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Primary Question for Adidas

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?

What enabled Adidas to be the Market Leader in the past?

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.

Track and Field

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

75% of track and field athletes wearing adidas in 1960 Olympics

78% of athletes wearing adidas at 1972 Olympics

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?

Adidass Evolving Strategy


Return to form via restructuring Loss of focus

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

Adidass Current Strategy

Has Adidas's acquisitions helped position itself against its competitors?

Salomon Acquisition: Was it Successful?


Product Line Before Athletic Shoes Athletic Apparel Product Line After Athletic Shoes Athletic Apparel

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

Adidass Stock Price


60 50

Stock Price (in euros)

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.

Adidas after Salomon was divested


Product Line Before Athletic Shoes Product Line After Athletic Shoes Product Line After Divestiture Athletic Shoes

Athletic Apparel

Athletic Apparel
Ski Equipment Golf Clubs

Athletic Apparel
Golf Clubs*

Bicycle equipment Winter Sports Apparel


Only added Golf Clubs to product line

What role do developing countries have in Adidas's future success and how is Adidas's position in those countries?

Adidas is a global player


43% of sales from Europe, which is slowest growth market Encouraging that #1 in developing eastern European market, Russia expected to be most profitable market in Europe by 2010 2006 acquisition of Reebok not enough to overcome Nike in North America Growing number of sales in Asia market, fueled by adidas success in China. Strong demand and large population

Net Sales in Emerging Markets

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.

Regional Footwear/Apparel Markets


Region Size Market Growth Rate 3% 2% (20% Eastern Europe) 13% (South and Central) 15% (China) N/A Adidas Sales Adidas Sales Growth $2.9 billion $4.3 billion 5% 8%, mainly in Russia 17% Adidas Position #2 behind Nike #1

North America Europe

$42.5 billion N/A

Asia

3.2 billion people N/A

$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?

Retail Store Strategy


2006
Adidas Retail Locations Reebok Retail Locations

2007 1003 430

875 283

Adidas AG Geographic Revenue Performance


5,000
4,500 4,000 3,500 3,000 2,500 2,000 17.6% 11.6% 32.6% 27.8% 56.4% 3.2% 31.5% 106.4% -9.4% Europe North America Asia Latin America

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%

Strong Apparel Presence

Over 70 touring pros lift apparel presence.

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%

Adidas Global Revenue Sources (2007)


6.4%

Remaining regions = 71.3% of revenues


42.8%

22.1%

Europe North America Asia Latin America

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.

N.A. market 28.7% of revenues

Reebok Global Revenue Sources (2004)


11.4%

21.4%

12.5%

Europe United Kingdom United States Other Countries


54.7%

Conclusion Use Adidass control and production efficiencies to enhance Reeboks distribution network in U.S. to increase U.S. revenues.

U.S. market 54.7% of 2004 revenues

Is there another corporate strategy Adidas should be pursuing?

Alt Strategy Options


Use Adidas as revenue driver outside of U.S. market restructure Reebok strategy to capitalize on historic revenue performance in U.S.
Decrease number of Adidas retail outlets in U.S. convert to Reebok retail Increase Reebok U.S. endorsements

Use Adidas global distribution to further increase TaylorMade international revenues

Slides that follow still need to be placed or cut.

External Environment: PEST


Category Issue Threats/Opportunities Ranking (1-5) Operating multi-nationally awareness of cultures, laws, image, environment, regulations Current state of economy customers may be less willing to pay for higher priced items

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

Extreme forces in competitor pricing.

Social

Keeping up with the wants of the younger generation

Technological

Product innovation is a key driver in the industry

Porters 5 Forces
Threat of Substitutes

Low

Bargaining Power of Suppliers


Low

Intensity of Competition High Bargaining Power of Buyers High

Threat of New Entrants Low

Porters Five Forces


Factor
Threat of Substitute Products

Description
adidass strength is product innovation and meeting customer expectations

Impact
Low

Threat of New Entrants

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

Bargaining Power of Buyers

High

Bargaining Power of Suppliers

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)

How has Adidas evolved since it was founded?

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.

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