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adidas did StrategicAnalysis Strategic Analysis 2011 2016

DavidBajak METAD711 LeadershipandStrategy December18,2010

Whatbusinessarewein? What business are we in?


Currently l
AthleticPerformanceEnhancingFootwear, Apparel&Equipment(80%) AthleticFashionStyledFootwear,Apparel& Equipment(20%)

Recommend
Design Marketing RetailDistribution

CompetitiveForcesAffectingadidas Competitive Forces Affecting adidas


Five Forces Model of Competition FiveForcesModelofCompetition
HighRivalryamongCompetitors
Intenserivalrybetweenadidas (21%)&Nike(36%)formarketshare Powerful competitive strategies used by market leaders Powerfulcompetitivestrategiesusedbymarketleaders

LowThreatofNewEntrants
Strongbrandpreferencesandcustomerloyalty Marketleadersbenefitfromsignificanteconomiesofscale Diffi lt f Difficultfornewentrantstoestablishdistributor/retailernetworks t t t t bli h di t ib t / t il t k

HighThreatofSubstituteProducts
Substitutesarereadilyavailableandattractivelypriced LowSwitchingCosts g

LowSupplierPower
Materialssuppliedarecommodities Manufacturingisoutsourcedtolowcostproducers

Hi h B HighBuyerPower P
Buyersbenefitfromintenserivalryformarketshare Lowswitchingcostsforbuyers Buyershavediscretioninpurchasingproducts Buyersarewellinformedonpurchasedproductsduetointensemarketing

OurImpactfromGlobalization Our Impact from Globalization


Heavycompetitioncontinuestodevelopin emergingmarketsbetweenadidasandNike g g forworldwidemarketleadership Production activities are migrating to Productionactivitiesaremigratingto countrieswherecostsarelowest Growingglobalconsumerdemand Reduced trade barriers and government Reducedtradebarriersandgovernment cooperationforproduction

ForcesDrivingChangeinIndustry Forces Driving Change in Industry


Ch Changesinlongtermindustrygrowthratesinemergingmarkets i l t i d t th t i i k t duetohighdemand Increasingglobalizationasaresultofintenserivalry Aggressiveproductinnovationaveragingonemajorproduct innovationannuallyineachproductcategoryofeachbrand y y q Reducedcostsandincreasedefficiencyachievedbyacquisitionof diversifiedcompanies Consumersdemanddifferentiationinproductsaswellas customization Emergingmarketsindevelopingnationsundergoingchanging societalconcerns,attitudes,andlifestyles Newinternetapplicationsallowconsumersabilityforcustomization New internet applications allow consumers ability for customization inonlinestores Successfulmarketing,technologicalandproductinnovation I Impactofdrivingforcesincreaseindustryprofitability t fd i i f i i d t fit bilit

High

adidasStrategicGroupMap adidas Strategic Group Map


Nike

P Price/Performance/ /Reputatio on

adidas

Timberland PUMA KSWISS

Lo ow

Low

Models

High

adidasKeySuccessFactors adidas Key Success Factors


Awellknownandwellrespectedbrandname Clever advertising Cleveradvertising Strongdirectsalescapabilitiesviatheinternet andcompanyownedretailoutlets,etc d d il l Abilitytosecurefavorabledisplayspaceon y p y p retailershelves E Expertiseinsportstechnology ti i t t h l Innovateordie

adidasSWOTAnalysis adidas SWOT Analysis


Strengths
Leveragingstrongbrandportfoliotoestablisharobustretailfootprint Recordlevelsofcashfromoperationsandsignificantlyimprovedfinancialpositionamidsta weakeconomicbackdrop S Strongperformancedrivenbythesuccessof2010FIFAWorldCup f di b h f 2010 FIFA W ld C Widegeographicalfootprintwithincreasingfocusonemergingmarkets

Weaknesses
WeakperformanceinChinaimpactedbyexcessinventories p p y Dependenceonthirdpartymanufacturing

Opportunities
Reorganizationaimedatimprovingefficiency S Sponsorshipagreements hi t Reeboksrevival

Threats
Counterfeitproducts p Globalsportinggoodsindustrytoexpandonlymoderately Foreignexchangefluctuations

adidasSWOTAnalysis adidas SWOT Analysis


Strengths
adidas istheworld'ssecondlargestmakerofathleticfootwear,apparelandequipmentby saleswithrevenuesof$15,333.30million adidas groupsleadingmarketpositionisbuiltonitsportfolioofstrongbrands,which enhancesadidas market position and boosts its topline: enhances adidasmarketpositionandboostsitstopline:
adidas Reebok TaylorMade Rockport Ashworth adidas operatesover2,200storesfortheadidas andReebokbrandsworldwide adidas ownretailbusinessincludes:
ecommerce, monobrandedstoresrunbyretailpartners, shopinshopsestablishedwithkeyaccounts, jointventureswithretailpartners, cobrandedstoreswithsportsorganizationsorotherbrands

adidasportionofownretailhasgrownsubstantiallygivingadidas morebrandcontrol

Largegeographicalfootprintindiversemarketsenablesadidas toexpanditsmarketstohigh growtheconomies

adidasSWOTAnalysis adidas SWOT Analysis


Weaknesses
Chinanegativelyimpactedbyclearanceofhighexcessinventoriesfollowing theBeijing2008OlympicGameswhichsubduedconsumerdemandin2009 adidas outsources 95% of production to independent thirdparty suppliers in outsources95%ofproductiontoindependentthird partysuppliersin Asia,including32%fromChina Merchandiseprocuredfromforeignmanufacturersisaweaknessbecauseit givesadidas lesscontrolovertheproductquality.
ConcernsoverunsafeChineseconsumerproducts f h d TheConsumerProductSafetyCommission(CPSC)hasissuedalertsandannounced voluntaryrecallsbyUScompaniesonnumerousproductsmadeinChina

Vendorandmanufacturerfailurestoachieveandmaintainhighmanufacturing standardscouldresultinmanufacturingerrorsresultingin:
productrecallsorwithdrawals, delaysorinterruptionsofproduction, cost overruns costoverruns

Relianceonthirdpartyvendorsandmanufacturersmakesadidas proneto toplinerisksfromexternalparties

adidasSWOTAnalysis adidas SWOT Analysis


Opportunities
adidas hassponsorshipagreementsformajorsportseventsacrosstheglobe
JapanFootballAssociationuntilMarch2015 Australian Olympic Committee until 2016 AustralianOlympicCommitteeuntil2016 Securedsponsorshiprightstothe2014FIFAWorldCup

Extendeditspartnershipwith:
UEFAfortheUEFAEURO2012 UEFA EURO 2016 f tb ll h UEFAEURO2016footballchampionships i hi UEFAChampionsLeague

Signedan11yearglobalmerchandisingpartnershipagreementwiththeNBA
Makesadidas theofficialuniformandapparelproviderfortheNBA,WNBAandtheNBA pp p , DevelopmentLeague

OfficialSportswearPartnerto2012OlympicsinLondon Sponsorshipofmajorsportseventshelpsthecompanystrengthenits profitabilityandenhanceitsbrandrecallamongconsumers profitability and enhance its brand recall among consumers

adidasSWOTAnalysis adidas SWOT Analysis


Threats
Widespreadcounterfeitsdepriverevenuesforthe p p companyandcandilutetheadidasbrandimage The market for sports apparel and footwear has Themarketforsportsapparelandfootwearhas declinedin2009
Athleticfootweardeclined3.2%in2008&1.4%in2009 Athletic footwear declined 3 2% in 2008 & 1 4% in 2009 Declinedueto3%declineinmen'sfootwearsegment Activeappareldeclinedby4% Active apparel declined by 4% Sportsuseappareldecreasedby5.5%in2009.

adidas Fiscal Situation vs Competition FiscalSituationvs.Competition

adidas Fiscal Situation vs Competition FiscalSituationvs.Competition

adidasStrengthvs.Competition adidas Strength vs Competition


Weight adidas AG 7 4 10 8 10 6 1.4 0.4 1.5 1.2 12 3 0.6 8.1 NIKEINC 10 1 8 10 10 10 8.8 2 0.1 1.2 1.5 15 3 1 PUMAAG 3 6 3 7 4 3 0.6 0.6 0.45 1.05 1 05 1.2 0.3 4.2 KSWISSINC 1 10 1 5 3 1 0.2 1 0.15 0.75 0 75 0.9 0.1 3.1 TIMBERLANDCO 2 9 3 9 6 2 0.4 0.9 0.45 1.35 1 35 1.8 0.2 5.1 RelativeMarketShare CostsRelativetoCompetitors' Abilitytobenefitfromstrategicfitswithsisterbusinesses Brandimageandreputation Brand image and reputation CompetitivelyValuableCapabilities Profitabilityrelativetocompetitors y p Sumoftheassignedweights OverallWeightedCompetitive 0.2 0.1 0.15 0.15 0 15 0.3 0.1 1.00

FocusingontheWayForward Focusing on the Way Forward


Identifysportstrendsearly
YogatrendinEuropeandAmericas g p EndorsementsandsponsorshipofCricketinIndia

adidasGenericStrategy adidas Generic Strategy


Current Broad Differentiation Current:BroadDifferentiation
StrategicTarget
Abroadcrosssectionofthemarket

Basis of Competitive Advantage BasisofCompetitiveAdvantage


Abilitytoofferbuyerssomethingattractivelydifferentfromcompetitors

ProductLine
Manyproductvariations,wideselection Emphasisondifferentiatingfeatures

ProductionEmphasis
Buildinwhateverdifferentiatingfeaturesbuyersarewillingtopayfor Strive for product superiority Striveforproductsuperiority

MarketingEmphasis
Toutdifferentiatingfeatures

KeystoSustainingtheStrategy
Stressconstantinnovationtostayaheadofimitativecompetitors Concentrateonafewkeydifferentiatingfeatures

Recommend:BroadDifferentiation

UpcomingChallenges Upcoming Challenges


BiggestChallenge
EmergingmarketcompetitionwithNike g g p CompetingwithNikeinaUSmarketingdriven culture Abilitytoacquireemergingmarketendorcements andsponsorshipsinanintenselycompetitive and sponsorships in an intensely competitive environment

UpcomingOpportunities Upcoming Opportunities


Bi BiggestOpportunity tO t it
Acquisitionofcompaniesaddingproductdifferentiationto g adidas offering Lululemon (LULU)
Womensapparel Y Yogatrend t d
Onlypureplayyogagearmaker

Highestmarginsinthebusiness
Average cost of shirt $70 Averagecostofshirt$70

Operatesposhneighborhoodstorefronts
BeverlyHills Passadena NYC Miami Honolulu

RecommendedActions Recommended Actions


R Recommendrestructuringadidas & R b k b d d i did &Reebokbrands
Establishadidas brandbeyondEurosportbrandintoUSAsport & Euro sport brand & Eurosportbrand MoveAmericanFootball&Baseballunderadidas umbrella
Wouldgivemorecredibilitytotheadidas brandintheUSA ReebokbrandpreviouslyperceivedaslowqualityinUSAmaystillharbor negativeimageamongAmericans Establishesadidas brandtobettercompetewithNikebrandoffering Wouldallowadidas tocompetewithNikeonmoreUSAplayingfields CouldpotentiallyfurtherbridgethegapbetweenAmericansandFootball whichwouldgrowAmericanmarketshareinFootball

UtilizeReebokbrandasacatchallbrandfortrendingsports andinemergingmarketsportssuchasCricketinIndia

Brand Restructuring BrandRestructuring


adidas
Golf Basketball Football Tennis Running Training g

Reebok
American Football Hockey Baseball Skateboard k b d Surfing

Opportunity
Cricket Yoga

adidasGrowthinTechnologies adidas Growth in Technologies


adidas i h did inthemedicalindustry di l i d
Enhanceddevicestoenableparaplegics

adidas inmotorsports
Seats&steeringwheeldesignedtoabsorbmulti directionalimpactandtorque

adidas inzoology
Enhancedmaterialsprotectingracehorsesfrom seriousinjury

adidas inarmedforces
Smartmilitaryboots

adidasGrowthinTechnologies adidas Growth in Technologies


adidas i did inmedicine&biochemistry di i & bi h i t
Safedrugscapableofprovidingathleteswithaprecautionary protectionagainstbodilywearandtear
Protectionforquarterbacksagainstseriousconcussion ProtectionagainstcareerendingACLinjuries

adidas in optics & electronics inoptics&electronics


Sunglassesdesignedwithdigitaldisplayperformance monitoringforathletes
Able to save workout data and upload to the cloud Abletosaveworkoutdataanduploadtothecloud, ShareWorkoutsandcompareyourperformancewithyourpartners performanceinrealtime, Motivate yourself by breaking a facebook friends stats & set records, Motivateyourselfbybreakingafacebook friend sstats&setrecords, Workouttoacelebrityorathletesroutine GPSracetrackingwithrealtimerunnerID,electronicdisplay fordistancebetweenrunners,laptimes,distancetofinish. , p ,