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Does Adidas's corporate strategy, including recent acquisitions and restructuring, stay true to its brand while positioning itself to improve shareholder value and challenge Nike as the leader of the global sporting goods industry?
Secondary Questions
What enabled Adidas to be the market leader in the past? How did Adidas lose its lead to Nike? What has the Adidas brand represented in the past and what does it represent today? How has Adidas's corporate strategy changed over time, specifically before and after the 2005-2006 restructuring? Has Adidas's acquisitions helped position itself against its competitors? What role do developing countries have in Adidas's future success and how is Adidas's position in those countries? Should Adidas be concerned about losing North American market share to Nike? Is there another corporate strategy Adidas should be pursuing?
Product Innovation
Analysis Adidas was an early entrant into athletic shoe industry. They developed many of the features still present in shoes today. Created a strong brand based on high quality, innovative products that top athletes choose to use in training and competition.
Soccer
Results
1925:studs and spikes Arch support 1949 molded rubber cleats 1952 screw in spikes
1954 screw in spikes 1963- Began producing soccer balls 1967 athletic apparel
Over 700 patents Strong reputation among top athletes 1970 leading brand in consumer jogging shoes
Marketing Innovation
Developed strong following with top track and field athletes. Applied this same model years later with soccer shoes and apparel. Successful because adidas was creating innovative, high quality products. Product innovation enabled marketing innovation. Different than Nike marketing is what set them apart from the start.
2 stripe (and later 3 stripe) brand Gave shoes to German athletes in 1928 Olympics
What has the Adidas brand represented in the past and what does it represent today?
How has Adidas's corporate strategy changed over time, specifically before and after the 2005-2006 restructuring?
Adis leadership
Focused on athletic footwear/apparel. Success factors are marketing and product innovation.
Focused on Puma, while Nike underestimated. Tries to catch up via acquisitions which yields product breadth instead of specialization.
Design and Innovation, differentiated image for brands, improved retail and supply chain
Ski Equipment
Golf Clubs Bicycle equipment Winter Sports Apparel
Analysis:Paid 1.5bn to diversify product line. Surpassed Reebok worlds 2nd largest sporting goods company, however
40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year Adidas Stock Price
Stock price fell soon after acquisition in 1998, Salomon divested except for Taylor-Made Golf line. Adidas overpaid for acquisition.
Athletic Apparel
Athletic Apparel
Ski Equipment Golf Clubs
Athletic Apparel
Golf Clubs*
What role do developing countries have in Adidas's future success and how is Adidas's position in those countries?
Analysis strong growth trend in sales in two very attractive emerging markets. Growth may be result of Adidas brand strength in soccer, worlds most popular sport.
Asia
$2.2 billion
#1
Latin America
$657 million
39%
#2 behind Nike
Analysis Adidas is strong in several developing markets (Eastern Europe, China) but its focus and acquisitions have been geared towards overtaking Nike in the large, but slow growth North America market.
Should Adidas be concerned about losing North American market share to Nike?
875 283
5.0%
1,500
1,000 500 0 2004 2005
1229.2%
31.7%
2006
2007
Key Growth Potential: Europe continue focus on soccer (including endorsements) and build brand loyalty Asia/Latin America increase distribution network and brand awareness - All three regions averaging double-digit growth rates
TaylorMade Advantages Shift to International Markets Revenues from Asia: 1999 13% of total 2007 35% of total Decreasing reliance on U.S. Market: 1999 69% of total 2007 52% of total Strength in Metalwoods Metalwoods currently hold number one ranking. Irons hold less than half market share of industry leader Golf balls have seen limited success
Reebok 23%
TM 8%
Conclusion TaylorMade should hold U.S. market share in U.S. given the brands strenghts, however, TM is only 8% of Adidas AG global revenues. TM cannot help Adidas overtake Nike in U.S. market
Adidas 69%
22.1%
Conclusion The majority of Adidass revenue streams are outside U.S. market and are growing significantly let Nike lead U.S. market but dominate Europe and emerging markets.
21.4%
12.5%
Conclusion Use Adidass control and production efficiencies to enhance Reeboks distribution network in U.S. to increase U.S. revenues.
Political
Threat- mistakes can be costly Threat high quality means higher prices Opportunity supply chain efficiencies and multiple distribution channels Opportunity Reeboks strength in this area Opportunity core competency for adidas
Economic
Social
Technological
Porters 5 Forces
Threat of Substitutes
Low
Description
adidass strength is product innovation and meeting customer expectations
Impact
Low
Strong presence of established brands and distribution channels Customers already loyal to their brand Huge resources required of new entrants Huge number of buyers means adidas must market products effectively Must be able to differentiate from the competition Buyers more conscious of their spending Buyers have access to more information
Low
High
Multiple sources of materials for shoes and apparel commodity status Suppliers are very dependent on adidas and others Ease in switching suppliers if necessary and can do so globally
Low
Competitive Rivalry
Recent acquisitions in industry All competition has global reach internet and e-commerce Remaining a leader is expensive aggressive sales and marketing Always struggling to get a competitive edge
High
SWOT Analysis
Strengths
Large event sponsorships Brand reputation / recognition Diverse product portfolio Culture driven by innovation / R&D Dominant in soccer and hockey Supply chain management
Weaknesses
High quality and innovation are costly Controlling subcontractor quality negative effects can be devastating Wasting resources trying to overtake Nike in the US?
Opportunities
Increasing female participation in sports E-commerce to increase market share Growth rates for footwear and apparel Central Asia (13%), Eastern Europe (20%) China (15%)
Threats
Nikes reputation and presence; a leader in marketing and advertising Sponsorships and endorsements may go wrong (Kobe Bryant)
Timeline of Adidas
1920-1925
Fouded 1920 by Adi Dassler wanted to design shoes for athletes in soccer, T&F, & tennis. The Dassler brothers (Rudi & Adi) made their first major innovation in athletic shoes, integrating studs & spikes in track & field shoes. Innovators in Marketing gave away shoes to German athletes competing in Olympic games. By 1936 most athletes would compete only in Dassler shoes.
1928-1936
1948-1949
Bitter family feud, company dissolved. Rudi established Puma. With his departure Adi renamed company Adidas & registered the trademark 3rd strip to Adidas shoes.
1954
Adi expanded spikes concept in track shoes to soccer shoes. Partial credit was given to the soccer shoes for Germanys World Cup Championship that year.
Timeline of Adidas
1960-1967 1970s Adidas is the clear favorite among athletes 75% of T&F athletes wear them in Olympics. 63 started producing soccer balls, 67 athletic apparel Adidas became leader in consumer jogging shoes in the US. Tshirts and apparel bearing the 3 stripes became popular among teens.
1978
Adi Dassler dies, Adidas remains worldwide leader in athletic footwear but they are losing market share fast to Nike in US. Market share loss continues through the 80s and mid 90s. Through cost cutting, new model launches, and endorsement contracts with popular athletes Adidas increased sales by 75% over prior year in US. Becoming 3rd largest athletic footware company in US trailing only Nike and Reebok.
1994
Timeline of Adidas
1998 Acquisition of Salomon SA diversified beyond shoes & apperal to ski, golf, bicycle, & winter sports.
1998-2005
Stock price takes a hit possibly due to Salomon acquisition. Adidas mgt divested all of Salomons winter sports & bicycle equipment.
2006
Acquistion of Reebok, included Rockport footware, Greg Norman apparel, & CCM hockey equipment.