Adidas AG is the leading global producer of sportswear and equipments. These products offered by the company are presented in three major brands. These brands majorly cover footwear, apparel and hardware making three market segments, under which the company operates. The sports segment of the company creates modern goods that focus on running, football, basketball, tennis and training, all of which geared towards enhancing the performance of sportsmen.
The name “Adidas” represents and fights for sufficiency in every sector of sports across the world. The foundation of the company dates back to 1920, when the founder Adolf Dassler came up with an idea of making shoes. The corporate philosophy embraced by Adolf has seen the company grow and succeed throughout all generations.
The main aim of Adolf (Adi) Dassler anchored on providing each athlete with the best sportswear and equipment one can imagine. This story and success of Adidas started in 1920, it was when Adolf Dassler manufactured his first shoes with the use of the little materials available in the Post World War I period. Today, these products provided by Adidas have extended form apparel and footwear to various accessories for most of sports. The major areas that Adidas focuses on are football, running, training and basketball.
During the 1930s, Adolf (Adi) Dassler made 30 different shoes for eleven kinds of sports. At that time, the company had the total labor force of about 100 employees. In less than two decades, Adidas underwent rapid development becoming the world’s leading sports shoes producer.
Shortly after the Second World War, the Adidas Group underwent a fresh start. This came because of the effects of the Second World War. Adolf began to put into practice knowledge gained before the Second World War and developed the company putting new ideas into practice. Adolf Dassler registered the company in 1949 in the city of Fürth near Herzogenaurach, Germany. At that time the company’s licensed name was Adolf Dassler Adidas Sportschuhfabrik.
The company’s breakthrough in business was 1954, when Germany won the Soccer World Cup. This occurred, when the German team wore Adidas boots with screw-in-studs. Sport events and its rapid development enhanced Adi Dassler’s continued specialization and optimization in product development. As an entrepreneur Adi Dassler used sports promotion to publicize his innovations in the sports industry. Various and well-known sportsmen and athletes were invited to advertise Adidas products. They included such people as Muhammad Ali, Jesse Owens, Max Schmeling, Sepp Herberger and Franz Beckenbauer.
The company uses aggressive publicity as its marketing policy. This is the cornerstone of the popularity of Adidas products. Adi Dassler came up with the major innovation for every sport event occurring in the world. This enhanced the documentation of superiority of Adidas sportswear and apparel. Adi Dassler had constant contact with every active athlete in all categories of sports and thus developed optimal shoes for almost each kind of sports. Thus, by developing this niche with his son Horst, the company became the leading innovator and producer of sportswear and apparel across the globe.
From the 1960s, the company developed and produced apparel for competition and training. It started producing balls in 1963. Since 1970, an Adidas product has been an official match ball at major soccer events..
The Dassler family controlled the business for about seven decades and withdrew in 1989. The company transformed during this time. The new. Adidas Corporation became a world leader in the market of sporting goods and sports marketing.
Guided by the need to reach a wider market, the company started targeting the young market with street balls in 1992. In 1993, it initiated the comeback of three stripes under the leadership of Robert Louis-Dreyfus. Adidas shares appeared in the stock market in 1995. In 1997, the company merged with the Salomon group. TaylorMade separated from the Salomon Group and combined with Adidas Golf.
In 2005, the company sold the Salomon shares to the Finish Amer Sports Corporation. This included related subsidiaries, such as Salomon, Bonfire, Mavic, Arc Teryx and Cliché.
In 2006, the company bought Reebok International Ltd. This provided the Adidas group with a footprint of about € 9.5 billion in the global athletic footwear, hardware and apparel markets.
The Adidas Group aspires to surpass market development (both GDP and sporting goods market). The company must base this on the Group’s strong brands, premium products, and its extensive global presence. This also includes the company’s commitment to innovations and the consumer. The company also intends to continue growing its bottom line faster than its top line. In addition, the Adidas Group plans to lay the foundation for leadership in the sporting goods industry. In order to achieve this, the company must grow faster than its major competitors in the sports industry. The Adidas Group targets the growth rate of total annual earnings being 15%. The company aspires to attain an operating margin of 11% sustainably by 2015 at the latest.
Presently, the company provides its products through three main brands. These brands include Adidas, Reebok and TaylorMade-Adidas Golf. The Adidas Group is a global player and leading operator in the sports industry. The company mainly operates in Asia, Europe, Latin America and North America. This occurs through over 190 subsidiaries.
The mission statement of the Adidas Group is that the company strives to be the global leader in the sporting goods industry with sports brands built on the passion for sports and a sporting lifestyle (Adidas Group, 2007).
Strategic Assessment - Current Strategic Posture
Philosophy & Culture
The company dedicates itself to act consistently and deliver outstanding financial results. The company is a leader in innovation and design, and seeks to help athletes with different skills and levels achieve high performance by means of every good that it produces. The company focuses on consumer needs and strives to continuously improve the quality, the look and the image of its products. The company matches its structure to consumer expatiations and provides them with the value of their money. The Adidas Group is an organization that commits itself to corporate social responsibility and rewards its shareholders and employees (Adidas Group, 2008).
For the Adidas Group, the main culture and philosophy is corporate responsibility. This culture is the foundation for the company’s core values.
The values of performance, passion, integrity and diversity drive the business. These values take root from sports, and the company strives to use them, since sports are the soul of the Adidas Group. These values link the company’s past and the present.
The values of the company enable the Adidas Group to become innovative. This has led to the creation of the world’s leading products in the sports industry. With these values ingrained into its culture, the company can work collectively with all ethnic divides and regional displacements.
The company is a performer and leader. It has continued to deliver better financial results and investment returns to its shareholders. Above all, it is committed to strengthening its brands and products in order to improve its competitive position. These values have enabled the company to create and develop brands that customers believe in. This has enabled stakeholders to trust the company. Corporate social responsibility is a culture that is a part of the company’s objectives and operations.
The culture of corporate social responsibility of the Adidas Group entails that the company improves working conditions of supplier’s factories. It also ensures that it reduces the environmental impact of its operations and supply chain. The responsibility in the company’s operations implies that it cares for the welfare and development of its employees. Lastly, responsible operations by the company ensure that it makes a positive difference and impact on people in communities, where it operates (Adidas Group, 2008).
The company strives to make these responsibilities the integral part of its day-to-day operations. The company calls for the incorporation of its values into its missions, visions, and objectives of core and critical corporate functions. The company adheres to sustainability principles. The principles of sustainability range from those relating to legislation, management, supplier customer relationships, and the support of stakeholders. Under legislation, the company strives to adhere to social and environmental laws, directives and guidelines. The company does this by continually improving and contributing to a sustainable society.
Management values and principles ensure that the company analyses, evaluates, and assesses the social and environmental impact of its new products, technologies and processes at design and development stages. The company also sets up clear targets and formulates action plans as it monitors its progress. It works with its suppliers and ensures that there is compatibility of suppliers’ and company’s activities. The company also supports social and environmental programs to develop sustainable societies (Adidas Group, 2008).
Strategies for Marketing, Procurement and Production
Adidas works in partnership with suppliers to ensure that they improve their collective performance. The company encourages business customers to have a positive attitude towards social and environment issues (Adidas Group, 2008). It makes use of athletes to market itself. For instance, Muhammad Ali was invited to market shoes for the company. Adidas also has a tradition of using well-known athletes, who have a big number of fans as company’s brand ambassadors. This has mainly been the company’s major marketing strategy since its inception. This marketing policy has enabled the company to draw attention of a large audience while advertising through these sportsmen. In most cases, the company targets such people as Muhammad Ali, David Beckham and others. Additionally, it makes use of other advertising channels, such as TV, Radio, Websites, and posters. Similarly, through the sponsorship of major sports events, such as Olympic Games, basketball, and football matches, the Adidas Group managed to break through the market effectively.
Human Resources Management
Human resources management is a core function of the organization. The company’s success depends on its employees’ commitments and talents. Therefore, the company has a human resources policy that seeks to build the leading global workforce in the sporting goods industry. The human resources mission targets at creating and developing the best and the most productive labor force. The company plans to achieve this by creating a working environment that enhances team spirit and passion. The environment must enhance the engagement and achievements of employees. Secondly, the company sets a ground for winners by instilling a performance culture, founded on strong leadership (Adidas Group, 2007). In addition, the company fosters and develops the understanding of social and environmental responsibility among employees. Thus, it ensures compliance with laws and regulations in the areas of operation. Ultimately, the company aims at providing a secure working environment for its employees.
Human resources policies outline wages and benefits for employees. The company’s wages and benefits policy determines wages for employees, which are equal or surpass the minimum wage required under the law. The company follows policies established by the International Labor Organization. Thus, wages provided by the company must improve living standards of employees.
According to the company’s annual report of 2009, it aims at using new technology and coming up with new and better products and brands. The company’s technology is regarded as one of its major strengths. The company has come up with an outstanding brand of shoes, and therefore, it manages this innovation carefully. For the company to remain the leader, it must continuously develop innovative ways of performing its operations. Besides, Maier (2009) notes that a business must keep up with the pace of changing technology. Thus, companies must embrace and apply new technology in their operations in order to remain relevant. With changing consumer needs, the management of such technology by the Adidas Group will ensure the sustainable growth for the company.
Financing and Financial Management
The financiers of the company are mainly shareholders. The company has a strong commitment that seeks to maximize free cash flows. This is achieved by following strict working capital management and financial leverage optimization strategies. In addition, the company’s financial management strategies focus on ensuring clear investor’s value orientation (www.adidas-group.com).
SWOT Analysis [Strengths, Opportunities, Weaknesses, Threats]
Adidas AG - Strengths
Leader in the Sports Goods Industry
The Adidas Group is one of the leading companies in the sporting industry. This is caused by its strong brands, namely Adidas, Salomon, and TaylorMade, that have become global household names. In addition, the company manufactures products that are leading in the market. It has sponsored several sport events, some of which include the Winter Olympic Games, the FIFA World Cup and the 2004 Euro Tournament.
The company has recently sponsored and equipped several teams in the 2010 FIFA World Cup. This included more than 200 players and 12 teams from such countries as Denmark, South Africa, Spain, Argentina, Nigeria, Paraguay, France, Japan, Mexico, Slovakia, Germany, and Greece. On the other hand, the subsidiary of Adidas TaylorMade has become a leading company in golf worldwide. It has become the leading company in terms of sales in the world’s largest golf market of North America.
Expanding Market Share in the Sector
The company’s sales and market share have continually increased. The company has a large market share in the global € 45 billion sports goods industry. For instance, in 2011, the company’s total sales were € 11.99 billion with its net income being € 567 million.
The company’s global sales have continually increased. For example, its sales in 2007 were € 10.3 billion with a net income of € 551 million. In 2008, it had a profit of € 642 million and sales worth € 10.8 billion. In 2009, the Adidas Group closed with sales worth € 10.38 billion with a net income of € 245 million. This shows the company’s consistency and growth (Adidas Group, 2007).
Successful Innovations and New Products
The Adidas Group has consistently launched new products. This has enabled the company to expand its portfolio and develop a competitive advantage. Company’s brands target various market segments and develop products that suit all market needs. The TaylorMade brand targets the golf market segment. The company develops goods during any period, and it has resulted into its success. For instance, in March 2002, the company introduces a top-notch innovation of ClimaCool. This footwear innovation features a 360º ventilation system. The shoe has breathable materials that allow consumers to feel the breeze. The innovation is followed by another one called a³ (which is pronounced as "a-cubed"), which provides a cushioning system.
Wide International Presence
The company is a major sponsor of major world sports events. This gives it an international presence and develops its image. The company is present in up to 200 countries all over the world.
Company Brand Recognition and Reputation
The company has developed a well-recognized brand in the sporting goods industry. This has increased its reputation in all spheres.
Adidas AG - Weaknesses
High Costs Structures
The company faces high input costs, and this presents a threat to it. This has led to the company pricing some of its products highly, thereby cutting its sales.
Few Brand Ambassadors
Marketing Adidas products involves the use of athletes. A few of these athletes have influence in the countries, which they come from, and therefore, the company’s marketing strategy faces challenges.
Dependency on Third Party Suppliers
The company relies on suppliers and third parties to supply and manufacture some of its products. This represents a weakness for the company as this gives these suppliers a chance to develop poor quality products that do not meet the aspirations of the company.
Decrease in Reebok Brand Sales
The initial merge of Adidas and Reebok aimed at ensuring an increase in Adidas total United States market share. The move also aimed at gaining a US market share of Nike (Tribune LA). The takeover was friendly and saw the improvement of the stock prices of both companies (MSNBC report). Towards the end of 2005, Reebok’s sales dropped to $912 million from $1 billion. This underperformance of Reebok continued for some time and negatively influenced the group’s total sales. In March 2007, the Adidas Group admitted that the merge was not successful. The decline in the company’s sales was caused by Reebok.
Limited Exposure to Markets in the U.S.
The Adidas brand has a limited exposure in the U.S. market. This represents a weakness, since the company has not penetrated into this wide market.
Adidas AG - Opportunities
The company’s opportunities include the following parts:
The Company has strategic partnerships with various companies that enable it to survive. Partnerships with suppliers present opportunities for growth. For example, in 2006, the company made an 11-year deal with the NBA. The aim was that the company would become an official apparel provider for the NBA. This presents both a marketing opportunity for the company as well as a continuous sales source.
Rising Popularity of Online Shopping
With the advent of technology and the need for virtual markets, the company can increase its sales substantially.
The company has grown to become a leader in sportswear innovations. Continued product innovations by Adidas present a good opportunity for company’s sustainability.
Change in Consumer Lifestyles
Consumer tests and preferences change from time to time. Thus, the company should align itself to changing market needs. This represents an opportunity for the company that may propel it to new levels of success.
Mergers, Partnerships and Acquisitions
The recent buyout of Reebok International presents an opportunity for the company to increase its total market share. The company became an Official Sportswear Partner of the 2008 Beijing Olympic Games (Adidas Group, n.d). This presents an opportunity for the company to market itself across the globe. In 2008, the company acquired Ashworth expanding its market share.
Adidas AG - Threats
However, the company faces threats. Some of the challenges and threats to the growth of the company are categorized in the following way:
Slowing Global Economy
The world economy faces slow growth after the world financial crisis of 2008. This poses threats on the company, especially those that relate to interest and exchange rates. The financial slowdown also cuts spending patterns by consumers, thus it is likely to reduce possible sales that the company can get.
Competition from Foreign Markets
The company faces stiff competition in the international market. This competition comes from such companies as Nike and Puma. Nike has also a strong reputation in the footwear and apparel industry. The action by competitors to have and develop their market share may reduce Adidas’ market share. Other competitors have entered the sporting goods market with aggressive advertising policies.
Change in Consumer Preferences
The lifestyle and preferences of consumers tend to change from time to time. The dynamism in their preferences will affect sales of the company.
Rising Input Costs
Input costs required for manufacturing products keep on rising. This poses a threat to the survival of the company in the production of sportswear and apparel.
Product Counterfeiting Risk
Recent developments and the existence of the counterfeit product in markets pose a challenge to Adidas. Counterfeit products tend to be cheaper, and these steal a market from the company. In addition, some counterfeit products come in lower and poor quality destroying the goodwill of genuine Adidas products. Adam (2010) notes that the sporting goods market has several counterfeit products. These products resemble genuine ones and deceive buyers. This has led to the loss of trust among customers of Adidas.