MARKS

FACULTY OF BUSINESS AND ECONOMICS

PPB 3143
BUSINESS POLICY AND STRATEGIC MANAGEMENT

TITLE:
STRATEGIC MANAGEMENT IN THE ANNUAL REPORT OF ADIDAS

BY :
NAME

MATRIC. NO

PROGRAM

NORZAINI BINTI BURKRI

D20111048248

AT21

NURUL AMALINA KAMILAH BT. ABDULLAH

D20121058460

AT19

GROUP

:A

LECTURER

: DR. MAT ITHNIN BIN SALLEH

DATE OF SUBMISSION

: 19 DISEMBER 2014

CONTENTS
NO.
1.0

2.0

3.0

4.0

5.0

6.0
7.0

CONTENT
Introduction

PAGES

1.1 Background

1.2 Organisation Chart

Mission And Vision Statement

2.1 Mission Statement

2.2 Vision Statement

Internal Audit

3.1 Internal Factors

3.2 Internal Factors Evaluation

External Audit

4.1 External Factors

4.2 External Factors Evaluation

Strategy Used In Adidas

10

5.1 Diversification Strategy

11

5.2 Differentiation Strategy

11

5.3 Focus Strategy

Strategy Analysis
Conclusion

12
13
15

1.0

INTRODUCTION
1.1
BACKGROUND
Adidas was founded in 1924 in Germany by two bothers Adi and Rudolf Dassler. The
company was first named Dassler shoes and later became Adidas. By the Dassler
shoes being seen in the Olympics this really helped the company get its name known.
However, in 1948 Rudolf Dassler leaves to start his own company which is now
known as Puma, which quickly became the business rival of Adidas. Once Rudolf left
his brother came up with the famous three stripes logo and changed the name to
Adidas. Both the Adidas and Puma companies still remain based in Herzogenaurach,
Germany to this day.
The 3 stripes were created to keep the foot stable, but ended up being the logo.
Throughout the years Adidas was seen in the Olympics, and it was the leading brand
making their shoes highly sought after by Olympic athletes. In 1978, Adi Dassler
passed at age 78 and his wife Kathe ran the company. Six years later Kathe passed
and the company was left for their son Horst Dassler to run, and three years later
Horst passed at age 51. After Horsts death Adidas ran into some major financial
problems, and later Bernard Tapie comes to make an attempt to save the company and
he borrowed some of the money to buy Adidas.
Tapie was at the time a famous specialist of rescuing bankrupt companies, an
expertise on which he built his fortune. In 1992, unable to pay the loan interest, Tapie
mandated the Crdit Lyonnais bank to sell Adidas, and the bank subsequently
converted the outstanding debt owed into equity of the enterprise, which was unusual
as per the prevalent French banking practice. The state-owned bank had tried to get
Tapie out of dire financial straits as a personal favour to Tapie, it is reported, because
Tapie was Minister of Urban Affairs (ministre de la Ville) in the French government at
the time. In February 1993, Crdit Lyonnais sold Adidas to Robert Louis-Dreyfus, a
friend of Bernard Tapie for a much higher amount of money than what Tapie owed.
Robert Louis-Dreyfus became the new CEO of the company. He was also the
president of Olympique de Marseille.Now, Adidas has global corporate headquarters
in Germany, and many other business locations around the world such as Portland
OR, Hong Kong, Toronto, Taiwan, England, Japan, Australia, and Spain. Mainly sold

in the U.S., Adidas makes lots of assets from these countries and is expanding to more
overseas countries.
Adidas is on the move and always has been: It has had an adventurous history
since it first grew out of a family business in Herzogenaurach, Germany in the 1920s.
With the hostile separation of two brothers interests in the 1940s, nearly going bust in
the 1980s and then executing two rescue operations, first by sending production
offshore to Asia and then by reinventing itself into a design and marketing company,
Adidas has riden the waves of change in the sports goods sector both up and down.
Alongside its own brands, it owned the Saloman ski and sportswear brand for nearly a
decade and now includes the Reebok, Taylormade Golf and Rockport brands in its
stable.
1.2

ORGANISATION CHART
EXECUTIVE BOARD

Herbert Hainer
(Chief
Executive
Officer)
Roland auschel
(global sales)
2.0

Glenn Bennett
(Global
Operations)

Robin J. Stalker
(CFO)

Erich Stamminger
(Global Brands)

MISSION AND VISION

2.1

MISSION STATEMENTS

The Adidas Group strives to be the global leader in the sporting goods industry with
brands built on a passion for sports and a sporting lifestyle. We are committed to
continuously strengthening our brands and products to improve our competitive
position.
1. We are innovation and design leaders who seek to help athletes of all skill levels
achieve peak performance with every product we bring to market - customers

2. We are consumer focused and therefore we continuously improve the quality,

look, feel, and image of our products and our organizational structures to match
and exceed consumer expectations and to provide them with the highest value products
3. We are a global organization that is socially and environmentally responsible, that
embraces creativity and diversity, and is financially rewarding for our employees
and shareholders - concern of public images
4. We are dedicated to consistently delivering outstanding financial results - concern
of growth, survival and profitability.
Mission review: Mission statement is about what an organization wants to be and
whom it wants to serve. This Adidas mission statement is a good statement because its
include most of the mission statement components such as customers, product,
concern of public images and concern of growth, survival and profitability. Besides,
this mission statement also broad in scope which is not include any monetary amount,
percentages, ratios or objectives. Last, this mission statement not just reconciliatory
and enduring, but also inspiring and reveal that Adidas is socially and
environmentally responsibility.

2.2

VISION STATEMENT

To enhance social and environmental performance in the company and the supply
chain, thereby improving the lives of the people making our products.
Vision review: A vision statement is about what the organization wants to become.
This vision statement should be short which preferably only in one sentence and has
as much as input from the managers to develop the statement. Adidas vision statement
is a good statement because it answered the question what we want to become.

3.0

INTERNAL AUDIT

The internal audit is carried out by the accountant employed by an organization. The purpose
of internal audit is to assess the internal controls and record-keeping activities of the
organization concerned. Group accountants perform internal audit work is referred to as
internal auditors. Internal auditor is one of the most important jobs in an organization which
is tasked to review the work of other staff and assess the efficiency and effectiveness of their
work. The management organization providing this service for the internal auditors to
determine the extent to which the staff of the organization can stick to the policies and rules
of the organization, as well as achieve operational efficiency and effectiveness of the system
of record keeping. It can be said that the role of internal auditors is to ensure compliance with
internal control procedures of the organization. In addition, the internal audit's role is to
convince management that the internal review and accounting system is effective in terms of
design and operation and that the financial statements submitted to management can be
trusted.
Internal audit or internal assessment will emphasize the strength and weaknesses of the
organization in the event of changes or events in the control of the organization. We will list
some of the strengths and weaknesses of Adidas Group to form the matrix IFE (Internal
Factor Evaluation). IFE matrix is an approach that can be used as a basis for assessing the
organization's strategy. IFE matrix should focus on changes in the strengths and weaknesses
in organizational management, marketing, finance, accounting, production, operations,
research and development and computerized information systems.

3.1

INTERNAL FACTORS
STRENGHTS

Good financial position

Strong brand
Competitive pricing
Strong international distribution
Sponsor many major sport events
Has worldwide presence which has

over 2400 stores.

Effective market strategy
Owns several sport brands
Has a workforce of over 45,000

employees
High brand value since 1924.

WEAKNESSES

The products can sometimes be costly

due to innovative technology or

production method
Stiff competition and similar big
brands means customers have high

brand switching
Over pricing
Low quality product/services
Limited product line
Web booking only offered in USA and

some locations in Europe

product popularity is dependent upon

consumer loyalty
Highly susceptible to downturns in

local and international economies.

invests much of its advertising funds
not only in products but in athletespokespersons.

3.2

INTERNAL FACTOR EVALUATION (IFE)

Internal Factors

Weight

Rate

Weighted
7

Score
STRENGHTS
Good financial position

0.10

0.10

Strong brand

0.08

0.08

Competitive pricing

0.04

0.08

Strong international distribution

0.07

0.07

Sponsor many major sport events

0.05

0.15

Has worldwide presence which has over 2400 stores.

0.07

0.14

Effective market strategy

0.08

0.08

Owns several sport brands

0.04

0.12

Has a workforce of over 45,000 employees

0.05

0.10

High brand value since 1924.

0.03

0.06

The products can sometimes be costly due to

0.05

0.10

innovative technology or production method.

Stiff competition and similar big brands means

0.07

0.07

customers have high brand switching

Over pricing

0.04

0.08

Low quality product/services

0.03

0.09

Limited product line

0.03

0.06

Web booking only offered in USA and some locations

0.04

0.08

in Europe
product popularity is dependent upon consumer

0.06

0.06

loyalty
Highly susceptible to downturns in local and

0.03

0.06

international economies
Invests much of its advertising funds not only in

0.04

0.12

WEAKNESSES

products but in athlete-spokespersons.

Total

4.0

1.70

EXTERNAL AUDIT

External audit or external evaluation focused on the identification and assessment of trends
and events that beyond the control of the organization. These trends may be occurring
because of the economic, social, cultural, demographic, political, technological and

competitive that it is hard to change and outside the organization authorized to handle. Adidas
should pay attention to these factors and operate in accordance with the changes that occur to
avoid the risks of disability in the market in order to increase the profit and sells.
External audit will focus on opportunities and threats of the organization in the event
of changes or events beyond the control of the organization. We will list some of the
opportunities and threats for Adidas Group to form the matrix EFE (External Factor
Evaluation). EFE matrix is an approach that can be used as a basis for assessing the
organization's strategy. EFE matrix can give clues to what extent the effectiveness of the
company's strategy to act as a feedback on opportunities and external threats.
4.1

EXTERNAL FACTORS
OPPORTUNITIES

THREATS

generates close to 60 new footfriendly designs each year in order to

compete with other brands

can joint venture with

other

companies in making more stylish

designs and cuts

Tie-up
with

teams/clubs/players internationally
Brand building by setting up sports

academies
Can bring the newly popular athletes

to be the spokesperson
Sponsorship of global sports events
Change in customer lifestyle.
Technological innovation

4.2

emerging

sports

Competition is highly intense in the

sports apparel and footwear market.

Competitors actions
Growing the power of customer to set

the price.
Change in customers lifestyle
Financial slowdown
Price war between the competitors
Growing the power of supplies to set

the price
New competitors entering the market

EXTERNAL FACTORS EVELUATION

External Factors

Weight

Rate

Weighted
Score

OPPORTUNITIES
generates close to 60 new foot-friendly designs
each year in order to compete with other

0.10

0.20
9

brands
can joint venture with other companies in
making more stylish designs and cuts
Tie-up
with
emerging

0.12

0.12

teams/clubs/players internationally
Brand building by setting up sports academies
Can bring the newly popular athletes to be the

0.08
0.05

3
3

0.24
0.15

spokesperson
Sponsorship of global sports events
Change in customer lifestyle.
Technological innovation

0.03
0.06
0.05
0.10

3
1
2
1

0.09
0.06
0.10
0.10

apparel and footwear market.

Competitors actions
Growing the power of customer to set the

0.06
0.05

1
2

0.06
0.10

price.
Change in customers lifestyle
Financial slowdown
Price war between the competitors
Growing the power of supplies to set the price
New competitors entering the market
Total

0.03
0.04
0.06
0.06
0.03
0.08
1.0

2
3
2
2
3
1

0.06
0.12
0.12
0.12
0.09
0.08
1.81

sports

THREATHS
Competition is highly intense in the sports

10

5.0

STRATEGY USED IN ADIDAS

Adidas is one of the leading companies in the world that specialise in the production of wide
variety and high quality sportswear and sports equipment. The head office of the company is
located in Germany and has good brands through which it promotes its products. The
company is carrying on its operations by using the three brands names of Adidas, Taylor
Made-Adidas Golf, and Reebok. The company is widely operating in Europe, North America
and Asia. Adidas has a strong work force of around 39,000 employees working in different
parts of the world. The company has its operations in Europe, US and Asia in more than 150
subsidiaries and are purely focussed on manufacturing. Adidas focuses on sports and the
brand specialises in footwear, apparel and accessories. Adidas is very popular with the sports
division where the brand image of the company is promoted in sports like running, football,
basketball, tennis and many more.
5.1

DIVERSIFICATION STRATEGIES

Adidas being using diversification strategies to develop the business for these three
years. For more specific, Adidas using related diversification strategy because we can
clearly see that all the brand under the Adidas Group in the production of related
products. For example, sport shoes and apparels, sport equipment, accessories such as
glasses, eye pieces and bags. Related diversification strategy is the most popular
distinction between the different types of diversification and is made with regard to
how close the field of diversification is to the field of the existing business activities.
This strategy occurs when Adidas adds to or expands its existing line of production or
markets. In these cases, Adidas starts manufacturing a new product or penetrates a
new market related to its business activity. Under related diversification the company
makes easier the consumption of its products by producing complementing goods or
offering complementing services.

5.2

DIFFERENTIATION STRATEGY

Next strategy is differentiation strategy. Adidas commitment to product innovation

and this strategy should be pursued only after a careful study of buyers need and
preferences to determine the feasibility of incorporating one or more differentiating
features into a unique product that features the desired attributes. Normally,
11

companies apply this differentiation strategy when there are many ways to
differentiate the product, when technology change in fast speed and also when few
rival firms are following a similar differentiation approach. The differentiation
strategy would well fit Adidas to improve the market base as it has lot of advantages
with technology. As Adidas is already making use of the e-commerce and the
customers can design their own products over the internet, the product management
team can do a lot of research with the new designs and release them into the market.
Since Adidas is being identified as a brand that is associated with a particular segment
and also very specifically to particular sports, it can use this as an added advantage in
trying to be different in targeting people who are into sports, athletics and many more.

5.3

FOCUS STRATEGY

The last strategy that Adidas has been used in these years is focus strategy. Focus
strategy depends on an industry segment that is of sufficient size, has good growth
potential, and is not crucial to the success of the major competitors. Adidas is using
this strategy because its target market niche is large, profitable and growing. When
Adidas thinks of implementing the focus strategy, it can start focusing on different
segments apart from sports as the infrastructure is available with the company. It
needs to add up some more facilities, and try to focus on the entire foot wear segment
suitable for all the age groups like Bata. There are certain negative effects for this
strategy as it is a time taking process for the company to start its operations by
focusing on a different market segment and customers. In the long run, the new focus
area may be over looked by the company due to poor performance and the company
will lose lot of money, time and more importantly, the profits may come down and the
cost will go up. Adidas basically focus and target on consumers who play and love
sports. They target on people in age 20-29 years old and also high school athletes
around age 14-19 years old. The main sport that Adidas focus on is football, tennis,
running and basketball.

12

6.0

STRATEGIES ANALYSIS

We strongly agreed to implement Boston Consulting Group (BCG) Matrix for Adidas Group.
Boston Consulting Group (BCG) Matrix is defined by the Pearce (2013) as an approach
pioneered by the Boston Consulting Group that attempted to help managers balance the
flow of cash resources among their various businesses while also identifying their basic
strategic purpose within the overall portfolio. The BCG Matrix is also known as portfolio
techniques.
This strategy is totally based on the market share of the product and the growth of the
market. It is a typical strategy where the companies should have products with high growth in
large markets and also products that have low growth but can generate more cash for the
company. Based on such combinations of this matrix, there are four dimensions for this
model based on which the companies can understand how much cash is being generated and
consumed. There are four categories that a company can divide its products based on the
BCG Growth Matrix. They are cash cows, stars, problem child and dog.

INDUSTRY SALES GROWTH RATE

RELATIVE MARKET SHARE POSITION

High

Medium

Low

Medium

Low

STARS

QUESTION MARKS

II

CASH COWS

DOGS

III

IV

13

a) Cash cows
In Adidas, the different kinds of products that are sold on the brand name of Adidas
are the cash cows for the company. The reason behind this is that these are widely
used by people and reasonable profit is generated from these products. By selling such
products, Adidas is able to generate more cash for the company and this can be used
either for the development of new products or investment can be done in some other
business area. The main financial pillars for the company are Adidas products which
are the cash cows and so the revenue generated from these cash cows is very crucial
for the company to sustain.
b) Star
Stars are such kind of products that generate enough amount of revenue for the
company, but at the same time these products need more cash to maintain its position
in the market. The Adidas brand can be considered as a star according to our
assessment as it is known for its fashion and it is a popular product among young
people. Sales occurred from Adidas can generate revenue. In countries like India,
Adidas is a popular brand, but the sale done and revenue obtain the profits from other
products.
c) Question Mark (or Problem Child)
Such products are made available in high markets and the market share is very less.
They require lot of funds to improve their market share and it is uncertain whether
they will grow or not. As the markets are growing phenomenally, Adidas has few
problem Childs and these can be ignored by the company.
d) Dogs
These are products that have fewer shares in the market and also have a very slow
growth rate. The products dont consume a lot of investment and they dont generate
huge revenue for the companies.

14

7.0

CONCLUSION

The Adidas Group strives to be the global leader in the sporting goods industry with brands
built upon a passion for sports and a sporting lifestyle. Inspired by their heritage, the Adidas
Group know that a profound understanding of the consumer and customer is essential to
achieving that goal. To anticipate and respond to their needs, the Adidas Group continuously
strive to create a culture of innovation, challenging their selves to break with convention and
embrace change. By harnessing this culture, Adidas Group push the boundaries of products,
services and processes to strengthen their competitiveness and maximize the Groups
operational and financial performance. This, in turn, will drive long-term value creation for
their company and stakeholders.

15