« adidas vs. Nike »
Names:
Vera Forst (vfo); Nicole Schupke (nsc); Simone Weiss (swe); Markus Wiedner (mwi)
Course:
V7.2 – International Strategic Management
Professor:
Prof. Dr. Gerard J. Lewis
University:
Hochschule für Technik und Wirtschaft Dresden (FH)
Semester:
3
Date:
12-01-2006
Word count:
8434
Copyright © 2006 Vera Forst, Nicole Schupke, Simone Weiss, Markus Wiedner. All rights reserved.
No part of this paper may be reproduced or made use of without the written consent of the authors.
Table of Contents
TABLE OF EXHIBITS............................................................................................................ II
EXECUTIVE SUMMARY (SWE) .............................................................................. III
1. INTRODUCTION (NSC) ................................................................................................ 1
2. THE SPORTING GOODS INDUSTRY (VFO & NSC)............................................... 2
3. ADIDAS (SWE & MWI) ................................................................................................. 5
3.1 GENERAL STRATEGY ASSESSMENT (MWI)................................................................... 5
3.2 RESOURCES (SWE)....................................................................................................... 5
3.2.1
Financial Resources.................................................................................. 5
3.2.2
Technological Resources........................................................................... 5
3.2.3
Human Resources...................................................................................... 6
3.3 CAPABILITIES (SWE).................................................................................................... 6
3.3.1
Branding.................................................................................................... 6
3.3.2
Efficient Risk Management........................................................................ 8
3.3 DIFFERENTIATION AND COST CONSCIOUSNESS (MWI)................................................. 8
3.4 VALUE SYSTEM (MWI & SWE) ..................................................................................... 9
3.5 PRODUCT - MARKET STRATEGIES (MWI) ................................................................... 11
3.5.1
Product Portfolio..................................................................................... 11
3.5.2
Product-Market Strategy Analysis .......................................................... 13
4. NIKE (VFO & NSC) ...................................................................................................... 15
4.1 RESOURCES (VFO) ..................................................................................................... 15
4.1.1
Financial Resources................................................................................ 15
4.1.2
Technological Resources......................................................................... 15
4.1.3
Human Resources.................................................................................... 16
4.2 CAPABILITIES (VFO) .................................................................................................. 17
4.2.1
Building Reputation................................................................................. 17
4.2.2
Research and Development..................................................................... 17
4.2.3
Design...................................................................................................... 18
4.2.4
Efficient Risk Management..................................................................... 18
4.3 CUSTOMERS (VFO)..................................................................................................... 19
4.4 DIFFERENTIATION AND COST CONSCIOUSNESS (NSC)................................................ 19
4.5 VALUE SYSTEM (NSC) ............................................................................................... 20
4.6 PRODUCT - MARKET STRATEGIES (NSC).................................................................... 22
5. COMPARE AND CONTRAST (SWE)........................................................................ 24
6. STRATEGY OUTLOOK (MWI) ................................................................................. 25
ABBREVIATIONS ................................................................................................................ IV
REFERENCES AND BIBLIOGRAPHY ...................................................................................... V
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Table of Exhibits
EXHIBIT 1 - MARKET SEGMENTATION ......................................................................................... 3
EXHIBIT 2 - GENERAL VALUE CREATION CHAIN ......................................................................... 4
EXHIBIT 3 - ADIDAS SUPPLIERS BY REGION ................................................................................. 9
EXHIBIT 4 - ADIDAS VALUE SYSTEM ......................................................................................... 10
EXHIBIT 5 - ADIDAS PRODUCT PORTFOLIO ................................................................................ 11
EXHIBIT 6 - ADIDAS PRODUCT-MARKET STRATEGY .................................................................. 13
EXHIBIT 7 - NIKE VALUE SYSTEM ............................................................................................. 21
EXHIBIT 8 - COMPETITOR RANKING BY ANNUAL SALES ........................................................... 26
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Executive Summary (swe)
Enjoying extraordinary growth rates, especially in rising markets such as Latin America and
Asia, the sporting goods industry signalises promising future prospects. This report examines
the two leading global players of this industry: adidas and Nike.
Both conduct research and development, design and marketing in-house, because these activities represent their core competencies. The lion’s share of the production processes is offshore
outsourced to low labour cost countries. This is reasonable regarding the costs, but therein the
firms take risks concerning the theft of intellectual property and the damage of their images.
Target customers in developed countries might not value this, as jobs are transferred to lowcost developing countries where working conditions might also be relatively poor. Scandals
and bad press can substantially hurt the firm’s image. This has to be avoided as trust in brand
and reputation are important key buying factors. The firms do offer state-of-the-art technology and appealing design but do need customer’s trust and loyalty to secure their sales figures.
In this highly competitive market, it is important to gain a competitive advantage and secure
further growth. As diverse situations on different markets exist, the firms do have options to
increase their market shares.
Time will tell, if worldwide number two adidas will successfully upgrade their aggressive
expansion strategy and reach their long-term goal to outstrip Nike.
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1.
Introduction (nsc)
This year’s Fifa World Cup is going to be a major event for the host country Germany, the 32
World Cup teams and millions of fans worldwide. For the sporting goods company adidas, the
World Cup has a very different importance. In no other segment is the competition between the two
giants of the business, adidas and Nike, as fierce as in football equipment. For adidas, the World
Cup is a chance to set an example and stress its ambition to become the world’s best sports brand.
Consequently, it is no wonder that adidas has announced the most expensive advertising and sponsoring campaign in its history1. Adidas is providing six World Cup teams with shoes, apparel and
equipment2. Furthermore, the company is the official sponsor of the event, which means that adidas
is equipping referees and other officials as well as providing the balls for every single game3. Adidas and Nike, the global market leader in the sporting goods industry, have invested incredibly in
the World Cup. The reason for this enormous engagement is simple: in 2002, one billion people
watched the World Cup final and being the sponsor of the winner team of the 2006 Fifa World Cup
would be great publicity4.
Both companies rely on their brand as their major asset. During the past years, it has become more
difficult for them to differentiate from each other and to guarantee the uniqueness of their brand.
Although the sporting goods industry is a very attractive one, the fierce competition as well as
newly emerging risks are serious challenges for the global players. Making sure that their logo appears in every game of the 2006 World Cup is only one measure adidas is taking to stay competitive
in this dynamic and challenging industry. The following report is comparing the strategies of adidas
and Nike and explaining how they adapt to the industries requirements. Additionally, this report is
trying to answer the question how adidas can strengthen and improve its position in the sporting
goods industry.
1
http://www.manager-magazin.de/unternehmen/artikel/0,2828,379357,00.html
http://www.saar-echo.de/de/art.php?a=29269
3
http://www.manager-magazin.de/unternehmen/artikel/0,2828,383615,00.html
4
http://fifaworldcup.yahoo.com/06/de/o/faq.html (1 Mrd.)
2
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2.
The Sporting Goods Industry (vfo & nsc)
The two companies compared in this report are operating in the sporting goods industry. This means
they are producing, marketing, distributing and selling training shoes, sports equipment, sports apparel and accessories. Although the different competitors are facing various problems, the industry
is still a very dynamic and promising one. One reason for this assessment is the rising sales figures,
especially in America and Asia5. During the past decade, the industry has gone through many changes. The most significant driver is the rising importance of the sports-lifestyle segment. Approximately 80 percent of the articles sold by sporting goods companies are not used for training purposes but as comfortable leisurewear6 or to express a certain life-style. This shows that sports
equipment have become fashion items. Additionally, people care more about their body and health.
Therefore, sports and fitness have become an important aspect in their life. Consequently, there is a
rising demand for sports equipment. Another driver is the fierce competition within the industry.
Due to the great variety of different competitors, the customer can choose from a wide range of
products. This means that a permanent search for new products as well as flexibility is crucial to
success. However, the fierce competition can be a depressor as well. Emerging markets like China
or India with a relatively young population and increasing purchasing power can be a driver for
growth in the future. Those countries are also becoming even more attractive for cost-conscious
manufacturing because local governments have changed legislations and reduced trade barriers. The
necessity of constantly being innovative as well as a general progress in scientific research has accelerated the development of new technologies in the sporting goods industry, too.
On the other hand, there are also factors, which make the industry decline. First, the customer’s
behaviour as well as people’s life expectancy change. In industrial countries, life expectancy tends
to increase while birth rates decline. This development has to be considered because young people
are still a main target group for sporting and life-style goods. Secondly, maintaining a good image
5
http://www.faz.net/s/RubD16E1F55D21144C4AE3F9DDF52B6E1D9/Doc~
EC4AE7272834A4D1DBDCDD2D4586FE41E~ATpl~Ecommon~Scontent.html
6
http://www.faz.net/s/RubEC1ACFE1EE274C81BCD3621EF555C83C/Doc~
EC4AE7272834A4D1DBDCDD2D4586FE41E~ATpl~Ecommon~Scontent.html
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becomes more difficult due to rising transparency and faster access to information for stakeholders.
The result of a bad reputation can be boycott and decreasing sales figures. A third depressor is the
financial losses through the selling of cheaper counterfeits mainly produced in developing countries, where corresponding laws are missing.
The companies this report seeks to analyse are not only producing classic sporting goods. They are
active in various segments of the sporting good industry, which are even overlapping with the traditional textile industry today. Exhibit 1 is an example for the segmentation of the market, Nike and
adidas are operating in.
Exhibit 1 - Market Segmentation
price/
quality
high
Specialized
sport
brands,
medium
Luxury labels
Global players
Smaller global players
Trendy youth fashion brands
low
Super-/hypermarkets (non-food)
sports
street-wear/ life-style
fashion
usage
_________________________________________________________________________
Source: own research findings
Adidas and Nike belong to the strategic group of global players. They offer a wide range of products. Consequently, those two companies and their subsidiaries are operating in different segments.
They are facing many different competitors from other strategic groups, because their product
ranges are overlapping. Strategic groups consisting of potential competitors for large global players
are for example specialized sports brands, smaller global players, super – and hypermarkets, trendy
youth fashion brands and luxury labels. Specialized sport brands like Spalding and K2 do usually
sell a smaller range of high prized products and have an excellent reputation in their businesses.
Smaller global players like Puma are not too different from global players like Nike and adidas.
However, they do have a smaller product range, are operating in a smaller number of segments and
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can therefore concentrate much more on their core competencies and build a unique reputation in
their core business. Potential competitors in the low price segment are supermarkets and hypermarkets like Aldi, Lidl or Walmart. They do often sell so-called non-food products for very low prices.
Those offers can include products like training shoes or sports equipment, which adidas and Nike
are selling too. Trendy youth fashion brands like Cordon, Diesel and Only compete with the global
players in the segments of medium prized street-wear and fashion goods. Finally, there are luxury
labels like Prada or Gucci. While global players have moved into this segment with own products or
subsidiaries, e.g. Nike’s Cole Haan, luxury labels started to offer their own high priced sports collections. This market segmentation shows that global players have to compete in various segments
with very different requirements. In order to stay competitive, adidas and Nike always need to be
one-step ahead of their competition. Remaining successful in the sporting goods industry requires
the following set of resources and capabilities:
Exhibit 2 - General Value Creation Chain
KBFs
Brand
Technological Innovations
Design
KSFs
Successful marketing campaigns
Collaborations with famous
athletes and singers
Innovations
Collaborations with famous designers
Capabilities
Branding
Authentic Corporate Social
Responsibility
Efficient risk management
(especially: quality control and
prevent counterfeiting)
Efficient pipeline
management
Innovative and customer
appealing design
Resources
Financial resources
Qualified personnel
Intense market research
Financial resources
Qualified personnel
Intense market research
Own R&D centres
Financial resources
Qualified personnel
Intense market research
Own Design department
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3.
adidas (swe & mwi)
3.1
General Strategy Assessment (mwi)
Adidas’ ultimate strategic objective is to become the worldwide market leader in the sporting goods
industry. The corporation describes this goal in its 2004 annual report mission statement: „We strive
to be the global leader in the sporting goods industry with sports brands built on a passion for competition and a sporting lifestyle.” (adidas 2004, p.22). In other words, everything that the adidas
group is doing is aimed at replacing Nike as the global market leader in sporting goods. All decisions and actions, being taken by adidas, must positively contribute to the mid to long-term
achievement of this strategic goal. Adidas relies on five fundamental values to reach this goal: consumer focus, innovation and design leadership, social and environmental responsibility, competitiveness and extraordinary profitability7. The focus of the group’s current activities lies on substantial growth in North America and on the extension of its market leadership position in Europe8.
3.2
Resources (swe)
3.2.1 Financial Resources
Adidas steadily improves its financial situation. Their operating profit in 2004 amounted to € 580
million, an increase of 18%, compared to 2003 (adidas 2004, p.80). Adidas and TaylorMade-adidas
Golf augmented their net sales and their profit in the same period but Salomon performed poorly.
Surely, this was one of the reasons for selling it in 2005. Shareholders benefited from the firms
strong position, too. The dividend per share grew 30% from € 1 in 2003 to € 1.30 in 2004 (adidas
2004, p.2).
3.2.2 Technological Resources
The most important task concerning technological resources is to secure a full innovation pipeline
and launch new, innovative products in regular intervals. Adidas wants to launch one major technological innovation per year. In 2004, one major innovation was the adidas_1 intelligent running
shoe. It is able to adapt to its wearer while running by optimizing the cushioning level. A similar
7
8
www.adidas–group.com/en/overview/values/default.asp
adidas-Salomon Annual Report 2004, p.21
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approach is included in the new TaylorMade r7 quad driver that allows players to adjust launch
conditions to fit to their specific swing characteristics. This is realized by an additional weight,
which can be redistributed to produce different launch conditions in one driver (adidas 2004, p.17
ff).
3.2.3 Human Resources
As production is done by independent suppliers, adidas’ employees are not active in production
processes but mainly in the marketing, sales, administration and R&D section. Out of overall
17,023 employees, in 2004, 12% worked in the marketing section and only 6 % in R&D (adidas
2004, p. 86). Adidas’ employees have to be highly qualified and able to deal with and adjust to current trends and market changes. As adidas is a global player with subcontractors all over the world,
they also care for the employees of their numerous manufacturers. On reason is their will to be sensitive to the needs of all stakeholders and another one is their image. They have to protect it and
cannot accept bad press, e.g., about inhuman working conditions at supplier facilities. Therefore,
adidas set up their Standards of Engagement that outlines guidelines, which have to be respected by
its suppliers9. They include the prohibition of child labour and discrimination of any sort, the protection of minimum wages and the freedom of association. Furthermore, a hygienic and safe working environment has to be guaranteed10. Certainly, it does not suffice to only set up these guidelines;
they have to be controlled on a regular basis, too. Penalties have to be executed if misconduct exists. The accreditation of the program through the Fair Labour Association proves the credibility of
adidas’ measures11.
3.3
Capabilities (swe)
3.3.1 Branding
Adidas’ most important assets are its brands. Securing and boosting reputation and brand recognition are therefore a major formula for success. A selection of different capabilities is needed to secure a strong position of the brands in the marketplace. First, adidas stands for technological knowl9
http://www.adidas-group.com/en/sustainability/Overview/our_standards/default.asp
http://www.adidas-group.com/en/sustainability/Overview/our_standards/standards_of_engagement.asp
11
http://www.adidas-group.com/de/sustainability/archive/2005/fair_labor_association_akkreditiert_adidas_salomon.asp
10
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edge and expertise. Adidas protects its technological innovations; it holds about 700 patents and
similar industrial property rights worldwide – a proof of its technological strength12. The numerous
adidas trademarks underlie a high degree of protection, too. Second, the design department provides
new and exciting designs to keep up with the competition. This is secured through collaborations
with famous designers, e.g., Stella McCartney. Third, adidas focuses on the image of its brands and
builds connections to leading athletes and style icons, e.g., David Beckham or Missy Elliott (adidas
2004, p.18). Another important capability is successful marketing. Adequate to the different brands,
adidas also follows different individual marketing campaigns. For instance, the “Impossible is nothing” campaign for the adidas Sport Performance product range or “Respect ME” featuring Missy
Elliott for Sport Heritage and “What drives you?” for TaylorMade. “Impossible is nothing” stands
for the will of adidas and all athletes to surpass limits (adidas 2004, p.55 ff). It is their first worldwide brand advertising campaign, featuring present and past athletes from various fields, e.g., Muhammad and Laila Ali. Having started it in 2004, adidas kept the campaign and even widened it in
2005. “Respect ME” aims at boosting adidas’ urban street credibility and especially strengthen the
brand’s position among the new Hip Hop generation (adidas 2004, p. 64). The importance of marketing becomes clear when analysing the operating expenses. In 2004, with 878 million € out of a
2,478 million budget, over one third of the firms expenses consisted of the marketing working budget, while only 88 million € were spent for R&D (adidas 2004, p.86). Moreover, a clean image is
crucial to adidas, especially as most of their subcontractors are situated in low-wage countries. The
consumers are more and more aware of what the firms are doing and are able to make use of their
freedom of choice if they do not agree to certain practices. Adidas has to be aware of all activities
relating to the firm, also the ones located outside the company. If adidas wants to be seen as a
global player with authentic corporate responsibility, it has to make sure that its business partners
adhere to legal and social standards, too.
12
http://www.press.adidas.com/en/Desktopdefault.aspx/tabid-28/
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3.3.2 Efficient Risk Management
Adidas faces external risks, such as macroeconomic and sector risks as well as internal risks, such
as value chain and operational risks. The highly competitive nature of the sporting goods industry
and the high level of market saturation are significant external risks. Adidas’ response is achieving
further growth by expanding its market share, acquisitions and by maintaining the mix of investments in advertising, sponsorships and R&D (adidas 2004, p.103). Additionally, the adequate management of the diverse suppliers from mainly Asian countries has to be assured to protect the products quality and price. The high expenses for marketing represent an internal risk for the firm’s financial health. Therefore, adidas conducts intense market research, includes performance incentives
in its contracts and reserves the right to terminate contracts for instance in case of drug abuse (adidas 2004, p.104). Widespread are also the risks of lost turnover due to piracy and trademark counterfeiting, as well as patent infringements. Furthermore, preventing the loss of intellectual property
that has been transferred to subcontractors is very important. Adidas states that classical counterfeiting of adidas brands has an annual volume of 10% of the overall sales. The group has a separate
department that is solely dedicated to putting an end to these illegal actions (adidas 2004, p.105).
3.3
Differentiation and Cost Consciousness (mwi)
Image, brand, design and technology are adidas’ major sources of differentiation. The firm wants to
create the impression, that its products enable the individual to live up to previously unknown potential. Major advertising campaigns and extensive sponsoring of top athletes support this notion
(adidas 2004, p.24). The brands are the company’s most important assets. Many no name products
serve the very same purpose that adidas equipment does, but the logo makes the difference. Adidas
also differentiates on new, exciting designs because its customers want to express their individuality
through their sports wear. Innovative, technological advancements are often developed in close
partnership with professional athletes. Their valuable input helps adidas to create equipment that
distinguishes from other products through superior performance. Adidas’ main source of cost effi-
-8-
ciency is the offshore outsourcing of production processes. The most part of manufacturing takes
place in Asia, where input factor costs such as labour or raw material costs are particularly low.
Exhibit 3 - adidas Suppliers by Region
Shoes
Europe;
4%
Apparel
America;
2%
Europe;
17%
America;
6%
Asia;
94%
Asia;
77%
_____________________________________
Adopted from: adidas-Salomon Annual Report 2004, p.32
3.4
Value System (mwi & swe)
Adidas is not fully vertically integrated. R&D and design, procurement and marketing are the business processes that the company focuses on. Production is almost entirely completed by third party
vendors13. Distribution and retailing used to be done through business partners only but has recently
become a field where adidas, following the strategy of its competitors, engages, too.
13
Apart from four self-owned production facilities (adidas social and environmental report 2004, p.11)
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Exhibit 4 - adidas Value System
adidas
Research &
Development
Design
adidas
partners
adidas
SCM
Procurement
Production
Marketing
partners/adidas
Distribution
Retailing
Consumer
_________________________________________________________________________
Source: own research findings
R&D, together with design, is done in-house because these activities are some of adidas’ key capabilities that provide the firm with a competitive advantage. For the production process, adidas relies
on close and long-term strategic partnerships with high quality suppliers, mostly located in Asia
(Exhibit 3). Each supplier receives guidelines to ensure the high quality of the products and is controlled and inspected, too. Once the product development has been completed, the actual large scale
manufacturing of sports shoes and apparel represents a standard process. Given the comparative
cost advantages of Asian manufacturers, production outsourcing is therefore a viable means for adidas to attain cost structure efficiency. Consequently, the wholly adidas owned aSIS Ltd., responsible for worldwide procurement and SCM of adidas supplies, has been off shored to Hong Kong. Its
geographical proximity ensures the fostering of good relationships with the regional adidas suppliers14. Adidas seeks to maintain close strategic partnerships with its suppliers, because high quality
standards, high flexibility and short lead times need to be kept. Short lead times are crucial to respond quickly to current market trends and to changing demand conditions. Product distribution is
also coordinated by adidas’ sourcing operation, whereas retailing is mainly the responsibility of a
vast network of independent expert sport stores, purchasing associations15, mail order deliverers and
factory outlets (Bieber 2001, p.67). To intensify favourable relations to its retailers, adidas has begun to conduct the repacking steps in the factories before shipping the products. Hitherto this step
had been assigned to the retailers (adidas 2004, p.32 ff). However, adidas has also entered own re14
15
adidas staff are often based at the supplier’s production facility to maintain a close partnership (adidas 2005, p.32)
Such as Sport2000 or Intersport in Germany (Bieber 2001, p.67)
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tailing recently because this allows for increased control over the way the products are being presented to customers. Exclusive and unique product presentation is an element of strengthening
brand reputation and the initiative to set up own stores is therefore in line with the group’s image
building strategy. In 2004, 11% of adidas brand sales were generated through adidas’ own retail
activities. The group currently operates 235 concept stores and 206 factory outlet stores worldwide.
The, during 2004 and 2005, substantially risen personnel figures at adidas shops indicate the firm’s
strong commitment to further pursue its own retailing activities (adidas 2005, p.86). However, not
every customer has the chance to shop at a local adidas store and e-commerce is becoming more
and more popular. Sales at the adidas online shop16 are increasing steadily, especially in North
America. Exploiting a variety of available sales channels in order to maximize revenues is one of
the group’s key capabilities. Marketing is also performed by adidas because it represents the means
to maintain and strengthen image and brand - the firm’s major sources of differentiation17.
3.5
Product - Market Strategies (mwi)
3.5.1 Product Portfolio
Adidas’ product portfolio currently consists of four main product divisions, as shown in Exhibit 5.
Exhibit 5 - adidas Product Portfolio
adidas Sport Performance
Performance
Athletes
adidas Sport
Heritage
adidas Sport Style
Sports-Lifestyle
Consumers
Fashion
Consumers
TaylorMadeadidas Golf
Golf Players
_____________________________________
Adopted from: adidas-Salomon Annual Report 2004, p.24
The Sport Performance division accounts for 82% of total adidas brand sales and is the backbone of
the group’s product portfolio. The five main categories in this division are running, football, basketball, tennis and training. This division aims at performance athletes worldwide and features
technological innovation as well as commitment to performance. Continued product development
16
17
www.adidas.com
Marketing budget accounted for 44 percent of overall operating expenses in 2004 (adidas 2005, p.86)
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will assist adidas to secure its current number 1 or number 2 position in the market segments covered by this division. Recent innovations introduced to this category include the acclaimed performance range for women by Stella Mc Cartney and the adidas_1 intelligent sneaker. The Sport Heritage division was only set up in 2000, but already stands for 18% of total adidas brand sales. It aims
at lifestyle customers, who seek to purchase trend-setting street wear and authentic sports clothes.
This division is intended to help adidas benefit from a growing sports lifestyle market. The Sport
Style division exists since 2002. It is meant to attract cosmopolitan customers, looking for exclusive, style-leading sportswear that meets the highest quality standards. This division attempts to
capitalize on the global trend of fashion-sports clothing. The TaylorMade-adidas Golf division is an
industry leader in the provision of golf equipment such as hardware, metal-woods, golf-footwear
and apparel. It thrives on innovative products such as the r7 quad driver and contributes strongly to
overall sales figures. New developments for this product range will strengthen the current position
and even increase profitability in this premium market segment.
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3.5.2 Product-Market Strategy Analysis
Exhibit 6 summarises adidas’ current product-market strategy, explained in the following chapter.
Exhibit 6 - adidas Product-Market Strategy
New countries:
new
Horizontal diversification:
• Asian markets
• Reebok
• Latin America
• Maxfli
Market
Market penetration:
existing
Product development:
• Sport Performance
• Sport Style division
• Sport Heritage
• Porsche Design range
• Sport Performance
Withdrawal:
• Salomon
existing
by Stella Mc Cartney
Product
new
_________________________________________________________________________
Adopted from: Prof. Lewis, Lecture 4
Adidas has experienced strong growth18 in Asia and Latin America lately and is determined to further increasing sales of its existing shoe and apparel product range in these relatively young but
rapidly developing markets. To support its ambitious sales objectives, the group has introduced two
programs named “Vision Asia” and “Latin Conquest” (adidas 2005, p.118). Both seek to push
product sales through region specific projects such as the extensive sponsoring of the 2008 Beijing
Olympics in China19. North America stands for 50 percent of worldwide turnover in sporting goods
and is adidas’ prime strategic target. The group used to be in the top spot there until 1980, when
Nike’s turnover in the US first exceeded adidas’ (Bieber 2001, p.35). All attempts to regain the
market leadership position through organic growth have since failed. In summer 2005, adidas therefore decided to diversify horizontally and acquired Reebok - the third largest global player in the
18
19
In 2004, turnover augmented by 21 percent in Asia and 34 percent in Latin America (adidas 2005, p.96)
The group expects turnover in China to grow from € 100 million in 2004 to € 1 billion in 2010 (adidas 2005, p.111)
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industry (Exhibit 8). Reebok generates 58 percent of its sales in North America20. The deal thus
gives adidas the opportunity to significantly extending its market share in this fiercely competed for
market from hitherto nine percent to roughly 22 percent in the future. Apart from that, adidas also
anticipates benefiting from a broader product spectrum, larger economies of scale in global sourcing, joined R&D resources and general operation synergies resulting in € 125 million annual cost
savings once the transaction and integration have been completed21. However, the Reebok acquisition is not free of risk. The initial price of € 3.1 billion represents a heavyweight financial burden
for the adidas group that will limit its options for other strategic projects in the mid-term. Successful
synergies are also not guaranteed and there is a possible danger of product or market share cannibalization. Superior strategy execution is now crucial for the success of adidas’ move to take over
Reebok. The group has proven the capability to do so when it acquired the Maxfli golf brand from
the Dunlop-Slazenger Group in early 2003 - a step that helped the company’s market share in golf
products and accessories take off from a previous one percent to now 16 percent (Datamonitor
2005, p.9). However, adidas has also exhibited weaknesses when carrying out strategies. The acquisition of the French ski equipment manufacturer Salomon in 1997 turned out to be an inefficient
effort to diversify and expand. Since 2001, Salomon suffers from declining profits due to a general
decline in winter sports equipment sales and adidas has not managed to reverse this trend despite
several initiatives to innovate Salomon’s product range. Consequently, the group has decided to
withdraw from the winter sports business and has sold Salomon in 2005. Although the financial loss
from the transaction will be substantial22, adidas is now able to fully concentrating on its core business activities in the fields of shoes, apparel and golf. The Sport Performance and Sport Heritage
division comprise the group’s core products and are the major sources of revenue. In order to maintain high sales figures and secure growth potential for both divisions, adidas applies a market penetration strategy that is driven by innovation and strong brand positioning. With its Sport Style division, the group has entered new territory and tries to capitalize on the global trend for exclusive,
20
www.adidas-group.com/en/investor/_downloads/Reebok/adidas-Reebok%20Investor%20Presentation.ppt , p.9
www.adidas-group.com/en/investor/_downloads/Reebok/adidas-Reebok%20Investor%20Presentation.ppt , p.21
22
adidas purchased Salomon in 1997 for € 1.2 billion. It sold Salomon this year for € 500 million.
21
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style-leading, active sports wear, which opens new opportunities for growth in saturated markets.
Strategic partnerships with Porsche Design, who will develop premium sports utilities in cooperation with adidas from 2007, and Stella Mc Cartney, who has designed a cutting-edge functional
performance range for women, confirm that adidas is committed to establish its brand in the quickly
evolving market segment for exclusive sports goods.
4.
Nike (vfo & nsc)
4.1
Resources (vfo)
4.1.1 Financial Resources
Nike’s financial situation guarantees them to extend its global market position. In December 1980,
it went public and since then it is listed on the New York stock exchange.23 In 2004, its turnover
and profit increased with two digits.24 In the first quarter of the financial year 2005/2006, Nike’s
profit increased from $ 326.8 million to $ 432.3 million. Compared to last year, this is an increase
of 8%.25 Nike has sufficient capital to finance its operations. The company merged with important
companies, like Cole Haan, Bauer Nike Hockey, Hurley International and Converse.26 These companies enable Nike to offer a wide range of products and increase its profit.
4.1.2 Technological Resources
When entering a business, expertise and knowledge belong to the most important aspects. Nike’s
technology is adapted to the insights about the customers. The consumers are offered both functional and comfortable products. Concerning footwear, there are different technological innovations: Nike Cushioning, Nike Air, Zoom Air and Nike Shox. These technologies offer the customer
a more comfortable feeling and an improved protection from impact. The company’s aim is to increase the athlete’s performance.27
23
http://www.nike.com/nikebiz/nikebiz.jhtml?page=3&item=facts
http://www.welt.de/data/2004/06/26/296662.html
25
http://investments.citibank.de/germany/research/detail.html?pageID=Aktien_Research&ID=US6541061031,61&
date=1128067724&navi=3,5,0
26
http://www.nike.com/nikebiz/nikebiz.jhtml?page=3
27
http://www.nike.com/nikebiz/nikebiz.jhtml?page=6&item=footwear
24
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Beside the footwear, there are also technological developments in apparel and equipment. The customer gets the possibility to do sports during any weather conditions. The garments are not only
good-looking but also weatherproof. Double-brushed microfiber fleece protects against coldness,
wind and wetness. Water-resistant Pro garments absorb perspiration as well as keeping the athlete
warm and protect him/her against snow or rain. Nike’s idea is to create multifunctional garments.28
Product technology can also be found in the equipment range of Nike. The eyewear consists of unparalleled optical clarity with wrap-around curved lenses. It offers an optimal protection against the
sun. Nike Timewear includes the innovative technology Circadium. The display offers an improved
readability. All these products are a result of high knowledge and expertise. 29
4.1.3 Human Resources
The Global Alliance is one of the most important partners of the company. It helps to coach managers as well as workers. The workers get the possibility to talk about their problems and feelings. In
2001-2002, members of the alliance interviewed a group of workers in Indonesia. Relying on such
surveys, the Nike compliance team can take care of physical or psychological problems. The consequence of such care is that the employees become more motivated and feel treated respectfully. Furthermore, the Global Alliance coached about 25,000 managers and workers in China, India, Indonesia, Thailand and Vietnam.30 Nike’s workforce is extremely diverse. Therefore, the company provides diversity training for their managers. Special one-day workshops shall improve the manager’s
skills and qualifications concerning different cultures and traditions. Since the beginning of such
training programs in 2003, about 700 managers have participated.31 Human resources, like the training of the personnel, form a basis for capabilities. They are essential for any successful business.
28
http://www.nike.com/nikebiz/nikebiz.jhtml?page=6&item=apparel
http://www.nike.com/nikebiz/nikebiz.jhtml?page=6&item=equipment
30
http://www.nike.com/nikebiz/nikebiz.jhtml?page=25&cat=monitoring&subcat=global
31
http://www.nike.com/nikebiz/nikebiz.jhtml?page=28&cat=training
29
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4.2
Capabilities (vfo)
4.2.1 Building Reputation
To be successful in the sporting goods business, brand recognition and a good customer relationship
are important factors. The customers have to feel save and satisfied when using the products. A
good reputation can depend on quality, reliability or an efficient advertisement. Nike concentrates
strongly on its marketing. To the most important promotion activities belong advertisements with
the golfer Tiger Woods, the basketball player LeBron James and the racing cyclist Lance Armstrong.32 Nike also publishes commercials with football stars like Ronaldo or Totti. In the centre of
its advertisement stands the attention for the brand, more precisely, the logo called Swoosh. The
permanent appearance of the Nike symbol results in a good brand recognition. Moreover, the company gives the customer a meaning for the use of Nike articles:
“JUST DO IT” – Nike developed an everyday life philosophy which shall activate a feeling of on
one’s own initiative.33
In 2005, Nike fights against racism during football matches. In a special campaign, the firm promotes more tolerance and acceptance in European football stadiums with the motto: “Stand up,
Speak up”.34 Campaigns like this improve the company’s image and arouse a feeling of trust. On
the other hand, Nike has also to deal with rumours damaging the company’s image. In 2004, an email went around with a shocking Nike advertisement. It showed the aftermath of an apparent suicide bombing in Israel. A bloody shoe lies in the foreground. The text, appearing next to Nike's
Swoosh reads, “You may not survive the blast. But your shoes will.35” That forgery resulted in big
tumults. On its web site, Nike states that it is not responsible for such an advertisement.36
4.2.2 Research and Development
Research & development are important conditions to provide innovation and new technology. The
majority of Nike’s scientists are former athletes. They can think and feel like the customers and
32
http://de.wikipedia.org/wiki/Nike_%28Firma%29
http://science.orf.at/science/news/54209
34
http://de.wikipedia.org/wiki/Nike_%28Firma%29
35
http://www.adl.org/internet/nike.asp
36
http://www.nike.com/nikebiz/nikebiz.jhtml?page=58
33
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identify their needs. Most of the researchers used to play semi-professional rugby, cricket, basketball, hockey or they ran marathons regularly. They have enough background information to develop
new and more efficient products.37 The researchers have excellent skills and qualifications because
all of them have a master’s degree and the majority has their doctorates in biomechanics or physiology. The employees come from different fields, e.g., one researcher worked together with NASA
astronauts before.38
4.2.3 Design
Although Nike’s priority is the functionality of the products, design does also play an important role
and is another effective capability. Nike products are conspicuous and they have a special look, e.g.,
every shoe bears the Nike logo. The Swoosh is characterized as “Simple.Fluid.Fast.”39 It is recognized everywhere and the people associate it with Nike. Moreover, the firm has a special offer: the
web site NIKEiD.com enables the customers to create their individual and unique shoe design.40
4.2.4 Efficient Risk Management
To avoid big financial losses or a bad reputation Nike has an efficient risk management. The company does not merge with its subcontractors, for example in Indonesia or China. That means, Nike
can stop the collaboration with them at any time. The company cannot be held responsible for the
working conditions or working processes in these firms and cannot call account for any problems
there. With such a strategy, Nike can protect itself against an ineffective production. If Nike is unsatisfied with the manufacturing it can change it subcontractors immediately. That helps the firm to
remain flexible and independent.
37
http://www.nike.com/nikebiz/nikebiz.jhtml?page=2&item=purpose
http://www.nike.com/nikebiz/nikebiz.jhtml?page=2&item=purpose
39
http://www.nike.com/nikebiz/nikebiz.jhtml?page=5&item=origin
40
http://www.nike.com/nikebiz/nikebiz.jhtml?page=2&item=id2005
38
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4.3
Customers (vfo)
Nike’s aim is to provide products that fill everybody with enthusiasm. With the slogan “If you have
a body, you are an athlete”41 the company tries to convince every potential consumer. Their products are created for every kind of customer. Professional athletes as well business people, who like
running in their free time, are seen as Nike customers. Nike’s product range serves all types of customers: golfer, hockey players, football players, skiers, runner, etc. Sporty footwear, clothes,
equipment and accessories as well as luxury shoes, accessories, coats or handbags are offered to the
customers. The company also takes into consideration the lifestyle of the youth.42 Overall, Nike
stands for performance, fashion and lifestyle.
4.4
Differentiation and Cost Consciousness (nsc)
A closer look on price, quality, design and distribution of Nike products suggests the conclusion
that Nike is following a differentiation strategy. Nike is offering a wide range of products all over
the world, which means that the company operates within a broad competitive scope. The company
is gaining competitive advantage through various sources of differentiation. First, by trying to maintain excellent customer relations. Using diverse ways of distribution like outlet stores, authorized
retailers and the Internet, Nike makes sure that its products are available for everyone. The company emphasizes that the customer is in the middle of their attention and the purpose of their products is to support the customer. Therefore, Nike claims to be dedicated to developing better and
more practical technologies and products in order to meet the customer’s requirements. The best
example for the fact that Nike is really offering customized products is the existence of its special
website: NIKEiD.com. On this page, the customer can choose colour and features of the product he
or she wants to purchase. He or she can order the product online and receives his individual product
within two or three weeks. Additionally, the customer gets first hand information on the company
and all of the Nike products online. The technology of certain products is also explained online.
This level of transparency contributes to better customer relationship, too.
41
42
http://www.nike.com/nikebiz/nikebiz.jhtml?page=4
http://www.nike.com/nikebiz/news/pressrelease.jhtml?year=2005&month=11&letter=c
- 19 -
A second source of differentiation is the product itself. Nike is known nearly everywhere in the
world and the brand is associated with high quality training shoes and sports equipment. The company supports this image through catchy advertising campaigns. Furthermore, Nike has equipped
successful soccer and basketball teams43. However, professional sports are not the only market
segments where Nike has a good reputation. They are also established in fashion and street-wear. In
those different segments, Nike has been able to create an image of selling trendy, high quality products, which makes them stand up from the competition. The design of Nike products is a further
source of differentiation. The company is also counting on new innovative technology in order to
make the products better and to stand up from the competition. However, this does not mean that
Nike is not trying to safe costs. In fact, Nike’s business model, which is managing a network of
subcontractors and partners, allows the company to safe money and shift financial risk. Nike is also
known for producing at low cost locations like Indonesia and China. Nevertheless, Nike’s strategy
is not to be a cost leader but to deliver products that match the customer’s requirements and to fulfil
their expectations.
4.5
Value System (nsc)
Nike is a good example for a virtual organization, which is the opposite of a fully vertically integrated organization. This means, that Nike, Inc. is mainly considered with analyzing their current
situation and possible further steps, making the related strategic decisions and coordinating the implementation of those decisions. The company’s main achievement is the effective management of a
global network of suppliers and subcontractors.
43
http://www.nike.com/nikebiz/nikebiz.jhtml?page=2
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Exhibit 7 - Nike Value System
Nike
Research &
Development
Design
Nike
partners/Nike
partners
SCM
Procurement
Production
Marketing
partners/Nike
Distribution
Retailing
Consumer
_________________________________________________________________________
Source: own research findings
One of Nike’s key success factors is the advanced technology and the resulting quality and functionality of its products. Consequently, research and development is an important source of competitive advantage for Nike. Therefore, the company does most of its research and development
work in-house. This decision seems quite reasonable. It allows Nike to keep new results or products
secret, to control all research and development activities and to react very fast if the scientists need
new or different technology. Other product development units like the design department and the
material and mechanical testing lab are also situated at Nike’s headquarters in Oregon44. This arrangement makes communication between those related departments easier and allows close and
effective cooperation. However, Nike has partnerships with other companies for the development of
a small percentage of its products too.
Nike products are manufactured by 800 independent subcontractors in about 50 different countries.45 Most manufacturing facilities are located in Asia and South America and only 14% of Nike
apparel is made in the US.46 Now China, Indonesia and Vietnam are the most attractive countries
for outsourcing manufacturing activities. Outsourcing the manufacturing process allows Nike to
save costs and pass risks on to their subcontractors.
Like research and development and design, marketing is one of Nike’s core competencies. The
company relies very much on advertisement and promoting their brand. Nike spends a relatively
44
http://www.nike.com/nikebiz/nikebiz.jhtml?page=2&item=purpose
http://www.cnsnews.com/facts/2003/facts20030423.asp
46
http://www.nike.com/nikebiz/nikebiz.jhtml?page=3&item=facts
45
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high percentage of its annual revenue for marketing. As marketing is so crucial for the company’s
success, Nike has its own department for strategic marketing. To implement marketing strategies,
Nike hires advertising agencies and other subcontractors, too.47
Nike products are shipped either directly to a customer (like a wholesaler) or to one of Nike’s distribution centres. Nike has separate distribution centres in all four regions, which includes the U.S.
Region, the Europe, Middle East, & Africa Region (EMEA), the Asia Pacific Region and the Americas Region. Nike’s subsidiaries, like Converse, have separate distribution centres. However, to
transport Nike products from manufacturing facilities to customers or distribution centres, the company employs many different independent logistics providers. To manage this network, it is necessary that information from customers or the distribution centres reach Nike quickly in order to allow
for example adjustment in production capacity. Therefore, Nike decided to do without an external
logistics management and to do the distribution management and planning in-house.48
Nike uses various channels to sell its products worldwide. First, there is Nike’s own retail system
including Niketowns, Nike Factory stores and NIKEgoddess stores. Besides that, Nike does also
have its own online store, niketown.com.49
These Nike stores are used to promote the brand and only responsible for a small percentage of
Nike’s sales. Nike distributes its products to different types of retail stores all over the world.
Among them are not only specialized shops for sports equipment but also department stores and
companies selling Nike products online.
4.6
Product - Market Strategies (nsc)
Taking the Ansoff-Matrix as a basis for analysing Nike’s product-market strategies there are four
major strategies: market development, market penetration, product development and diversification.
The company has made various efforts in market development by moving to different countries.
Meanwhile, Nike is known and present in nearly every country of the world. A further option for
47
http://www.fxguide.com/press-106.html
http://www.inboundlogistics.com/articles/features/0704_feature01.shtml+http://www.nike.com/nikebiz/nikebiz.jhtml
?page=3&item=facts
49
https://gsbapps.stanford.edu/cases/documents/EC9B.pdf
48
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market development is to conquer new segments through the acquisition of different companies or
brands. Nike has applied this strategy very successfully. In 1988, Nike acquired for example Cole
Haan to move into the segment of luxury and fashion articles. Another example for the successful
extension of Nike’s portfolio was the creation of the Exeter Brand Group. This wholly owned subsidiary includes brands offering cheaper sport shoes and apparel and allowed the company to enter
medium to low price segments.50
Nike has penetrated the market by constantly expanding its retail network and doing very effective
advertising. The most common example for the application of effective advertising is Nike’s “Just
Do It” campaign launched in 1988. It allowed the company to “increase its share of the domestic
sport-shoe business from 18 percent to 43 percent”, and the worldwide sales from $877 million to
$9.2 billion between 1988 and 1998.51 However, market penetration does not only mean to expand
but can also include retreating from unattractive areas. A good example for consolidation is the
merger of Nike’s and Bauer’s hockey product lines. Bauer, already owned by Nike, was producing
and selling similar products like Nike’s own hockey section. Nike optimized the two hockey product lines by discontinuing products, which were not selling well. Furthermore, a new brand: “NikeBauer” was created for the improved hockey product line. This allowed Nike to save resources and
use capabilities more efficiently.52 The third product-market strategy is product development.
Nike’s abilities in this area have contributed a lot to Nike’s success. It was already mentioned earlier that especially in developing new technology Nike has a lot of experience.
Besides these product-market-strategies, the company has done related, mainly horizontal diversification, too. Nike has for example used its expertise in material development or selection as well as
its knowledge about the sports industry to create contact lenses especially for sportsmen and
sportswomen. Another example would be Nike’s diversification into the fashion business.
50
http://www.nike.com/nikebiz/media/nike_timeline/nike_timeline.pdf
http://www.cfar.com/Documents/nikecmp.pdf
52
www.sgma.com/sportsedge/
51
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5.
Compare and Contrast (swe)
After looking closer at adidas and Nike, it becomes clear that the two companies possess numerous
similarities. Both try to win over customers and secure their loyalty to the brand by state-of-the-art
technology, modern and appealing design and impressive advertisement. This is realised through an
efficient use of their resources and capabilities.
Considering the value system, adidas and Nike rely on numerous subcontractors, e.g., in production.
Both have to assure quality of their products and good working conditions for the employees of
their subcontractors, otherwise their image could be harmed. Additionally, counterfeiting is a real
threat to their sales figures and should be antagonised. One has seen the similarities in resources,
capabilities and the value system of the two companies, therefore their most important asset are still
their brands.
Besides the brand, the mission statement of a company contributes a lot to its image. Nike and adidas are aware of this fact and do have a very strong mission statement. Interestingly enough, although the two companies have a lot in common their mission statements could not be more different. Adidas’s mission statement „to be the global leader in the sporting goods industry” puts the
company itself and its ambitious goals in the centre of attention (adidas 2004, p.22). This mission
statement defines a clear economic goal and matches adidas’ aggressive strategic actions. Furthermore, it underlines that the commitment of everyone involved in the companies operations knows
no bounds and that the customer can expect the best from adidas’ products. Nike’s mission statement: “To bring inspiration and innovation to every athlete in the world” and the definition “If you
have a body, you are an athlete” belonging to the mission, has a different content. It focuses on the
customer and states that Nike’s primary aim is to help the customer to achieve his or her goals.
This shows that companies try to build a unique image and exceed the competition. Whereas Nike
is active in basketball on the US-market and appeals to urban kids, adidas still has a less fashionoriented image and is active in European team sports like soccer, but also track and field. By merging with Reebok, adidas has strengthened its position on the US market, since Reebok is seen as
- 24 -
‘trendy’ among the American kids and engages in the NFL and NBA. Adidas leads the European
sports footwear market, but has a weak position on the US-market, with only 8.9% market share.
Even together with Reebok’s 12%, they are no threat for Nike and its lion share of 36%.53 On the
worldwide sneaker market, adidas (together with Reebok) gets closer to Nike: with 25% in comparison to Nike’s 40%.54
As already stated, the main aim of adidas is to become the market leader in the sports good industry.
The acquisition of Reebok seems to be a step in the right direction, if it can be completed successfully. Nike, in contrast, tries to maintain and strengthen its position as current market leader. It concentrates mainly on organic growth and acquires solely small enterprises, as Converse for example.
Adidas has proven in the past that its expansion strategy is much more aggressive and aims at larger
corporations. Therein lies a risk too, as the failed overtake of Salomon proves. One has to consider
all opportunities and risks carefully before acquiring another company, as financial risks but also
risks of product cannibalisation are present. One can observe that the product portfolio of Nike and
Reebok is quite similar, whereas adidas’ is different.
Therefore, adidas tries to strengthen its position in segments dominated by Nike and should clearly
distinguish between adidas and Reebok products in order to avoid product cannibalisation.
6.
Strategy Outlook (mwi)
With the acquisition of Reebok, adidas has made a significant step forward towards reaching its
objective to become the worldwide market leader in the sporting goods industry. The challenge for
the coming two to three years will be to focus on completing the transaction, integrating Reebok
into the group and achieving the anticipated economies of scope and scale. Value will only be created if adidas manages to position and market the two brands in a way that allows for benefiting
from complementary strengths while keeping product overlaps to a minimum. However, even
though the Reebok deal implies opportunities for over proportionate future growth, it is not certain
that this will suffice to take the lead. If the recent acquisition turns out to be a success and the em53
54
http://blogs.guardian.co.uk/news/archives/2005/08/03/adidas_takes_a_run_at_nike.html
http://www.boston.com/business/articles/2005/08/04/shoemakers_to_make_run_at_nike/
- 25 -
ployed financial resources can be recovered, adidas might therefore want to consider purchasing yet
another global player of the industry. A potential candidate for a merger or an acquisition is Puma
who, in the past decade, has developed into a pure lifestyle sports products brand55. Its portfolio of
shoes and apparel represents a strong complement to adidas’ Sport Heritage division. Puma has also
exhibited superior skills in discovering new sports lifestyle trends and in reacting to them with the
creation of appealing products, while adidas’ growth in this market segment has been relatively
humble56. An acquisition would permit adidas to merge its Sport Heritage division with Puma, bundle existing resources and capabilities and thus leverage product development, sales and operating
efficiencies. The resulting adidas-Reebok-Puma group would have a leading position in Europe, a
strong basis in North America and a firm grip on the advancing sports lifestyle market. Let alone
the fact that, by purchasing the, according to 2004 revenues in US $, global number four - Puma,
adidas could attain its long term strategic objective and advance to the worldwide market leader of
its industry (Exhibit 8). However, given the current financial constraints imposed by the Reebok
deal, the group has to postpone any further strategic acquisitions for the coming two to three years.
This might be too late though – the danger of a Puma take over by Nike is not to be underestimated.
The world’s number one possesses the required financial resources and Puma would fit perfectly
into Nike’s product portfolio, since it could significantly amplify the firm’s efforts to grow in the
sports lifestyle market57.
Exhibit 8 - Competitor Ranking by Annual Sales
Company
Nike
Net Operating Revenues 2004
Currency
in US $58
12.253.000.000 USD
12.253.000.000
adidas
6.478.000.000 Euro
8.032.720.000
Reebok
3.785.284.000 USD
3.785.284.000
Puma
1.530.000.000 Euro
1.897.200.000
Asics
1.325.000.000 USD
1.325.000.000
Amer
1.059.000.000 Euro
1.313.160.000
_________________________________________________________________________
Source:
2004 annual reports of the different companies
55
As Puma’s mission underlines: http://about.puma.com/puma.jsp?type=company&parent=18&id=6&lang=eng
56
While the sports lifestyle brand Puma grew by 21% in 2004 (Puma 2004, p.13), adidas’ sports lifestyle division
Sports Heritage only grew by 11% during the same period (adidas 2004, p. 95)
57
http://www.manager-magazin.de/unternehmen/artikel/0,2828,368303,00.html
58
Currency conversion is based on the 2004 average US $/€ exchange rate of 1.24/1 as provided by the European Cen
tral Bank on: http://www.ecb.int/stats/services/ebi/html/index.en.html
- 26 -
Another strategic option for adidas, which does not involve acquiring a competitor and could serve
as a future basis for organic growth, is diversification into previously not covered or brand new
market segments. Taking into account the aging societies in Western Europe and North America,
adidas could carve out a completely new market segment that specifically aims at the needs and
wants of active seniors. Sample products could include apparel tailored to the differing size of seniors, extra protective utilities like ankle-protecting shoes or accessories for types of sports preferred
by seniors, e.g. Nordic Walking sticks or swimming equipment.
A market that has not been covered by adidas so far is the market for skate shoes, garments and
accessories. The group could use its existing resources and capabilities in the field of sneaker production in order to enter the skate shoe market59. Moreover, key buying factors in this segment are
often image and brand - an opportunity for adidas to capitalize on its key capabilities, image building and branding. Benefiting from its expertise in promoting products through sponsorship of exceptional athletes, the group could team up with a skate celebrity, e.g. Tony Hawk, and thus successfully penetrate the market. Finally yet importantly, the fact that Nike has recently purchased the
small skater label Converse suggests that this could be an attractive segment for adidas, too60.
59
It is recommended to diversify into skate shoes first, since commonalities with existing product range are largest
there, i.e. it would be unadvisable to start producing decks or trucks without having any experience with that.
60
Converse has been the first Nike acquisition ever and the aspect that the firm committed itself to this move indicates
that this market segment bears a certain attractiveness to the likes of adidas and Nike.
- 27 -
Abbreviations
FIFA
Fédération Internationale de Football Association
KBF
Key Buying Factor
KSF
Key Success Factor
NASA
National Aeronautics and Space Administration
NBA
National Basketball Association
NFL
National Football League
R&D
Research & Development
SCM
Supply Chain Management
- IV -
References and Bibliography
adidas-Salomon (2004), Annual Report 2004, Herzogenaurach 2004, adidas-Salomon AG.
Amer Sports Group (2004), Annual Report 2004, Helsinki 2004, Amer Sports Group.
Asics (2004), Annual Report 2004, Kobe 2004, Asics Corporation.
Bieber, Christoph (2001), Sneaker Story, 2. Auflage, Frankfurt am Main 2000, Fischer Taschenbuch Verlag GmbH.
Datamonitor plc (April 2005), Adidas-Salomon AG – Company Profile, Frankfurt am Main 2005,
Datamonitor Europe.
Nike (2004), Annual Report 2004, Beaverton 2004, Nike Inc..
Puma (2004), Annual Report 2004, Herzogenaurach 2004, Puma AG.
Reebok (2004), Annual Report 2004, Canton 2004, Reebok International Ltd.
adidas-Salomon AG, adidas and the adidas logos are registered trademarks of the adidas Group.
Nike and the Swoosh are trademarks of Nike Inc.
The websites, appearing in the footnotes have last been checked on 8 March 2006.
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