1. 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?

2. 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 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?

3. What enabled Adidas to be the Market Leader in the past?

4. Product Innovation
Track and Field
1925:studs and spikes
Arch support
1949 – molded rubber cleats
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.
Created a strong brand based on high quality, innovative products that top athletes choose to use in training and competition.

5. 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.

6. How did Adidas lose its lead to Nike?

7. What has the Adidas brand represented in the past and what does it represent today?

8. How has Adidas's corporate strategy changed over time, specifically before and after the restructuring?

9. Adidas’s Evolving Strategy
Return to form via restructuring…
Adi’s leadership…
Loss of focus…
Design and Innovation, differentiated image for brands, improved retail and supply chain
Focused on Puma, while Nike underestimated. Tries to catch up via acquisitions which yields product breadth instead of specialization.
Focused on athletic footwear/apparel. Success factors are marketing and product innovation.

10. Adidas’s Current Strategy

11. Has Adidas's acquisitions helped position itself against its competitors?

12. Salomon Acquisition: Was it Successful?
Product Line Before
Product Line After
Athletic Shoes
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…

13. Adidas’s Stock Price
Stock price fell soon after acquisition in 1998, Salomon divested except for Taylor-Made Golf line. Adidas overpaid for acquisition.

14. Adidas after Salomon was divested
Product Line Before
Product Line After
Product Line After Divestiture
Athletic Shoes
Athletic Apparel
Ski Equipment
Golf Clubs*
Golf Clubs
Bicycle equipment
Winter Sports Apparel
Only added Golf Clubs to product line

15. What role do developing countries have in Adidas's future success and how is Adidas's position in those countries?

16. 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

17. 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.

18. Regional Footwear/Apparel Markets
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%
Latin America
$657 million
39%
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.

19. Should Adidas be concerned about losing North American market share to Nike?

20. Retail Store Strategy
2006
2007
Adidas Retail Locations
875
1003
Reebok Retail Locations
283
430

21. 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

22. Decreasing reliance on U.S. Market: 1999 – 69% of total
TaylorMade Advantages
Shift to International Markets
Metalwoods
Strength in
Strong Apparel Presence
Revenues from Asia:
1999 – 13% of total
2007 – 35% of total
Decreasing reliance on U.S. Market:
1999 – 69% of total
2007 – 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

23. 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.

24. 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.

25. Is there another corporate strategy Adidas should be pursuing?

26. 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

27. Slides that follow still need to be placed or cut.

28. External Environment: PEST
Category
Issue
Threats/Opportunities
Ranking
(1-5)
Political
Operating multi-nationally – awareness of
cultures, laws, image, environment, regulations
Threat- mistakes can be costly 2
Economic
Current state of economy – customers may be less willing to pay for higher priced items
Threat – high quality means higher prices
Extreme forces in competitor pricing.
Opportunity – supply chain efficiencies and multiple distribution channels 4
Social
Keeping up with the wants of the younger generation
Opportunity – Reebok’s strength in this area
Technological
Product innovation is a key driver in the industry
Opportunity – core competency for adidas
“Significance” represents value-neutral impact, and may be either positive or negative for Whole Foods.

29. Porter’s 5 Forces Intensity of Competition High Threat of Substitutes
Low
Bargaining Power of Suppliers
Bargaining Power of Buyers
High
Threat of New Entrants

30. Porter’s Five Forces Factor 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
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
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

31. SWOT Analysis Strengths Weaknesses Opportunities Threats
Large event sponsorships
Brand reputation / recognition
Diverse product portfolio
Culture driven by innovation / R&D
Dominant in soccer and hockey
Supply chain management
Weaknesses
High quality and innovation are costly
Controlling subcontractor quality – negative effects can be devastating
Wasting resources trying to overtake Nike in the US?
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%)
Threats
Nike’s reputation and presence; a leader in marketing and advertising
Sponsorships and endorsements may go wrong (Kobe Bryant)

32. How has Adidas evolved since it was founded?

33. 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 only in Dassler shoes.
Bitter family feud, company dissolved. Rudi established Puma. With his departure Adi renamed company Adidas & registered the 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 Championship that year.
1954

34. 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 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% over prior year in US. Becoming 3rd largest athletic footware company in US – trailing only Nike and Reebok.
1970’s
1978
1994

35. 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 equipment.
Acquistion of Reebok, included Rockport footware, Greg Norman apparel, & CCM hockey equipment.
1998
2006