How has Adidas evolved since it was founded?

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 3 rd 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

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 3 rd largest athletic footware company in US – trailing only Nike and Reebok ’s

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

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 screw in spikes Soccer 1954 – screw in spikes 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.

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.

Has Adidas positioned itself well in developing markets?

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 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 RegionSizeMarket Growth Rate Adidas SalesAdidas Sales Growth Adidas Position North America $42.5 billion3%$2.9 billion5%#2 behind Nike EuropeN/A2% (20% Eastern Europe) $4.3 billion8%, mainly in Russia #1 Asia3.2 billion people 13% (South and Central) 15% (China) $2.2 billion17%#1 Latin America N/A $657 million39%#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.

Has the Acquisitions helped position Adidas against its competitors?

Salomon Acquisition: Was it Successful? Product Line BeforeProduct 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 2 nd largest sporting goods company, however…

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 divested Product Line Before Product Line After Product Line After Divestiture Athletic Shoes Athletic Apparel Ski EquipmentGolf Clubs* Golf Clubs Bicycle equipment Winter Sports Apparel Only added Golf Clubs to product line

Should Adidas be concerned with losing North American market share to Nike?

Retail Store Strategy Adidas Retail Locations Reebok Retail Locations

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

TaylorMade Advantages Shift to International Markets Strength in Metalwoods 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 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 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

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.

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.

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