpassed by Nike and Adidas.

In Zhang Zhiyong's view, Lining himself is still deeply affecting the Li Ning Co.

"All his questions are about the future."

When it comes to the theme of two people's daily communication, Zhang Zhiyong told reporters, "he has a strong sense of trust. When he can identify your key abilities, he really lets you do it all."

However, in Lining's view, he is just playing the role of a good chairman.

He did not want a company to be on the ups and downs of a strong founder, but he also hoped that Li Ning Co could realize his business dream: create a brand full of sportsmanship, a global brand from China.

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The company is showing unprecedented confidence.

This may come from the following figures.

In 2009, Li Ning Co sales revenue was 8 billion 387 million yuan, an increase of 25.4%, more than Adidas's return to the Chinese market second position.

Since its establishment in 1990, Lining will enter the general sense of "adult age" of Chinese enterprises this year: 20 years old.

If the average annual growth rate of 25% is calculated conservatively, Lining will jump into the 10 billion club by the end of the 2010 fiscal year.

"In China, few brands can develop as fast as Lining, and few local brands can attach importance to brand building."

Bao Guiji, President of management consulting firm, told the reporter that "three of the long term tracking of the development of sports market" (R3), "Lining will eventually upgrade from a sporting goods brand to a real sports brand.

Look at Nike, Lining will find his way in the Chinese market. "

More importantly, Li Ning Co is a rare business company with clear business logic and strategy in China.

For a long time, Li Ning Co has been caught in the cracks of the market: in China's super large and first tier cities, Nike and Adidas are firmly in the high end; in the two or three and below urban markets, many local rivals such as Anta, XTEP, PEAK and so on are eating up Lining's share at a more competitive price.

Since 2005, Li Ning Co has made a bold strategic choice: to enter the high-end market.

"The era of growth driven by distribution advantages has passed," Zhang Zhiyong said. "Brand innovation and product innovation will be the key to the next stage of competition."

With the gradual infiltration of multinational companies and the upward trend of Chinese consumers' consumption power, the two will be doomed to encounter, but "it will be disastrous for Chinese enterprises".

In the new 5 year plan, which began in 2009, Zhang Zhiyong's goal is to regain the championship position from Nike in the Chinese market.

In the next 5 years from 2014 to 2018, Li Ning Co's goal is to become the world's top 5 sporting goods manufacturer and become a global brand.

"In the next 10 years, there will be international brands in every industry in China, and some people will create this history.

For Lining, this is the opportunity.

He said.

Real and meaningful

The biggest sporting goods manufacturer in China is being redefined.

In the survey launched in 2008, Li Ning Co found that most consumers' impression of Lining brand is a reliable, mild, trustworthy and positive one, but these descriptions reflect an important flaw: what is the distinctive character of Lining brand?

Three key issues become the focus of discussion in the conference room: what is the positioning of Lining brand? Who are your customers? What is your brand DNA?

For Lining himself, he has always wished to keep himself at a distance from the company's brand.

In 2008, Lining and Liu Xuan and Jin Jing visited the children in the disaster area of Sichuan. When the hosts introduced Liu Xuan and Jin Jing, the children applauded enthusiastically. When Lining arrived, the host said, "do you need to introduce this everyone knows?" the scene is quiet.

Lining himself broke the embarrassment and pointed to Lining LOGO on his clothes.

"Oh, you are Lining."

Two children said with one voice.

But the question followed: as the founder and soul of this company, should Lining not be too early to retire behind the scenes? Undoubtedly, he should be the best commentator and spokesperson for Li Ning Co's core values and its advocacy of sports spirit.

As the memory of 1980s goes far away, the generation of consumers inspired by Lining's name has gradually entered the middle age. The latest report of China Merchants Securities has pointed out that the actual consumption group of Lining brand is too old, and over 50% of consumers are 35-40 years old.

Lining brand urgently needs to make itself sticky to the new generation of consumers after 80 and 90, which makes the brand remodeling become the inevitable choice of Lining.

The Li Ning Co responsible for the bid changing team has conducted many consumer research, channel research and internal staff surveys since the 2008 Olympic Games. All the research results have been placed before the top of the company, and then the research on brand DNA and brand personality has been carried out.

However, there are big differences in the Li Ning Co's bid.

The most favoured product is the shoe product department.

The reason is that the original LOGO is relatively soft. The designers of shoes products hope that the new LOGO can play a certain supporting role in the physical function of the upper. What they want is that the new LOGO looks more powerful, speed and more youthful.

Next is the market department and the clothing system, also expressed the support attitude.

But the sales department put forward a strong objection. What if the distributors have opinions? What do consumers not approve of?

Of course, the most important thing is Lining's own opinion.

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Zhang Zhiyong said, for the original LOGO, the most emotional person is the oldest employee in the company: Lining himself.

As the head of the bid changing project, Li Ning Co CMO Fang Shiwei confirmed the "rules of the game" from the very beginning: no democratic centralism was practiced, only two people, Lining and Zhang Zhiyong, had the right to decide.

"50% of the general companies fail."

Fang Shiwei told reporters, "one reason is that there are too many people involved in the decision. Two, the boss finally feels the best and the third one is unable to register."

The original design was "quite subversive", Fang Shiwei said, which was totally different from the original LOGO.

After being rejected, Lining expressed his view: no animal image; no closed pattern; the most important thing is to embody the concept of "human" and embody the sportsmanship.

When the second round of 9 LOGO designs was placed before and after Lining and Zhang Zhiyong, they all made the choice - and the same one.

But the next disaster test rejected the plan.

The reason is that global registration is not possible because it is similar to that of other countries.

The third submitted plan chose Lining's classic "Lining crossover" which was created on pommel horse as inspiration and finally passed.

The determination of art patterns is easy, and more importantly, the redefinition of brand connotation and tonality.

The key question is how to deal with the relationship between profession and fashion.

"I hope Li Ning Co is rooted in the essence of sports. I am not against sports fashion, but there are too many companies that simply pursue fashion. Li Ning Co is not such a company."

Lining himself said.

This means the fundamental difference between Lining and KAPPA brand. The latter actually draws on the elements of sports as inspiration for fashion design, which is closer to the fast fashion mode such as UNIQLO.

In order to end the conflict between profession and fashion, Li Ning Co now directly divides designers who specializes in professional products and designers of ordinary products. "It's very stressful for a person to finish his work from the beginning to the end," he said.

Fang Shiwei said that fashion can be expressed through good design, but it is not the meaning of Lining brand.

Li Ning Co hopes to seize the inherent characteristics of young consumers and get a sense of cultural identity.

This is reflected in Lining's brand tone: smart humor, frank, full of curiosity and creativity.

The new brand DNA focuses on four points: Heritage, Inspiration, New play, and China experience to the future (Chinese experience).

Among them, "excellence comes from one continuous line" includes sensitivity, balance, flexibility and precision.

It is important to redefine these keywords to make Lining brand more closely related to Chinese culture.

David Semitre, Dean of the Sloan School of business at Massachusetts Institute of Technology, argues that many Chinese companies have not established a link between brand and cultural roots in trying to build global brands.

"I hope that in 5 or 10 years, Chinese enterprises will be happy to tell the story of their brand and adopt a way of linking the brand to the culture of their own country."

He told reporters (for details, please refer to "learn to say" yes "in Gemag.com.cn).

For Zhang Zhiyong, this is very important. Only in this way, can the brand connotation be "real and meaningful".

The design ideas embodied in the product and elements used in storefront layout will make consumers feel that is Lining.

For example, the hoisting ring, which Lining used to be good at gymnastic equipment, was widely applied to the sixth generation shop of Lining which just opened.

"What we need is strategic design capability so that we can continuously accumulate brand equity."

Zhang Zhiyong said.

However, Lining changed the label by some analysts as a risky move, and most analysts subsequently lowered Li Ning Co's capital market rating.

Deutsche Bank reported that Li Ning Co did not have a strong enough brand and enough good products to compete with Nike and Adidas in the first tier market.

Optimistic views, such as from UBS, believe that brand remodeling and product price increase will increase the brain share of Lining brand among Chinese consumers, but may affect market share in the short term.

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The more you sell, the more expensive you are.

Zhang Zhiyong will not forget the hard time of the Li Ning Co from 2003 to 2004. The local sporting goods manufacturer, which was the first place in the Chinese market, was soon surpassed by Nike and Adidas.

This makes Zhang Zhiyong realize two problems: first, China's consumption upgrading is faster than imagination; more importantly, Lining brand has been doing "dress for others" for so many years, helping international brands do consumer education in two or three line cities, and these consumers, once they have higher consumption ability, are immediately committed to the embrace of international brands, which is the difference between brain share and market share.

Where is the future?

Lining needs to choose his main battlefield.

According to statistics provided by Deutsche Bank, the largest share of China's sports consumer goods market in 2004 came from products under 200 yuan, accounting for 40%; 300-500 yuan accounted for 30%; and 500 yuan or more accounted for 30%.

But by the end of last year, this data has changed greatly. The price of products at 300-500 yuan is more than 40%, which is equal to 500 yuan or above, while the product below 200 yuan has dropped to 12%.

The rapid growth of Nike and Adidas in China in the past 5 years is closely related to the improvement of consumers' purchasing power.

Zhang Zhiyong's judgment of the future sports consumer goods market is that the price range of more than 400 yuan will be the largest part of the market increment, and Lining must be able to "sell more and more expensive".

In this market segment, Lining will have a positive confrontation with Nike and Adidas.

Reality forced Lining to do so.

In 2008, China's sports consumer goods market experienced unprecedented prosperity, and the economic crisis that followed it reduced consumers' enthusiasm for purchase.

Before 2008, the industry's 5 - year compound growth rate reached 30%, while the market growth rate dropped to 11% last year.

The industry consensus is that the market will be slightly warmer this year, with an estimated growth of around 15%, but in the long term it will maintain a moderate growth trend.

At the same time, the mode of relying on the advantage of distribution network as the driving force of growth is now coming to an end.

Although there is still room for expansion of retail terminals in the three or four tier cities, the rate of single store profit is decreasing due to the increase in rents and labor costs.

Take Lining as an example, there were 1004 new stores last year, of which 80% were in two or three tier cities, but the same store sales growth dropped to 25.8% from -2.3% in 2008.

It would be an unthinkable disaster if new stores were not offset by income growth.

Data from Li Ning Co show that the cost of store rentals has accounted for 25% to 30% of dealer sales, and Li Ning Co plans to increase discounts to dealers in the future to make up for the increase in human and rental costs.

Analysts at Deutsche Bank noted that Lining not only provided 50% of the decoration subsidies to dealers in important cities, but also refined the subsidy for three or four line cities to 300-400 yuan per square meter.

In this way, raising the flat efficiency ratio (sales per square area) has become a top priority for every company, which also forces Lining to increase product innovation and brand innovation.

This means a key question: is Lining going to be a consumer sports brand like Nike, or a retailer brand like Decathlon? The latter relies on a strong supply chain, as well as the size and revenue of the branch.

For many small brands that have been pformed from the industry and Commerce in China, their business models are more like a retailer brand: relying on strong distribution capabilities to achieve growth.

Lining obviously chooses the former.

This means distance from other domestic rivals.

"The threshold of the sporting goods industry is very low, and a lot of clothes and shoes companies can be squeezed in," Zhang Zhiyong said. "But if you want to make a brand with unique personality and location, and have the essence of sports and assets, it's not so easy."

In addition to climbing up the price range, Lining sees the super large tier city market as a strategic priority in the 5 year plan that began in 2009.

Bao Guiji, President of management consulting firm, three, R3, said that Lining has now successfully pulled away from Anta and other local brands.

But it should be noted that teenagers in super large cities are more similar to those in Europe and the United States, and have fewer common points with their peers in China's three or four tier cities.

Therefore, "if we want to succeed in this high-end market, Lining must take time to understand the culture and fashion trends of young people in the world, not just China."

To this end, in this brand remodeling, Lining also integrated the product line, and established a separate professional product line: ATHLETIC PRO, which changed the situation that the professional line was exclusively for athletes and could not be bought in retail channels.

Zhang Zhiyong hopes that these high-end products can help enhance Lining's brand share in the minds of consumers, and ultimately achieve the conversion to the actual market share.

At the same time, Zhang Zhiyong restructured the sales system in March this year, and divided the entire Chinese market into three parts: East China, North China and Southern China. In the future, it will no longer be a unified order by headquarters. Instead, it will convene the order meeting according to the local market characteristics, and decide the matching and listing time of the goods independently.

"To change the front desk first, the supply chain of the background will follow."

Zhang Zhiyong said.

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Like Nike

A more fundamental change is that Li Ning Co is brewing a new price model, changing from cost pricing mode to retail pricing mode.

Chen Jijun, senior director of Li Ning Co brand strategy business group, said that in the future, the company should first look at what products the market needs, which products are in the same price range, and the motive force that consumers are willing to pay for this price is because the products contain technology, fabric or sports resources, and consider the brand premium factor.

Then, back to the value chain, we allocate the cost to the suppliers and distributors, and consider the extent to which the labor cost and management cost should be controlled.

This price model will be put into use in the fourth quarter of next year.

This is just one of the tasks led by Chen Jijun.

This department was set up 18 months ago, and its core work is to realize matrix management within Li Ning Co. This is the biggest change brought by the brand remolding of Li Ning Co to internal management.

In 2004, Nike's joint CEO Parke and Dan Sen also changed Nike to matrix management, which was Nike's sales revenue of more than 8 billion US dollars.

The move has abolished regional management responsibilities and product management responsibilities. Since Nike has introduced 120 thousand products to the market in 4 different cycles each year, local managers usually have many choices - but this also indicates that they are likely to fail.

In the matrix management structure, Nike headquarters decides what products the company should launch, and how to sell the product, but the district manager has the right to make appropriate changes to the headquarters instructions.

This greatly reduces the probability of making mistakes.

The brand strategy business division has re segmented the business unit of Li Ning Co, and the original vertical shoes products, clothing products, sales system and so on are horizontal to cut into sports category.

Chen Jijun, who worked in Nike before, is in charge of the Department. He has 5 categories of directors, including badminton, basketball, running, women's fitness and sports life. Their most important work is to formulate 5 year plan and next year's plan for future development by category, so as to ensure the consistency of the operation process.

For example, in the past, because shoes and clothing were separate systems, sometimes even the same category of shoes and clothing were on the same season.

Chen Jijun said that such a situation would be avoided in the future. "All creative ideas among different sports items should be consistent, which is much more important than creativity itself."

For example, if Li Ning Co plans for the next 10 years of running category is the first brand, then the brand strategy business department's work is to define what NO.1 is first - let consumers think of running brands, and think of Lining for the first time, this is awareness.

Second, the business goal is to occupy the first place in the market share of the product.

Third, what is the winning ratio of competing products among athletes?

After that, the plan of sports resources allocation in the next 5-10 years is formulated, including athletes who should be signed every year. The next step is to locate the tonality of the brand: what is the concept of the category dissemination every year, and the number of products in the price segment.

Chen Jijun said, "our department is like a locomotive, making overall planning."

Although it is not possible for Nike to abolish regional and product management responsibilities by using the matrix management system, the most important thing for young Li Ning Co is to allocate limited resources and reduce unnecessary waste.

COO Guo Jianxin has always said that Lining is a small company.

But it is the small company that has many resources to allocate, including sports resources, R & D, supply chain integration, dealer management and supplier integration.

Everything is in line with business. Chen Jijun is the most concerned about Nike.

Chen, for example, knew that he was famous before he signed a $3 million athlete for a year, but he would not do the purchasing power investigation because of him.

Chen made the rules by signing the contract with the athletes, making a budget, probably estimating how long it will take and how many products to sell to recover the investment.

Lining said at an internal conference that Lining's brand sponsored sportsmen did not see sales in stores.

Chen Jijun began to look for reasons, and later discovered that Li Ning Co's sports products and retail outlets are two lines.

"The ultimate goal of signing sports resources is to sell products. If big goods do not have their products, how can they help sales?" Chen said at the meeting, "in Nike, if you do this, you will be shot."

As a result, the clothes worn by all Lining sponsors will be sold in retail stores starting in the first quarter of next year.

But Chen's department still faces great challenges.

Although Zhang Zhiyong has invested a lot of energy in it, it is not easy to accept and carry out his strategic plan for those who are CXO.

"Rely on your charm, influence, and profession to convince others."

Chen Jijun said.

In Chen Jijun's computer, there is a PPT specially designed for internal training. The first page is "Who are we". It introduces the tasks and roles of the brand strategy business group in detail.

In the process of formulating the strategic plan for the next year, he also took some unusual measures to divide the vertical business group into two groups: COO and sales + strategy and products, first communicate with the CXO directors, then communicate with the following people, adjust the strategic plan and communicate with CXO, and finally reach an agreement and hand over to CEO Zhang Zhiyong.

"We must respect their participation," Chen Jijun said. "Sometimes they even need each of them to sign."

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Internationalization test

Lining himself would like to have a strong correlation between the Lining brand and a sports category, like Nike's in basketball.

The new strategic direction is badminton.

Last April, Lining replaced Yonex as the main sponsor of the Chinese badminton team, and in July, it was one of the three biggest brands to buy Chinese Badminton equipment market.

Now, badminton rackets, which cost more than 1100 yuan, account for 38% of the total shipment. The best racket is the racket with the Chinese badminton player Lin Dan.

Over the past year, data from Li Ning Co show that Lining has taken 20% of the market for badminton professional channels.

"China badminton team is the world's number one in this project. We have such a strong sports resource team to support it, which is enough to make a higher price."

Lining badminton category director Yang Gang told reporters.

Choosing badminton as the main direction of the next stage is another important reason that badminton equipment is more international.

"Its standardization is very strong, which is a very good opportunity for globalization."

Zhang said.

Compared with clothing, this part reduces the cost of trial and error in entering the foreign market, and also makes production and distribution easier.

In July 2008, Lining opened the flagship store in Singapore. The shop is located on the two floor of the ION Orchard shopping center on the most prosperous Orchard Road in Singapore. It is on the entrance elevator, and the traffic volume is very large.

The adjacent shops include ECCO, Clarks, Puma, Levis and so on.

The most prominent aspect of the store is the half badminton racket model at the door. In the huge LCD TV, the production process and the use of badminton equipment circulate with subtitles in English.

Badminton rackets, badminton sports shoes and sportswear are mainly sold in stores.

Badminton rackets range from 139 to 489 Singapore dollars, and shoes are between 59 and 99 Singapore dollars.

Lining's six types of racket, such as Flame thunderbolt, Woods whistling, Rocks, and so on, have attracted many customers to stop and buy.

In the 2009-2013 year and 5 year plan, "we are positioning internationalization in the testing stage," Zhang Zhiyong said.

Southeast Asia is an overseas market with a high level of badminton sports. Zhang hopes to use badminton products and Southeast Asia as the first step in the international trial of the Li Ning Co, so as to organize preparations, system preparation and experience accumulation.

In the next five year strategy from 2014 to 2018, internationalization will become an important part of Li Ning Co strategy.

Zhang Zhiyong is also consciously attracting western professional managers to join Li Ning Co to make talent pool for the next step of internationalization.

Earlier this year, Zadorf Paul Arthur (Zadoff Paul Arthur), a former well-known sports brand, became the general manager of Lining brand shoes product system.

"This is a bold step forward. Although Lining has many foreign designers, it is the first time to hire Westerners at the general manager level."

Zhang Xiwang's own team has a more open mind and self insight.

Lining's LDC Center (Center for learning and development) will develop 53 courses next year, including two parts of knowledge follow-up and leadership, so that the management ability of the whole team will match with the key business of the company.

This is exactly what Lining himself wants to see.

He often talked about his dream to the outside world. It was Lining's past slogan, "anything is possible", which has grown from an ordinary athlete to a world champion. From a small company that started 20 years ago in Guangdong Sanshui, it expanded into a huge commercial empire today.

His ultimate commercial dream is to make Lining a real international brand.

Because international brands are among the top three factors in Chinese consumers' buying preferences.

However, at the same time of brand internationalization, Li Ning Co will still take the local market as the main battlefield.

The former Chinese gymnast now occasionally sits in front of the TV to watch the younger gymnastics competition.

"I think they are great, really proud of them, and nervous for them.

The most difficult movement of our year has now become the basic movement, so it is often seen sweating all over.

Do not say what language to praise their ability, even their eyes can not keep up with their movements. Sometimes they are more nervous than I used to be.

Lining told reporters.