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 the lead to Nike?• What has the Adidas brand represented in the past and what
does it represent today?• How has Adidas' corporate strategy changed over time,
specifically before and after the 2005-2006 restructuring?• Have Adidas' acquisitions helped improve their position
against the competition?• What role do developing countries have in Adidas's future
success and how is Adidas positioned 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
Track and Field
• 1925:studs and spikes
• Arch support
• 1949 – molded rubber cleats
• 1952 - screw in spikes
Soccer• 1954 –
screw in spikes
• 1963- Began producing soccer balls
• 1967 – athletic apparel
Results• Over 700
patents• Strong
reputation among top athletes
• 1970 – leading brand in consumer jogging shoes
Analysis – Adidas was an early entrant into athletic shoe industry. They developed many of the features still present in shoes today.
Strong presence in Olympics and soccer.
Created a strong brand based on high quality, innovative products that top athletes choose to use in training and competition.
Marketing Innovation
Gave shoes to German athletes in 1928 Olympics
2 stripe (and later 3 stripe)
brand
75% of track and field athletes
wearing adidas in 1960 Olympics
78% of athletes wearing adidas at
1972 Olympics
•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 the 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?
Adi’s leadership…
Loss of focus…
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.
Return to form via restructuring…
Design and Innovation, differentiated image for brands, improved retail and supply chain
Adidas Evolving Strategy
Adidas’ Current Strategy
Have Adidas’s acquisitions helped improve their position
against the competition?
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…
0
10
20
30
40
50
60
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Stoc
k Pr
ice
(in e
uros
)
Adidas Stock Price
Adidas’s 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 divestedProduct Line Before
Product Line After
Product Line After Divestiture
Athletic Shoes Athletic Shoes Athletic ShoesAthletic Apparel Athletic Apparel Athletic Apparel
Ski Equipment Golf Clubs*Golf ClubsBicycle equipmentWinter Sports Apparel
• Net addition was TaylorMade golf
TaylorMade-Adidas Golf Sales by Product Line
0
50
100
150
200
250
300
350
Sales (in millions)
2004 2005 2005 2007
Year
MetalwoodsApperalFootwareOther Hardware
Conclusion: TaylorMade/Adidas has been able to keep sales up through athlete endorsements even though USGA rules have limited tech advances & an industry decline in the number of golfers.
2007 TaylorMade/Adidas Golf Sales Breakdown
MetalWoods42%
Apperal18%
Footwear9%
Other Hardware
31% MetalWoodsApperalFootwearOther Hardware
Conclusion: Use Adidas’s marketing model of track & field/soccer shoes to gain more sales in footwear & apparel.
SWOT Analysis for ReebokStrengths
•Strong in hockey, football and baseball•Loyal female customer base•Past success in marketing•Strong stable of professional athlete endorsements
Weaknesses•Poor reputation for quality and innovation•Greg Norman golf apparel brand•Limited distribution channels
Opportunities• Encouraging sales growth in Latin America and Asia•Economies of scale with Adidas supply chain and distribution
Threats• Possibility of cannibalization if sold in same place as Adidas products• Still third in market share in its strongest market, North America
Reebok Acquistion
Adidas Reebok
Football
Baseball
Hockey
Soccer
Running
Basketball•On paper it looks like Reebok’s product portfolio, endorsements and relationships round out Adidas and together they can join forces to overtake Nike.
•Issue is can management overcome Reebok’s reputation for poor quality and lack of innovation?
•Can two companies come together with such different cultures and focus?
•Adidas – product innovation and commitment to quality•Reebok – marketing focus
What role do developing countries have in Adidas's future
success and how is Adidas positioned 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 Growth
Rate
Adidas Sales Adidas Sales Growth
Adidas Position
North America
$42.5 billion 3% $2.9 billion 5% #2 behind Nike
Europe N/A 2% (20% Eastern Europe)
$4.3 billion 8%, mainly in Russia
#1
Asia 3.2 billion people
13% (South and Central) 15% (China)
$2.2 billion 17% #1
Latin America
N/A N/A $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 Strategy2006 2007
Adidas Retail Locations
875 1003
Reebok Retail Locations
283 430
Adidas AG Geographic Revenue Performance
2004 2005 2006 2007€ 0
€ 500
€ 1,000
€ 1,500
€ 2,000
€ 2,500
€ 3,000
€ 3,500
€ 4,000
€ 4,500
€ 5,000
3.2%
31.5%
5.0%
17.6%
106.4%
-9.4%
27.8%
32.6%11.6%
1229.2%56.4% 31.7%
EuropeNorth AmericaAsiaLatin America
Key Growth Potential:Europe – continue focus on soccer (including endorsements) and build brand loyaltyAsia/Latin America – increase distribution network and brand awareness - All three regions averaging double-digit growth rates
TaylorMade Advantages
Shift to International Markets Strength in Metalwoods Strong Apparel Presence
Revenues from Asia:1999 – 13% of total2007 – 35% of total
Decreasing reliance on U.S. Market:1999 – 69% of total2007 – 52% of total
Metalwoods currently hold number one ranking.
Irons hold less than half market share of industry leader
Golf balls have seen limited success
Over 70 touring pros lift apparel presence.
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
Adidas69%
Reebok23%
TM8%
Adidas Global Revenue Sources (2007)
42.8%
22.1%
6.4%
EuropeNorth AmericaAsiaLatin America
N.A. market 28.7% of revenues
Remaining regions = 71.3% of revenues
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)
21.4%
12.5%
54.7%
11.4%
EuropeUnited KingdomUnited StatesOther Countries
U.S. market 54.7% of 2004 revenuesConclusion – 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
Category Issue Threats/Opportunities Ranking (1-5)
PoliticalOperating multi-nationally – awareness of cultures, laws, image, environment, regulations
Threat- mistakes can be costly 2
EconomicCurrent state of economy – customers may be less willing to pay for higher priced items
Threat – high quality means higher prices 2
Extreme forces in competitor pricing.Opportunity – supply chain efficiencies and multiple distribution
channels4
Social Keeping up with the wants of the younger generation
Opportunity – Reebok’s strength in
this area4
Technological
Product innovation is a key driver in the industry
Opportunity – core competency for
adidas4
Porter’s 5 ForcesThreat of SubstitutesLow
Bargaining Power of SuppliersLow
Bargaining Power of BuyersHigh
Threat of New EntrantsLow
Intensity of Competition
High
Porter’s Five ForcesFactor Description Impact
Threat of Substitute Products •adidas’s strength is product innovation and meeting customer expectations 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
Low
Bargaining Power of Buyers•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
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
