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.
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.
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?
 Adidas’s Evolving Strategy
Return to form via
restructuring…

Loss of focus…
Design and
Innovation,
Adi’s Focused on Puma, while differentiated image
leadership… Nike underestimated. for brands,
Tries to catch up via improved retail and
Focused on athletic acquisitions which supply chain
footwear/apparel. yields product breadth
Success factors are instead of
marketing and specialization.
product innovation.
Adidas’s Current Strategy
Has Adidas's acquisitions helped
position itself against its
competitors?
 Salomon Acquisition: Was it
Successful?
Product Line Before Product Line After
Athletic Shoes Athletic Shoes
Athletic Apparel Athletic Apparel
Ski Equipment
Golf Clubs
Bicycle equipment
Winter Sports Apparel

•Analysis:Paid 1.5bn to diversify product line. Surpassed Reebok world’s

2nd largest sporting goods company, however…
 Adidas’s Stock Price
60

50
Stock Price (in euros)

40

30 Adidas Stock Price

20

10

0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year

•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 Product Line Product Line
Before After After Divestiture
Athletic Shoes Athletic Shoes Athletic Shoes
Athletic Apparel Athletic Apparel Athletic Apparel
Ski Equipment Golf Clubs*
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, world’s
most popular sport.
 Regional Footwear/Apparel Markets
Region Size Market Adidas Sales Adidas Sales Adidas
Growth Growth Position
Rate
North $42.5 billion 3% $2.9 billion 5% #2 behind
America Nike
Europe N/A 2% (20% $4.3 billion 8%, mainly #1
Eastern in Russia
Europe)
Asia 3.2 billion 13% (South $2.2 billion 17% #1
people and Central)
15% (China)
Latin N/A N/A $657 million 39% #2 behind
America 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 2007

Adidas Retail 875 1003

Locations
Reebok Retail 283 430
Locations
 Adidas AG Geographic
Revenue Performance

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
 Revenues
Revenues from
from Asia:
Asia: Metalwoods
Metalwoods currently
currently Over
Over 7070 touring
touring pros
pros
1999
1999 –– 13%
13% of
of total
total hold
hold number
number one
one lift
lift apparel
apparel presence.
presence.
2007
2007 –– 35%
35% of
of total
total ranking.
ranking.

Decreasing
Decreasing reliance
reliance Irons
Irons hold
hold less
less than
than
on
on U.S.
U.S. Market:
Market: half
half market
market share
share of
of
1999
1999 –– 69%
69% of
of total
total industry
industry leader
leader
2007
2007 –– 52%
52% of
of total
total
Golf
Golf balls
balls have
have seen
seen
limited
limited success
success

Conclusion – TaylorMade should hold U.S.

market share in U.S. given the brand’s
strenghts, however, TM is only 8% of Adidas
AG global revenues. TM cannot help Adidas
overtake Nike in U.S. market
 Adidas Global Revenue Sources (2007)

Conclusion – The majority of

Adidas’s revenue streams are
outside U.S. market and are
growing significantly – let Nike
lead U.S. market but dominate
Europe and emerging markets.
 Reebok Global Revenue Sources (2004)

Conclusion – Use Adidas’s

control and production
efficiencies to enhance Reebok’s
distribution network in U.S. to
increase U.S. 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
Ranking
Category Issue Threats/Opportunities
(1-5)
Operating multi-nationally – awareness of
Threat- mistakes can
Political cultures, laws, image, environment, 2
be costly
regulations
Current state of economy – customers
Threat – high quality
Economic may be less willing to pay for higher 2
means higher prices
priced items
Opportunity – supply
chain efficiencies and
Extreme forces in competitor pricing. 4
multiple distribution
channels
Opportunity –
Keeping up with the wants of the younger
Social Reebok’s strength in 4
generation
this area

Opportunity – core
Technologic Product innovation is a key driver in the
competency for 4
al industry
adidas
Porter’s 5 Forces
 Porter’s Five Forces
Factor Description Impact

Threat of Substitute Products •adidas’s strength is product innovation and meeting customer expectations Low

•Strong presence of established brands and distribution channels

Threat of New Entrants •Customers already loyal to their brand Low
•Huge resources required of new entrants

•Huge number of buyers means adidas must market products effectively

•Must be able to differentiate from the competition
Bargaining Power of Buyers High
•Buyers more conscious of their spending
•Buyers have access to more information

•Multiple sources of materials for shoes and apparel – commodity status

Bargaining Power of Suppliers •Suppliers are very dependent on adidas and others Low
•Ease in switching suppliers if necessary and can do so globally

•Recent acquisitions in industry

•All competition has global reach – internet and e-commerce
Competitive Rivalry High
•Remaining a leader is expensive – aggressive sales and marketing
•Always struggling to get a competitive edge
 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
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%)
Weaknesses
•High quality and innovation are costly
•Controlling subcontractor quality –
negative effects can be devastating
•Wasting resources trying to overtake
Nike in the US?
Threats
•Nike’s 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
• Fouded 1920 by Adi Dassler – wanted to design shoes for athletes in
soccer, T&F, & tennis.
1920-1925 • 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
1928-1936 only in Dassler shoes.

• Bitter family feud, company dissolved. Rudi established Puma. With

his departure Adi renamed company Adidas & registered the
1948-1949 trademark 3rd strip to Adidas shoes.

• Adi expanded spikes concept in track shoes to soccer shoes. Partial

credit was given to the soccer shoes for Germany’s World Cup
1954 Championship that year.
 Timeline of Adidas
• Adidas is the clear favorite among athletes – 75% of T&F
athletes wear them in Olympics. ’63 started producing soccer
1960-1967 balls, ’67 athletic apparel

• Adidas became leader in consumer jogging shoes in the US. T-

shirts and apparel bearing the 3 stripes became popular
1970’s among teens.

• Adi Dassler dies, Adidas remains worldwide leader in athletic

footwear but they are losing market share fast to Nike in US.
1978 Market share loss continues through the 80’s and mid 90’s.

• Through cost cutting, new model launches, and endorsement

contracts with popular athletes Adidas increased sales by 75%
1994 over prior year in US. Becoming 3rd largest athletic footware
company in US – trailing only Nike and Reebok.
 Timeline of Adidas
• Acquisition of Salomon SA – diversified beyond shoes &
apperal to ski, golf, bicycle, & winter sports.
1998

• Stock price takes a hit possibly due to Salomon acquisition.

Adidas mgt divested all of Salomon’s winter sports & bicycle
1998-2005 equipment.

• Acquistion of Reebok, included Rockport footware, Greg

Norman apparel, & CCM hockey equipment.
2006