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Case Study By Nyasha Ganda Jason Truscott David Winn

Adidas Final

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Page 1: Adidas Final

Case Study

By

Nyasha Ganda

Jason Truscott

David Winn

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Table Of Contents

Executive Summary...........................................................................................3Question 1 : How are changes in the external environment impacting the sporting goods industry?....................................................................................8

External Environment....................................................................................8 Political Environment.........................................................................8 Economic Environment......................................................................8 Global Environment...........................................................................8 Social Environment............................................................................9 Technological Environment.............................................................10 Demographic Environment..............................................................10

Industry Environment...................................................................................11 Threat of new entrants......................................................................11 Bargaining Power of Suppliers........................................................12 Bargaining Power of Buyers............................................................12 Threat of product substitutes............................................................13 Intensity of rivalry among competitors............................................14

Question 2: What are the strategies of Adidas, Nike and Reebok?..................15Adidas...........................................................................................................15Nike..............................................................................................................16Reebok..........................................................................................................16

Question 3: Compare the Resources and Capabilities of Adidas, Nike and Reebok..............................................................................................................17

Adidas...........................................................................................................17Nike..............................................................................................................19Reebok..........................................................................................................21

Question 4: Do a SWOT analysis of Adidas....................................................23Strength............................................................................................................23Weaknesses......................................................................................................24Opportunities....................................................................................................25Threats..............................................................................................................26Question 5: What should Adidas do to become more competitive?................27

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Executive Summary

Introduction

Adidas went through turmoil since 1978 after the death of its founder, Adi

Dressler. After going bankrupt in 1990, and being handed over to Robert

Louis Dreyfus, Adidas has seen a remarkable turnaround. Dreyfus knew little

about the sporting goods industry, and as a result analysed the situation

similarly to as is shown below. The external environment is analysed, as well

as the industry forces. The firms, and competitors strategy was revealed, as

well as its capabilities and resources. Finally a SWOT analysis is performed,

and from this recommendations are derived.

External Environment

In analyzing the external environment, a number of factors should be

considered, including the general environment, industry environment, and

competitor’s environment. The general environment includes the traditional

factors which affect an industry, including the political, economic, global,

social, technological and demographic environments. The industry analysis is

performed using Porter’s five forces model.

General Environment

The shoe industry is showing rapid growth and development. World

demand is increasing, particularity in Asia. The entire dynamic of the

sports industry is changing, with sports equipment being used for leisure

wear as well. In addition with the development of new fun sports for

casual sportsmen/woman sports equipment is becoming a form of lifestyle

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for use in all occasions. Shoe technology changes slowly, but results in a

long term competitive advantage. All firms have different key technologies

all achieving a similar effect of improving comfort. The sports industry

has two seasons and has to meet the needs of a wide combination of

customers, which is increasing including fashion conscious under 25’s and

women.

Industry Environment

The use of Porters 5 forces revealed that the sporting industry is moderately

attractive to operate in, as there is not a high threat of new entrants, and

bargaining power of both suppliers and buyers is low which makes conditions

easier to operate in. However, the threat of substitutes is high, with intense

rivalry between firms, which makes the industry more difficult and less

attractive to operate in. It is certainly an interesting industry to operate in,

which is not difficult to gain access to, but exceptionally difficult to gain a

market foothold.

Strategies

Adidas

Adidas uses the Integrated Cost Leadership Differentiation Strategy as their

shoes are sold at a lower cost to their competitors, while still have a high

technological quality focus – equal to that of their competitors. IN addition

Adidas focuses on 5 core markets.

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Nike

Nike employs a differentiation strategy as it focuses on adding value to their

customers throughout the purpose process, from deliveries, customer service,

quality and technology. As a result of these efforts to satisfy customers in all

aspects, a premium price is charged.

Reebok

Reebok utilizes a differentiation strategy as it markets itself as a trendy,

fashion oriented sports company. Its sporting goods quality has been lost in the

eye in the consumer in the effort to clearly define itself as trendy and

fashionable.

Resources and Capabilities

Adidas

Adidas has a number of resources, including a large financial base on which to

operate. It has a strong R&D department both in the development of new shoe

technologies and production advancements. Through the ownership of a

number of its own factories it can ensure quality and assist in further supplier

technology development. Adidas’ capabilities include its effective marketing

at sporting events capturing the sporting market. Combined with an extensive

retail network, Adidas has developed the capability to maximise reach through

subsidiaries and licenses.

Nike

Nike has an exception resource pool, with enormous sales by in America. An

effective R&D team comprising of a number of sources to address all possible

desires in a shoe. Through outsourcing, Nike can harness its true skills in

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marketing and designing of its products. Effective capabilities include the

ability to market by using top sports personalities that appeal to the market. In

addition, they have developed the capability to sell merchandise in 80

countries quickly through a strong preordeing system, accounting for 70% of

sales.

Reebok

Reebok has vast economic resources, and a business which is split into two

major divisions; Reebok and the Speciality business group with each division

being responsible for different lines, thus ensuring a differentiated product

line. Strong innovation has led to the development of a number of new

technologies to increase their competitiveness. Reeboks capabilities lie in their

ability to market effectively through different mediums, but primarily TV.

Their capability in distribution to sell in 140 countries through who9lly owned

subsidiaries is representative in their strength in logistics. Extensive

distribution:

SWOT Analysis

STRENGTHS WEAKNESSES OPPORTUNETIES THREATS Strong Brand•Good Quality•Strong R&D•Global Footprint•Control

European market•Licenses in

countries with import restrictions

•Revenue well divided between shoes and clothing

•Various

•High Clearance sales

• 90% of income from core products

• Pre-ordered stock arrives late

•Delivery with a 7 month lead time

•Not regarded as a fashion brand

•Not well regarded by woman and teens

• 1 TV advert per

•Sports market growth by 28%– Increasing woman

entering sports–Footwear used

casually as well–Development of

outdoor recreation sports

•Greater access to USA

•Development of fashionable image

•Global markets offer greater

• 80% of shoes sold in casual wear, where Adidas produces for sports

• Development of new sports, may encourage new market entrants

• Nike and Reebok entering the specialty

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distribution channels

year•Loss of market

share in Britain, France and Spain

•Neglect of US market

•Turbulent management after death of Adi Dresser

opportunities market• Licensees may

decide not to produce Adidas

• Brash marketing by Nike and Reebok to earn teen market

Recommendations

To be more effective we would recommend a number of adjustment. The

Develop of more fashionable clothes and footwear is crucial to capture the

fashion conscious market. The low prices lowers the bottom line, and does not

give additional volume, so prices should be aligned with competitors. In

addition retail outlets should be used as opposed to wholesalers to increase

profit. Outsourcing all production would also lower costs, as quality assurance

from in house production does not earn a premium from the market. Poor

logistics should be urgently addressed, possibly by adopting a decentralized

approach, which also gives the benefit of customizing products to individual

market needs.

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Question 1 : How are changes in the external environment

impacting the sporting goods industry?

In analyzing the external environment, a number of factors should be

considered, including the general environment, industry environment, and

competitor’s environment. The general environment includes the traditional

factors which affect an industry, including the political, economic, global,

social, technological and demographic environments. The industry analysis is

performed using Porter’s five forces model. The competitor environment is

analyzed in question 2 of this paper.

External Environment

Political Environment

o There is little information on any political factors which had an

impact on the shoe industry. However, certain countries restricted

imports of shoes, so as a results shoe manufactures had to find an

alternative method of servicing that market.

Economic Environment

o There is little information on any economic circumstances which

had an impact on the shoe industry. However, the shoe industry

was expected to grow by 28% to $55 Billion by 1998. This implies

that the shoe industry was growing rapidly, and as a result fierce

competition could be expected to capture a share of this lucrative

market.

Global Environment

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o There is an increasing usage of global outsourcing, with 60% of

production facilities being based abroad. This resulted in

significantly cheaper production costs, and as a result all firms have

had to utilize this approach to remain competitive

o With Asian demand expected to double, as well as being huge

proportion of the world’s population, firms need to be aware of this

and be prepared to take advantage of this expected growth.

Social Environment

o There is an increasing trend of using sports equipment being used

for leisure purposes. This accounts for approximately 50% of sales,

and as a result people require quality durable multi-purpose shoes.

This is a trend that shoe firms should be prepared to embrace and

develop products specifically for this niche.

o With an increasing interest in health and sports, and the

development of aerobics development, a multi purpose shoe is

required by the market.

o Sport is increasingly no longer an elitist activity, with fun sports

developing such as basketball, soccer and mountain biking.

o 80% of shoes are used in casual wear, particularly in the under 25

age group, which indicates that firms should focus on this segment.

o With the development of outdoor recreation sports such as skiing,

golfing and hiking, functional outdoor clothing is also required.

However, this equipment is less prone to fashion changes, but with

a focus on authentic performance products. Thus sports firms need

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to ensure that this segment is provided with quality performance

products with a lesser focus o fashion.

o Sports equipment is tending to become a form of lifestyle, with the

clothing being used in all aspects of clothing wear, thus it is

necessary for firms to develop products which are functional and

can be used anytime.

Technological Environment

o Sports technology is a key element of success in differentiation of

products between competitors. It is not rapidly changing, with

advances providing a long term competitive advantage.

o Typically 1-3% of sales are spent on R&D, with the aim of

increasing comfort and performance.

o The mayor competitors each have different technologies providing

similar advantages, with Nike having the Air sole technology to

reduce impact and shock. Reebok utilizes Hexalite, Graphlite and

Pump technology to make the shoes more comfortable, increase

stability, and improve strength. Adidas utilizes Torsion technology

to increase stability and strength. Thus all the manufacturers utilize

different methods to achieve the same objectives, thus lowering

any technological differences between them.

Demographic Environment

o There are two seasons in the shoe industry, with one for Spring and

Summer, and one for Autumn and Winter. Thus firms have to be

prepared and have different lines for the different seasons.

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o The age groups of the major sports buying segment is changing,

with a trend of younger people making up a large proportion of the

industry. Firms need to be aware of this trend and cater for this

need, specifically in the fashion segment.

o With the development of aerobics, woman rapidly became another

segment in the sports industry market.

Industry Environment

Porters 5 forces

Threat of new entrants

o Economies of scale are required to enter the sports shoe industry, to

obtain the reach to be competitive

o Extensive capital requirements are necessary, in terms of physical

production facilities, and marketing to establish a firm in the

industry.

o It is difficult to establish a brand, as strong brands are already well

established, and extensive, expensive marketing would be required

to compete against them.

o There are very low switching costs, as it is easy for buyers to

change suppliers, thus it is relatively easy for a customers to buy

from a new firm.

o Access to distribution channels is not difficult to obtain, as a new

firm would easily have access to existing channels in department

stores and specialist sports shops.

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o Strong retaliation would be expected by existing firms, as the

sports industry is lucrative thus they would wish to defend their

market share.

o Considering these factors the threat of new entrants is

regarded as moderate, as there are certain barriers to entry,

but not to the extent that the market is impossible to gain

access to.

Bargaining Power of Suppliers

o Switching costs are low, thus it is easy for a firm to obtain

suppliers

o There are few substitute inputs to produce shoes with the essential

elements of rubber, and fabric being the main ones which are hard

to substitute.

o There are many suppliers of raw materials, thus making it easy to

obtain supplies

o There is a strong threat of backward integration whereby the shoe

firm produces its own raw materials to ensure quality. However,

there is a very small threat of forward integration as the suppliers

do not posses a highly differentiated product.

o Bargaining power of suppliers is considered to be low as it is

easy to obtain supplies from a number of sources.

Bargaining Power of Buyers

o Bargaining Leverage

There is a low buyer concentration as there are many of

them, thus the individual consumers have little power.

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However, there are a few large retailers which buy a

substantial volume, thus they have a high bargaining power

as they have the ability to leverage.

There is a low switching costs as it is easy for consumers to

change to another sports shoe brand without incurring any

costs.

It is difficult to integrate backwards as consumers lack the

resources to manufacture sports equipment.

o Price sensitivity

There are very few product differences which could be

regarded as significant to sway a customer, as essentially

the shoes have different technologies which produce the

same effects, thus price and design are factors which may

sway buyers, but with 2 similarly designed shoes, they will

be price sensitive.

Possessing a strong brand is a differentiating factor, thus

being an influential aspect when buyers choose a product.

o Bargaining powers of buyers is believed to be moderate, as they

do not have a significant ability to influence the industry as

individuals, but collectively they have considerable influence.

Threat of product substitutes

o There are low switching costs for the consumer, as it is easy to

change between brands and sports equipment suppliers

o There is a low propensity to substitute away from the industry as

the products provided are highly specialized.

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o Counterfeits are a significant threat in the branded shoe sector,

being sold at a lower price, but at a perceived similar quality and

performance.

o The threat of substitutes has been evaluated as high, as there

are many substitutes available, and with extremely low

switching costs it is easy for customers to change.

Intensity of rivalry among competitors

o There are many competitors but with only a few major players who

have approximately equal resources which intensifies the

competition.

o There is rapid industry growth which would reduce the competition

to take market share away from competitors as there are sufficient

growth opportunities without engaging the competitors.

o There are few fixed costs thus rivalry between firms is reduced, as

they are not constrained by the capacity of their equipment, and

forced to produce large volumes to cover costs.

o There are few product differences thus customers are unlikely to be

loyal as many firms have products to satisfy their needs. As a result

there are low switching costs, thus increasing competition between

firms to capture the market.

o There is little diversity of competitors thus competition is increased

due to their inability to differentiate on the basis of product.

o There are low exit barriers as there are few specialized assets, few

labour agreements, as production occurs predominately in third

world countries. There are no strategic alliances, or emotional

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barriers which could prevent a firm from exiting the industry or a

geographic segment.

o The Rivalry among competitors is considered to be high, as

there are few differences between them, thus forcing

competition to increase due to their inability to differentiate on

the product basis.

Question 2: What are the strategies of Adidas, Nike and

Reebok?

Adidas

Adidas uses the Integrated Cost Leadership Differentiation Strategy. This is

supported by the fact that their products are cheaper compared to the other

industry participants whilst it also looks at other different markets as a sports

leader. According to Adidas, the company “strives to be a global leader in the

sporting goods industry with sports brands built on a passion for competition

and a sporting lifestyle. Our strategy is simple: continuously strengthen our

brands and products to improve our competitive position and financial

performance.”

Reasons

o The company stresses performance and quality not fashion

showing a differentiated focus.

o Concentrates on five core products whilst having with a strong

focus on soccer, again showing a differentiated focus.

o Adidas markets its products at sporting events showing a

differentiated marketing approach

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o High technological focus – tension technology and the use of new

materials showing a differentiation focus

o Goods are priced lower than competitors thus showing a cost

leadership strategy.

Nike

Nike employs a differentiation strategy as it focuses on customers who

perceive value in its products compared to the other products that are produced

and marketed by competitors.

Reasons

o Consistent manufacturing of attractive products

o Rapid responses to the unique customers desires

o Through excellent inventory management and consistent

production planning Nike is able to respond rapidly and deliver and

on time to retailers and distributors showing a differentiated

distribution strategy

o Makes use of a strong brand, with Research and Development

expertise and a strong marketing leverage with top sport stars to

differentiate the product.

o By offering support and sales personnel training to the 14 000

strong retailers Nike has a differentiation focus with regard to

customer service.

Reebok

Reebok utilizes a differentiation strategy. It markets itself as a trendy, fashion

oriented sports company.

Reasons

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o Through Reeboks focus on branding in sport and fitness, they have

differentiated themselves, such that they are ranked as the number

1 sports and fitness brand

o The firm has separate divisions for athletics and sports thus

ensuring the complete differentiation of different lines of

equipment and apparel.

o Retain a differentiated focus by charging a premium as

They operate in 140 countries and emphasizes different

elements in each market, Reebok emphasizes the use of

high-quality retailers and avoiding lower margin

merchandisers and discount outlets.

Distributes through specialty retailers, sports stores and

department stores and clothes through specialty shops

Utilizes concept stores that sold a collection of Reebok’s

footwear and clothing

o Enhances its brand image by signing sports stars for sponsorship

Question 3: Compare the Resources and Capabilities of

Adidas, Nike and Reebok .

Adidas

Resources

Europe represents 32% of worldwide sales in sporting and footwear sales

and Adidas is the leader in this market.

Gross profit 38%, Net profit 5%

A strong R& D division

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o Adidas was the inventor of “Torsion Technology”, which is a

system of a pair of cross supports running from the front to the

back of the shoe, allowing movement and at the same time

maintaining strength and stability.

o Product innovation is primarily focused on the creation of new

footwear and textiles.

Effective Production

o They however wanted to maintain a certain level of company

owned production to ensure quality and hence kept factories in

France and Germany.12% of the footwear and 7% of the textiles

are produced in-house. Outsourcing of production was divided

between Asia (70%) and Europe (30%)

Capability

Effective Advertising

o Adidas’ strength is in international and Olympic events in which

participants were amateurs, and endorsements were made with

national sporting associations rather than individuals. This built the

brand through event marketing rather than individual athlete

endorsements. Adidas supplies team athletes with products and

benefited from the resultant coverage.

o A large resource budgets accounted for Adidas spending $60

million on advertising in Europe which accounted for on average

6% of sales, of which 75% of the marketing budget was spent on

promotion.

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o T.V. advertising was covered by a single spot which stressed the

quality of Adidas products and ran for a year without review.

Effective Distribution networks

o Adidas utilized various methods to ensure maximum coverage to

gain market share. They leveraged their capabilities in distribution

through subsidiaries and licensees. Germany, France, U.K. and

U.S. were the most important subsidiaries representing 43% of total

sales.

o Licenses are granted in countries with restrictions on imports e.g.

Argentina and Japan (18% of sales). Licensees paid royalties to

Adidas and distributed the Adidas brand whilst Adidas provided

guidelines on prices, provided representation and quality assurance.

o Adidas also had its own brand shops in Eastern European countries

e.g. Budapest, Prague, Moscow and Riga.

o Adidas delivered to its subsidiaries with a seven month lead-time,

resulting from considerable sourcing and production in Asia. On

average 50% of products were pre-ordered and the remaining 50%

consisted of on-demand re-ordering. However Adidas wasn’t

considered reliable and half the re-ordered stock consistently

arrived late.

Nike

Resources

Gross profit margin (38%), Net profit 11%

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America accounted for approximately 50% of worldwide sales and Nike is

the leader with 32% of the market sales worth $3.4 Billion in 1992

Effective R&D

o Strong R&D team which consists of research committees and

advisory boards made up of coaches, athletes, trainers and other

experts to review designs, materials and concepts for product

improvement. They also developed the Air-Sole technology by

using air in the soles to reduce the shock of impact. This was

claimed to allow athletes to train longer and educe the risk of

injury.

Production

o By utilising outsourcing of production and manufacturing

agreements meant that Nike was able to harness their core

competencies, and behave like a marketing and design group,

utilising Indonesia, China, Taiwan and Thailand for manufacturer

because of the cheaper labour costs

Capabilities

Effective Marketing and advertising

o Nikes ability to leverage athlete endorsements meant that the

company chose top athletes with brash personalities- John

McEnroe and Andre Agassi (tennis), Ronaldo (soccer) and Michael

Jordan (basketball) - which particularly appealed to the young

market and portrayed the image Nike were seeking.

o Most of the extensive advertising budgets ($280 million) was

spent on television spots targeted at young customers. They sold a

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lifestyle, a combination of sports and music, fashion and fun. On

average Nikes advertising budget accounted for 10% of sales and

in 1992 they spent $180 Million in the U.S. and about $100 million

in Europe. They then used these spots along with the athletes and

one catchy slogan “Just do it”.

o By harnessing their capability in the career management of sports

stars to promote Nike acted not only as a shoe company but as a

sports company

Extensive Distribution

o Nike sold its products to approximately 14,000 retail accounts in

the U.S. and in as many as 80 counties resulting in a huge footprint.

o Nikes strategy was to sell merchandise through different channels

to different target segments. They sold shoes for athletes in spots

shops, for amateurs in department stores, and for the mass

consumers in shoe stores. Nike further pioneered the future in pre-

orders. This was possible due to the strong demand for Nike

products and consequently, 77% of Nike footwear products were

pre-ordered in 1992. This strategy had considerable impact on

inventory management, production planning, and securing retail

accounts.

o Nike developed the Nike Town concept, a 20,000-square-foot mall

with 14 stores that sold equipment for 25 different sports.

Reebok

Resources

Gross Profit 40%, Net profit 8%

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Reebok has harnessed their resources through two major divisions within

the business; Reebok and the Speciality Business Group. The Reebok

division was responsible for designing, producing and marketing the sports

shoes and accessories. The Speciality Business Group included “Above the

Rim” basketball clothes, “Tinley” running and cycling performance

clothes and “Weebok” for toddlers and infants.

Product research and Development

o Reeboks rise to success was fuelled by innovation which lead to

the production of the first aerobic/dance shoe “Freestyle”

designed for women. Freestyle captured the vast majority of the

female sporting market and branded Reebok as a fitness company

rather than a performance company. Although Reebok had

developed its own technology it was not branded as a sporting

company, despite having developed a strong line of technological

innovation (Pump, Instapump, Hexalite, Graphalite) which

increase shoe comfort, stability and strength. However, the

company’s strength lay in its trendy shoes.

Capabilities

Effective Marketing and Advertising

o With an advertising budget of $85 million in the U.S. $25 million

in Asia, and $10 million in Europe, Reebok had exceptional reach.

Of this 60% was used in television and the remaining 40%in

media. They effectively used their resources to optimise their

ability to create advertisements to appeal to their customers.

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o They further made a strong strategic push in the sports market,

gaining increased visibility on playing fields and sporting arenas

worldwide through endorsement arrangements of prominent stars

in a multitude of sports.

o They utilised the resources available to them in the advertising

department to launch their first global campaign “Planet Reebok”,

further adopting a single global logo strengthening their global

brand position.

Production

o Outsourcing is the major form of production accounting for 80%,

although some of the clothing and footwear components were still

done in the U.S.

Extensive distribution

o Reeboks utlised their capbabililty in logistics to distribute and

market their products in 140 countries through wholly owned

subsidiaries in Austria, Belgium, Canada, Chile, France and

Germany.

o Reebok further had concept stores located in Boston, Santa Monica

and New York that sold a selection of Reeboks footwear and

clothing

Question 4: Do a SWOT analysis of Adidas

Strength

o Strong brand of performance and quality

o High quality

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o Strong Research and Development in products and materials

utilized in production

o Strong culture of winning within the organization

o Global footprint

o Control the European sector of the shoe industry

o Sold licenses to give access to additional countries with import

controls

To produce according to specifications to ensure quality,

provide technicians

Check up to ensure brand was well represented

o Covers a broad range of sports, and secondary product such as

sports bags

o Regarded a genuine sports brand

o Strong soccer focus and reputation

o Popular with middle aged men

o Various distribution means to gain market share,

o Revenue well diversified between clothing and shoes

o Makes use of event advertising which shows their premium quality

Weaknesses

o High clearance sales (30%), with the industry average being 10%,

showing weak production planning

o Core products accounted for 90% of revenue, thus if market

changed rapidly and Adidas could not adjust they would have no

income

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Pre-ordered stock often arrived late to retailers

Strong German influence, could be regarded as a negative factor to

foreigners, as little English possibly spoken

Centralized management approach, which results in all geographic

segments receiving the same marketing material and products, which may

not be appropriate to each region.

Delivery with 7 month lead-time

Not regarded as a fashion brand

Not well regarded by woman and teenagers

Only one advert on TV which is used globally, which suggests that

marketing in certain regions I not well targeted.

Neglect of the American market which is the largest market

Loosing of market share in Britain, France and Spain

Turbulent organizational and management changes after the death of

Alfred “Adi’ Dassler.

Opportunities

o The sports market that was expected to grow by 28 percent to $55

billion by 1998, indicating greater opportunities for expansion due

to

Increasing number of woman entering the sports or leisure

market, so offering the firm a larger possible customer base

Athletic footwear was no longer reserved for professional

exercise and competition but also has become a part of

leisurewear, thus the leisure market can be exploited

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Development of outdoor recreation sports such as golfing,

skiing, jogging and hiking which was encouraging growth

of functional outdoor clothing,

o Greater access into the USA

o Develop more of a fashion image

o Price shoes higher to match competition, if regarded as better

quality, this is possible

o Endorse athletes to further enhance the premium quality sports

image

o Greater advertising to appeal to the younger generation, and

woman

o Greater control of licensees to control prices, and marketing

o Deliver faster to reduce lead time, which will allow greater

inventory control, and fewer clearance sales

o Global markets offer the firm more opportunities to obtain critical

resources for success

o Developing an internet distribution channel

o Can make use of E-Commerce and E-Business to improve

distribution as well as selling direct

o Changing the Adidas image to one of an attractive leisure sports

wear company while retailing their performance image

Threats

o 80% of shoes are used for casual wear, and this is increasing,.

However, where Adidas makes most of their sales in the sports

shoe segment

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o The development of new markets such as street baseball, street

soccer, which may encourage more competitors to enter the market,

o Nike and Reebok further entering the specialty market, eroding

their market share

o Nike and Reebok moving more into Europe

o Licensees may decide not to produce Adidas

o New entrants into the leisure shoe industry such as Timberland

o Brash marketing campaigns from Nike and Reebok that were

supported by huge budgets that were targeting women and

teenagers with lower quality, more fashionable products, which

could erode market share

Question 5: What should Adidas do to become more

competitive?

Design more fashionable clothes and footwear to capture the a larger share

of the leisure market

Increase price of apparel as under priced compared top rivals

Utilize own production facilities in hard to reach countries

Deliver pre-ordered stock on time through faster delivery to reduce lead-

time and clearance sales. More effective distribution channel to achieve

this

Focus on USA as such a large market, as well as attempt to gain a first

move advantage in the emerging markets.

Use decentralized approach, with each country organizing itself, in terms

of marketing and production so that each can respond faster to changing

trends

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Change Adidas image to one of a fashion designer as well as producing

high quality sports products.

Outsource the rest of production to Asian firms, as the additional quality

control does not allow a premium to be charged for this.

Open more retail outlets, as they mark-up by a 100% as opposed to 20%

when they sell to the wholesaler.

Have more distribution channels to target different segments, for example,

department stores for amateur products, chains for mass consumers,

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