Joshua Adeeso, Philip Banks, Oscar Chapellin & Noor Said

Professor Parneet Pahwa

MKT 3300
9 December 2015

adidas Group
Company Description
Adidas is a company that makes sports shoes, clothing and accessories. The company is
based in Herzogenaurach, Bavaria, Germany. Adidas also owns Reebok, Taylormade and
Rockport. Adidas was founded by Adolf Dassler in August of 1949, following a family feud,
while working for the company known today as Puma. Naturally, Puma and Adidas quickly
became rivals. Adidas is considered to be the largest sportswear company in Europe, and second
largest in the world, behind Nike. Adidas employs roughly 50,000 people in over 160 countries.
In 2014, Adidas generated sales of $16.5 billion.
Adidas focus is in two main areas, with two other smaller areas. There are four different
divisions: Adidas Sport Performance, Adidas Originals, Adidas Sport Style and Adidas Five Ten.
Adidas Sport Performance division focuses on technology and innovation. This division makes
products for all sports. These products are also designed with professional athletes in mind. The
products help athletes reach peak performance by making them faster, stronger, smarter and
cooler. Adidas Originals brings Adidas to the streets. It leverages the Adidas brand, but in the
lifestyle area. Snoop Dogg, Rihanna and Katy Perry are ambassadors of Adidas Originals. One
of Adidas smaller divisions, Sport Style, is called the Future of Sportswear. Sportstyle is
designed to help you Style your Life. Adidas other small division, Five Ten, makes footwear
for adrenaline pumping sports such as biking, rock climbing and kayaking.

The mission statement is: To be the globally leading and most popular sporting goods
brand. Embracing a multi-brand approach allows Adidas to engage the customer with a longlasting relationship, solidifying their global position. It allows Adidas to tackle opportunities
from different perspectives. With this multi-brand approach, Adidas has been able to build a
competitive advantage which will last long into the future.
Industry Analysis
The market in which Adidas operates in is already matured with significant, large
competitors. Nike is Adidas biggest competitor and led Adidas with $16.2 billion in net sales in
2014. Though Nike is leading in sales, Adidas is steadily growing and produced 258 million
pairs of shoes in 2014, their largest number to-date.
Adidas is still growing and has significant market share in sports apparel. They spend a
significant number of their revenue to design new products and further market their products.
They hope to grow their net income by 15% every year until 2020. Additionally, Adidas aims to
satisfy consumer needs in many different industries.
Their main focus is the sportswear market which consists of athletic shoes, sporting
apparel, and sport bags. Adidas succeeds in producing specific shoes for different sports. For
example, they provide a wide variety of popular soccer cleats.
There are many different regulations that affect Adidas, such as labor laws and import
taxes. 60% of Adidas products are being made in the Asia-Pacific area, and their products are
being manufactured in 62 countries world-wide. This global spread requires compliance with
many different laws and regulations. For instance, the company must comply with the federal
and state minimum wage laws throughout the United States. Importing their products from
outside the U.S. also requires Adidas to pay a federal import tax on each product they import.

Competitor Analysis
The main competitors that Adidas has in the sports industry are Nike, Puma, Under
Armour, Converse, Callaway Golf Company, and Reebok. Other small competitors that Adidas
has are Skechers, New Balance, Warrior Sports, Li Ning, and Umbro. The companies that
Adidas competes with on a daily basis are Nike and Puma. Both competitors have a major
foothold in the footwear industry, domestically and internationally. In the following paragraphs,
we will cover a few of the major competitors and provide a basic overview of their operations, as
well as highlighting their strengths and weaknesses.
Nike is known worldwide and is considered the top footwear/sports brand around the
world. They sell athletic gear for football, basketball, baseball, soccer, golf, tennis, etc. They also
produce products in the technology sector like Nike+ shoes with sensors that can sync to Apple
devices, and sport watches with GPS. Nikes global revenue has amounted to about 30.6 billion
dollars annually, and in the U.S alone they make 13.74 billion dollars in revenue annually. Nike
has about a 33.6% market share of the footwear/sports industry worldwide, and 62% in the U.S.
As stated, a major strength of Nike is that it is a strong global brand. They have strong
celebrity endorsements - particularly when it comes to basketball - with their most famous
celebrity endorsement Michael Jordon. They have low cost manufacturing due to the fact that
most products are produced outside of the U.S. Also, they have a strong research and
development team and always strive to produce better quality products every year. In contrast,
Nikes image has been affected throughout the years due to the ongoing perception that the
company has poor labor practices. The company has acknowledged this and has worked the last
20 years to improve working conditions in many of their overseas factories to Nike Standards,

but still struggle. Lastly, their products, due to how strong the brand is, tend to be high-priced
and out of reach of many customers around the globe.
Puma is known worldwide for its quality sport footwear, clothing, and accessories with
the range of these products expanding over several sports and activities. Puma is established in
over 90 countries. They offer products for many activities such as soccer, running, basketball,
and other European sports for any man, woman, or child. They currently hold a 26% market
share in the U.S. and 52% in Europe.
Puma has partnerships with Ferrari and BMW which helps them with funding. Their
football boots (soccer shoes) are also known for high quality and have been creatively and
innovatively made. They also sponsor many top athletes like Usain Bolt. Unfortunately, Puma
has tough competition and have seen their market share dwindle in the last decade due to large
companies like Adidas and Nike. They also have less financial strength compared to their
competitors, causing their product line to stagnate.
Under Armour is known mainly in America for the development of apparel, footwear
and accessories. They have grown tremendously in last the last few years. This is due to the
launch of new products and a growing product portfolio. It has also launched highly visible
marketing campaigns with the help of top-profile endorsements, such as Tom Brady and Stephen
Curry. Their products are for sports, including: football, baseball, lacrosse, softball, soccer, and
basketball. They also have a special line of athletic apparel they label as COLDGEAR, which
provides both dryness and warmth.
Under Armour posted revenues of 1.4 billion dollars in the U.S just this last quarter (Q3
2015) and has quickly become the second largest U.S apparel brand. They represent about 14
percent of the U.S. market share. Despite its recent success, Under Armour has yet to establish

itself as a global player in the footwear industry. Over 90 percent of its revenues come from
North America. Also, they do not manufacture their own products which can leave the company
vulnerable to shortages in its supply chain. Lastly, it lacks diversity when it comes to technology,
whereas Nike and Adidas both have a foothold in this.
Company Analysis
As previously mentioned, Adidas is firmly positioned as the 2nd global leading sportswear
and apparel provider. Its net sales have topped 10 billion euros every year, since 2006.
Additionally, Adidas has hooked up with several famous athletes and entertainers to carve out a
niche within the younger section of Generation Y and the older section of Generation Z. Despite
their success, sales have dipped in North America steadily over the past few years. In an attempt
to spur innovation and make up ground in the market share, they plan to over-invest into major
US cities such as Los Angeles and New York. The thought is, if they can win running in those
cities then they will gain market share throughout the United States as well. Additionally, its
seemingly narrow focus on the sport of football (association soccer) has framed them as a
soccer-first company, and has prevented growth in other sports.
A major opportunity for Adidas lies within athletic footwear. Despite its broad ranging
product line and stellar ambassador endorsements, it still has fallen behind Nike globally. Adidas
also continues to lose ground in the United States to competitors VF Group, Under Armour, and
others. If they were able to make a subtle impact in the United States and make up ground on
Nike (48% of the market in comparison to Adidas/Reebok at 8.7%) then they may begin to see
this change for their global sales as they pick up mind share. One of the biggest threats to
Adidas and its success is one of the most fundamental consumer spending and confidence.
They state that socio-political factors and/or economic downturns can negatively impact their

sales and profitability, especially because of their global scope. Additionally, the marketing
power of their competitors can drive their own marketing costs upward and adversely impact
their profitability and market position (without a strong response). Lastly, the need to convert
their currency to their central unit (the Euro) has led to a loss in net income. They state they if
they were to have received 10% more Euros (in substitution of USD) they would have earned $7
million more Euros to their net income.
Customer Analysis
Many customers view Adidas as one of the world leaders in sports clothing, shoes and
accessories so when someone needs sporting goods, Adidas is one of the companies that comes
to mind first. Consumers need this product when they need to work out or when they want to
play sports. Due to their sponsorship of the biggest and most famous sports teams in the world,
some of the biggest sports stars use Adidas products. This influence trickles all the way down to
the little kids playing on the street outside of their house. The information a consumer would
consider is the pricing advertised by the Adidas stores or the retailer that sells their products.
Consumers are often times torn between Nike and Adidas. Generally, people are loyal to one
brand, but when that isnt the case, it is left up to personal preferences and which one has the
most competitive prices.
The consumer makes the decision to purchase when they need it. It is not something with
great risk like buying a house, and many people have extensive experience buying their products
or similar ones. As expected, there is an increase in the number of sales when there are discounts.
If someone wants to buy it for as cheap as possible, they tend to go to the more popular retailers
that carry the products. If someone wanted variety, they would buy it from Adidas online or at
their stores.

Product Strategy
For the purpose of this section, we will focus on soccer cleats. Adidass soccer cleats are
at the growth stage of their product life cycle. Adidas is continually releasing new cleats, since
they are experiencing great success in the growing market of soccer cleats. The cleat industry is
an oligopoly, having a few large companies who own most of the market share. Adidas, as well
as Nike and Puma, are the companies who hold an advantage in the soccer cleat industry,
therefore there is fierce competition amongst them. Adidas launches several product lines that
appeal to cost and quality. They have higher end quality cleats that are meant for consumers
willing to pay more for quality, while also holding some cleat lines that appeal to price-sensitive
consumers. Adidas also allows consumers the flexibility to personalize their cleats, giving them
an edge over the competitors that do not provide such customization. Several of their shoe lines
are endorsed by professionals, causing their shoes to be viewed as more prestigious than their
competitors. This also gives consumers the idea that the players good performance is due to the
cleats, convincing many consumers to purchase them.
Pricing Strategy
Adidas offers different prices based on the quality. They mainly use two types of pricing:
competitive pricing and a skimming price strategy. Adidas tends to use skimming prices on their
apparel. They rarely use penetrative pricing due to the fact that it will affect the brand equity.
The higher price helps in the price quality for Adidas because customers believe that higher Price
means better quality. Due to this, Adidas rarely ever drops its prices in the market like Nike or
Puma. Adidas promotes their products in a way that signifies that their products are more lavish
or higher-end (in relation to their competitors). Eventually, prices fall as their products become
old.

Adidas has recently developed customization on different products, mainly shoes, to

allow customers to tinker with the color or material of their existing models of athletic shoes.
This campaign was started to compete with Nike and other brands. Unlike their competitors,
Adidas does not charge a mark-up from the price of the standard shoe.
The main target audience for Adidas is upper-middle class consumers and upper class
consumers, around the ages of 13 to 30, who are involved in some kind of sport. There is also a
smaller audience for Adidas which are consumers who are in to their lifestyle brand. This group
is generally middle class males and females between the ages of 16 and 24. Geographically, they
most frequently targeted market is in Europe due to the high demand of soccer shoes. Adidas
tend to lower prices in countries that are struggling economically. In developed countries, they
supply below demand to keep the price of the product and rareness high.
Channel Strategy
Adidas utilizes an intensive distribution strategy to sell its products. Across the globe,
Adidas products can be purchased in major retailers, in their self-run concept stores or their
factory outlets. This also includes the recently acquired Reebok and TaylorMade products. By
taking on this strategy, they are able to act as their own middleman, wholesaler and retailer.
Adidas also pilots in the eCommerce space, where potential customers are allowed to
take advantage of clearance sales, discounted items and even customize their own products.
eCommerce continues to be a bigger focus for Adidas as the world continues to transition into
the digital space.
In relation to Europe, Adidas North American presence is relatively small. It is
concentrated in major cities such as Los Angeles and New York, but is less visible elsewhere.
Most of the locations in North America are factory outlets, and this has negatively effected the

brand image of Adidas in the United States. Out of well over a hundred locations in the United
States, only a handful of stores are specialized Adidas concept stores.
Adidas management has spoken of the potential for growth in the states, but they also
mention it comes with a cost. Due to their German roots, currency and foreign exchange rates
negatively impact their bottom line year-after-year. This has deterred them from making large
campaigns and product enhancements specifically for the U.S.
With Adidas disposition and global market share of sports apparel, they have a unique
challenge in satisfying all of the markets it operates in. They are challenged due to their major
focus on association football in Europe, where its perceived contrast in American football is also
one of its major markets. This has led Adidas to campaign around basketball and its stars such as
Derrick Rose to help sell globally, especially in Europe where basketball is much more popular
than American football.
Promotion Strategy
The company communicates their heritage of innovation, technology, and big success
stories. Adidas promotes sayings like, We knew then - we know now & There is nothing
between you and success, so exceed your own expectations and limitations & Earn it. They
focus on appealing to the customers inner will to be better and succeed.
Adidas had an event called Take the Stage during the 2012 London Olympic Games
where they differentiated themselves from all the other Olympic sponsors. They helped spark the
interest of the youth in the Games. They recruited 32 kids, one from each district of London, to
go to the Olympics. They showed Adidas, above all the other sponsors, makes dreams come true.

To push their product Adidas relies on both direct selling and selling through
intermediates. They have many of their own stores and also sell their products through sporting
goods retailers such as Academy, Sports Authority and others.
They refer to themselves as game changers. They are positioning themselves to be the
one thing someone needs in their life so that they can take charge of it and make it better. Adidas
uses both push and pull promotional strategies. They plaster their logo on just about everything
they can to ensure that people are always aware of the company, but they also do things like the
event Take the Stage where they shine a bright light on the companys image and lure
customers to their products.