I.

THE RESEARCH

Methodology
In order to effectively study the chosen industry, the researchers will use specific
methods in order to gather essential data and information.
Visits to the office of the chosen firm are essential in conducting the industry study.
Interviewing the top managers and some employees for information, as well as gathering
general-purpose financial information for numerical data will be done by the researchers for the
said visits. After acquiring the said information through the visits, the researchers plan to hold
group discussions to analyze the data gathered.
In order for the researchers to have a firm grasp about the whereabouts of the industry,
the researchers will either contact or visit statistics agencies for statistical data about it. To
further strengthen the information taken from statistical agencies, the researchers will also
conduct both library and internet research. Only credible sources from established and well-
known information banks will be considered.

Significance of Research Findings

Conducting a research study for a particular industry in our economy entails studying the
firms that compose it as well as the kind of environment that these firms dwell in. One has to
study the firms that make up the industry. Having an in-depth study and analysis of just a single
firm in the industry, coupled with some bite-sized information about its competitors (the other
firms in the industry), is sufficient in studying the said industry.
Through paying a visit to the firm itself, the researchers will be able to gain inside
knowledge about its operations and business functions. Likewise, the firm’s financial statements
will provide the researchers a brief description of its performance and financial standing. Is it
successful? Is it fulfilling its purpose of satisfying the customer? Moreover, interviewing key
persons of the firm will give the researchers background knowledge of the firm itself. In addition
to knowing its primary purpose of creating a customer, the researchers will learn what other
objectives it has. Such as how the firm hopes to contribute to society etc.
As specified earlier, studying the firm itself is not enough. Studying its fellow firms is
also essential. Through the information about the other firms given by the chosen firm itself, by
statistical agencies, as well as by intensive library and internet research for credible sources, the
researchers will have a clear view about the activities going on inside the industry. Whether it be
the stiff competition amongst the firms or the origins and breakthroughs of the whole industry
itself through various moves made by the firms, knowing such activities of the industry is
essential to have a great understanding about it. After all these steps have been done, the
researchers will be in a better position to talk about the industry.

Scope and Limitations of the Study

The study will only focus in the sportswear industry, thus the data and information about
the sporting products of the chosen firm as well as with the other firms will be the only concern
for research and analysis. The wide range of athletic wear that Accel (the chosen firm) offers will
be the focus of the study. The methods that the researchers will use in order to gather the
necessary data will seek those that are about all sporstwear.

II. The Firm

Brief Description
Accel primarily is an athletic equipment brand. It caters to the needs of Filipino
consumers who are into sports. Aside from selling basketball shoes which are its first
products, the brand is also selling athletic shoes for running, badminton and cross-training.
The brand also manufactures sports accessories which include sports bags, wristbands, socks
and many more. Licensed PBA jerseys are also part of the brand’s long list of available
products because it is the official outfitter of the PBA. Being a Filipino-owned brand, the
primary target consumers of the brand are Filipinos. That is why the sizes sold for the
brand’s shoe products are rather small compared to the shoe products sold by international
brands. Price is another important point in this matter. Unlike the hefty price tags of the
products of international brands, Accel’s products are affordable. It is the vision of one of the
brand’s founders to provide Filipinos with high-quality, yet affordable products.

History of the firm

 The firm’s history is definitely a Cinderella story. It all started as a vision for
Philip Go, one of the firm’s founders and is currently the chairman of the firm’s mother
company, Sporteum Philippines, Inc. After graduating from the University of Santo Tomas
with a degree in accountancy, Philip Go immediately worked as a clerk for Rubberworld, the
mother company of Grosby and Kaypee, which were local athletic shoe brands back then. Go
worked his way to be the vice president and general manager of Rubberworld’s Adidas
Philippines division. While working, Go learned the different aspects of making athletic
footwear. Rubberworld eventually folded because of external financial issues. This closure of
Rubberworld paved the way for the decision of the original German umbrella company of
Adidas to launch a subsidiary in the Philippines. Go then became Adidas Philippines Inc.’s
President and Managing Director. While working for Adidas, Go conceptualized the
possibility of having a Filipino sporting brand. He wanted Filipino consumers to have high-
quality sporting goods without having to pay much. For him, Filipinos are paying much to
acquire sporting goods from international brands.
Thus, Accel, from the word “acceleration”, was born. Together with Wilfredo
Ortiz and Louie Larosa, his fellow officemates in Rubberworld, they formed Accel. They
started the firm from scratch. Their very first office was a small room with just a computer
and a fax machine at Go’s house in Libis. The founders built the very foundations of the firm
by initially persuading factories in China to manufacture the shoes that they designed. After
the manufacturing dilemma, the three also had to work hard in order to put these shoes on the
shelves of stores. They also persuaded PBA players to wear the basketball shoes that they
manufactured. Fortunately, luck went their way and the rest is history. Accel is currently one
of the top sporting brands in the country. Currently making 250,000 pairs of shoes a year,
Accel’s massive growth from just a vision to a household name is definitely something that
Filipinos should be amazed of and proud of at the same time.

Important Figures
The firm’s total assets are currently P 150 million. Its office is situated in Pasig
which houses its regular and contractual employees that are 58 and 140 in number
respectively. Gross revenue or total sales for the year 2006 amounted to P 157 million. There
 is no official market share data but the firm estimates it to be around 7 to 8 percent. On the
other hand, Return on Investment (ROI) during the year 2006 was 30 percent.

III. THE INDUSTRY

Definition
The sportswear industry can be basically defined as an industry which caters to the
sporting needs of consumers. It encapsulates various sports, from basketball to football, from
badminton to tennis. Sportswear does not refer mainly on athletic shoes. Rather, sport-specific
garments such as t-shirts, shorts, track pants, wristbands, headbands, socks and the like are also
part of the variety of products sold by sportswear firms. Firms which sell only athletic shoes are
not considered as a sportswear firm. In order for a firm to be classified under the sportswear
category, it should sell not just athletic shoes but also athletic apparel like those mentioned
above.

Background History
There is no recorded history for the actual origin of the sportswear industry. But its origin
can be traced to the founding of Rubberworld Philippines Inc. Rubberworld, was the only firm
that caters to the sporting needs of consumers back then. Besides from making and selling home-
grown products, Rubberworld also owns sole licenses of some international brands, meaning it
has the sole right to distribute and sell these imported brands in the county. It can be inferred that
during those times, locally made sporting goods were patronized more by consumers since
imported sporting goods were scarce. This scarcity of imported sporting goods can be attributed
to the expensive fees in importing goods from other countries. Since it was expensive for the
local firms to get imported goods from other countries, very few imported sporting goods came
to the country. And these few goods were obviously high-priced since importing them was
costly. This kind of situation opened the door for smuggling. Smuggling was rampant during
those times since many wanted low-priced imported sporting goods. Smuggling was a resort in
order to avoid the high tax fees for imported goods.
All this came to an end during the Ramos administration in the mid 90’s. Under the rule
of then president Fidel V. Ramos, the taxes for imported goods were lessened. Thus, prices of
imported goods became cheaper compared from before. This move was part of Ramos’ plan to
open-up the once closed-door economy of the country in order to attract foreign investors.
Because of this, international sporting brands such as Nike and Adidas established their own
Philippine subsidiaries. This led to the downfall of Rubberworld because international brands
were now patronized. The once local firm-controlled industry is now dominated by international
brands.

Major Players and their Influences

Since the country has become friendly to importers due to the economic amendments of
the Ramos administration, international firms took control over the whole sportswear industry.
Currently, two firms reign supreme. Nike Philippines Inc. and Adidas Philippines Inc. are the
two current major players in the sportswear industry. Statistical data from the year 20051 show
that Nike and Adidas’ total revenue for that particular year was P 1,300,723,000 and P
1,067,356,000 respectively. Compared to their competitors whose average total revenue for that
same year is just around 118 million, it can be clearly seen how dominating these two firms are.
In sports terms, it can be said that these two firms have been dictating the pace of the game in the
whole sportswear competition.
According to Mr. Philip R. Go, the Chairman of the mother company of Accel, the
group’s chosen firm, there are two ways on how Nike and Adidas are able to influence the entire
industry. The first influential factor is the matter on trends. These two leading firms dictate
what’s in and what’s not. They are able to dictate the kind of design, color, and even the
technology that’s going to be proclaimed as hip and trendy. For example, if Nike will release
low-cut shoes and market it as the new trend, other firms will definitely do the same. Because if
the other firms will not follow to the trend set by the two big firms, it is highly probable that their
revenues will drop since they do not sell the “in” products in the market. The other influential
factor of these big firms is the case about surpluses or overstocks. If ever there will be an
overstock on a particular product, these big firms will definitely sell it with a big discount in
order to solve the overstock problem. This particular scenario can greatly influence the sales of
the small firms because in this case, the price of the product that is given a big discount will
more or less be the same as the cheaper prices of the products of the small firms. As Mr. Go said,

1
Top 7000 business profiles 2005 by Philippine Business Profiles and Perspectives, Inc.
a basketball shoe aficionado will definitely buy a P 2,500 discounted Nike shoe rather than buy
an Accel shoe worth the same price.

Current Industry Size

The group consulted the Top 7000 Business Profiles for the year 2005 prepared by the
Philippine Business Profiles and Perspectives, Inc. in order to compute for the estimated industry
size. The group was able to come up with the estimate by adding the total revenue of the firms in
the industry that are articulated in the said book. Figure 1 summarizes the statistical figures with
the addition of the ranks of the firms for the year 2005.

Figure 1
Industry Rank (year 2005) Revenue (in peso)
Adidas Philippines Inc. 728 1,067,356,000
Nike Philippines Inc. 613 1,300,723,000
Sporteum Philippines Inc. 3144 178,137,000
Fil Concept 2087 123,019,000
Cougar Resources 3752 138,672,000
Realzbach Ventures 6512 33,752,000
Total Market Size 2,841,659,000

Importance to and Inter-relationships with economy and other industries

Since the sportswear industry’s products revolve from rubber shoes, t-shirts, and the like,
the industry can be connected with two other industries, namely, both the rubber and textile
industry. It is pretty obvious that rubber is the main component of athletic shoes. This makes
athletic shoe makers loyal customers to rubber-making firms. Whatever happens to both these
firms clearly affects the other. For example, if the demand for athletic shoes will drop, then
manufacturers will surely decrease production. This would further entail a decrease in the
demand for rubber. On the other hand, a decrease in the supply of rubber would definitely mean
a decrease in athletic footwear production.
Since sports clothing such as t-shirts and shorts are made through materials that are also
used and produced by the textile industry, there is a clear connection between the two. The
manufacturing of clothing is of course the specialty of textile industries. Any innovation or
technological change in the whole manufacturing process in the textile industry affects the
sportswear industry since they too should change. Any discovery from either the two industries
affects the other since the two are both concerned in manufacturing clothing. An example is the
conception of the dri-fit concept of Nike. Since new fibers were discovered in the textile
industry, sportswear firms tend to adopt certain fibers to sporting use. The dri-fit technology of
Nike is a perfect example since the discovery of new fabrics paved the way for a new material in
making sportswear. With the dri-fit, the athlete is kept dry because the fabric used in the clothing
quickly absorbs the athlete’s sweat and the sweat quickly evaporates.
In the case of the country’s economy, the sportswear industry is greatly affected by the
economic situation that the country has. As Accel’s Chairman, Mr. Philip Go would describe it;
sportswear is not part of the consumers’ basic necessities. According to him, sportswear is the
last priority of consumers. If ever a consumer would go to the mall and shop, buying athletic
shoes or gym wear will be the last thing that will ever cross his or her mind. In this case, the
country’s worsening economy would mean financial problems for sportswear firms. Consumers’
demand for sporting goods will surely decline because they will definitely allot a bigger portion
of their income for basic necessities since there is price inflation for these goods. Lower demand
for sporting goods would mean lower income for these sportswear firms. And the price inflation
for basic necessities for fuel and electricity would mean higher operating expenses for the firms.

IV. THE INTERNAL ENVIRONMENT OF THE FIRM

Organizational Life Cycle

In just 6 years, Accel has been able to become one of the top ten firms in the sportswear
industry. Their increasing profits seem to indicate that they are still in their growth stage.
Likewise, they were able to gain 6-7% market share during their company’s injection into the
industry.

Current Problems and Issues

The problem that the firm is currently facing is the country’s current struggling economic
situation. As stated by the chairman, Mr. Go himself, sportswear is not one of the basic
necessities of consumers. Buying sporting goods is the last priority of consumers. And since the
prices of basic necessities are rising, the portion allocated by the consumers for sporting goods
decreases. The demand for sporting goods decreases because of this. This may lead to a decrease
in the revenue of the firm. Because of this, maintaining operations for the firm is difficult. Their
problem is not solely based upon decreases in demand of consumers, for it is also based on the
prices of basic utilities for the firm. With rising electricity and fuel prices, budgeting the firm’s
operating expenses has also become an alarming problem.

Shared Vision
As the only local brand that as a complete range of categories, from footwear to apparel,
to accessories, Accel’s mission is to be an alternative brand for consumers of sporting goods. It is
because of this mission that Accel is up and running. Products of international brands are pricey;
thus, Accel wants to provide the Filipino consumers with sporting goods that are affordable
without sacrificing quality. To formally state its mission, the following mission statement was
taken from Sporteum Philippines Inc.’s (Accel’s mother company) company profile:

“Sporteum’s vision and mission is to offer an alternative sports brand to our

consumers, with equally high in quality and performance and with various
innovative designs, but certainly at more affordable and very reasonable prices. It
also aims to look for other popular Brands focusing on sports that can be
distributed in the local market.”

It is also Accel’s vision to be included to the top 10 sportswear brands in the local area.
They have been successful in accomplishing this feat since in a span of just 6 years, Accel was
able to rank 7th in the top 10 sportswear brands.

Strategies
Accel was able to survive and at the same time, be successful in the sportswear industry
amidst the supremacy of international brands because its initial strategy is not directly to
compete with the leading brands. Instead it positioned itself as an alternative brand for
consumers. Since the prices of the products from international brands are relatively high, Accel
offered reasonable and affordable prices for its products without sacrificing quality. Since the
target market of the big firms is the class A market, Accel provided products for classes B and C
that are at par with the products of the international firms. Because of this, Accel was able to
quickly increase its market share in a seemingly impenetrable industry that is dominated by
international brands.
 Even though majority of Accel’s products are manufactured in factories in China just like
the products of international brands, Accel is able to sell them at low prices because their
advertising strategy is not extravagant compared to those of the international brands. According
to Accel’s Chairman, Mr. Philip Go, the prices of the products of international brands are
relatively high because the muli-million costs that these brands spend to advertise their products
are passed on to the consumers. Unlike these brands, Accel does not advertise extravagantly in
order to keep the prices of the products very reasonable and affordable.

Resources
 Physical Resources
• Warehouse
• Office
• Delivery trucks
• Customized display modules on stores
 Financial Resources
• Bank credit lines
 Organizational Resources2
• 60 regular employees
• 250-265 contractual employees from outsourcing agencies

Systems and Processes – Information Systems

The overall information system (software, hardware and database) is managed by an IT
administrator. The company keeps their inventory records by using software called Distribution
Management System (DMS) in which sales orders are encoded to the time that the accounts are
paid by the customers. It also handles their sales, receivables and payables systems. To add
more, the DMS is a fully integrated system that handles inventory records automatically. This
means that when a particular sale is booked, the items in the sales invoice are automatically
deducted from inventory and booked as sales and accounts receivables.

2
Please refer to the Organizational Chart for a more-detailed organizational resource structure
 Also, the inventory module is another system that manages how the inventories are
tracked. The process starts when the purchase is made and delivered, then it is encoded and
becomes part of their inventory.

Systems and Processes – Production/Operating Processes

The firm does not own any production facilities and therefore only uses accredited
factories to produce items for them. These factories are mostly from China and some in local
areas. They are being inspected first if they (the factories) are in accordance with the standards of
the firm and if they do, then they are accredited.

Systems and Processes – Management Control Systems and Procedures

The Board of Directors (BOD) is the one who mainly controls the management systems
inside the firm. This board includes the President and Directors who are delegated to oversee the
daily events occurring within the company. Since they are the ones who govern the company, the
major decisions should comply first with the verdict of the BOD before they are undertaken.
They are also the ones in charge of preparing and approving targets and budgets every fiscal
year. Likewise, each department in the company such as Sales, Marketing, and Sourcing are
mandated in order for the firm to reach sales targets. These departments also ensure that the firm
operates within the operating budgets approved. Therefore, overall performances of the officers
are based from the actual sales and profit results vis-à-vis the budget established.
In addition, the BOD also administers the internal approval processes like disbursement
and expenditures. To ensure that everything is organized, the company also hires external
auditors to examine the books and all records of the company and these are reported to the BOD.

Networks (Supplier network, Distribution network, other alliances and tie-ups)

The company accepts suppliers who are in accordance with their standards. The Sourcing
Director is the one who usually looks for these suppliers and is also the one who approves them.
Their distribution network has two models: outright and concession. Outright accounts
are the outright purchases of the stores, while the concession model is like a consignment.
Merchandises are consigned to the retailers and by the end of the month, these retailers report
their actual sales and then get their sales commission. The distribution network is mainly
composed of all major sporting shops like Toby’s, Olympic Village, Royal Sporting House,
Sports Central and all major department stores like SM, Robinsons, Gaisanos and the like.
Sports organizations such as PBA, PBL, POC, etc. are their other alliances in promoting
their products to the end users as well as sports personalities who are mostly PBA players like
Mark Caguioa, Allan Caidic and Asi Taulava.

Corporate Social Responsibility (CSR)

The rejects which they get from factory production are given to boy’s towns. Of course,
these products are checked to see if they are still useable and safe. Aside from providing free
goods the less-fortunate Filipinos, Accel also runs basketball shooting camps for the youth with
the help of PBA Legend, Allan Caidic. In these camps they gather 10-15 talented youths and
train them. They also have 3 pt shooting competitions. In addition to this, they gather homeless
people who like to play and form a futsal team. This team is outfitted with their products.
Accel believes that they are partly responsible for the athletic development of the youth
and that it is their job to help nurture and develop these young talents.

Overall Performance for the last 3-5 years

Modesty aside, Mr. Philip Go describes the performance of his firm to be quite successful
because they were able to penetrate the market from scratch. Again, Accel is the only local brand
displayed side by side with the international brands such as Nike and Adidas. The firm is proud
to say that they were able to gain 6-7 % of the market share on a span of just 6 years.

V. THE INDUSTRY (EXTERNAL MICRO) ENVIRONMENT

Industry Life Cycle

In order to determine the current stage of the entire industry, it is essential to look at the
financial figures of the two dominant players (Nike and Adidas) for this indicates the
profitability of the entire industry and as well as look at the products since this industry is
product-driven. By the looks of the financial data from both the dominant players, it can be
clearly seen that both are undeniable growing. Products-wise, the whole industry had
experienced and is currently experiencing exciting product innovations for the benefit of
consumers. These growing financial data, together with the exciting continuous development of
products, it can be clearly seen that the industry is currently on the growth stage and is showing
no signs of leaving. Through continuous product development that would both excite and greatly
help consumers perform better in their respective sports activities, the sky is the limit for this
industry.

Current Problems and Issues

One of the main issues that the industry faces is child labor. Again, since this industry is
product-driven, manufacturing of products through factories is essential. Most of the factories
that manufacture products for these firms are contractual, thus, firms do not have an eagle’s eye
view on the happenings inside of these factories. In this particular case, firms are not aware of
the workers that are employed by these contract factories. As published in Independent/UK, Nike
admitted their mistake over child labor.3 Another major problem that the industry faces is the
working conditions of the factory workers. This is a vital challenge that the industry has to deal
with because they should comply with the China Labor Law since most of its factories can be
found in China. It is been documented that the employees are overworked and underpaid.4 They
employ young kids and women to work on their factories and were exposed to unsafe conditions
such as hazardous chemicals, noise, heat and dust. This issue really damaged their reputation at
some point and it may be very devastating for them in the long-run. They may lose their assets if
such unpleasant issues were associated with their image.5
In order to answer and solve these issues that concerns the manual laborers for these
firms, Nike aims that by the year 2011, they will be able to eliminate excessive overtime in
contract factories. Also, they vowed to implement human resource management systems to solve
the child labor issue. Furthermore, they also aimed at educating these laborers especially those
who are the breadwinners for their families.6 Both Nike and Adidas implemented Codes of
Conduct for their contract factories in order to ensure the workers of a safe working
environment.

Competitive Analysis (Porter’s 5 Forces)

3
http://www.commondreams.org/headlines01/1020-01.htm
4
http://cbae.nmsu.edu/~dboje/nike/nikemain1.html
5
http://www.american.edu/projects/mandala/TED/nike.htm
6
Nike’s Corporate Responsibility Report – Workers in Contract Factories
 Using Porter’s 5 forces in analyzing competition in an industry is a must for every firm.
In the case of the competitive force of suppliers, firms face a huge threat especially in the
Philippine market. Majority of the products of firms are manufactured in China or in other Asian
countries were labor is cheap. Suppliers or manufacturers of these products pose possible threats
to firms because reportedly, they are also the ones who manufacture counterfeits. The Chairman
of Accel himself said that factories in China only need a product catalogue in duplicating a
particular product. Counterfeits of sporting goods are prevalent in the market. Counterfeits are
often sold in various tianges and in low-end shopping centers. A perfect concrete example would
be the shoe stalls in Greenhills Shopping Center where counterfeits of Nike and Adidas products
are sold. The prevalence of these counterfeits pose revenue threats to firms since they are cheap.
It is highly probable that a practical consumer would buy a counterfeit over an original since the
price difference is large.
On the other hand, the competitive force for new entrants poses only a minimal threat to
existing firms. This is because building a firm for this particular industry requires a relatively
high capital. In order for a company to venture in such an industry, it needs to have a
groundbreaking product that offers and showcases something different that would set it apart
from the existing products in the market. And in making a groundbreaking product, huge
amounts of money is needed for research and development. The high costs do not stop in making
a product that is different from the existing ones in the market. Even if lets say a company did
came up with a distinct product, marketing and advertising that particular product would be
definitely expensive since newbie companies need to totally announce their arrival to consumers.
Even if they are able to come up with a groundbreaking product, it would be useless to sell it if
consumers wouldn’t recognize it because of insufficient advertising. Consumers don’t actually
buy products from unknown brands because most of the time, unknown brand is equal to
doubtful quality. Because of expensive initial capital in order to venture in this industry, the
barriers to entry can be considered as high.
On the other hand, the competitive force of rivalry among competing sellers is a factor
that firms should somewhat reckon with. In terms of a neck-to-neck, intense rivalry, the only
concerned firms are the two leading ones – Nike and Adidas. Since both are doing well in the
market, the advantage really lies on the firm that can offer the best products to consumers. It is
estimated that almost 70% of the total market share is divided between these two giants. The
remaining 30% is fought at by the remaining firms. For these remaining firms, the advantage lies
within the firm who will be the best alternative brand for consumers who cannot afford the
products of the two leading brands.
The competitive force of close substitutes is weak in this particular industry. There are no
close substitutes for sporting goods.
Lastly, the competitive force of buyers, especially of Filipino consumers should also be
considered by firms even if it is not that strong of a threat. Sporting goods are not on the top of
the list of the consumer’s basic necessity list. In order for firms to fight this relatively moderate
force, they should influence the consumer to consider sporting goods as an essential necessity.
In conclusion, reasonable pricing, good product development, good marketing and
advertising are the essential tools for survival in the whole industry. All existing firms need not
be bothered by possible entrants. They should all focus on developing their products and in
pricing them reasonably. For the two leaders, they should always benchmark in product
development and marketing. The remaining firms should capitalize on what’s left on the table for
them.

Marketing Practices/Strategies/Characteristics of Dominant Players

Since the sporting goods industry is obviously product-driven, firms, especially the
dominant ones focus on product research and development. This focus on product R&D is the
reason why the industry is enjoying its stay on the growth stage. The industry does not show any
sign of leaving this stage. Because of breakthroughs in product development like innovative
soles and cushioning for athletic footwear for example, these brands which are led by the
dominant ones are able to generate something good that Adidas stated as one of its marketing
strategy that is to generate consumer excitement and enhance brand profitability. Consumer
excitement is brought about by products which are innovative, stylish and functional.
Of course, no innovative product would be successful without the help of proper
marketing and advertising. The breakthrough that a particular product has will not entice
consumers to be excited about it without the help of proper marketing and advertising.
 Before the process of innovating and marketing the product, firms should also consider
careful planning, what to innovate/create and how to market/advertise. So far, it can be observed
that the dominant players in the industry which are always trend-setters in product development
are able to effectively provide and excite consumers with innovative and stylish products that
really improve athletic performance through product use.

ADIDAS
(information courtesy of www.adidas-group.com)
Adidas offers majority of its products at high and mid-level price points. The company
believes that the best defense against a promotional retail environment (competition at retail via
price wars) is a strong brand image. In order to build a strong brand image, the company has the
following strategies at their disposal:

“Impossible is Nothing” Campaign, Endorsers and Partnerships

In the case of Adidas, their current advertising and marketing campaign is the
“Impossible is Nothing” campaign. This is a global campaign that encourages consumers to
achieve their personal “impossible” goals no matter what they might be. In reaching for the
“unreachable”, Adidas vows to provide the consumer with high-quality, high-performance and
innovative products. Adidas’ products will be the essential tools that will help consumers reach
unparalleled heights. In order to effectively manifest the idea of limitless possibilities for
consumers through the use of Adidas products, the effective marketing and advertising tools are
the endorsement contracts with famous athletes around the globe. Basketball stars such as Tracy
McGrady, Gilbert Arenas, Kevin Garnett and Dwight Howard are the perfect endorsers of
Adidas in promoting limitless possibilities to the consumers. For football, players such as David
Beckham, Michael Ballack and Kaka spearhead the promotion of “Impossible is Nothing”. These
athletes, who have thus far reached so many “unreachables” in their respective fields, are the
perfect promotional icons for Adidas since they are idolized by many.
Aside from handing endorsement contracts to top athletes from certain sports, Adidas’
other marketing/advertising strategy is its partnerships with big sports institutions and household
names. Currently, the brand is the official outfitter of the NBA. FIFA and UEFA, two of the
leading football associations in the world, are also partners of the brand. Locally, Adidas is the
official outfitter of the Ateneo De Manila University as well as the De La Salle University.
Through these partnerships with big-name institutions, Adidas is able to advertise and promote
its products well.

Strategies on the apparel sector/sports lifestyle

To go into further detail, Adidas currently focuses on expanding the men’s and women’s
apparel businesses and the Adidas Originals. According to the firm, training is the sporting goods
industry’s largest apparel category. That is why they want to capitalize on this fact by expanding
the apparel business. Currently, Adidas claims to be the global leader in training apparel. The
brand wants to extend this leadership position. In order to further move forward on this
leadership, the brand is going to release innovations in their apparel product line. For men’s
apparel, the brand is going to expand the TechFit business in 2008 on the back of strong
communication and sports marketing support. In addition, the brand will also work closely with
key retailers and support them with a quick replenishment and the “never-out-of-stock” program.
On the other hand, for the women’s apparel, the brand intends to further grow the business with
extended product offerings in the high-end adilibria, the Fuse, and the gym wear Clima 365
collections.
Aside from the training apparel section of the industry, the brand also seeks to capitalize
on the sports lifestyle segment of the industry. According to Adidas, the market for streetwear
and lifestyle fashion represents a unique opportunity for sporting goods companies as it is more
fragmented and larger in size than the market for goods used in sports activities. Also, the sports
lifestyle market has a higher profitability rate as a result of lower R&D expenses. Furthermore,
the sports lifestyle market is also growing faster than the actual market for sports products. In
order to strive at this segment of the whole industry, the brand plans to expand the Adidas
Originals. Adidas considers the Adidas Originals as the cornerstone of the Sport Style Division.
The company plans to address three consumer segments for the entire sports lifestyle portion of
the whole industry:
• Metropolitan consumer
• Urban Segment
• Coastal Segment
Optimizing the wholesale business
Another strategy of Adidas is optimizing the wholesale business. The company
reportedly generates 83% of its revenues through its wholesale business. Its major customers are
sporting goods, sport specialty, athletic specialty and family footwear retailers as well as high-
end department stores. The company generally does not sell its products to value or discount
chains in order to preserve the premium image of the Adidas brand. In line with this kind of
distribution strategy, the company focuses on the expansion of controlled space:
• By further growing its own-retail business and extending the mono-branded store
network particularly in emerging markets
• By diversifying its own store formats and establishing a multi-dimensional store
portfolio comprising Metropolitan stores, concept stores, e-commerce and factory outlets
• By accelerating its roll-out of shop-in-shops with key retail partners in mature
markets

Operating Practices/Strategies/Resources of Dominant Players

In this particular industry, the dominant players are the trend-setters. They dictate what
products are fashionable and what are not. They also dictate what’s new and what’s not.
Dominant firms, control the tempo of the entire industry. Since they are trend-setters, it can be
concluded that apart from shipping and selling their goods, a major part of their operations is
allotted to product research and development. In the case of Nike Inc., their World Headquarters
which is located in Oregon houses 16 buildings named after legendary athletes. It is on these
buildings that sporting goods of tomorrow are carefully conceptualized and tested.
The products are then manufactured in the factories. Most of the factories that
manufacturers the products of these firms are located in China since the cost of labor is cheap.
Finished products are then transported through company-authorized distributors. It is then
marketed to different countries through subsidiaries.

Human Resource Management of Dominant Players

(information courtesy of Nike’s Corporate Responsibility Reports & Adidas’ HR Programme)
The dominant players in the industry, namely, Nike and Adidas, share the same
philosophy when it comes to their human resources management systems. For these two industry
leaders, diversity in their respective workforces is a focal point behind their success. According
to Gina A. Warren, Nike’s VP for Global Diversity and Inclusion,
“Diversity and inclusion is fundamental to Nike’s performance. It’s what makes
us better. It’s what makes us smarter. It helps our business grow and helps us
connect with consumers.”

For Nike, diversity and inclusion is what drives creativity and innovation. Since these
companies are global, they employ talents from different countries. Their respective rosters of
talents are composed of diverse people with diverse backgrounds and skill sets. In order to
effectively use this diverse workforce Nike uses the following strategies:
• Cultivate diversity and inclusion to develop world-class, high-performing teams
• Ignite change and inspire critical conversations around diversity, inclusion and
innovation
• Create venues and environments for open dialogue, diverse opinions and a multitude of
perspectives
This vision of Nike on diversity and inclusion does not mainly rest on the shoulders of its top
directors; rather, Nike employees themselves from around the globe articulated a consistent,
four-pronged business case for diversity:
• Diversity drives recruitment of the most dynamic people
• Diversity enriches the creativity and innovation that shapes the brand
• Diversity grows competitive advantage
• Diversity heightens the stature and belief in the brand and within our culturally diverse
consumer base
Furthermore, Nike’s Diversity and Inclusion team focuses on three areas:
• Engaging Employees
• Providing Business Consultation
• Developing Innovative Tools, Models and Designs

Employee Networks
Nike also has employee networks. These networks are designed to help the company
move toward greater diversity. The intended role of each network is to
• Foster professional development
 • Enhance work performance
• Identify mentors
• Assist in recruiting diverse professionals
• Develop increased community interaction
• Encourage improved teamwork and interaction within and across work groups
These are Nike’s current employee networks (Asia Pacific Employee Network is given detail):
• Native American Employee Network
• Latino Employee Network
• Gay, Lesbian, bisexual, transgender & friends Employee Network
• Disabled Employee Network
• Asia Pacific Employee Network
Mission: To support Nike’s globalization efforts by enhancing the understanding of Asia
Pacific cultures within Nike and the local community. (Awareness for Asia Pacific
cultures helps in formulating business strategies for the Asia Pacific consumer)
• Black Employee & Friends Network

Nike’s Global Women’s Leadership Council

In addition to Nike’s Employee Networks, the company also has the Global Women’s
Leadership Council. This council, otherwise known as the GWLC promotes and supports the
career advancement of women within the company. Through its mentoring programs, flextime
policies and consistent representation of women, the GWLC is able to support current and
emerging women leaders at all levels throughout the company. Nike wants to be the employer
and brand of choice for talented women around the world.

HR Programme of Adidas
In the case of Adidas, they are able to effectively handle their employees (more than
27,000 employees working at more than 150 locations in more than 50 countries) by first
identifying the common challenges that they face wherever they operate. In order to identify
these common challenges, Adidas’ HR Programme implements the following strategies:
 • Talent management (to identify, recruit and retain the most talented people and
develop career opportunities for them tailored to the specific needs of our company)
• Employee-oriented leadership (to strengthen the alignment of management and
employees by improving communication and enhancing employee feedback systems)
• Motivation (to provide reward and incentive schemes as well as a working
environment that promotes employees’ commitment, engagement and wellbeing)
• Communication (to improve transparency and efficiency in communication at all
levels of the Group and wherever we operate)

Employee Benefits
In terms of employee benefits, Nike and Adidas ensure that all of their employees are
treated well. Nike’s recent recognitions in various business magazines says a lot about this
unwavering commitment of Nike when it comes on this employee issue. Fortune magazine
named Nike as one of the “100 Best Companies To Work For” for the year 2008. Furthermore,
the company was also listed on Business Week’s Top 100 Best Places To Launch A Career List.
To name a few of these benefits, Nike employees are given the opportunity to choose from a
variety of health plans provided by the company. The company also has the Performance Sharing
Plan (PSP) in which the company has an annual bonus plan that rewards employees based on the
company’s performance and individual performance. Also, Nike employees have the opportunity
to allot 1-10% of their payroll to buy Nike stock at 15% off the fair market value.
On the side of Adidas, the company has the Global Salary Management System (GSMS).
This system sets employees’ salaries in a clear, understandable and measurable way. This
particular system also relates performance evaluation and uses a clear defined system for setting
salaries in line with market requirements and performance levels. There are also health and
safety management programs that ensure the safety of workers and employees. There are core
guidelines as well as specific ones for each facility in accordance to its specialty or specific
function. Furthermore, since Adidas firmly believes that global presence and success in
worldwide markets require a workforce willing and able to work around the world, the company
also provides training and cultural preparation to familiarize the relocating professionals and
their families with their new living and working environments.
Factory Workers on Contract Factories
Office employees are not the primary concern of both these big companies. The
contractual workers from the contract factories of these firms are also given primary concern.
For Nike, the company aims that by 2011, they will be able to eliminate excessive overtime in
contract factories, implement human resources management systems and educational training for
workers about their rights to freedom of association in key contract factories. The company
wants to address this issue simply because they believe that it is a possible problem for the
industry at large. As stated in the Workers in Contract Factories portion of Nike’s Corporate
Responsibility Report, they want to bring about change for workers’ rights within the supply
chain and the industry at large. One effective tool that Nike employs in exercising this solution is
the code of conduct which was drafted in 1991 for contract factories. This was the first step of
the company in its effort to improve working conditions in contract factories. Nike directs
contract factories to post the code of conduct visibly and in the appropriate local languages.

Financial Strategies/Resources/Profitability
Since the industry is product-driven and it is currently in the growth stage, it can be
inferred that majority of its money-spending activities lie on product research and development
as well as on product marketing and advertising. Recently, Nike released the Hyper Dunk which
is said to be the lightest and strongest basketball shoe available at the market. It showcases new
technological innovations, the Flywire technology and Lunarlite foam that constructs the
lightness and durability of the shoe. Developing this kind of basketball shoe costs money. This is
a good example on how dominant players spend their money – on product development.
Innovate products will surely be flops if not for good advertising. Nike and Adidas are
known for their extravagant advertising gimmicks. For Adidas, they currently launched the
global campaign entitled “Impossible is Nothing”. On the side of Nike, they hosted the Nike+
Human Race: The World’s Largest One Day Running Event that spans multiple continents and
covers 25 cities. Again, these events that are mainly for advertising purposes costs lots of money.
In addition to events, dominant firms also spend a lot on endorsement contracts for leading
athletes from various sports.
Aside from spending on R&D and on advertising, dominant firms also made big financial
moves in buying other firms in the industry. Nike has bought Converse, Cole Haan, Umbro and
Hurley X. Adidas, on the other hand, has bought Reebok and Taylor Made. This move by the
dominant players does not show their aim to control the industry alone. These firms bought these
other companies in order to flex their respective financial capabilities. Owning more companies
indicates expansion of financial capabilities. If managed the right way, these firms will continue
to dominate and even prolong the industry’s stay in the growth stage since they have a wad of
products that they will develop and market from a line of established companies at their arsenal.
In conclusion, it can be said that these financial strategies of dominant firms are thus far
effective. Financial figures from both Nike and Adidas show that their profitability and ROI are
increasing. These financial strategies do good not for the dominant firms alone for the entire
industry benefits from it too. These strategies that are focused on spending on product
development and advertising continue to entice consumers to patronize the products of the
industry. Because of these financial strategies of dominant firms that are anchored also on their
operations and marketing strategies, not only these firms, but the entire industry as well, is
definitely growing.

Growth and Expansion Strategies

Initially selling running shoes with soles made from plastic molded from waffle makers,
Nike and Adidas definitely reached high in striving for dominance and excellence. From initially
selling running shoes, both firms eventually expanded and are now selling shoes for various
sports activities such as basketball, golf, football, soccer and the like. Aside from footwear, these
firms also sell sports apparel, and sports equipment. These firms are able to be in the position
that they are now because of product development, innovation and diversification. They both
started on selling running shoes. After gaining profit in doing so, they developed and further
improved these running shoes. The cycle here is pretty simple. After they were able to innovate a
particular shoe, they were able to attract consumers. Thus, customer creation leads to profit
creation. With more profit, these firms eventually ventured on other products. These firms did
not limit themselves on selling mainly athletic shoes. They eventually ventured on
manufacturing and selling other sport-related products. After shoes, then came apparel, and
equipment.
From expanding through product diversification and innovation, these dominant firms
then ventured on firm acquisition. Nike acquired several firms namely, Converse, Cole Haan,
Umbro and Hurley X. On the other hand, Adidas was able to acquire Reebok and Taylor Made.
Through these acquisitions from both sides, the dominant players indeed expanded. These
expansions lead to financial flexibilities and product diversity. Again, not just these firms
themselves are able to grow because of these expansion moves, for the entire industry itself,
experiences growth through these continuing expansions.

VI. THE GENERAL (EXTERNAL MACRO) ENVIRONMENT

Socio-cultural Environment
In order to determine the drivers of market demand in any industry, one has to consider
looking at the socio-cultural background of consumers. The growth of the sportswear industry
can be attributed to two factors. One factor is that Filipinos are some of the world’s most avid
followers of basketball.7 The other factor is that Filipinos today are undeniably health and figure-
conscious.
The first factor needs no further introduction. It is highly evident that the Philippines is a
basketball-crazy nation. Filipinos love basketball. In any city, town, or province, may it be a
posh location or a squatter’s area; there is always a basketball court. This indicates the love of
Filipinos to the sport. This love of Filipinos to the game of basketball is one of the reasons
behind the sportswear industry’s growth. Filipinos constantly demand for basketball equipment.
It is also important to take note the popularity of the game’s premier league, the NBA. Filipino
basketball fans idolize NBA hoop stars. They buy the equipment (i.e. shoes, jerseys, etc.) that
these basketball stars use. The advertising and marketing strategy of firms is evident in this
scenario. Since consumers are idolizing these basketball players, the firms use these players to
endorse their products so that the consumers will do the same with their products. One concrete
example is the current craze on the basketball shoes of Gilbert Arenas which are produced by
Adidas. Gilbert Arenas’ popularity and fan base here in the Philippines led to shoe’s success and
popularity. Countless pairs of Arenas’ signature shoes were sold in every athletic equipment
store.
The second evident factor that drives the industry’s growth is the fact that Filipinos today
are health and figure-conscious. Filipinos today view being thin is being beautiful. 8 This does not
7
http://en.wikipedia.org/wiki/Basketball_in_the_Philippines
8
“Experts say it’s harder for obese people to be happy” by Nikko Dizon, Philippine Daily Inquirer
concern primarily adults. According to a veteran nutritionist, even young Filipinos are
increasingly becoming conscious of their weight. 9 The prevailing mentality among Filipinos is
that a well-chiseled body, especially for men, is the ideal body that one should possess. Because
of this, gyms suddenly became a household name. Gold’s Gym, Fitness First and Slimmer’s
World are some of these gyms that have various branches nationwide. The constantly increasing
members of these gyms entail an increase in the demand for training equipment. This claim holds
water because as proclaimed by Adidas in their list of marketing strategies, they want to expand
globally in terms of training apparel and equipment because it is currently a strong and growing
portion of the entire sportswear industry. Adidas, one of the dominant firms in the entire
industry, plans to capitalize on this situation by expanding its hold on the training apparel portion
of the industry. For the firm, this can be done by further providing consumers with high-
performance training equipment.

Technological Environment

Factories and Machineries

The entire process of producing athletic shoes and apparel is definitely labor intensive.
While there are machineries in producing these products, the whole process is not highly
technical/technological. Even though the assembly line can be automated, it still requires manual
labor. Some of the basic machineries that factories possess are the following:
• Cutting machines
• Sewing machines
• Lasting machines
• Conveyor belts
• Oven
• Dryers
• Buffing machines
• Pressing machines

9
Ibid.
 The ones listed above are the basic machineries for the industry. It can be inferred that
machinery development and innovation only comes into play whenever production of a new
product will entail a new machine.

Product Research and Development (R&D)

The sporting goods industry’s growth is anchored to technological innovations in product
research and development. Through constant product innovations, consumer excitement is
maintained for these breakthroughs also bring forth better product performance and quality. As
said by Sporteum Phils. Inc.’s Chairman, Philip Go, the dominant players are the trend setters in
terms of product development and innovation. This opinion of his can might as well be treated as
a fact because obviously enough, it is very evident that these dominant players really do set the
tone of technological innovations in the entire industry.
In terms of athletic shoes, the technological development is focused on the soles and the
material of the shoe. The entire industry is witness to these sole and material technological
innovations. Concrete examples are the emergence of the Nike Air sole technology. This
innovation by Nike prompted the other firms to develop their own sole technology and it is
evident today that almost all brands have a shoe model that has an air sole. Another example in
terms of sole innovation is Nike’s Shox technology. Because of this breakthrough by Nike, its
rival, Adidas, released their own by the name of A3. The A3 is no longer available and is replaced
by the new Bounce technology from Adidas.
On the other hand, technological innovations in terms of sports apparel are also evident.
Once again, Nike was the first one to release an innovative product in the name of Dri-Fit. This
release by Nike prompted of course its competitors to do the same. Eventually, Adidas did
release an apparel line that carries the same concept. Adidas released the Clima-Cool products to
directly compete with the Dri-Fit of Nike.
It is very evident that in the industry’s technological environment, the dominant firms are
the most influential factors. A dominant firm’s release of a new product will prompt the other
firms, especially its rival/s, to release one of their own. Since in this particular industry, the two
dominant firms (Nike & Adidas) conquers more than half of the total market share, technological
moves from one will definitely force the others to move as well. If the other firms will not follow
the flow that is set by these dominant firms, they will be left behind.
Economic Trends
It can be readily observed that the Philippines’ economy is struggling. Currently,
exchange rate between the Philippine Peso and the US dollar is more or less 46 pesos. 10
According to Meralco, the price of electricity per kilowatt hour is set to increase. Even if there
are rollbacks in terms of the prices of petroleum products, they are still expensive nonetheless.
These increasing prices and economic problems definitely affect the entire sportswear industry as
a whole. Even if all of the manufacturing facilities of the firms are situated in other Asian
countries, specifically in China where labor costs are low, the firms here in our country,
especially the small players are still suffering from these economic setbacks. These firms are
suffering from high operating costs. With the expensive prices of gasoline and electricity to
name a few, all the firms in the industry are undeniably facing high transportation costs since
majority of the products that they sell came from factories from other countries. Transporting
these products from the ports to their respective outlets can be very costly given the expensive
costs of petroleum products.
These economic setbacks do not affect the firms in the industry through operating costs
alone. They also affect the entire industry through its effects on the demands of the consumers.
As said by Sporteum Phils. Inc.’s chairman, Philip Go, sporting goods is not part of a Filipino
consumer’s list of basic necessities. If it does land on the list, it is usually the last one prioritized.
Only a small portion of a consumer’s income is allotted for sporting goods. It is also important to
take note that consumers don’t buy sporting goods often. For example, athletic shoes are not
bought every month. This goes for other sporting equipment such as basketballs, footballs, etc. as
well. Consumers do not buy basketballs every week. Unlike food which is a basic necessity, we
do not buy sporting goods often. Demand for basic necessities is relatively higher than demand
for sporting goods. Since the prices of basic necessities are also increasing because of the
country’s struggling economy, it can be inferred that consumers today, especially those who
belong to the 30% of the total population who live below the poverty line (2003 est.) 11 do not
anymore allocate a part of their budget for sporting goods. Furthermore, it can also be inferred
that even the consumers who belong above the poverty line, those who are in the middle class,
have also lessened the portion of their income allocated for sporting goods.
10
Bangko Sentral ng Pilipinas – Reference Exchange Rate Bulletin, 05 Sept 2008
11
CIA – The World Factbook, Philippines
 Even if the country is suffering from such an economic struggle, the sportswear industry
still manages to continuously grow. This can be attributed to the present socio-cultural
environment here in our country that is directly compatible to the products released by the
industry. The industry capitalizes on the present socio-cultural environment of the country in
order to maintain consumer demand despite of the country’s economic setbacks. The current
weight and health-conscious mindsets of Filipino consumers and the fact that Filipinos love
basketball are the aspects of the present socio-cultural environment which maintains consumer
interest on sporting goods.

Political or Regulatory Environment

During the early days of the sportswear industry, it was purely dominated by local firms
particularly Rubberworld Philippines Inc. Imported sportswear products were expensive and
scarce due to the closed-door economy of the country back then. Due to these high taxes on
imported goods because of the country’s closed-door economy policy, smuggling was rampant in
order to bring in imported goods in the country and sell it at lower prices. Locally, it can be said
that one of former president Fidel V. Ramos’ economic reforms benchmarked the growth of the
industry. During Ramos’ presidency in the 90’s, he opened the once closed-door economy of the
country in order to achieve his goal of economic growth. In can be inferred that before Ramos’
economic reform, the sportswear industry is rather small because there are only a few players.
Foreign firms were discouraged to invest in the country due to high import taxes. Ramos’ reform
opened the door not only for the economy, but for the growth of the entire sportswear industry as
well. Because of his reform, the big players then came to the country to build their respective
branches. The industry then became large because international firms also come into play. It can
also be said that even though this reform of Ramos spearheaded growth for the economy and for
the local sportswear industry, this move of his also weakened local firms in the industry. Since
imported goods are now available at cheaper prices because taxes are not high anymore,
consumers tend to buy imported goods more than the locally made ones since it is deemed that
imported goods possess higher quality. This eventually led to the downfall of the once ruler of
the local sportswear industry – Rubberworld Philippines Inc. The industry which was ruled over
by local firms is now dominated by international firms. This move then by former president
Ramos has its pros and cons. On one side, it elicited growth and on the other, it served as the
reason for the decline of Filipino owned sportswear firms.

Natural Resource Environment

According to Sporteum Phils. Inc.’s chairman, Philip Go, while there are no direct
adverse effects of pollution and global warming in the sportswear industry, it is still an important
concern. It is an important concern because it is the industry that can influence the problem on
pollution and global warming. Due to this, firms in the industry take specific actions, particularly
in the manufacturing of their products in order to address the issue and not contribute to it.
Since bigger firms have bigger environmental footprints, they have a bigger
responsibility on managing their impact on the environment as well as on society. In the case of
Adidas, the firm addresses these environmental issues through its Managing Environmental
Systems. These systems are used in order to mitigate the negative impacts of their manufacturing
process to the environment. Energy efficiency, waste reduction and pollution prevention 12 are
some of the key points that these management systems focus on. For Adidas, the first step is to
improve the materials that go into the products and the next step would be to tackle pollution in
the factories.13 In improving the materials that go into the products, the firm selects materials that
are non-toxic in use and disposable. Also, they select materials which do not cause toxic
emissions during the manufacturing process. Eliminating PVC is also one of their solutions to
reduce the impact on the environment. As for reducing the pollution emitted by them, the firm
has also lowered VOC consumption in the manufacturing process of the products. Aside from
manufacturing, Adidas also aims to minimize carbon dioxide emissions that come from
transporting the goods.
As for Nike, almost the same action as Adidas’ are employed. Energy efficiency,
improvement of raw materials for product manufacturing, and reduction/elimination of toxic
emissions in the manufacturing process are also Nike’s concern with regards to this issue. To be
more specific, they incorporate 5% organic cotton as well as use environmentally preferred
rubber and recycled polyester in their products. Just like Adidas, Nike also minimizes PVC. The
figure below shows Nike’s management systems to address the environmental issue.

12
http://www.adidas-group.com/en/sustainability/_downloads/Guidelines/Guide%20to%20Best%20Environmental
%20Practice_Nov%202005.pdf
13
http://www.adidas-group.com/en/SER2007/e/e.asp
Global Environment
On a grander scale, the entire sportswear industry is growing. Spearheaded by Nike and
Adidas, the sportswear industry is continuously expanding through its various product
innovations. It does not fail to excite consumers. Most importantly, it continues to provide
consumers, specifically athletes all around the globe with high-performance products. Through
these products which are constantly innovated, athletes from around the globe are able to defy
impossibilities for these sporting goods enable them to perform better.
 In terms of the global economy, the only major threat would be the subprime mortgage
crisis. The subprime mortgage crisis is a current economic problem. It is characterized by
contracted liquidity in the global credit markets and banking system.14 With regards to this
worldwide economic issue, the International Monetary Fund says that the worldwide losses
stemming from the US subprime mortgage crisis could run to $945 billion. 15 The bad effects of
this issue are evident.
Even though the subprime issue is still at hand, the growth of the entire industry is still
unwavering. When it comes to sports, the industry knows no borders. The big names in the
industry have branches in various countries. The dominant firms’ success globally is the main
driver behind the continuously growing industry. Athletes around the globe speak the same
language, that is, their respective sport. A good manifestation of this was the recently concluded
Summer Olympics that was held in Beijing. This is a perfect manifestation on how sports are
able to unite different races. Of course, this big event is backed up by firms in the sportswear
industry. Again, the sportswear industry knows no borders. It caters to every consumer/athlete.
Its mission is to provide consumers with performance-enhancing equipment wherever possible.

VII. SWOT ANALYSIS & KEY SUCCESS FACTORS

SWOT Analysis for the Firm

Strengths
• Competitive pricing – this particular strength of the firm ensured both the entry of the
firm in the industry as well as its growth and survival. The firm’s vision and mission to
be an alternative brand – to offer products at affordable prices without sacrificing quality
benefited average consumers who find the products of foreign brands to be quite pricey.
Accel was able to position itself as the best 2nd choice.
• Strong Distribution Network – since Accel’s founders were once the big bosses of Adidas
Philippines, the firm was able to get hold of a good distribution network. All of the work
experience and connections that its founders had when they were still working for Adidas
proved beneficial for the growth and stability of the firm. Also, Accel’s mother company,
14
http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Effect_on_world_economy
15
New home sales fell by record amount in 2007 - Real estate - MSNBC.com
 Sporteum Philippines Inc., is also a sub-distributor of other foreign brands like Nike and
Puma. Because of the firm’s access to various distribution channels through its other
endeavors, it was able to ensure that their products are set side by side with the
international giants in sports stores. As their chairman said, Accel is the only local brand
that is set side by side with the international giants in local sports stores.
• Brand is already established – due to the efforts of its hardworking founders, Accel
became a respected local sportswear brand. It can be observed that in less than a decade,
Accel was able to emerge as a sports brand worth looking at – a rare feat by a Filipino
firm particularly in the sportswear industry where players are entirely foreign.

Weaknesses
• Poor/lack of concentration on R&D – when it comes to R&D, the firm’s performance is
weak. This is mainly because of lack of necessary funds to pursue such endeavor.
Because of lack the absence of an R&D department, the products of Accel, particularly
its shoe products do not showcase any extraordinary feature. In this case, they are in a
disadvantage in terms of innovative features since the products of their competitors
showcase these innovative features. In this particular scenario, the consumer might find
the products of the international firms as far more enticing and vibrant than the ones from
the firm since it does not showcase any innovative feature.
• Poor Advertising – it is pretty evident that the advertising strategies of the firm are fairly
week. They have no commercials whatsoever. But since commercials for sportswear
firms are not at all frequent, weak performance in this regard is forgivable. But in terms
of print-ads and billboards, the firm performs weak too. In comparison with the print-ads
of the dominant firms, Accel’s print-ads explicitly showcase a sense of inferiority and
mediocrity. While those of the foreign brands showcase excitement, uniqueness and
ingenuity. Accel should focus on fixing this weakness because the image of their
company rests in this matter. Brand image is important in the industry. They must not let
their brand be considered by consumers as a weak attempt of a Filipino firm to have a
local sportswear brand. Sarcastically speaking, they should not be viewed as push-overs.
Instead, their print-ads must show a sense of Filipino ingenuity. It should convey the
 message that Filipinos too can have a sportswear brand of their own that is equally of
high quality like the foreign brands.

Opportunities
• Focus on apparel and Sports Lifestyle category – this is a good opportunity for the firm if
they want to further expand and earn more money. Since the sports lifestyle category is a
growing portion in the industry, they should capitalize on this by being the alternative
choice for consumers. Since the dominant firms will surely offer products that are pricey,
they should be the first ones to act in offering consumers with a more affordable
alternative.

Threats
• Counterfeits – it is very evident today that counterfeits in the market are rampant. There
is a tendency that consumers would settle for counterfeits of the international brands
rather than settle for alternative brands such as Accel since some of these counterfeits are
almost alike as the original ones.
• Current Economic Crisis – with the inflation of prices of basic expenditures, the firm is
currently facing problems in terms of operating costs. Since the country is facing
economic instability, and since sporting goods were defined as goods which are last on
the list of consumers, it can be inferred that buyers for sporting goods will lessen. This
would mean lower sales which will is bad for the company since it is already facing
problems in terms of high operating costs.
• Current legal actions of the government towards Globalization – tax exemptions for
foreign firms are just some of the legal moves of the government in order to favor
globalization. Because of this, there is a tendency for the prices of imported goods to go
down. If this will happen, the prices of imported goods, which are better products in the
eyes of consumers, will be bearable/affordable. In this scenario, the firm is in a clear
disadvantage since most likely, if the prices of its products are almost the same as those
of the foreign brands (because if tax exemptions), consumers would prefer imported ones
than local ones.
Industry’s key success factors
• Highly Influential Marketing and Advertising Tools/Strategy – since the success of the
entire industry is mainly because of the huge efforts of the dominant firms, it is but right
to cite the strategies employed by these firms as the success factors for the entire
industry. The continuous growth of the entire industry is made possible by highly
influential marketing and advertising tools. These tools and strategies are highly effective
in terms of persuading consumers in buying products. The entire industry is earning profit
because the marketing and advertising strategies employed are able to make consumers
buy products. Key tools in this matter are the endorsement contracts dished out by the
firms to athletes. These athletes are highly idolized role models of society. Because of
this, through the use of these athletes, the firms are able to make consumers buy their
products.
• Focus on Diversity and Innovation – because of innovation and diversity, the whole
industry became very profitable and exciting. Every year, new products are featured. This
focus on innovation and diversity is the reason behind the unwavering excitement of
consumers in terms of buying sporting goods. The consumers know that each new
product will showcase a new feature that will further improve product performance.
• Diverse employee roster – the dominant firms have employees that came from various
cultures and nations. Product development, marketing and advertising strategies are
carefully devised through various opinions and ideas that came from different cultural
backgrounds. This way the industry is able to cater to not just a sole culture or nation.
Rather, products became global. Products are designed and produced not just for a
particular few. The products are maid for everyone. The products are tailored for every
culture every nation. Product selling defied boundaries.
• Knack to see opportunities – the firms in the industry, particularly the dominant firms
have been keen in seeing possible opportunities for further growth and expansion. Going
back to the origins of the industry, it all started with running shoes. Today, the firms’
products cater to various sports disciplines. Another good proof would be the current
focus of the dominant firms in capitalizing on the sports lifestyle category. Sporting
goods nowadays are not just for athletic use alone. It also has become a fashion
 statement. Firms have located this opportunity and are now venturing in further
unraveling this untapped goldmine of the industry.

VIII. CONCLUSIONS & RECOMMENDATIONS

For Accel
There is no question about the success of Accel as a local brand. It has indeed established
itself as a brand that can be placed side by side with the likes of Nike and Adidas on the shelves
of sports stores. Its vision to be an alternative brand to the dominant brands – to provide sporting
goods to consumers at affordable prices, has been an effective strategy that ensured not only the
survival of the brand but also its fast growth. From starting with just an office at its chairman’s
house in libis, Accel is currently the official outfitter of the country’s premier basketball league –
the PBA. The success of this firm is definitely laudable.
In order for Accel to maintain its current standing and further expand, the researchers
recommend the following:
• Improve advertising strategy
• Improve product designing
• Venture on the “sports lifestyle” category

Improve Advertising Strategy

It would be very beneficial for the firm to improve its advertising since it would further
strengthen brand image. Currently, the only strong tool of Accel in strengthening its brand image
is through its partnerships with various sporting bodies in the country and through its
endorsement contracts with famous local basketball stars. Advertisements-wise, particularly in
print-ads, television commercials, and billboards, the firm’s performance is poor. This is pretty
evident in their print-ads which obviously lack luster in terms of catching the attention of
consumers. Their print-ads are somewhat simple and mediocre compared to the advertisements
of their foreign counterparts. Accel also doesn’t have television commercials.
When asked about their current advertising practices, Accel’s chairman, Philip Go said
that they don’t spend huge sums of money on advertisements because this will only increase the
prices of the goods that they offer. He also added that the foreign firms’ extravagant advertising
practices are contributing factors to the high prices of their products. He doesn’t want to spend a
lot of money advertising and then pass the expensive advertising costs to the consumers through
high prices of products.
What the researchers want to recommend is to improve advertising practices but not on
the scale just like the strategies employed by the dominant firms. The researchers do not
recommend excessive and extravagant spending. Rather, the researchers recommend that the
firm should fix the strategies that they currently employ. The firm should make its print-ads more
vibrant, make it attention catching. Their print-ads should convey the message that the brand is
indeed established. If their products convey a sense of practicality due to its affordable prices,
their print-ads should convey a sense of quality and class. This way, they can effectively
manifest their vision and mission to be a brand which offers products that are affordable without
sacrificing quality.

Improve Product Designing

Another recommendation of the group for the firm is to improve product designing. This
strategy goes hand in hand with the later recommendation. Accel should design products that are
different from their foreign counterparts. From observations from visits from various sports
stores, the group has observed that some of the shoe products being offered by Accel possess the
same design like those of the foreign brands. If the firm’s goal is to be the best alternative brand
for consumers, then they should offer products which have the same design like those of the
products of the dominant brands. If the firm will continue on designing products just like those
of the dominant brands, the consumers might think that Accel is just a copycat brand of the
dominant firms. Worst case scenario would be that Accel’s products will be labeled as close to
counterfeits, that their products aren’t considered as such because it bares a brand name of its
own. But if the brand is taken out, it can be readily considered as a counterfeit.
To effectively pursue its goal to be the best alternative brand, the firm should value the
ingenuity of their products. They should design their products, particularly their shoes in such a
way that it is considerably different from its counterparts. It is important to take note here that
product development in terms of innovative features are not taken into consideration since
application of this factor would entail bigger spending and this could heighten up the price tags
of Accel products. Since the firm’s Chairman firmly believes that high performance footwear
boils down only to cushioning, and that the firm has already perfected this factor, then they
should indeed focus more in product designing. They should make their products more upbeat,
more unique. This could go smoothly with a new advertising strategy. They do not have to spend
a lot by imitating the spending strategies of the dominant firms. They just have to make their
products the “best other”.

Venture on the “sports lifestyle” category

The last recommendation of the group to the firm would be to venture on the sports
lifestyle category of the industry. Adidas saw this category as a growing section of the industry.
Sporting goods aren’t used anymore for the sole purpose of sports activities. Sporting goods,
particularly footwear, has become a fashionable material. Rubber shoes are not used mainly for
basketball or football anymore. They have become part of consumers’ everyday fashion. Since
the dominant firms are currently capitalizing on this niche of the industry, the firm should also
join the bandwagon. The firm should also apply its vision to be the alternative choice in this
regard. It is expected that the dominant firms’ products in the sports lifestyle category will
definitely be pricey for the average consumer. Accel can capitalize on this by offering sports
lifestyle products that are more affordable. This way, consumers can have an affordable choice
for sports lifestyle products. Instead of buying counterfeits of the foreign brands that are of low
quality, consumers can be rest assured that they can buy affordable sports lifestyle products from
Accel that possess high quality.

For the industry

No doubt about it, the entire sportswear industry has experienced tremendous success. It
is currently growing and expanding. It is as if this industry will stay in the growth stage forever.
New generations produces new athletes, new trends, new designs, and new concepts. One cannot
insert the word saturation for this industry. The group only recommends one thing for the entire
industry, which is to be more critical in terms of launching new innovative technologies for their
products. This goes out particularly for the dominant firms which are considered as the main
trend-setters for the entire industry. To be critical is to be mindful of certain factors in terms of
product R&D. As an industry concentrated in manufacturing, they should be mindful of the
materials that go in the development and production of new product technologies. That means
that they should ensure that raw materials used should be environmental-friendly particularly in
its disposal. Secondly, they should be mindful in a sense that the innovations that they pursue are
really for the benefit of consumers. These innovations should be pursued not because for the sake
of creating marketing hypes. Rather, they should keep in mind that these innovations developed
in their pursuit of providing consumers/athletes with products that further enhances performance,
to make the athletes one with the sport. This way, fraudulent marketing and advertising strategies
are employed. What they are offering are real high-performance products, not marketing hypes.