HHL- GRADUATE SCHOOL OF MANAGEMENT

Adidas Group business strategy analysis

Strategy Assignment
Edgar Girn Maldonado 29/11/2010

Our goal as a Group is to lead the sporting goods industry with brands built upon a passion for sports and a sporting lifestyle. To anticipate and respond to our customers' needs, we continuously strive to create a culture of innovation. By harnessing this culture, we push the boundaries of products, services and processes to strengthen our competitiveness and maximize the Groups operational and financial performance. This, in turn, will drive long-term value creation for our shareholders. 1

KEY FACTS2
Industry Founded Founder Headquarters Key people

COMPETITORS IN THE INDUSTRY Market Shares

Sporting goods, worldwide 1924 as Gebrder Dassler Schuhfabrik Adolf Dassler Herzogenaurach, Germany Herbert Hainer (CEO) Erich Stamminger (CEO, Adidas Brand) Igor Landau (Chairman of the supervisory board) Products Footwear, sportswear, sports equipment, toiletries Revenue 10.38 billion (2009) Operating income 508 million (2009) Profit 245 million (2009) Employees 39,600 (2009) Website www.adidas-group.com

Adidas Customers: Urban youth Worldwide, also older consumers in Europe Made with data from Wikinvest

COMPETITIVE ENVIRONMENT
Environmental Trends
Nike's Large Size Reduces Advertising Expenses Growth of China and Other Emerging Markets Leads to More Sales Movement towards Lowperformance Footwear Global Market Slowdown

Attractiveness of the industry: The

sporting goods industry is unattractive for new entrants and will continue to be so for the foreseeable future. Porter's five forces model analysis was useful to illustrate this industry's lack of attractiveness.

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Adidas Group Wikipedia

Adidas and exploitation of trends Adidas sets targets to overtake Nike Reuters, November 8 2010 Adidas to Add More Than 2,500 Stores in China CNBC, November 15 2010 Adidas to Boost China Stores 9% to 6,100 Next Year Business Week, November 16 2010

STRENGTHS AND WEAKNESSES VALUE CHAIN:

Adidas value chain configuration is flexible supply chain which is one of the Adidas Group strategic pillars. Their goal is to become closest to every consumer by building and managing a supply chain that responds quickly to changing market needs and supports multiple Value Chain Breakdown distinct business models.

ITEM

Material C ost L abour Cost

To the left a table summarizing the multiple components of the value configuration for Adidas and the respective percentages for a $100 product (footwear). The analysis indicates that the cost to produce and sell an item over the Internet costs almost 50% of the price of the item.

Adidas defines a value proposition for each division in order to achieve its go-to-market strategies and maximize the Groups impact in the market. The link between value proposition and value creation is creating through innovation in products, services and processes which strengthens their competitiveness and maximizes the Groups operational and financial performance.

Core competences: Development of athletic footwear and apparel.

ADIDAS STRATEGY

The Groups strategic goal is to lead the sporting goods industry with brands built upon a passion for sports and a sporting lifestyle. Understanding of the consumer and customer is essential in order to achieve this goal.

Strategic pillars and how the group pretends to achieve its goals: Brand Portfolio: cover consumers from sport performance to sport lifestyle through a diverse brand portfolio with distinctive brands. Markets/Channels: investments are focused on the highest-potential markets Supply Chain: become closest to every consumer through creating a flexible supply chain Innovation: lead through innovation Team: develop a team committed to the positive values found in sports and that is grounded in Adidas heritage

Adidas Group strives to become the global leader in the sporting goods industry and aims innovation and design leadership as a source of competitive advantage. Sustainability in revenue and operating profit growth is critical to any company success and Adidas Group is not the exception. The Groups decision process is driven by the creation of value for the shareholders though significant cash flow generation. Thus Adidas group should pursue the avenues for growth that are expected to be the most value-enhancing, with particular emphasis on improving profitability. Furthermore, rigorous management of working capital and 0ptimisation of capital structure must be priorities for the Group. STRATEGIC ACTIONS I WOULD HAVE ALSO TAKEN Aggressive growth strategies in emerging markets High profile sponsorships

Looking to become new market leader in world golf market through TaylorMade's. RECOMMENDATIONS TO FURTHER STRENGTHEN THE BUSINESS Increase cooperation with retail partners Expand own-retail and e-commerce Improve presence in the United States Continuously try to be faster, stronger and thus more competitive