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
Analysis – Adidas was an early
entrant into athletic shoe
industry. They developed
many of the features still
present in shoes today.
Strong presence in Olympics
and soccer.
Created a strong brand based
on high quality, innovative
products that top athletes
choose to use in training and
competition.
Track and Field
• 1925:studs
and spikes
• Arch
support
• 1949 –
molded
rubber
cleats
• 1952 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
Marketing
Innovation
•Developed strong following with
top track and field athletes.
Gave shoes to
German
athletes in 1928
Olympics
•Applied this same model years
later with soccer shoes and
apparel.
75% of track and
field athletes
wearing adidas in
1960 Olympics
•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.
2 stripe (and
later 3 stripe)
brand
78% of athletes
wearing adidas
at 1972
Olympics
How did Adidas lose the lead to
Nike?
How Did adidas Lose US Market Share to Nike?
Nike
adidas
Nike emerging in the 70’s
Innovative leader dies in1978 –
quality declines, innovation drags
Aggressive launch new styles –
going after youth and fitness craze
Dedicated to competitive athletes
Large endorsement contracts –
sign Michael Jordan
Passed on Michael Jordan
Focused, aggressive, dedicated
leadership
8 years of management and
ownership changes
Outsourcing of manufacturing to
Asia
Costly German manufacturing
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…
Adi’s
leadership…
Focused on athletic
footwear/apparel.
Success factors are
marketing and
product innovation.
Focused on Puma, while
Nike underestimated.
Tries to catch up via
acquisitions which
yields product breadth
instead of
specialization.
Design and
Innovation,
differentiated image
for brands, improved
retail and supply
chain
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
Stock Price (in euros)
50
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
Before
Athletic Shoes
Product Line
After
Athletic Shoes
Product Line
After Divestiture
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
200
Sales
(in millions) 150
Metalwoods
Apperal
Footware
Other Hardware
100
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%
Footwear
9%
MetalWoods
42%
Apperal
18%
MetalWoods
Apperal
Footwear
Other Hardware
Conclusion: Use Adidas’s
marketing model of track &
field/soccer shoes to gain
more sales in footwear &
apparel.
SWOT Analysis for Reebok
Weaknesses
Strengths
•Strong in hockey, football and baseball
•Loyal female customer base
•Past success in marketing
•Strong stable of professional athlete
endorsements
•Poor reputation for quality and
innovation
•Greg Norman golf apparel brand
•Limited distribution channels
Opportunities
• Encouraging sales growth in Latin
America and Asia
•Economies of scale with Adidas supply
chain and distribution
Threats
• Possibility of cannibalization if sold in
same place as Adidas products
• Still third in market share in its
strongest market, North America
Reebok Acquisition
•On paper it looks like Reebok’s
product portfolio, endorsements
and relationships round out
Adidas and together they can join
forces to overtake Nike.
•Issue is can management
overcome Reebok’s reputation
for poor quality and lack of
innovation?
•Can two companies come
together with such different
cultures and focus?
•Adidas – product
innovation and commitment
to quality
•Reebok – marketing focus
Adidas
Reebok
Basketball
Hockey
Running
Baseball
Soccer
Football
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
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%
#1
Latin
America
N/A
N/A
$657 million
39%
#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.
Should Adidas be concerned
about losing North American
market share to Nike?
Retail Store Strategy
2006
2007
Adidas Retail
Locations
875
1003
Reebok Retail
Locations
283
430
Adidas AG Geographic
Revenue Performance
€ 5,000
€ 4,500
5.0%
31.5%
€ 4,000
€ 3,500
106.4%
3.2%
€ 3,000
-9.4%
Europe
North America
€ 2,500
11.6%
€ 2,000
32.6%
17.6%
€ 1,500
Asia
Latin America
27.8%
€ 1,000
1229.2%
€ 500
56.4%
31.7%
€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
Markets
Strength in
Metalwoods
Revenues from Asia:
1999 – 13% of total
2007 – 35% of total
Metalwoods currently
hold number one
ranking.
Decreasing reliance
on U.S. Market:
1999 – 69% of total
2007 – 52% of total
Irons hold less than
half market share of
industry leader
Strong Apparel Presence
Over 70 touring pros
lift apparel presence.
Golf balls have seen
limited success
Conclusion – TaylorMade should hold U.S.
market share in U.S. given the brand’s
strengths, however, TM is only 8% of Adidas
AG global revenues. TM cannot help Adidas
overtake Nike in U.S. market
TM
8%
Reebok
23%
Adidas
69%
Adidas Global Revenue Sources (2007)
6.4%
Remaining regions =
71.3% of revenues
22.1%
42.8%
Europe
North America
Asia
Latin America
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.
N.A. market 28.7% of
revenues
Reebok Global Revenue Sources (2004)
11.4%
21.4%
12.5%
Europe
United Kingdom
United States
Other Countries
54.7%
Conclusion – Use Adidas’s
control and production
efficiencies to enhance Reebok’s
distribution network in U.S. to
increase U.S. revenues.
U.S. market 54.7% of
2004 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
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
2
Extreme forces in competitor pricing.
Opportunity – supply
chain efficiencies and
multiple distribution
channels
4
Category
Social
Keeping up with the wants of the younger
generation
Opportunity – Reebok’s
strength in this area
4
Technological
Product innovation is a key driver in the industry
Opportunity – core
competency for adidas
4
Porter’s 5 Forces
Threat of Substitutes
Low
Bargaining Power of
Suppliers
Low
Intensity of
Competition
High
Bargaining Power of
Buyers
High
Threat of New Entrants
Low
Porter’s Five Forces
Factor
Description
Impact
•adidas’s strength is product innovation and meeting customer expectations
Low
•Strong presence of established brands and distribution channels
•Customers already loyal to their brand
•Huge resources required of new entrants
Low
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
Low
•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
High
Threat of Substitute Products
Threat of New Entrants
Competitive Rivalry