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PRESENTED BY:

NOORSEHA , FARAH
DAHLIA FARAHIYAH,
ZEPHANIA THAISAYI OPATI
SUMMARY
• Adidas AG’s corporate strategy is to try and take over the number one
position from Nike as the leader of the global sporting goods industry.
Its strategy was acquisition that would build up its capacity and
capabilities and position it with greater power of bargaining, with
suppliers, acquire economy of scales, wide distribution network, and
variety of products and economies of scope.

These are the highlights of the company:


• 1998 -acquisition of French sporting goods manufacturer and marketer
Salomon SA
• 2005-Adidas management divested all of Salomon’s winter sports and
bicycle components brands to Amer Sports Corporation for €485 million.
• In 2006- it acquired the Reebok branded athletic footwear and apparel,
which designed, marketed, and sold Rockport footwear, Greg Norman
apparel, and CCM hockey equipment.

• Whether acquisition will help Adidas to increase shareholder value?


HISTORY
• 1949-The foundation: 'Adi' from Adolf and 'Das' from Dassler.

• 1950s- The 'Miracle of Bern’: Germany battle Hungary with a


competitive advantage. They are wearing Adidas soccer boots
which for the first time feature removable studs.

• 1960s- Adidas manufactures equipment for what some


consider "fringe sports". Unconventional high jumper Dick
Fosbury launches himself up and over in Adidas footwear.

• 1970s-The “Adidas" team wins: Crowning moment: Franz


Beckenbauer, the "Kaiser", raising the World Cup in victory
salute. Germany had just beaten Holland 2-1 in the 1974 final.
Contd….
• 1980s-The transition: After Adi Dassler's death, Adi's wife
Käthe, his son Horst, and his daughters carry on the business.
• 1990s-New management: Under the CEO Robert Louis-
Dreyfus, Adidas is moving from a manufacturing and sales
based to marketing company.
• 1995- Adidas goes public: Flotation of the company on the
Frankfurt and Paris Stock Exchange.
• 1996- A splendid year: Provide 6,000 Olympic athletes from 33
countries.
• 1998- Adidas-Salomon AG: Adidas AG acquires the Salomon
Group with the brands Salomon, TaylorMade, Mavic and
Bonfire in December 1997.
Contd…
• 2000-New management: The new management initiates
an ambitious Growth and Efficiency Program. Major sports
events eg. the European Soccer Championship EURO
2000™, the Olympic Summer Games.

• 2005-Sale of Salomon: The Salomon Group (including


Salomon, Mavic, Bonfire, Cliché and Arc’Teryx) is being
sold to Amer Sports in October 2005. They are focusing in
the athletic footwear and apparel market as well as the
growing golf category.

• 2006-Adidas-Salomon AG acquires Reebok : The closing


of the Reebok transaction on January 31, 2006 marks a
new chapter in the history of the Adidas Group.
VISION

Strives to be the global leader in the sporting


goods industry with sports brands built on a
passion for sports and a sporting lifestyle.
MISSION
• Continuously strengthen our brands and
products to improve our competitive position
and financial performance:

Adidas-Footwear, apparel, accessories

Reebok-Footwear, apparel and accessories

TaylorMade-adidas -Golf Equipment:
metalwoods, irons putters,

 
ADIDAS GROUP BRANDS
ADIDAS’ CORPORATE
STRATEGY

• diversified it beyond
•footwear and apparel and into ski equipment,
golf clubs,bicycle components, and winter sports
apparel.
Acquisition • focused on extending its leadership in product
Salomon SA innovation, creating a differentiated image for the
(1998) products offered by each of its three business
segments, expanding controlled retail space through
its network of company owned stores, and achieving
efficiencies in its global supply chain process
and activities.
• to Amer Sports Corporation for €485 million.
Divestiture
Salomon’s winter sports • The divestiture of Salomon’s winter sports
and bicycle and bicycle components business would make
components business TaylorMade Golf the lone business retained
(October 2005) from the company’s 1998 acquisition
of Salomon SA

• Adidas-Salomon’s shareholders approved


a resolution to change the company’s name
to Adidas AG.

Acquisition • Announce in August 2005 that it would acquire


Reebok Reebok International Ltd. for €3.1 billion.
International Ltd.
(2006) • the final component of a restructuring initiative
that would focus the company’s business lineup
primarily on athletic footwear and apparel and
golf equipment by 2006.
• Adidas as a technologically superior shoe
designed for serious athletes

• Reebok would be positioned as leisure shoe that


would sell at middle price points.

• Adidas divested the Greg Norman golf apparel line


shortly after the completion of the Reebok
acquisition.

• In 2008, Adidas’s businesses were organized


under three units based around the company’s
core brands which are Adidas, Reebok, and
TaylorMade-Adidas Golf.
ADIDAS AG’S EXTERNAL
CONSIDERATION
• The outlook for the company with its present
product/market/customer and strategic direction
– Besides sports footwear, the company also produces other
products such as bags, shirts, watches, eyewear and other
sports and clothing related goods.
– The company’s 1998 acquisition Salomon SA diversified it
beyond footwear and apparel and into ski equipment, golf
clubs, bicycle components, and winter sports apparel.
– Reebok's focused strategy is on the engagement of youth
through sports, music, and technology
– Adidas' focus is on superior technology and performance,
coupled with a large international presence. Adidas has
positioned part of its product range in the lifestyle segment,
but the company relies on the performance market. Lifestyle
success to an authentic company is a bonus.
• Adidas will benefit from increased distribution in North
America, where Reebok already has a significant presence.
The addition of Reebok will enhance not only its position
among the top US distributors, but will also give Adidas-
Reebok more power over promotions and in-store displays.

• Reebok has an extensive line of men and women's apparel.


The new company can combine Reebok's apparel with
Adidas' new addition of fashion designer Stella McCartney,
who has created an apparel line that integrates both sport
and style. This innovative move shows that Adidas
continues to look for new opportunities and markets in
order to gain a competitive advantage.

• The Reebok brand will also gain sustainable competitive


advantage through increased brand recognition. Globally,
Reebok will benefit greatly from Adidas' distribution around
the world. Coupled with the cost savings and increased
cash flow, Reebok's marketing resources could increase.
New customer groups and geographic
markets should the company get in


position to serve
The sportswear market can be split into two separate markets:
– Sports Performance Group and
– Sport Style Street wear/life style fashion group

• The mass-market for sportswear initially developed in the 1980's with the
growth of the training shoe market.

• The worldwide sales of athletic apparel and footwear for athletes and
those drawn to sport-inspired products totaled nearly $125 billion in 2007.

• The annual growth rate for the global athletic footwear and apparel
industry had slowed from 6.8 percent in 2005 to 3.3 percent in 2007.

• At about $42.5 billion, North America was the largest market for athletic
apparel and footwear but its 3 percent annual growth rate was greater
than only Europe’s 2 percent annual growth rate among all developed and
emerging markets for athletic apparel and footwear.

• Markets in Eastern Europe, south and Central Asia, and China grew at
rates of 20 percent, 13 percent, and 15 percent, respectively, between
2006 and 2007.
Emerging market
opportunities the company
ought to pursue
• Eastern Europe
– Sales had grown by as much as 50 percent annually in Rusia and other
former Soviet states such as the Ukraine, Armenia, and Belarus to give
it a 2-to-1 margin over runner-up Nike
– Adidas management expected Rusia to become its largest and most
profitable market in Europe by 2010.

• Asia
– was projected to become Adidas’s largest market overall within the
near term because of the strong demand for athletic footwear and
apparel in Asia country markets.
– Asia up more than two-thirds of the world’s population in 2008 and was
projected to grow from 3.2 billion people in 2008 to 3.6 billion people
by 2028.

• Women
– There is also a new trend in consumer behavior and women are getting
a bigger influence in all buying decisions and more and more
companies realize this and redirect their advertising towards women.
This, as well as their increased interest for sports, should make women
an obvious target for Adidas-Reebok and their advertising.
ADIDAS AG’S INTERNAL
CONSIDERATION
• Company ambitions
– The company’s corporate strategy since 2008
was focused on extending its leadership in
product innovation, creating a differentiated
image for the products offered by each of its
three business segments, expanding controlled
retail space through its network of company
owned stores, and achieving efficiencies in its
global supply chain process and activities.

– Going into 2009, there were signs that Adidas


AG’s corporate strategy were bringing about
the hoped-for improvement in the company
financial performance.
Present business generates
sufficient growth and profitability
to please shareholders
• During the first six months of 2008, corporate revenues increased by
12 percent, with sales for the Adidas business unit growing by 16
percent and sales at TaylorMade-Adidas Golf growing by 11 percent.

• Sales at Reebok declined by 2 percent during the first six months of


2008. The revenue growth and cost savings resulting from the
Reebok integration allowed Adidas AG’s gross margin and operating
margins to improve by 2.5 percentage points and 1.1 percentage
points, respectively, during the first half of 2008.

• Earning per share increased by 25 percent during the first half of


2008, the company’s improvement in free cash flow allowed the
company to buy back nearly 7.7 million shares at an average price of
€41.35 per share.

• According to the financial summary for Adidas AG from 1998 until


2007, the dividends per shared was also keep increasing year by
year from €0.21(1998) until €0.50 (2007).
Company resource strengths and its
ability to add new products and get
into new businesses.
• Reebok have a loyal following among women
participating in general fitness training, walking, and
aerobic.
• In 2008, Adidas management had chosen to use the
Reebok brand of athletic footwear to focus on
beginning and recreational runners and women
athletes participating in running, aerobics, walking,
and training.
• The company developed a variety of new styles and
color combinations that were intended to appeal to
women
– partnership with the Avon Walk around the World for Breast
Cancer charitable organization to increase awareness of the
Reebok brand among women.
Company stretching its resources
too thin by trying to compete in too many
product categories or market arenas, some of
which are unprofitable
• Reebok
– At the time of its acquisition by Adidas, the Reebok brand had suffered from
a poor reputation for quality, innovation, and styling. Thus, Adidas
management had also undertaken efforts to improve Reebok’s image in
men’s sport with endorsements from such professional athletes as Peyton
and Eli Manning, Allen Iverson, Yao Ming, David Ortiz, and Vince Young.

– Beginning in 2008, the company increased Reebok’s distribution network to


include a greater number of large sporting goods stores and department
store.

• TaylorMade-adidas Golf
– In 2008, TaylorMade was the largest seller of drivers, fairway woods, and
hybrid clubs. TaylorMade also produced and market a line golf balls but had
not achieved any significant market success in the product category.
Successful new product
innovations
For Adidas AG, each business unit was expected to develop at least one
major product innovation per year in each product category.

• In 2008, TaylorMade Golf introduced its r7 CGB Max Limited driver,


which incorporated nine movable weights and interchangeable shafts
allowed golfers to make adjustment to the club that could produce
more than 1,000 different ball flight trajectories.

• In 2007, the Adidas athletic footwear and apparel division introduced


its innovative SuperNova and Response running shoe families and a
StellaMcCartney gym and yoga Apparel collection.

• Reebok’s major product launches in 2007 included its Trinity KFS III
running shoes and Reebok Edge uniform systems for hockey. The
company also improved the comfort of its Rockport footwear
collection in 2007 by incorporating its Torsion system developed for
Adidas running shoes.
Financial Objectives
• According to the financial summary for Adidas AG from 1998
until 2007, the company financial performance was reported a
good signs, which increased from €5,065 (1998) to €10,299
(2007).

• Beside that, the dividends per shared was also keep increasing
year by year from €0.21(1998) until €0.50 (2007).

• The Reebok acquisition increased the company’s revenues


from €5.8 billion in 2005 to €10.1 (approximately $13.3 billion)
in 2006 and bought it closer to Nike, which ended fiscal 2006
with total revenues of $14.9 billion by year-end 2007

• Adidas management expected that the Reebok acquisition


would boost 2008 revenues by an additional €250 million.
• Going into 2009, there were signs that Adidas AG’s corporate
strategy were bringing about the hoped-for improvement in
the company financial performance.

• During the first six months of 2008, corporate revenues


increased by 12 percent, with sales for the Adidas business
unit growing by 16 percent and sales at TaylorMade-Adidas
Golf growing by 11 percent. Sales at Reebok declined by 2
percent during the first six months of 2008.

• The revenue growth and cost savings resulting from the


Reebok integration allowed Adidas AG’s gross margin and
operating margins to improve by 2.5 percentage points and
1.1 percentage points, respectively, during the first half of
2008.

• Earning per share increased by 25 percent during the first


half of 2008, the company’s improvement in free cash flow
allowed the company to buy back nearly 7.7 million shares at
an average price of €41.35 per share.
Strategic Objective
• Adidas AG management expected the company to winning China market to
become the company’s second largest market after the United Stated by
the end of 2008.

• The integration of Adidas and Reebok supply chain activities was expected
to result in cost saving of €105 million by year-and 2008 and contribute to
improvements in both the company’s gross margins and bottom lines.

• The company's continuous commitment towards new product innovations


not only improved revenues but also helped in strengthening its
relationship with its customers and attracts new customers.

• Efficient supply chain management was critical to Adidas’s profitability


because of the importance of getting new styles to market quickly and
because of importance of low cost manufacturing.

• Adidas kept its production costs low by outsourcing more than 95 percent
of its production requirements to contract manufacturers located
throughout Asia. In 2005, the company launched an initiative called World
Class Supply Chain to improve coordination with its contract
manufacturers, get new products to market more quickly, and lower costs.
S.W.O.T ANALYSIS
Strength
• In many invents is the biggest sponsor
• Strong management team
• Brand recognition and reputation
• Diversity and variety in products offered on
the web
(footwear, apparel, sporting equipment,
etc.)
• Strong control over its own distribution
channel
• No bad reputation like child labor or
environment
pollution
• In the Soccer industry, Adidas has a
Contd…
Weaknesses
• High prices in some products
• E-commerce is limited to USA
• The direct sale to consumers is creating
conflicts with its own resellers
• Online customer service not "helpful" or
easy to find
Contd…
Opportunities
• Increase female participation in athletics Adidas by Stella
McCartney
• Collaborate with other online retailers to offer Adidas products
• Possibility of outsourcing the web development and e-commerce to
a third party developer
 
Threats
• Nike's strong reputation in the footwear and apparel industry
• Negative image created by the sponsored athletes (i.e. Kobe
Bryant and his sexual assault case)
• Increase in the Price of Raw materials
• Continuing challenges in import/export duties
 
PEST ANALYSIS
Political
• control and monitor hazardous substance to
protect human health and environment
• manage and monitor SARS in Asia factory
• protects and supports the rights of its
employees by following all the current
employment laws

Economic
• decrease unemployment by increasing the
number of employees every year
Contd…
Social
• products are always in fashion with unique design
• focus on sports and athletics enthusiast

Technology
• maker of world’s first smart shoes - microchip and
wireless mp3 player inside shoes
• efficient production
FIVE FORCES ANALYSIS
• Threat of New Entrants
High due to the large economies of scale needed for
manufacturing, distribution, research and development,
and other operations.
• Threat of Substitutes
Substitutes for Adidas products come from rival manufacturers
such as Nike, Puma, Asics, and New Balance. In addition to
large rivals, substitutes come from smaller and more localized
companies around the world.
• Bargaining Power of Buyer
Customers carry large bargaining power as they can always
threaten to buy rival products. Switching costs are typically
very low due switch to a rival’s products if the rival offered
trendier or hotter product.
Contd…
• Bargaining Power of Supplier
The suppliers’ bargaining power is high as well, since
Adidas makes contracts with famous athletes or teams
(such as Chelsea FC, Liverpool FC, NY Giants, LA Lakers,
David Beckham), to promote and advertise its products.

• Intensity Rivalry between Existing Competitors


Adidas largest rival is sporting apparel giant Nike,
which controls over 36% of the worldwide market for
athletic shoes. In addition, other much smaller rivals in
the United States and Europe include Puma, Asics, and
New Balance. In China, Adidas faces competition from
Li Ning, China’s biggest athletic shoe manufacturer.
NEW STRATEGIES
• Work to Rebrand Reebok Image
-Reposition itself in the casual footwear and active footwear market
-consider opening Reebok retail outlets that market Reebok as highly fashionable
or begin marketing Reebok at more upscale department stores.
-Reebok should make sure it maintains a very high level of quality and durability
of its shoes.
• Focus on Emerging Markets
-Emerging markets in Asia and Latin America
-For local market Eg. forming strategic partnerships with local apparel
manufacturers in attempt to control local manufacturers’ competitive strengths.
• Focus marketing efforts at large sporting events on key products
-Market its shoes at the events by providing one of the championship teams with
its products. If the team wins, Adidas should immediately inform spectators about
the Adidas shoe that the winning team used and attribute part of the victory to
the Adidas shoe.
VALUE CHAIN
• Adidas, Salomon and TaylorMade are related
businesses.
• The product development, manufacturing and
assembly, and distribution activities for Salomon
and Taylor Made sporting goods equipment
unrelated
• the value chains for each equipment business
(winter sports, bicycle rims, and golf clubs) were
very unrelated.
• Even though the value chains of TaylorMade and
CCM hockey equipment are dissimilar to that of
Adidas’ footwear and apparel businesses, the
company’s corporate strategy after 2008 is best
described as primarily related diversification
Low Reputation /Performance
High
Many Brands
Few Brands
MAP APPLICATION
STRATEGIC FIT
• Contract manufacturing relationships,
• International distribution channels.
• Product design, production, and
distribution.
• Brand building, sales, and marketing
activities
• Purchasing,
• Product development,
• Share costs or transfer skills.
Any improvement

• the company’s poor performance in


the North American marketplace for
athletic footwear.
• there was little evidence that the
acquisition helped Adidas close the
competitive gap with Nike.
• The Reebok acquisition was intended
to address the company’s weakness in
the men’s basketball
CONCLUSION
• 2003,5years had adidas’ earnings per share
enjoyed in 1997.
• Stock price failed to return to its 1998 trading
range until 2004.
• Reebok acquisition increased revenues from €5.8
billion 2005 to €10.1 ($13.3 billion) 2006 to
Nike, $14.9 billion.
• Adidas revenues grown to €10.3 billion 2007 and
Adidas expected that the Reebok acquisition to
boost 2008 revenues by €250 million plus .
• Adidas possessed strong footing outside US , but
neither Adidas nor Reebok were serious
challengers to Nike in the United States or other
markets in North America
• Strengthen marketing activities in USA
Cntd...
• In 2008 the combined market shares
of Reebok and adidas were 15 points
less than Nike’s 36% market share in
North America. However, adidas was
quite strong in Europe, Latin America,
and Asia—making it a respectable
worldwide runner-up to Nike..
RECOMMENDATION
• The company’s wanted to position Adidas as a technology leader
and Reebok at lower price points has increased sales in
international markets are more likely to produce overall sales gains.
In international markets, they should continue
• should argue for the expansion of company-owned retail stores in
Latin America, Eastern Europe, and Asia.
• Company work diligently to capture expected cost-sharing benefits
between Adidas and Reebok operations thus by Integration efforts
should also apply all the business units.
• It should chisel its innovation is strength of the business and move
to consolidate areas where there are strategic fit opportunities. A
reduction in good in stock can liquidate cash would free up
additional capital to make strategic investments necessary to close
the gap with industry leader Nike.