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					     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
•   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
What enabled Adidas to be the
 Market Leader in the past?
                              Track and Field       Soccer          Results

Analysis – Adidas was an      • 1925:studs      • 1954 –         • Over 700
early entrant into athletic     and spikes        screw in         patents
shoe industry. They           • Arch              spikes         • Strong
developed many of the           support         • 1963- Began      reputation
                              • 1949 –            producing        among top
features still present in                         soccer balls     athletes
shoes today.                    rubber          • 1967 –         • 1970 –
                                cleats            athletic         leading
                              • 1952 -            apparel          brand in
Created a strong brand                                             consumer
                                screw in
based on high quality,          spikes                             jogging
innovative products that                                           shoes
top athletes choose to use
in training and

•Developed strong following with
top track and field athletes.                          Gave shoes to
                                                      athletes in 1928
•Applied this same model years                           Olympics
later with soccer shoes and
                                                      75% of track and
•Successful because adidas was                          field athletes
                                                      wearing adidas in
creating innovative, high quality                      1960 Olympics

     •Product innovation enabled                                          78% of athletes
     marketing innovation.           2 stripe (and
                                                                          wearing adidas
                                    later 3 stripe)
                                                                             at 1972
     •Different than Nike –
     marketing is what set them
     apart from the start.
How did Adidas lose its lead to
   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

                 Loss of focus…
                                                             Design and
Adi’s                               Focused on Puma, while   differentiated image
leadership…                         Nike underestimated.     for brands, improved
                                    Tries to catch up via    retail and supply
              Focused on athletic   acquisitions which       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
          Salomon Acquisition: Was it
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

Stock Price (in euros)


                         30                                                       Adidas Stock Price



                              1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

                          •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
                     Winter Sports
             •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
     •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
   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
   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
Reebok Retail            283            430
                  Adidas AG Geographic
                  Revenue Performance
€ 5,000

€ 4,500
€ 4,000                                          31.5%

€ 3,500
€ 3,000                                                     -9.4%   Europe

€ 2,500                                                             North America

                                                            11.6%   Asia
€ 2,000
                        17.6%                32.6%                  Latin America
€ 1,500                          27.8%

€ 1,000
                                             56.4%          31.7%
 € 500                          1229.2%

           2004           2005            2006           2007

 Key Growth Potential:
 Europe – continue focus on soccer (including endorsements) and build brand
 Asia/Latin America – increase distribution network and brand awareness
  - All three regions averaging double-digit growth rates
  Revenues from Asia:      Metalwoods currently       Over 70 touring pros
  1999 – 13% of total      hold number one            lift apparel presence.
  2007 – 35% of total      ranking.

  Decreasing reliance      Irons hold less than
  on U.S. Market:          half market share of
  1999 – 69% of total      industry leader
  2007 – 52% of total
                           Golf balls have seen            TM
                           limited success                 8%

Conclusion – TaylorMade should hold U.S.
market share in U.S. given the brand’s
strenghts, however, TM is only 8% of Adidas                                    Adidas
AG global revenues. TM cannot help Adidas                                       69%
overtake Nike in U.S. market
     Adidas Global Revenue Sources (2007)
                                             Remaining regions =
                                              71.3% of revenues

                                                         North America
                                                         Latin America

Conclusion – The majority of              N.A. market 28.7% of
Adidas’s revenue streams are                    revenues
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)


                                                           United Kingdom
                                                           United States
                                                           Other Countries


                                             U.S. market 54.7% of
Conclusion – Use Adidas’s                       2004 revenues
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
           Alt Strategy Options
• Use Adidas as revenue driver outside of U.S.
  market – restructure Reebok strategy to
  capitalize on historic revenue performance in
  – 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

                Operating multi-nationally – awareness of            Threat- mistakes can be
Political                                                                                        2
                cultures, laws, image, environment, regulations               costly

                Current state of economy – customers may be           Threat – high quality
Economic                                                                                         2
                less willing to pay for higher priced items           means higher prices

                                                                      Opportunity – supply
                                                                      chain efficiencies and
                Extreme forces in competitor pricing.                                            4
                                                                       multiple distribution

                Keeping up with the wants of the younger             Opportunity – Reebok’s
Social                                                                                           4
                generation                                            strength in this area

                                                                       Opportunity – core
Technological   Product innovation is a key driver in the industry                               4
                                                                     competency for adidas
      Porter’s 5 Forces

                         Bargaining Power of
Threat of Substitutes

                 Intensity of

Bargaining Power of
                        Threat of New Entrants
                                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                                 Weaknesses
•Large event sponsorships                    •High quality and innovation are costly
•Brand reputation / recognition              •Controlling subcontractor quality –
•Diverse product portfolio                   negative effects can be devastating
•Culture driven by innovation / R&D          •Wasting resources trying to overtake
•Dominant in soccer and hockey               Nike in the US?
•Supply chain management

          Opportunities                                     Threats
•Increasing female participation in sports   •Nike’s reputation and presence; a leader
•E-commerce to increase market share         in marketing and advertising
•Growth rates for footwear and apparel       •Sponsorships and endorsements may go
     •Central Asia (13%),                    wrong (Kobe Bryant)
     •Eastern Europe (20%)
     •China (15%)
How has Adidas evolved since it was
            Timeline of Adidas
            •   Fouded 1920 by Adi Dassler – wanted to design shoes for athletes in
                soccer, T&F, & tennis.
            •   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
                 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.
                 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.

            •   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
  2006          Norman apparel, & CCM hockey equipment.

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