IBDP

INTERNAL ASSESMENTS

BUSINESS MANAGEMENT

RESEARCH QUESTION: To what extent, Strategic Alliance between Adidas and Prada

will help Adidas to gain higher market share and profitability.

SESSION: May 2022

WORD COUNT: 1500 (Max)

 ACKNOWLEDGEMENT

I would like to express my gratitude to my Business Management Teacher for helping and

guiding me in the project. Without him I wouldn’t have been able to complete my project as

he was always there for me even when I was having problem in understanding some data.

2
 Table of Contents

INTRODUCTION 4-5

About Adidas 4

About Prada 4

Rationale Behind strategic alliance between Adidas and Prada 5

METHODOLOGY EMPLOYED 6

Secondary Research 6

Tools Used 6

BODY: INVESTIGATION AND DISCUSSION 7-14

Ansoff Matrix 7-8

Position Perception Map 9-10

BCG Matrix 11-12

Profitability Ratios 13-14

CONCLUSION15

BIBLOGRAPHY 16

3
 Introduction

About Adidas -

Adidas is a German brand that manufactures athletic shoes and apparel, and sporting goods for the

community. Its headquarters is situated in Herzogenaurach, Germany. It was founded by Adolf Dassler on

18th August 19491. The main motive of the firm is to manufacture sporting goods for athletes to help them

perform better in the sports of their choice. It is also the largest sportswear manufacturer in Europe and

comes second in the world after Nike. Dassler also identifies the company as the “three stripes company”

which is their famous identity mark that the company had been using as their designs and marketing aid. 2

34
About Prada -

Prada is an Italian luxury fashion house that specializes in leather handbags, travel accessories, shoes,

perfumes and other fashion accessories. It headquarters is situated in Milan, Italy. It was founded by Mario

Prada in 19135. Prada is a company which is entirely built on high-end leather goods6. In 1983, the owners

of Prada decided to expand its business to a luxury segment in order to raise their profit and sales revenue.

This was a strategic decision as the location chosen by the company was quite popular and famous among

the citizens that it elevated Prada in the luxury

segment. 7

1
“Adidas | History, Products, & Facts.” Encyclopedia Britannica, 1948, www.britannica.com/topic/Adidas-AG

2
“Adidas | History, Products, & Facts.” Encyclopedia Britannica, 1948, www.britannica.com/topic/Adidas-AG

3
Statista. “Adidas Retail Net Sales Growth Worldwide 2010–2020.” Statista, 14 Sept. 2021, www.statista.com/statistics/526669/retail-net-sales-growth-of-the-adidas-group-

worldwide.

4
Statista. “Global Net Sales of Prada 2013–2020.” Statista, 1 Nov. 2021, www.statista.com/statistics/582466/global-net-sales-prada

5
Shatzman, Celia, et al. “Prada.” Forbes, 2016, www.forbes.com/companies/prada/?sh=3611e6f243a6

6
“Prada and Adidas Will Blend Sports and Luxury in New Partnership.” Quartz, 10 Jan. 2020, https://qz.com/1744841/prada-and-adidas-will-blend-sports-and-luxury-in-

new-partnership

7
Fashion Editor. “History of Prada and Background.” Fashionintime.Org, 26 Sept. 2020, www.fashionintime.org/prada
4
 Figure 2: Net Sales of Prada from 2013 - 2020

Rationale behind strategic alliance between Adidas and Prada -

Recently, on social media Adidas has teased a collaboration with Prada where they published a photo of

two Adidas shoeboxes slipping into Prada’s embossed shopping bag. Europe’s largest sportswear

manufacturer and the Italian luxury house have finally decided to work together for a better future and to

bring new innovations in the society8. The main reason behind the strategic alliance was to blend Adidas’s

expertise in sport with prowess in leather goods and luxury. Their project was built on “fusion of fashion

and performance”.9 The first sneaker which will be launched by both the companies will be drawn on the

rich patrimony and iconography of both labels. This project is referred as “a new collaborative journey”

which means there will be many more things deriving from the partnership. The sneakers will be available

in a limited edition of 700 copies manufactured in Italy by Prada.

Prada and Adidas has used the branding strategy “Co-branding” to move ahead in the society and

introduce new products that are only available to limited customers. This is a branding strategy that is
Figure 1: Net Sales of Adidas from 2010 - 2020
mostly used for temporary collaborations between different brands for various purposes. If the brands are

8
Tashjian, Rachel. “Prada for Adidas Is Coming: Everything We Know About the New Collaboration.” GQ, 8 Nov. 2019, www.gq.com/story/prada-adidas-collaboration

9
Bain, Marc. “Prada and Adidas Will Blend Sports and Luxury in New Partnership.” Quartz, 10 Jan. 2020, https://qz.com/1744841/prada-and-adidas-will-blend-sports-and-

luxury-in-new-partnership/
5
 successful in co-branding than they view a drastic change in their sales and overall performance

which results in high turnover and high profits10.

Body: Investigation and Discussion

Ansoff Matrix: Ansoff Matrix is an insightful device that assists supervisors with picking and devise

different item and market development techniques. It shows the diverse development techniques a firm

can take contingent upon whether it needs to sell new or existing items in either new or existing business

sectors. The four item market development methodologies, or development choices are: Market

Penetration, Product development, Market Development and Diversification11.

Figure 3: Ansoff Matrix of Adidas X Prada

Analysis: The strategic alliance

between Adidas X Prada relies on rich legacies of both to re-engineer timeless icons12. They have

achieved two development strategies; market penetration and product development to further carry out

their project. Market Penetration is a low-risk growth strategy as the main focus of Adidas X Prada is to

sell the existing products in existing markets in order to increase their market share of current products.

10
Brea, Daniël Diaz. “Adidas and Prada: The Real Reason behind the Partnership.” Medium, 29 Nov. 2019, https://medium.com/dyseno/adidas-and-prada-the-real-reason-

behind-the-partnership-4a7e8ba75c43

11
Hoang, Paul. Business Management 4th Edition Paul Hoang IBID Press. IBID Press, 2021
12
Hoang, Paul. Business Management 4th Edition Paul Hoang IBID Press. IBID Press, 2021
6
 Evaluation: Both the strategies play a major role in the future of Adidas X Prada because if

we see market penetration is the safest growth strategy as its main target is existing customers and

products, plus the market research expenditure can also be minimised.

I have even used the help of Position perception Map (Next tool) to analyse and identify the position of

Adidas and Prada in their individual markets.

7
 Position Perception Map: A position perception is a visual tool used by the managers and

customers to determine the position of a firm in the market and further compare it with its competitors.

The information in these maps can also help the businesses to reconsider their market strategies according

to their competitors and customers.13

14 15

Figure 4: Position map of Adidas Figure 5: Position map of Prada

Figure 6: Position map of Adidas X Prada

13
Hoang, Paul. Business Management 4th Edition Paul Hoang IBID Press. IBID Press, 2021

14
“Prada UX Design - Mimi Tsai’ Design Portfolio.” Prada UX Design, https://cargocollective.com/mimiyytsai/Prada-UX-Design. Accessed 27 Dec. 2021.

15
Nayan, Arushi. “NIKE Perceptual Positioning Map.” Slide Share, www.slideshare.net/arushinayan/nike-perceptual-positioning-map. Accessed 27 Dec. 2021.
8
 Analysis: The above two diagrams are the position perception map of Prada and Adidas in

their individual market. Prada is an Italian luxury fashion house which operates in a premium market

along with Louis Vuitton and Burberry. Prada sells high quality and high price products16 which allows

it to compete in a premium market and makes it one of the leading companies17 in fashion with its large

customer base. Likewise, Adidas also operates in a premium market competing with many other

companies like Asics, Nike, Under Armour and many other.

Evaluation: Similarly, the fusion of fashion and performance18 requires a position perception map in

order to move ahead in the market and plus it is a new market for both the companies so it will be better to

get some prior knowledge on the market. The combination of lexicon of luxury with the language of high

performance sportswear in a shoe with unique and innovative style has captured attention of many people

in the market who are now eagerly waiting for the launch of new products. Therefore, it is a start of new

journey between technology and tradition.19

I have even used the help of BCG Matrix (Next tool) to analyse and identify the products that Adidas X

Prada would have to focus on to penetrate the market and increase their customer base.

16
Hoang, Paul. Business Management 4th Edition Paul Hoang IBID Press. IBID Press, 2021

17
The Industry Fashion. “Prada.” The Industry Fashion, www.theindustry.fashion/the_directory/prada. Accessed 27 Dec. 2021.

18
“Prada and Adidas Will Blend Sports and Luxury in New Partnership.” Quartz, 10 Jan. 2020, https://qz.com/1744841/prada-and-adidas-will-blend-sports-and-luxury-in-new-
partnership

19
Prada Adidas Superstar. Prada. (n.d.). Retrieved November 19, 2021, from https://www.prada.com/ww/en/pradasphere/special-projects/2020/prada-adidas-superstar.html

9
 2021
Boston Consulting Group (BCG) Matrix: Boston Matrix is a marketing planning tool

which was devised by Bruce D. Henderson in 1970 to helps managers of various businesses to plan for a

balanced product portfolio. Product portfolio is also used to contain many strategic business units (SBUs).

The planning tool majorly focuses on two dimension: market share and market growth. This tool helps

the companies to determine the products that requires maximum priority and investment. There are four

possible outcomes that derives from the BCG Matrix:

Figure 8: BCG Matrix for Prada

Figure 7: BCG Matrix for Adidas

20
Struggle, A. N. E. (2018, September 28). BCG matrix. foodieloverscom. Retrieved January 12, 2022, from https://foodieloverscom.wordpress.com/2018/09/28/bcg-
matrix/

21
yashaswimag17 April 8, 2018 0 C. (2018, April 10). Prada – BCG matrix. Prada – BCG Matrix. Retrieved January 12, 2022, from
https://phaisana.wordpress.com/2018/04/08/prada-bcg-matrix/
10
 Figure 9: BCG Matrix for Adidas X Prada

Analysis: Question Mark are the products that operates in a high market growth sector, but have low

market share. These products often arises tensions in the businesses as it may suggest inferior marketing

or low product quality. Question marks are the main users of cash in the BCG Matrix. A lot of times

question marks are also called wild cards as company may never know when to invest in these products

and whether it will be successful or not. The BCG Matrix of Adidas shows that sports equipment’s and

bags are few products that arises problem in the company and requires more investment.

Evaluation: According to the above matrix of adidas, sports shoes is one of the products that earns a lot

of profit for adidas. However, if we look at the matrix of Prada than we could see that currently it doesn’t

have any star products within the company. But, the figure 6, BCG Matrix of Adidas X Prada clearly

shows that after the strategic alliance both the companies could expect to view shoes, apparels and

handbags as their star products as previously Prada’s shoes and clothing were falling in the category of

question mark but with the help of the strategic alliance Prada could clearly view a boost in its profit from

these two products.

I have even used the help of Profitability Ratios (Next tool) to analyse and identify the past financial

records of Adidas. This will help me to understand the future profit ratios of Adidas X Prada.

11
 Profitability Ratios: Profitability ratios are used by the companies to investigate the profit

made by the firm in regards to the other data like the ratio of profit to sales revenues22. These ratios are

majorly used by the profit-seeking organizations or businesses rather not-for-profit organizations like

NGO’s and charities. These ratios plays a major role in the eye of investors, employees and managers as

it shows the progress of the firm and its performance in that particular year. There are two types of

profitability ratios:23

Net Profit Margin (€ in millions ) Gross Profit Margin (€ in millions ) Expenses (GPM – NPM) (€ in millions )

2,882 11,363
×100 = ×100 = 51.8 %
201824 21,915 21,915 (51.8 – 13.15)%

13.15 % = 38.65 %

12,293
×100
201925 3,845 23,640 (52 – 16.26)%
×100 = 16.26
23,640 = 52 %
= 35.74 %

9,855
× 100
2020 26
2,079 19,844 (49.7 – 10.48)%
× 100 = 10.48
19,844 = 49.7 %
= 39.22 %

Analysis: The above table shows us the gross profit margin and Net profit margin of Adidas. Through the

help of the column of gross profit margin we could evaluate that Adidas earns a gross profit of $51.8 for

every $100 sales in 2018. Similarly, in 2019 it earns a GP of $52 for every $100 sales and GP of $49.7 for

22
Hoang, Paul. Business Management 4th Edition Paul Hoang IBID Press. IBID Press, 2021

23
Hoang, Paul. Business Management 4th Edition Paul Hoang IBID Press. IBID Press, 2021

24
“Adidas GB 2018: Annual Report 2018.” Adidas Annual Report 2018 - Home, 1 Mar. 2019, report.adidas-group.com/2018/#facts-&-figures

25
“Adidas Annual Report 2019 - Home.” Adidas Annual Report 2019, 11 Mar. 2020, report.adidas-group.com/2019/en.

26
“Adidas Annual Report 2020 - Home.” Adidas Annual Report 2020, 8 Mar. 2021, report.adidas-group.com/2020/en
12
 every $100 sales in 2020. We could even see that after 2019 the company has viewed a decrease

in their Gross profit margin which is probably because of the pandemic.

Evaluation: According to the books and famous business men it’s better for every company to have a

higher gross profit margin as it is the major source of finance that helps them in paying taxes. Moreover, it’s

also beneficial for the businesses to have a higher net profit margin as it is the amount of money that is left

with the owner after paying off all the liabilities and taxes. The money is often reinvested in the business to

increase the sales. Similarly, Adidas also had a higher GPM and NPM value in 2018 and 2019 than 2020

because of COVID-19. However, this problem could still be solved by Adidas because if they decide to raise

their revenue by increasing the selling price of the products that have less substitutes than it will

automatically have a positive impact on their profit. Secondly, Adidas could also try to reduce their direct

cost by decreasing the wages of workers or reducing the number of workers working in the company. Both

these solutions will play a major role in increasing the gross profit margin and net profit margin of Adidas.

Figure 10: Sales of Adidas Figure 11: Sales of Prada

10%

40%
13
 Sales

20%

Asia Europe America Other Countries

References & Bibliography

1. “Adidas GB 2018: Annual Report 2018.” Adidas Annual Report 2018 - Home, 1 Mar. 2019,

report.adidas-group.com/2018/#facts-&-figures

2. “Adidas Annual Report 2019 - Home.” Adidas Annual Report 2019, 11 Mar. 2020, report.adidas-group.com/2019/en.

3. “Adidas Annual Report 2020 - Home.” Adidas Annual Report 2020, 8 Mar. 2021, report.adidas-group.com/2020/en

4. The Industry Fashion. “Prada.” The Industry Fashion, www.theindustry.fashion/the_directory/prada. Accessed 27 Dec.

2021.

14
 5. Struggle, A. N. E. (2018, September 28). BCG matrix. foodieloverscom. Retrieved January 12, 2022, from

https://foodieloverscom.wordpress.com/2018/09/28/bcg-matrix/

6. yashaswimag17 April 8, 2018 0 C. (2018, April 10). Prada – BCG matrix. Prada – BCG Matrix. Retrieved January 12,

2022, from https://phaisana.wordpress.com/2018/04/08rada-bcg-matrix/

7. “Prada and Adidas Will Blend Sports and Luxury in Nw Partnership.” Quartz, 10 Jan. 2020,

https://qz.com/1744841/prada-and-adidas-will-blend-ports-and-luxury-in-new-partnership

8. Prada Adidas Superstar. Prada. (n.d.). Retrieved Noember 19, 2021, from

https://www.prada.com/ww/en/pradasphere/specialprojects/2020/prada-adidas-superstar.html

9. “Prada UX Design - Mimi Tsai’ Design Portfolio. Prada UX Design, https://cargocollective.com/mimiyytsai/Prada-UX-

Design. Accessed 27 Dec. 2021.

10. Nayan, Arushi. “NIKE Perceptual Positioning Map.” Slide Share, www.slideshare.net/arushinayan/nike-perceptual-

positioning-map. Accessed 27 Dec. 2021.

11. “Adidas | History, Products, & Facts.” Encyclopedia Britannica, 1948, www.britannica.com/topic/Adidas-AG

12. “Adidas | History, Products, & Facts.” Encyclopedia Britannica, 1948, www.britannica.com/topic/Adidas-AG

13. Statista. “Adidas Retail Net Sales Growth Worldwide 2010–2020.” Statista, 14 Sept. 2021,

www.statista.com/statistics/526669/retail-net-sales-growth-of-the-adidas-group-worldwide.

14. Statista. “Global Net Sales of Prada 2013–2020.” Statista, 1 Nov. 2021, www.statista.com/statistics/582466/global-net-

sales-prada

15. Shatzman, Celia, et al. “Prada.” Forbes, 2016, www.forbes.com/companies/prada/?sh=3611e6f243a6

16. Fashion Editor. “History of Prada and Background.” Fashionintime.Org, 26 Sept. 2020, www.fashionintime.org/prada

17. Tashjian, Rachel. “Prada for Adidas Is Coming: Everything We Know About the New Collaboration.” GQ, 8 Nov. 2019,

www.gq.com/story/prada-adidas-collaboration

18. Bain, Marc. “Prada and Adidas Will Blend Sports and Luxury in New Partnership.” Quartz, 10 Jan. 2020,

https://qz.com/1744841/prada-and-adidas-will-blend-sports-and-luxury-in-new-partnership/

19. Brea, Daniël Diaz. “Adidas and Prada: The Real Reason behind the Partnership.” Medium, 29 Nov. 2019,

https://medium.com/dyseno/adidas-and-prada-the-real-reason-behind-the-partnership-4a7e8ba75c43

Books

1. Keller, Philip Kotler Kevin Lane. Framework for Marketing Management (6th Edition) by Philip T.

Kotler Kevin Lane Keller(2015–01-26). Pearson, 2022.

15
 2. Mega Print. SUMMARY OF Kotler on Marketing How to Create, Win, and Dominate

Markets By Philip Kotler. Independently published, 2021.

3. Hoang, Paul. Business Management 4th Edition Paul Hoang IBID Press. IB`ID Press, 2021

16