Adidas Business Description - Case Study Example

Case Study-ADIDAS of Summary Adidas, a multinational company was set up based on the passion for shoes. The founder, Adolf Dassler started it as small venture which later went on to be Germany’s biggest sports clothing, apparel and footwear manufacturing company and the second ranked in the world. Adidas has a multi-brand structure and the different subsidiaries take care of the different segments of their product designing, manufacturing and selling. While Reebok takes care of the women fitness products, Adidas AG looks after technologically advanced sportswear. TaylorMade however is the world leader in metalwood golf clubs. The mission and vision of this company is very clear – to thrive to be the global leader and delivering optimum consumer satisfaction. The company had adopted various business strategies in order to increase their market share. They had made tie-ups with various international sporting events and got their products advertised by some very famous and well-established names from the sporting world. The strate A SWOT analysis has been made of the company profile in order to get a better analysis of the same. Based on the analysis, few strategy recommendations have been suggested that can help increase the market share of the company in the future. Company Origin Driven by the idea of making durable shoes for athletes, Adolf Dassler founded Adidas, after the split from brother Rudolf who then went on to establish rival company PUMA. Adidas, based in Herzogenaurach, Germany, is a sports clothing, apparel and footwear manufacturing company. It is the largest sportswear manufacturer in Germany and the second largest in the world, after Nike. Adolf Dassler started young and at the age of 20, he made his first shoe and due to the absence of any good material in the post war period, his first shoe was made of canvas. By 1930 Dassler had already employed 100 people and was making 30 different varieties of shoes. Post World War-II, Dassler made his first sports shoes and then in 1949 formally registered the company. Although there is a popular notion that the name Adidas is an acronym for All Day I Dream about Sports, however that phrase is an acronym. The name of the company comes from the first three letters of his first and last name, ADI being a nickname for Adolf. The two brothers Rudolf and Adolf Dassler never reconciled and a bitter rivalry followed between the companies Adidas and PUMA. Adolf Dassler got his products endorsed from many famous athletes like Jessie Owens, Muhammad Ali, and Franz Beckenbauer. Along with these promotions the biggest push for Adidas was when Germany won the 1954 football world cup wearing Adidas shoes with screw-in studs. Henceforth they started aggressively marketing their products and targeted major sporting events as platform. Business Description Adidas AG along with its subsidiaries designs, develops, produces and markets sports related products worldwide. It has six sections namely Wholesale, Rockport, Retail, TaylorMade-Adidas Golf, other centrally managed brands and Reebok-CCM Hockey. Whereas the Retail brand is drawn in the sale of Reebok and Adidas products through its retail chains and e-commerce platforms, the Wholesale segment deals with the business activities of providing the retail customers with Adidas and Reebok products. The products under Retail include footwear, apparel and hardware such as bags and balls under the Adidas and Reebok brands. As of December 31, 2013, this segment has been operating 2,740 stores, including 1,557 stores under the Adidas brand, 404 stores under the Reebok brand and 779 factory outlets (Yahoo Finance, 2014). The TaylorMade –Adidas Golf segment consists of four brands which design, develop and distribute not just golf clubs, balls and accessories but also apparel, footwear and other accessories. The Rockport segment undertakes the designing and distribution of leather footwear for both men and women. Mission and Vision The mission of Adidas AG as stated in the annual report can be listed as follows: To strive to be the global leader in the sporting goods industry with brands those are built on a passion for sports and a sporting lifestyle. In order to carve a niche in the competitive world they are constantly into improving their brands and products. In order to help the athletes achieve a peak performance is the motive behind bringing out new and innovative products. Exceeding consumer expectations and to provide them with value for their money is the driving force behind Adidas’s constant improvements on the quality, look and feel and image of the products and the organisational structures. Honesty is a top-most priority with the company. Adidas as an organisation thrives to be a socially and environmentally responsible organisation that takes into account creativity, diversity and which is also financially rewarding for both their employees and shareholders. Executioner excellence in carrying out their operations is of core importance to the group. Passion is at the heart of the company and thus they are continuously thriving to move forward, innovate and improve (Adidas Group, 2013). Strategy Choice and Implementation In order to have a sustainable growth and development Adidas had to come up with innovative strategies. In 2011, Adidas signed a partnership with Cricket South Africa and provided their uniforms both during and after the World Cup finals. It also sponsors the South Korea national cricket team. Adidas is also the official apparel sponsor for Mumbai Indians, Delhi Daredevils and Pune Warriors during the Indian Premier League. In Ukraine Adidas is already a clear market leader and in order to do the same in Poland, it had planned on using UEFA EURO 2012 as a platform. According to Herbert Hainer, CEO of the Adidas group as the official partner of UEFA EURO 2012, they had planned to use the event to reach the market leadership in Poland by 2015 and alongside obtain category leadership in football in 2012. Adidas also obtained the permission to be the Official IAAF Athletic Sponsor and License Product Supplier at the London 2012 Olympic and Paralympics Games with the mission to provide the athletes with the lightest products that would make them faster and help improve their game. Apart from apparel Adidas is constantly innovating and venturing into launching new product types like special kinds of tennis rackets, rugby gear, shoes fit for skateboarding, team kits for football teams and referee kits. Instead of having one unit look after the production of all the different types of items that Adidas sells, they rather have subsidiaries entrusted with the task of managing separate sections. For example Adidas AG looks after technologically advanced sportswear. Adidas produces an assortment of products for athletes, professionals, amateur athletes and other fitness-minded people. Reebok, headquartered in Canton, Massachusetts looks after women’s sports and fitness products. TaylorMade which is headquartered in Carlsbad, California is the world leader in metalwood golf clubs. Marketing strategies like establishing Reebok as the leading fitness brand, maintaining Adidas Originals’ strong momentum with fashion driven lifestyle consumers helped them gain huge market shares in different categories of sports products. SWOT Analysis Strengths Effective marketing strategy Strong financial position Market leadership Effectively implemented international operations Competent supply chain and distribution channels Strong brand name Competitive pricing International recognition and worldwide presence Sponsorships of major sporting events Weaknesses High cost structure Caters to the elite Over pricing Low quality products and services Limited product line Inefficient online customer service Opportunities Constant change in consumer preferences Increasing purchasing power Available technological advancements Expand product line Diversify markets Expand customer base Tie-up with emerging sports clubs/players Venture into new and innovative designs and cuts Threats Severe and cut throat competition from rival brands like Nike and Puma Competition from foreign markets Inability to reach out to the masses Growing tendency of becoming the price taker Change in consumer preferences and lifestyles Increasing power of the suppliers to set the price Financial slowdown Price wars between competitors Entry of new competing companies Strategy Evaluation Adidas has been working and constantly improving on their marketing strategies and successfully introduced and established their products as renowned brands. In a world of cut throat competition positioning of a brand is very important and Adidas has done that quite successfully over the years. A brand is a mark or logo that distinguishes a seller of a product or service from the competition. Adidas has also come up with very catchy and inspiring slogans, an example of which is “Impossible is Nothing”. Adidas has become associated with assured quality products. Over the years they have committed themselves to producing high quality products with as less consumer complaints as possible and marketed that fact heavily. Adidas believes in the fact that consumers want choice and hence the need to come up with the multi-brand strategy. This allows them to capitalise on opportunities from varied perspectives as both a mass player and a niche one. Thus along with maintaining a unique identity it also provided the consumers with a wide spectrum of products. In order to generate substantial profits international marketing is very crucial to the group. Thus establishing their presence in the global market is very important. Tie-ups with major sporting events, sponsorships, advertisements done by famous personalities of the sports world have helped them further their brand and penetrate markets all over the world. Top priority is placed on China and Russia as they are deemed as fast emerging markets. Basketball being a famous sport in the US, Adidas is now using that as a medium of penetrating the US market. Thus Adidas has used Product, Price, Place and Promotion - the 4P’s of marketing very nicely to its advantage and created for itself a place in the world market. Strategy Recommendation Adidas can consider diversifying their product line more and include some more products. A lot of people in order to avoid the boredom listen to songs on the roads, while waiting for trains. Thus Adidas can introduce radio shoes teamed with Bluetooth and music loading functions. These special types of snickers will be one of its kinds and can prove to be potential revenue-earner for the company. This will enable the user to listen to music without having to actually carry a music system around. The radio shoe can also have academic implications if a student can load it with academic information and on the way to school or college can listen to it. Thus it will also be in line with parents’ expectations as it has been found that retention is higher when one is listening. Music also has a positive effect on one’s brain activities. A second recommendation to boost the sales of Adidas can be the introduction of children’s Olympics. It will help students relieve academic stress, stay fit, socialise and make friends. Also children have a lot of pent up energy and this event will act as a vent for this energy. Adidas can sponsor such events and along with making a socially relevant statement it also gets to boost the company’s sales. If this venture is successful in a small scale basis Adidas might think of expanding it to a larger scale and thus penetrate more markets. A third strategy recommendation for Adidas in order to increase its market share is to cut down on the prices. The shipping costs increase the costs of the products to a great extent. This can be checked. The company has products that are marketed to a specific class of people with a specific purchasing power. A lot of people especially in the developing and underdeveloped countries are unable to afford Adidas products. Thus in order to cater to the masses the company needs to both diversify and cut down on its prices. It can also consider introducing a separate line of products with affordable prices. Thus the non-penetrated markets will not be as much of a problem anymore with the company. Adidas can come up with more innovative advertising campaigns. However that should not affect the costs of the products. Keeping in mind the poverty levels of the developed and undeveloped countries, the company has to come up with smart ways of reducing costs and profit margins and adopt competitive pricing. References Adidas Group. (2013). our mission, vision, and values. Retrieved from http://careers.Adidas-group.com/mission-and-values.aspx. Read More