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Primary Question for Adidas. Does Adidas's corporate strategy, including recent acquisitions and restructuring, stay true to its brand while positioning itself to improve shareholder value and challenge Nike as the leader of the global sporting goods industry?. Secondary Questions.

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primary question for adidas
Primary Question for Adidas
  • Does Adidas's corporate strategy, including recent acquisitions and restructuring, stay true to its brand while positioning itself to improve shareholder value and challenge Nike as the leader of the global sporting goods industry?
secondary questions
Secondary Questions
  • What enabled Adidas to be the market leader in the past?
  • How did Adidas lose its lead to Nike?
  • What has the Adidas brand represented in the past and what does it represent today?
  • How has Adidas's corporate strategy changed over time, specifically before and after the 2005-2006 restructuring?
  • Has Adidas's acquisitions helped position itself against its competitors?
  • What role do developing countries have in Adidas's future success and how is Adidas's position in those countries?
  • Should Adidas be concerned about losing North American market share to Nike?
  • Is there another corporate strategy Adidas should be pursuing?
product innovation
Product Innovation

Analysis – Adidas was an early entrant into athletic shoe industry. They developed many of the features still present in shoes today.

Created a strong brand based on high quality, innovative products that top athletes choose to use in training and competition.

marketing innovation
Marketing Innovation

Developed strong following with top track and field athletes.

Applied this same model years later with soccer shoes and apparel.

Successful because adidas was creating innovative, high quality products.

Product innovation enabled marketing innovation.

Different than Nike – marketing is what set them apart from the start.

slide8

How has Adidas's corporate strategy changed over time, specifically before and after the 2005-2006 restructuring?

salomon acquisition was it successful
Salomon Acquisition: Was it Successful?
  • Analysis:Paid 1.5bn to diversify product line. Surpassed Reebok world’s 2nd largest sporting goods company, however…
adidas s stock price
Adidas’s Stock Price
  • Stock price fell soon after acquisition in 1998, Salomon divested except for Taylor-Made Golf line. Adidas overpaid for acquisition.
adidas after salomon was divested
Adidas after Salomon was divested
  • Only added Golf Clubs to product line
slide13

What role do developing countries have in Adidas's future success and how is Adidas's position in those countries?

adidas is a global player
Adidas is a global player

43% of sales from Europe, which is slowest growth market

Encouraging that #1 in developing eastern European market, Russia expected to be most profitable market in Europe by 2010

2006 acquisition of Reebok not enough to overcome Nike in North America

Growing number of sales in Asia market, fueled by adidas success in China.

Strong demand and large population

net sales in emerging markets
Net Sales in Emerging Markets

Analysis – strong growth trend in sales in two very attractive emerging markets. Growth may be result of Adidas brand strength in soccer, world’s most popular sport.

regional footwear apparel markets
Regional Footwear/Apparel Markets

Analysis – Adidas is strong in several developing markets (Eastern Europe, China) but its focus and acquisitions have been geared towards overtaking Nike in the large, but slow growth North America market.

adidas ag geographic revenue performance
Adidas AG Geographic Revenue Performance

Key Growth Potential:

Europe – continue focus on soccer (including endorsements) and build brand loyalty

Asia/Latin America – increase distribution network and brand awareness

- All three regions averaging double-digit growth rates

slide20

Revenues from Asia:

1999 – 13% of total

2007 – 35% of total

Decreasing reliance on U.S. Market:

1999 – 69% of total

2007 – 52% of total

Metalwoods currently hold number one ranking.

Irons hold less than half market share of industry leader

Golf balls have seen limited success

Over 70 touring pros lift apparel presence.

Conclusion – TaylorMade should hold U.S. market share in U.S. given the brand’s strenghts, however, TM is only 8% of Adidas AG global revenues. TM cannot help Adidas overtake Nike in U.S. market

adidas global revenue sources 2007
Adidas Global Revenue Sources (2007)

Conclusion – The majority of Adidas’s revenue streams are outside U.S. market and are growing significantly – let Nike lead U.S. market but dominate Europe and emerging markets.

reebok global revenue sources 2004
Reebok Global Revenue Sources (2004)

Conclusion – Use Adidas’s control and production efficiencies to enhance Reebok’s distribution network in U.S. to increase U.S. revenues.

alt strategy options
Alt Strategy Options
  • Use Adidas as revenue driver outside of U.S. market – restructure Reebok strategy to capitalize on historic revenue performance in U.S.
    • Decrease number of Adidas retail outlets in U.S. - convert to Reebok retail
    • Increase Reebok U.S. endorsements
  • Use Adidas global distribution to further increase TaylorMade international revenues
timeline of adidas
Timeline of Adidas

1920-1925

  • Fouded 1920 by AdiDassler – wanted to design shoes for athletes in soccer, T&F, & tennis.
  • The Dassler brothers (Rudi & Adi) made their first major innovation in athletic shoes, integrating studs & spikes in track & field shoes.
  • Innovators in Marketing – gave away shoes to German athletes competing in Olympic games. By 1936 most athletes would compete only in Dassler shoes.
  • Bitter family feud, company dissolved. Rudi established Puma. With his departure Adi renamed company Adidas & registered the trademark 3rd strip to Adidas shoes.
  • Adi expanded spikes concept in track shoes to soccer shoes. Partial credit was given to the soccer shoes for Germany’s World Cup Championship that year.

1928-1936

1948-1949

1954

timeline of adidas32
Timeline of Adidas

1960-1967

  • Adidas is the clear favorite among athletes – 75% of T&F athletes wear them in Olympics. ’63 started producing soccer balls, ’67 athletic apparel
  • Adidas became leader in consumer jogging shoes in the US. T-shirts and apparel bearing the 3 stripes became popular among teens.
  • Adi Dassler dies, Adidas remains worldwide leader in athletic footwear but they are losing market share fast to Nike in US. Market share loss continues through the 80’s and mid 90’s.
  • Through cost cutting, new model launches, and endorsement contracts with popular athletes Adidas increased sales by 75% over prior year in US. Becoming 3rd largest athletic footware company in US – trailing only Nike and Reebok.

1970’s

1978

1994

timeline of adidas33
Timeline of Adidas

1998

  • Acquisition of Salomon SA – diversified beyond shoes & apperal to ski, golf, bicycle, & winter sports.
  • Stock price takes a hit possibly due to Salomon acquisition. Adidas mgt divested all of Salomon’s winter sports & bicycle equipment.
  • Acquistion of Reebok, included Rockport footware, Greg Norman apparel, & CCM hockey equipment.

1998-2005

2006