Lining: Lost On The Road Of Internationalization

If a price tag is 800 yuan.

And a pair of Lining shoes priced at 700 yuan in front of consumers, consumers will choose Nike; if a pair of 330 yuan price tag Li Ningxie and a pair of Anta shoes priced at 250 yuan are placed in front of consumers, consumers will no doubt choose Anta.

Lining, who became the leader of China's local sports brand in the 90s of last century, became the focus of media attention at the beginning of 2012.

Not because of Li Ning Co's performance, but because of the phased closure of Li Ning Co's many external and internal boycotts over the years: the entry of new strategic partners and investor teams represented by the TPG team, and the exit of the former chief executive.

After that, Lining began to push ahead with a series of streamlining and contracting strategies, making clear that he would pay more attention to China's market in the future and close the platform for cooperation in Europe.

In addition, negative information has come out repeatedly: the design center in Portland has lost half of its employees; the agreement with the US partner Foot Locker Inc. has been suspended, and the sales company set up with the Spanish agent has also gone bankrupt; the company issued an early warning that the total amount of Q4 orders in 2012 had a high double-digit decline, and the annual revenue and profits will be negative growth. So far, Lining has closed 1200 stores.

These are seen as the ultimate failure of Lining's brand internationalization.

However, the author does not think that the above results illustrate the failure of internationalization of Chinese enterprises represented by Lining, nor does it suggest that Lining's international decision is wrong, but precisely that the internationalization of Chinese enterprises will be a relatively long process.

Every attempt in this process is a useful contribution and positive exploration for Chinese enterprises to move towards the international success mode.

In this sense, the slowing down or stagnation of the pace of internationalization of Li Ning Co is only a temporary loss, and it is also for accumulation of resources and capabilities to prepare for future development.

Even in the current unfavorable competition and operation environment, Li Ning Co is still sticking to the domestic market position second, the first place of the local sports brand.

Lining's experience and lessons in the process of internationalization of China's sports brand enterprises, especially how to learn from the Chinese industry, in order to continue to implement the "going global" strategy of Chinese enterprises and truly realize the international operation of Chinese local brands, is the focus of this article and readers.

What is internationalization?

In order to internationalize China's enterprises, we must first find out what the concept of "internationalization" or "globalization" is.

With the coming of the world into the twentieth Century, the emergence of pnational corporations characterized by global capitalism and its typical representatives makes the concept of internationalization and globalization prevail. In the management field, there is also a disciplinary system focusing on the study of pnational corporations, and extends a series of theoretical models, including pnational marketing, pnational human resources management, brand internationalization and pnational capital operation.

These theoretical frameworks have formed a relatively mature conceptual system in 1990s, especially for the definition of pnational corporations.

In the 80 and 90s twentieth Century to the present day, one of the most striking features of the world economy and world politics is the special role played by pnational corporations.

From a certain point of view, MNCs are carriers of internationalization.

"Transnational corporations" is a general term in Chinese, and it does not strictly distinguish the different stages and forms of pnational corporations.

Starting from the 90s of last century, the Western business management academia defined multinationals as four different forms in terms of the degree of pnational business activities and resource allocation, decision-making procedures and other indicators.

The International Company (International Company).

At this stage, the biggest feature of an enterprise is the ability to expand the knowledge and skills of the parent company to the whole world and adjust to the local conditions. The subsidiaries of different regions have certain autonomy in resources, responsibilities and decision-making, but the final decision-making power is still controlled by the parent company.

For example, GE, P&G, Ericsson and other enterprises in the 90s of last century.

The Global Company (global company).

The uniqueness and ability of such enterprises is to build an overall cost advantage through intensive global operation activities.

The most strategic assets, responsibilities and decisions must be unified and strictly controlled by the parent company.

Enterprises in this area are most typical of Japanese enterprises in the 90s, such as Hua Wang, Panasonic and NEC.

The Multinational Company (multinational company).

This is what we call the multinational corporations in China now.

The core competency of such enterprises is to maintain sensitivity and responsiveness to market demands in geopolitical differences, and to implement a solid localization strategy.

Such enterprises generally adopt decentralization systems in core assets, important responsibilities and decision-making, such as Unilever, PHILPS and the original ITT.

The Transnational Company (Multinational Corporation).

This is the advanced stage of the development of multinational corporations.

The core competencies of such enterprises include not only the capacity elements of other multinational companies, but also the ability of global integration, local differentiation and global innovation.

Today, the most powerful multinational enterprises in the world belong to this category, such as BASF, BP, Boeing and so on.

Some excellent and market competitive Chinese enterprises have made unremitting efforts and learning through their own efforts, and have the basic elements of pnational corporations, including the international allocation of resources.

Such as Lenovo, it can be said that is already an international enterprise, Haier, HUAWEI and so on, have begun to have the embryonic form of pnational corporations.

Through continuous efforts, more and more Chinese multinationals with global competitiveness will emerge and appear in every node of the world industrial chain.

In contrast, Li Ning Co does not yet have any form of pnational corporation.

Due to the rapid development of the industrial practice and the rapid expansion and development of all kinds of multinational enterprises, leading to the theoretical framework has lagged behind the industrial practice. At this time, China's management has been totally absorbed and accepted the theoretical framework of internationalization and globalization of Western management.

So far, in China's theoretical circles and industrial practice circles, there is no universal definition of internationalization and globalization.

This makes Chinese enterprises unilaterally understand the concept of internationalization in the process of implementing the "going global" strategy, and does not design an international path according to their own characteristics according to their own resources and capabilities.

This is the reason why many domestic enterprises are not successful in strategic design.

The author will take Lining's international failure as a case, and explain the basic paradigm and path of the internationalization of Chinese enterprises from four aspects, so as to provide reference for Chinese enterprises' internationalization practice.

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Strategic design: still being discriminated against

How to understand the strategic design of internationalization?

Internationalization refers to the process of the allocation of resources by an enterprise (Multinational Corporation) on a global scale.

But unlike other definitions, the resources here can be tangible resources or intangible brands and cultural resources.

Since it is a process, there will be a gradual step, such as economic and trade activities within and outside the territory, export orders, OEM and OEM, overseas branches, domestic and foreign joint ventures, overseas factories, mergers and acquisitions, etc., all of which are the process of internationalization and globalization, and the export of brand and culture can run through the whole process.

Having understood the basic definition and path of internationalization, the next step is to design an international strategy that suits itself.

The wrong idea to correct is that many theoretical and practical circles in China have established the market and production organization directly overseas as the only way of internationalization.

I saw Haier's Mini Fridge more than 10 years ago in a small electrical appliance shop in Beeston, a small town in England.

While feeling the market penetration ability of Haier, I understand the sales situation of the fridge with the salesperson.

The salesperson frankly said that the Chinese brand refrigerator is good, durable and affordable, but locals still prefer to use the European home appliance brand.

Besides culture and value, Haier Mr. Zhang Ruimin has found another reason.

Zhang Ruimin said in the past few years that Haier should not only create products of "quality", but also create products with "taste".

Unfortunately, this sentence has not attracted enough attention from the domestic industry.

The "taste" here refers to the factors that consumers have in terms of functions, culture and values.

Fortunately, Haier's products in recent years are positive in accordance with this international concept. The brand of the "Casarte" brand refrigerator is the concrete landing of this concept.

In contrast, Li Ning Co's shoes and clothing oriented sports apparel products are the most typical brand and cultural concept consumption areas in Europe and the United States. Simply speaking, it can be Made in China (made in China), but it must be LocalBrand (local brand); this is just the opposite of Chinese consumers' strong foreign sentiment.

If we do not understand the market characteristics, the internationalization strategy at least ignores the challenges in the implementation process.

From this perspective, there is no real consumer brand in China in the past twenty years based on the mainstream consumer goods market in Europe and the United States.

At this Olympic Games, a group of Chinese entrepreneurs use the Olympic opportunity to directly spread the Chinese clothing brand. Local consumers will certainly appreciate it, but they will not consume it.

Similarly, during the Olympic Games, a famous Chinese clothing brand opened in London's famous Oxford street and served as a bridgehead for brand communication. This strategy will not directly aim at sales performance.

Lining has been in the process of internationalization for more than 10 years, and the market they actually open is still in Spain.

But with the deepening of the Spanish economic crisis, Lining's authorized business obviously suffered an irreparable financial deficit and eventually went bankrupt.

However, the "brand discrimination" in the external market is not without solution.

A feasible strategy is to select a special market segment, and gradually use it to enter the mainstream market and establish brand status.

Billiards and table tennis equipment are good examples.

In the past, the world championship of billiards must be the top European and American brand. Now, China's "star card" has become one of the main sponsors of the tournament.

The original table tennis equipment must be Butterfly and other European and American brands, and now China's red double happiness has gone to the front desk.

The second strategy is to use culture to achieve fashion and creative effects and achieve the purpose of brand communication.

The most typical successful case is the Ospop China shoe.

Although European and American consumers have the "brand discrimination" complex, they accept the Ospop style and fashion, where to do and the importance of the brand "retire to the second line".

China's international brand should rely on the charm of Chinese culture to conquer the international market.

The internationalization of Li Ning Co in the future will also follow the basic strategy mentioned above, and choose a most suitable Lining brand core value and other European and American regional market demand factors, and launch its new internationalization strategy.

In this regard, other Chinese sports apparel brands, such as PEAK, Anta and 31st degree, have also made positive attempts and practices.

Supply chain management: imitation of inefficiency

An important system for enterprises to implement internationalization is the seamless supply chain system based on the whole world.

One of the reasons why Li Ning Co is trapped in the current management dilemma is that enterprises are also one of the "deadlock" of management of all garment enterprises.

Because the clothing industry is generally a light asset model and made in China, Lining's international supply chain management focuses on international design and localization.

However, as a leading local company, it has lagged behind in supply chain management.

Since 2005, Lining used Nike's light assets.

Outsourcing logistics and distribution business to third parties.

In terms of production, in addition to retaining a factory's main development and production of sponsorship products and products with high security requirements, Lining basically withdrew from manufacturing and became an integrator in the value chain and supply chain.

Lining's goal is to set up a sensitive supply chain from the maximization of the overall value of the supply chain, that is, to catch the change of market demand and respond quickly, and continuously improve the efficiency of the entire supply chain.

However, although Lining set up his headquarters for creative design in Beijing, Hongkong and the west coast of the United States, good products are often not reflected in the market, and many excellent products are often short of distribution.

For a long time, the cost of Lining supply chain is about 20% to 30% higher than that of Anta and PEAK. It is almost the same as Nike and Adidas, and it does not reflect the so-called low cost advantage made in China.

Take zipper supplier as an example, Lining did not adopt the YKK top class zipper company, but insisted on purchasing from a zipper manufacturer named Kee, which has repeatedly exposed quality problems.

Lining also tried to make changes.

In 2006, Lining set up a PPT project group to avoid inventory problems through a collaborative supply chain inventory management system called CPFR.

The system was pioneered by WAL-MART, and the IT system was used to manage the production plan, inventory plan, distribution plan and sales plan through the cooperation between retail enterprises and production enterprises.

The PPT project team has made an astonishing success: it takes up more than 25% of the order quantity by 10% product, and its test supply cycle also reduces to about 20 days.

However, Lining's attempt to build an international supply chain quickly ended without any change in management and internal commitment.

The problem of supply chain can not be solved in the controllable range of physics in China, let alone in the international market.

For any enterprise without an international supply chain system, talking about internationalization is just a gimmick of brand marketing, because this marketing can not stand the test of consumers and market "sand table simulation".

Why is it important to establish a globalized supply chain system for the implementation of internationalized Chinese enterprises? The reason is very simple, because China, which bears the responsibility of the world factory, passively accepts the management of the "master" of the supply chain, and now it acts as the "master" of the supply chain.

Second, as the world factory, the existing cost and labor advantages make huge quantities of raw materials, components and goods go through China to all parts of the world. Without the upgrading of the whole industry's supply chain management capability, China's internationalization practice will not achieve essential success.

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Human resource management: catastrophic conflict

According to the theory and practice of internationalization, a distinct feature is that there are essential changes in content and scope on the basis of traditional human resource management.

This will be a huge challenge for Chinese enterprises still in the "personnel management" stage.

For example, after the implementation of internationalization, the scope of the original human resources management has expanded from the previous linear links of "selection, education, use and retention" to three dimensional concepts of the country, home country and third country; the laws and regulations and departmental regulations related to human resources management have also been expanded to the scope of pnational laws and regulations, involving the complex legal administrative relations of languages, religions, races, international taxes, trade unions, and so on.

Therefore, the human resources director, who really has the experience and ability of human resource management in multinational companies, has been very popular.

As a listed Li Ning Co in Hongkong, it is also bound to be influenced by Hongkong's local business culture in terms of culture and philosophy. It is both a challenge and an opportunity to internationalize management capabilities of enterprises.

However, the excessive introduction of external professional managers has caused the confusion of Li Ning Co culture and led to significant changes in company management.

A large number of paratroopers almost hold the key parts of Li Ning Co: the product system is mainly the Hongkong people, and the market system is the site of the Taiwanese.

On the one hand, these people pformed Lining into a testing ground for various management models, which caused great losses to Lining.

On the other hand, these paratroopers obstruct the promotion channel of Lining's internal manager.

Lining's staff rating is divided into eight levels, the ceiling of internal promotion is 4, which results in serious employee turnover of Lining.

This is not conducive to the cultural tradition of the local movement of Li Ning Co. It has also become an important reason for the loss of direction of Lining's internationalization.

In order to balance the contradiction between the old staff and the paratroopers, Lining had to tolerate the growing ranks of middle managers. The result was disastrous decision-making and constant political conflict.

Perhaps it is precisely because of the lack of corporate human resource allocation and management in the past, and after Mr. Lining returned to the Li Ning Co management line, he first introduced a multinational career management team with good reputation in the industry. In the future, the candidates for new presidents also put forward a lot of experiences that need to be worked in multinational enterprises or cultural backgrounds.

In this regard, the Lenovo Group in China has shown us a preliminary successful paradigm of pnational human resource management. The internationalization practice of Haier group, HUAWEI and other enterprises is inseparable from upgrading and breakthroughs in the management of pnational human resources.

In short, pnational human resources management is not only a management function of a company, but also a strategic decision of a company.

Cultural adaptability: not localized

The industry has always said that the success or failure of enterprise internationalization is often determined by the integration of culture and whether conflicts are well resolved.

To some extent, this is right, because the most distinctive feature of internationalization is to enter a new atmosphere of cultural values.

In the 80s of last century, when Japanese companies entered the US market to seek international expansion, the founder of the original Sony Corp put forward a famous "Global, localization" judgment.

This conclusion can be extended and understood from many angles. It has guided the international practice of management academics for many years, and is also meaningful for the current Chinese enterprises to seek the "going out" strategy.

From a cultural perspective, it can be understood as starting from a global perspective and starting from reality.

When Li Ning Co first sought international cooperation, there was a European strategy consulting firms willing to serve as an intermediary between Li Ning Co and potential partners, matching the strategic orientation of both sides and facilitating business cooperation.

Because many small and medium enterprises in Europe and the United States are family businesses. The glory of the family makes it difficult for these enterprises to accept the idea of a Chinese enterprise knocking directly, saying, "I want to buy you, quote the price!" at this time, the value of the intermediary is reflected.

Not only can it reach the intention, but also help the two sides to design a win-win business plan. The two sides have also avoided some embarrassing problems.

However, Li Ning Co finally declined this proposal.

Although it eventually achieved business cooperation with a European enterprise, it also made some trouble.

The above case illustrates that in implementing the internationalization strategy, it is of great significance for both sides to reflect their own international ideas and values.

At the very beginning, the two sides did not just stand on the business side, but more importantly, seek the recognition and appreciation of the two sides in culture and values.

In the process of internationalization practice, the international cultural values are the only criteria recognized by both sides.

At the same time, Lining's strategic arrangement of "brand internationalization and market Sinicization" led them not to go deep into the local market of foreign developed countries and integrate into their culture.

Honda has been able to investigate the US market for many years. Haier can work in the US market for decades and launch products suitable for the local market. Lining simply wants to make use of these markets to achieve brand internationalization, but not to lay down her role. This is of course impossible.

Lining's sports marketing choice shows that they have not adapted to the western world culture.

Lining signed the Norway javelin world champion.

The introduction of endorsement ads, but the javelin movement has a very low appeal, which has not made much contribution to Lining's international brand building.

On the contrary, basketball is the street sport in the United States.

Lining's reaction was slow when NBA was red through the half sky. All the signed stars were O'neal, but Anta and other brands could take some of the stars.

Even PEAK, whose name is believed by many consumers, is able to promote the second tier brand in China through NBA.

As a result, by 2011, Anta's market capitalization was about HK $35 billion 800 million, and Lining was about HK $15 billion, and Anta's market value was not only far more than that of Lining, but it was 2.5 times that of the latter.

Today, Lining is absent from the London Olympic Games. Anta's dragon clothing is appearing in front of the world.

If we can not localize, we should not be internationalized. It should be a lesson that enterprises that should try to take the road to internationalization should bear in mind.