Case 18.

Adidas in 2008: Has Corporate Restructuring Increased Shareholder Value

Group Members: Muhammad Ali (3485) Shah Ali Ahmed (3612) S.Jawad Hussain (3218) S.Hassan Raza Umair Ahmed Uzair (3318)

 present strategy
Focused on acquisition Related diversification

Moves in new business

Kept its production cost low by outsourcing more than 95% of its production requirements to contract manufacturers located throughout Asia

Efforts to capture strategic fits

Adidas acquire Reebok in 2006 which increase the company's revenue from $5.8 billion to $10.1 billion due to expected cost saving of 105 million euro by year ended 2008 and continue improving its gross profit margin and bottom line.

Key Success Factors

Product innovation Direct sales & distribution Low cost manufacturing Marketing Activities Strong Financial Position

Competitive Profile Matrix

WEIGHT .S # SUCCESS FACTOR
(1.0-0.0)
RATING W. SCORE RATING W. SCORE

Adidas

Nike

1 2

Product Innovation Direct sales & distribution

0.25 0.1

3 4

0.75 0.40

4 4

1.00 0.40

Low cost manufacturing

0.2

0.80

0.60

4 5

Marketing Related Activities Strong Financial Position Total

Most Strong Mildly Strong Mildly Weak Very Weak 4 3 2 1

0.25 0.2 1

3 4

0.75 0.40 3.10

3 3

0.75 0.60 3.35

Evaluating Industry Attractiveness Relative to others Rating Sporting goods 3 1 3 3 2 2 3 3 1 1

Industry Attractiveness Factor

Weight

Wt. Avg.

Rating Golf 2 1 2 3 2 2 2 3 1 3

Wt. Avg.

Market Size and projected growth Intensity of competition Emerging opportunities and threats Seasonal cyclical factors Resource Requirements Presence of cross industry strategic fits and resource fits Industry profitability Social, regulatory and environmental factors Industry uncertainty and business fits Total

0.15 0.15 0.05 0.15 0.15 0.05 0.1 0.1 0.05 0.05 1

0.45 0.15 0.15 0.45 0.3 0.1 0.3 0.3 0.05 0.05 2.3

0.3 0.15 0.1 0.45 0.3 0.1 0.2 0.3 0.05 0.15 2.1

Competitive Strength of each of the companys Business Units company

Competitive strength measure Weight Rating Adidas .Wt. Avg Rating Reebok .Wt. Avg Rating Taylor Made .Wt. Avg

Relative Market Share Costs relative to competitors Ability to match rivals on key product attributes Bargaining leverage with suppliers/ buyers Strategic-fit relationships with sister businesses Technology and innovation capabilities How well resources are matched to industry key success factors Brand name reputation/image Degree of profitability relative to competitors

0.15 0.08 0.15 0.08 0.10 0.12 0.12 0.10 0.10 1.00

3 3 4 3 3 4 3 4 3

0.45 0.24 0.6 0.24 0.3 0.48 0.36 0.4 0.3 3.37

3 2 3 3 3 3 3 3 2

0.45 0.16 0.45 0.24 0.3 0.36 0.36 0.3 0.2 2.82

4 3 4 2 2 4 3 4 3

0.6 0.24 0.6 0.16 0.2 0.48 0.36 0.4 0.3 3.34

Total

GE Matrix
DIVISION SALES (Million) %SALES PROFIT %PROFIT I.A.S. C.STRENGTH

Adidas Reebok Taylor Made Golf Total

7,133 2,333 804 10,270

69.45 22.72 7.83 100.00

3,370 902 360 4,632

72.75 19.47 7.78 100.00

2.3 2.3 2.1

3.4 2.8 3.3

BCG Growth-Share Matrix

Identifying Competitive Advantage Potential of CrossBusiness Strategic Fits

Value Chain Activities

Purchase From Suppliers

Technolog y

Operations

Sales & Marketing

Distribution

Service

Adidas Reebok

Taylor Made Golf

Thank you