Lining Builds A Business Model Of Raising Product Premium By Brand

As the leader of the industry,

In the early 90s of last century, after the retirement of the Olympic champion Lining began to start a business, to achieve its "let the Chinese champion wear Chinese sports brand" dream, "brand building" has become the core of the Li Ning Co business model.

Looking at the media reports over the past few years, public opinion seems to be overly concerned about Lining's short term performance. There is little in-depth analysis of its business models, strategic planning and implementation capabilities.

Looking back at Lining's history, we can understand more comprehensively that the local growth company has been complying with the trend of market development in the past twenty years, actively finding problems and finding ways to solve the problems.

In the early 90s of last century, Lining, the Olympic champion after retiring, began to start his own business. To achieve his dream of "letting the Chinese champion wear Chinese sports brand", "building brand" became the core of Li Ning Co's business mode.

In the very early stage of development of the sporting goods market, Lining's personal brand effect played an irreplaceable role, but the company has been strengthening its close combination with China's sports champions, making "Lining".

In 2001, Beijing successfully bid for the Olympic Games. The Beijing Olympic Games in 2008 brought opportunities to China's sporting goods companies for a hundred years. The major brands were advancing rapidly, enjoying a feast.

However, the dialectics of "luck and misfortune" is once again embodied in the Chinese sporting goods industry. The hidden problems in the extensive mode of rapid growth were also beginning to emerge.

In 2009, the sporting goods industry began to encounter the common problems encountered by other industries in China. The cost of raw materials and labor has been rising, the retail rents have risen rapidly, and the space of the industrial chain has been squeezed.

At the same time, consumers' demand for brands and products is more mature, and international brands are constantly expanding their territory to further pressure on local brands.

By analyzing the industry, Li Ning Co further strengthened its determination to improve its business model. In 2010, it put forward two major reform measures: "brand remolding" and "channel reform", aiming to achieve brand differentiation and improve the efficiency of retail operation, so as to cope with the change of the overall industrial structure.

Management at that time made it clear that the next two to three years will be the pition period of the whole industry.

Despite all kinds of doubts, Li Ning Co is still sticking to its strategy -- complying with the development trend of the industry, facing all kinds of business problems, preparing for the rainy day and preparing for the challenges.

Concentrating superior resources and laying the foundation for sustainable growth of enterprises

Lining saw the nature of the development of the industry earlier, and planned his financial resources more adaptable to the "brand oriented" strategy.

Since the launch of various sports Brand Company, they have been used to make horizontal comparisons with various financial data.

It seems that everyone is accustomed to commenting that the higher cost ratio of Li Ning Co results in profit margins than other companies.

The reporter consulted a number of industry experts and financial professionals, and compared and studied the cost structure of Lining and other sports goods companies at home and abroad in recent years, and found that everything should not be superficial.

Brand is the core content of the sporting goods industry. All companies have disclosed the proportion of advertising and marketing expenses to sales. The reporters have found these data from the annual reports of various companies, and have made a comparison (see attached table).

Compared with other domestic brands, the cost rate of Li Ning Co is the highest in the industry.

Anta, PEAK and other enterprises basically began to increase substantially in recent years.

It shows that Lining has seen the nature of the development of the industry earlier, and has more forward-looking plans. His financial resources are adapted to the "brand oriented" strategy.

But is this part of the fee rate high or low? In the past, Nike and Adidas have experienced dozens of years and nearly a hundred years of successful brands. Today, when sales revenue is several times the level of domestic brands, advertising and marketing investment still account for over 10% of sales.

Taking the cost of brand investment as an example, Lining's financial resource planning is obvious. The rate of cost will inevitably affect the profit margin of the current period. Lining's operating profit margin is much lower than that of other domestic brands. If we look at the international brand, history seems to tell us that we should not simply measure the success of a company with short-term profit margins or high and low ones, but depend on how the company concentrates its superior resources to promote long-term development and whether it can win in long-distance running.

During the study, the reporters also focused on the data of product development.

Lining has also maintained a high investment, and other domestic brands are also rapidly increasing R & D expenses in recent years, indicating that companies are aware of the importance of products.

But Li Ning Co's emphasis on product strategy is more forward-looking.

Observing the new products launched by Li Ning Co in recent years, such as Li Ninggong, Li Ninghu and other technology platforms, it is easy for us to understand that constantly strengthening technological innovation and material innovation is an essential prerequisite for long-term development of enterprises.

This shows that Li Ning Co has a strong strategy in the fundamental direction of enterprise development.

The future of sporting goods industry

From cost driven to value driven and brand enhancing product premium, the business model of Lining's brand will become the foundation for the long-term and stable development of the brand and eventually become the international famous brand.

As we all know, cost is one of the key factors determining business models.

Chinese sporting goods companies have made a lot of profits in the past ten years, a large part of which is due to the lower cost structure. Today, this extensive business model is facing enormous challenges.

Chinese sporting goods enterprises are faced with two choices: first, to operate from production to sales, to save a lot of investment in brand and R & D, and to provide basic products; the other is to enhance brand value, enhance product development, provide consumers with better brand experience and quality products, and acquire stronger pricing power, so as to cope with the pressure of rising cost of the whole industry.

Lining chose the latter.

Different choices are closely related to the business mode and long-term accumulation of experience and ability of the enterprise itself. In the process of domestic brand self adjustment, how to adapt to the general trend of the development of the industry and combine with the advantages of itself is not an easy process. This may be the implication of Lining's "labor pains".

Some experts believe that Lining's shift from cost driven to value driven and brand enhancing product premium will undoubtedly lay a solid foundation for the long-term and stable development of Lining brand and eventually become an internationally famous brand.