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What enabled Adidas to be the Market Leader in the past__1_

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What enabled Adidas to be the Market Leader in the past__1_ Powered By Docstoc
					     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       Soccer          Results
Analysis – Adidas was an early                     • 1954 –         • Over 700
                                 • 1925:studs
entrant into athletic shoe                           screw in         patents
                                   and spikes
industry. They developed                             spikes         • Strong
                                 • Arch
many of the features still                         • 1963- Began      reputation
                                   support
present in shoes today.                              producing        among top
                                 • 1949 –            soccer balls     athletes
                                   molded
                                   rubber          • 1967 –         • 1970 –
Strong presence in Olympics
                                   cleats            athletic         leading
and soccer.                                          apparel          brand in
                                 • 1952 -                             consumer
                                   screw in                           jogging
Created a strong brand based       spikes
on high quality, innovative                                           shoes
products that top athletes
choose to use in training and
competition.
Marketing
Innovation

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

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

               Nike                                 adidas


                                      Innovative leader dies in1978 –
Nike emerging in the 70’s             quality declines, innovation drags

Aggressive launch new styles –        Dedicated to competitive athletes
going after youth and fitness craze

Large endorsement contracts –         Passed on Michael Jordan
sign Michael Jordan

Focused, aggressive, dedicated        8 years of management and
leadership                            ownership changes

Outsourcing of manufacturing to       Costly German manufacturing
Asia                                  facilities
   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 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, 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’ 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…
                                         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
             •Net addition was TaylorMade golf
      TaylorMade-Adidas Golf Sales by
               Product Line
             350
             300
             250

    Sales     200                                         Metalwoods
(in millions) 150                                         Apperal
             100                                          Footware
                                                          Other Hardware
              50
               0
                    2004   2005      2005      2007
                                  Year
    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

    Other
   Hardware
     31%                                   MetalWoods
                         MetalWoods
                            42%            Apperal
                                           Footwear
                                           Other Hardware

    Footwear
       9%
               Apperal        Conclusion: Use Adidas’s
                18%           marketing model of track &
                              field/soccer shoes to gain
                              more sales in footwear &
                              apparel.
        SWOT Analysis for Reebok
                Strengths                                  Weaknesses
•Strong in hockey, football and baseball   •Poor reputation for quality and
•Loyal female customer base                innovation
•Past success in marketing                 •Greg Norman golf apparel brand
•Strong stable of professional athlete     •Limited distribution channels
endorsements


             Opportunities                                    Threats
• Encouraging sales growth in Latin        • Possibility of cannibalization if sold in
America and Asia                           same place as Adidas products
•Economies of scale with Adidas supply     • Still third in market share in its
chain and distribution                     strongest market, North America
Reebok Acquisition                  Adidas       Reebok
•On paper it looks like Reebok’s
product portfolio, endorsements
and relationships round out
Adidas and together they can join
forces to overtake Nike.
                                    Basketball   Hockey

•Issue is can management
overcome Reebok’s reputation        Running      Baseball
for poor quality and lack of
innovation?
                                     Soccer      Football
•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       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
€ 5,000

€ 4,500
                                                            5.0%
€ 4,000                                          31.5%

€ 3,500
                                             106.4%
                                3.2%
€ 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%

    €0
           2004           2005            2006           2007


 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
                              TaylorMade Advantages


    Shift to International         Strength in
                                                          Strong Apparel Presence
           Markets                 Metalwoods
  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%

                                                      Reebok
                                                       23%
Conclusion – TaylorMade should hold U.S.
market share in U.S. given the brand’s
strengths, 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 =
                                   6.4%
                                              71.3% of revenues
                   22.1%
                                               42.8%

                                                         Europe
                                                         North America
                                                         Asia
                                                         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)
                             11.4%
                                     21.4%




                                                 12.5%




                                                           Europe
                                                           United Kingdom
                                                           United States
                                                           Other Countries

                    54.7%



                                             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
         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 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
                                                                            channels

                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
                              Suppliers
        Low
                                 Low


                 Intensity of
                 Competition
                     High


Bargaining Power of
                        Threat of New Entrants
      Buyers
                                 Low
        High
                                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

				
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