Presentation on theme: "Primary Question for Adidas"— Presentation transcript:
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 QuestionsWhat 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 InnovationTrack and Field1925:studs and spikesArch support1949 – molded rubber cleatsscrew in spikesSoccer1954 – screw in spikes1963- Began producing soccer balls1967 – athletic apparelResultsOver 700 patentsStrong reputation among top athletes1970 – leading brand in consumer jogging shoesAnalysis – 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 InnovationGave shoes to German athletes in 1928 Olympics2 stripe (and later 3 stripe) brand75% of track and field athletes wearing adidas in 1960 Olympics78% of athletes wearing adidas at 1972 OlympicsDeveloped 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.
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 chainFocused 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.
11 Has Adidas's acquisitions helped position itself against its competitors?
12 Salomon Acquisition: Was it Successful? Product Line BeforeProduct Line AfterAthletic ShoesAthletic ApparelSki EquipmentGolf ClubsBicycle equipmentWinter Sports ApparelAnalysis:Paid 1.5bn to diversify product line. Surpassed Reebok world’s 2nd largest sporting goods company, however…
13 Adidas’s Stock PriceStock 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 BeforeProduct Line AfterProduct Line After DivestitureAthletic ShoesAthletic ApparelSki EquipmentGolf Clubs*Golf ClubsBicycle equipmentWinter Sports ApparelOnly 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 marketEncouraging that #1 in developing eastern European market, Russia expected to be most profitable market in Europe by 20102006 acquisition of Reebok not enough to overcome Nike in North AmericaGrowing 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 SizeMarket Growth RateAdidas SalesAdidas Sales GrowthAdidas PositionNorth America$42.5 billion3%$2.9 billion5%#2 behind NikeEuropeN/A2% (20% Eastern Europe)$4.3 billion8%, mainly in Russia#1Asia3.2 billion people13% (South and Central) 15% (China)$2.2 billion17%Latin America$657 million39%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 Strategy20062007Adidas Retail Locations8751003Reebok Retail Locations283430
21 Adidas AG Geographic Revenue Performance 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
22 Decreasing reliance on U.S. Market: 1999 – 69% of total TaylorMade AdvantagesShift to International MarketsMetalwoodsStrength inStrong Apparel PresenceRevenues from Asia:1999 – 13% of total2007 – 35% of totalDecreasing reliance on U.S. Market:1999 – 69% of total2007 – 52% of totalMetalwoods currently hold number one ranking.Irons hold less than half market share of industry leaderGolf balls have seen limited successOver 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 OptionsUse 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 retailIncrease Reebok U.S. endorsementsUse Adidas global distribution to further increase TaylorMade international revenues
27 Slides that follow still need to be placed or cut.
28 External Environment: PEST CategoryIssueThreats/OpportunitiesRanking(1-5)PoliticalOperating multi-nationally – awareness ofcultures, laws, image, environment, regulationsThreat- mistakes can be costly2EconomicCurrent state of economy – customers may be less willing to pay for higher priced itemsThreat – high quality means higher pricesExtreme forces in competitor pricing.Opportunity – supply chain efficiencies and multiple distribution channels4SocialKeeping up with the wants of the younger generationOpportunity – Reebok’s strength in this areaTechnologicalProduct innovation is a key driver in the industryOpportunity – 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 LowBargaining Power of SuppliersBargaining Power of BuyersHighThreat of New Entrants
30 Porter’s Five Forces Factor Description Impact Threat of Substitute Productsadidas’s strength is product innovation and meeting customer expectationsLowThreat of New EntrantsStrong presence of established brands and distribution channelsCustomers already loyal to their brandHuge resources required of new entrantsBargaining Power of BuyersHuge number of buyers means adidas must market products effectivelyMust be able to differentiate from the competitionBuyers more conscious of their spendingBuyers have access to more informationHighBargaining Power of SuppliersMultiple sources of materials for shoes and apparel – commodity statusSuppliers are very dependent on adidas and othersEase in switching suppliers if necessary and can do so globallyCompetitive RivalryRecent acquisitions in industryAll competition has global reach – internet and e-commerceRemaining a leader is expensive – aggressive sales and marketingAlways struggling to get a competitive edge
31 SWOT Analysis Strengths Weaknesses Opportunities Threats Large event sponsorshipsBrand reputation / recognitionDiverse product portfolioCulture driven by innovation / R&DDominant in soccer and hockeySupply chain managementWeaknessesHigh quality and innovation are costlyControlling subcontractor quality – negative effects can be devastatingWasting resources trying to overtake Nike in the US?OpportunitiesIncreasing female participation in sportsE-commerce to increase market shareGrowth rates for footwear and apparelCentral Asia (13%),Eastern Europe (20%)China (15%)ThreatsNike’s reputation and presence; a leader in marketing and advertisingSponsorships and endorsements may go wrong (Kobe Bryant)
33 Timeline of AdidasFouded 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 AdidasAdidas is the clear favorite among athletes – 75% of T&F athletes wear them in Olympics. ’63 started producing soccer balls, ’67 athletic apparelAdidas 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’s19781994
35 Timeline of AdidasAcquisition 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.19982006