National Institute of Fashion Management,

Bhopal

Strategic and Innovation Management

Assignment – 2

Guided by - Mr. Rajdeep Singh Khanuja

Presented by- Kavita Gupta
Mrunmayee Samarth
Priyanka Bisht
Ruchi Mishra
Sneha Saxena
Sachin
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Adidas AG is a multinational corporation, founded and headquartered in
Herzogenaurach, Germany, that designs and manufactures shoes, clothing and
accessories. It is the largest sportswear manufacturer in Europe, and the second
largest in the world, after Nike. It is the holding company for the Adidas Group, which
consists of the Reebok sportswear company, Taylor Made Golf Company, 8.33% of
the German football club Bayern Munich, and Runtastic, an Austrian fitness
technology company. Adidas' revenue for 2018 was listed at €21.915 billion.

The company was started by Adolf Dassler in his mother's house; he was joined by
his elder brother Rudolf in 1924 under the name Dassler Brothers Shoe Factory.
Dassler assisted in the development of spiked running shoes (spikes= for multiple
athletic events. To enhance the quality of spiked athletic footwear, he transitioned
from a previous model of heavy metal spikes to utilising canvas and rubber. Dassler
persuaded U.S. sprinter Jesse Owens to use his handmade spikes at the 1936
Summer Olympics. In 1949, following a breakdown in the relationship between the
brothers, Adolf created Adidas, and Rudolf established Puma, which became Adidas'
business rival.

Adidas' logo is three stripes, which is used on the company's clothing and shoe
designs as a marketing aid. The branding, which Adidas bought in 1952 from Finnish
sports company Karhu Sports, became so successful that Dassler described Adidas
as "The three stripes company"

Adidas mission statement is “The Adidas Group strives to be the global leader in
the sporting goods industry with brands built on a passion for sports and a
sporting lifestyle. We are committed to continuously strengthening our brands
and products to improve our competitive position.”
Adidas vision statement is “to be the design leaders with a focus on getting the
best out of the athletes with performance guaranteed products in the sports
market globally.”
PORTER’S 5 FORCES MODEL- Obviously, Adidas five forces model is
highly competitive especially with competitors like NIKE and UNDER AMOUR (UA).
Notwithstanding, the five forces model ranges from Company Rivalry, Threat of New
Entrants, Threat of Substitutes, Suppliers power and Buyers power. The company’s
rivalry: This has to do with the all competitors in the sports industry which includes
Nike and UA. Competition here resides precisely on quality, price. This means that
all efforts are focused towards maintaining a good quality as well as affordable price
by the customers. Threats of new entrants: It is a true fact that no person will trust to
put money into a new business where strong competitors abounds unless it has
access to the resource fields with a strong brand name trusted by customers
especially from other companies, otherwise it stands losing the investments.
Furthermore, with dominant players like Nike, UA and Adidas, it will always be a
difficult competition to invest a start up with enough capital, for R&D, Marketing and
advertising and in-house or outsourcing bargaining of contracts. Threats of
substitutes: A substitute product is one that can serve exactly or partly what an
intended product can serve. In this case there are other industries which can
produce non-sport wears, like shoes, suits or accessories which can serve same
purpose as products from Adidas, Nike and Puma and are consumer friendly and at
the same time threats to these companies. Supplier’s bargaining power: It is very
wise here to measure and know the suppliers bargaining power in the current
economic climate over Adidas because it helps to know if Adidas has a higher
bargaining influence over the supplier as to be on the gaining side or at the losing
side. Obviously over-all suppliers bargaining power of Adidas is low. Buyer
bargaining power: For the fact that “the customer is the king’’. The sensitivity of price
and the rate of new product inventions or innovations by competitors especially in
this high economic climate has always change the weather in favor of the buyers
thereby increasing the switching costs for substitute products with a high bargaining
power to the buyer.
Adidas Portfolio
As one of the two most popular sportswear manufactures, Adidas aims to be the only
leading brand in the world. In terms of that, Adidas Portfolio is a major implement of
Adidas to compete market share to the other sportswear brands. It helps Adidas to
handle multiple consumer needs, exploit market opportunities from various angles as
well as be less affected by one-dimensional market risks.

Adidas Football
Absolutely, football is the hottest sport of the world. That means football has a huge
consumer groups and worldwide attentions, especially during the periods of major
sporting events such as the FIFA World Cup, UEFA Champions League and etc. So
football is clearly one of adidas’ key strategy priorities. More specifically, adidas’
main strategy is to be partners including football events (e.g. FIFA World Cup,
UEFA), national federation (e.g. defending FIFA), leagues (e.g. Major League
Soccer in USA), clubs (e.g. Real Madrid, FC Bayern Munich) and individual players
(e.g. Thomas Müller, Steven Gerard). Adidas football always occupies a mass part of
sales among all products.
Adidas Basketball
Adidas is committed to strengthening its position in basketball by expanding its
footprint in the critical North American market and capitalizing on the growing
popularity of the sport in the emerging markets. To achieve this, adidas Basketball
strives to build brand equity by leveraging its status as the official NBA outfitter,
capitalizing on relationships with some of the most promising stars of the NBA such
as Derrick Rose and Dwight Howard, and building the best product in the game.

Adidas Running
Running continues to be high on adidas’ agenda and is crucial to the brand’s
success moving forward. Adidas’ philosophy is to inspire and enable runners on all
levels, with the aim to be the most trusted and desired runners’ brand in the world.
Adidas sees significant market share opportunities among casual runners and young
multi-sport runners in the future. To achieve growth and market share increases,
adidas promotes by developing adiZero and Climacool ranges.
Adidas Training
At adidas, training is the biggest category for both men and women. Its positioning is
driven by adidas’ desire to support athletes to be “fit to win”. A key strategy priority
for future growth in the training category is adidas’ dedication to complement its best-
in-class product offering with revolutionary new consumer experiences that bring to
life the adidas vision to be the leading personalized brand in the world.

Adidas Originals
The market for street-wear and lifestyle fashion represents a unique opportunity for
sporting goods companies as it is more fragmented and larger in size than the
market for products used in sports activity. Adidas Originals takes a three-tier
strategy to brand and product marketing:

– First, the brand invests and innovates in new concepts, whether it’s street
fashion collections.

– Second, this permanent creation of newness and creating buzz around the
Originals brand then allows us to broaden our messages and expand into wider
business segments.

– Third, we commercialize the sub-brand to the widest audience with concepts.

To stay connected to tis core teenage consumers, adidas Originals uses a constant
stream of digital content to keep them interested 365 days a year.
Adidas SLVR
At adidas, we believe that there is a need in the market for sophisticated, classic, yet
fresh and confident sportswear that lasts longer than one season. The adidas SLVR
label fulfils this need.
Products Apparel Sports Shoes
Equipment
& Hardware
Revenue(In 7 3 10
US$bn)
Relative market 11.6 15.7 21.9
share
Industry Growth +7.66 +3.4 +2.34
rate
Adidas company holds four types of strategy such as Diversification, Backward
Integration, Product development, Market development due to company’s mission
and vision.

Diversification strategy- Adidas is a well-known company with its multiple product

and also very successful brand name.

Backward integration- The Company is outsourcing in foreign countries

especially in Asia. The percentage of outsourcing is 93 % and it is very high. In this
condition the suppliers have high bargaining power.

Market Development- Entering to a new market will be successful due to there is

a high level of competition within the market, so in the purpose of company
development the company consider to growth.

Product development- Adidas Company believes that the development in the

product line will give benefits and will differentiate from those in the market.

Competitive profile matrix (IE) - Identifies firm’s major competitors and their
strengths and weaknesses in relation to a sample firm’s strategic position. If total
weighted score for NIKE is 2.85 then this indicators for Adidas is 2.72 and for
Reebok 2.42. Adidas is a first sportswear company in Europe but in the world Nike is
leading with the percentage of 39.2%. Then, Adidas with 15.1%, Reebok 10.9%,
New Balance 9.4% and others.

SWOT Analysis
The SWOT-analysis highlights how internal factors such as strength and
weaknesses or external factors as opportunities and threats are affecting the
organization and its decision-making.

1. Strengths

The first thing to discuss in the SWOT analysis of Adidas are the strengths of Adidas

and how well it uses it.

STRONG LINEAGE: Founded in the year 1924, Adidas over the years has slowly

and steadily become the brand it is today. Regarded globally as a premium

sportswear manufacturer, Adidas has created a strong niche for itself with its own set

of audience.

GLOBAL PRESENCE: The next key strength of Adidas is its global presence. The

company is operating in Asia Pacific, Western Europe, North and Latin

America, Emerging markets and Russia/CIS.

INNOVATIVE BUSINESS STRATEGIES: Some of its subsidiaries like Reebok,

TaylorMade, and Runtastic has helped Adidas push its gross margins well above its

competitors.

INNOVATIVE PRODUCTS AND MARKETING STRATEGIES: One of the major

strengths of Adidas is the innovative way it approaches while manufacturing its new

products. Products like Yoga Collection made from recycled ocean plastic and

AlphaEdge 4D sneakers made by using light and oxygen through a process called

Digital Light Synthesis are some of the innovative products that Adidas introduced in

the market and got a phenomenal response.

Adding to the strengths of Adidas is the aggressive marketing strategies Adidas

adopts to promote its products. Adidas targets the “innovators” and “early adopters,”

consumers in the 15-30 age range, with new products that create instant sales

bonanzas using digital and offline channels.

COLLABORATION: The celebrity-infused strategy involving High profile

collaborations and partnerships with celebrities and companies such as Pharell

Williams, Run DMC, Kanye West, Bape, and Beyonce has helped the brand outdo

its competitors and create a buzz in the market which no other sportswear maker

managed to create.

2. Weaknesses
The second in the SWOT Analysis of Adidas is the Adidas weakness.

NARROW PRODUCT LINE: Despite having t-shirts, shorts, etc in its product line,

Adidas lays more emphasis on its footwear, thus limiting its market share. Adidas

needs to have a holistic approach while promoting its products so as to eat up the

market share from its competitors.

PRICE POINTS: One of the major weakness of Adidas is its pricing strategy, which

targets only upper-middle and affluent classes. Competitors like Puma have

successfully got their pricing strategy right and target both the middle class and

upper-middle-class customers with its products.

ABSENCE OF BRAND LOYALTY: Unlike its competitors like Nike and

Underarmour, Adidas has failed to create loyalty among its customers. Launching

the Yeezie brand was a good attempt by Adidas to create brand loyalty but it still has

miles to go to reach where Nike is.

BRAND ENDORSEMENTS: Nike endorsements with athletes are very high in

number than Adidas, Under Armour or any other brand. In 1980, Adidas was passed

on a potential endorsement with American basketball player Michael Jordan. But

Nike was able to snagged Jordan endorsement deal and even today the brand is

generating billions of dollars revenue for one of the leading brand Nike.

3. Opportunities

The third in the SWOT Analysis of Adidas is Adidas Opportunities

PRODUCT INNOVATION: At Adidas, innovation is at the core of all the products it

manufactures. The choice of materials and how they are manufactured are the two
main ways by which the innovation team of Adidas influences the environmental

footprint of our products.

Approaching the innovation challenge from an environmental perspective helps

Adidas make products that are better for consumers and better for the planet, too.

Some of the main examples of innovative ideas and new technologies that have

been used in the creation of the Adidas products are:

 Sport Infinity
 Parley for the oceans
 Biosteel fiber etc

COLLABORATIONS: Sneakers like the Raf Simons x adidas Originals Ozweego

and the Kanye West x Adidas Originals YEEZY Boost 350 have been canonized as

some of the biggest status symbols in the footwear world.

 Pharrell Williams x Adidas Originals

 Palace x adidas Originals
 Bedwin and The Heartbreakers x adidas Originals

Are some of the famous collaborations that Adidas has come into.

INCREASING PURCHASING POWER OF CUSTOMERS: The last in the list of

Adidas opportunities is the Increasing purchasing power of the customers. With the

increasing income of customers, people tend to purchase more products allowing

Adidas to increase the sales of their products.

4. Threats

COUNTERFEITS: Counterfeits or fake products are one of the major threats

of Adidas. Counterfeits target lower and middle-class customers and are

slowly eating away the company’s market share in underdeveloped and

developing countries.
 COMPETITION FROM LOCAL AND INTERNATIONAL PLAYERS: One of

the major threats of Adidas is the fierce competition it faces from local as well

as international players. Competitors like Nike, Puma etc are giving the

company a tough run for its money in the fight to get the largest pie of the

market share.

PESTLE ANALYSIS
External influences are defined as political, economical, socio-cultural, technological,
legal and eco- environmental headings. This leads to “PESTLE-analysis” as an
instrument for this report. Because Adidas’ headquarter is in Germany, I will focus
mainly on this country.

1. Political
The major that affecting Adidas are changing trade policies and political
unrest in many countries. Adidas has to tackle such issues in order to sustain
its global presence and financial performance.
The Trump administration is imposing import tariffs and restrictions. US tariffs
on Chinese goods is a huge area of concern for Adidas and other athletic
apparel industries with respect to increase in products prices. Germany is a
major exporter and US import restriction and tariffs can cost Germany up to
20 billion euros.

Adidas has a worldwide operations that involve shipping and distribution

of products and services. Adidas is unable to achieve its overall goals and
objectives without improving its complex supply chain to meet international
and political laws and procedure. This will help the Adidas to increase its
sales, profitability and brand awareness.

2. Economic

Unemployment, wages rates, taxation, inflation and interest rates are

those economic factors that can affect Adidas performance and profitability.
Adidas and Nike both are the giants of sports footwear industry. In 2011, the
combine concentration ratio of both brands was 52.7% which means that these two
are controlling almost half the industry.
Adidas products are not necessity of life but focus on active life style consumer and
athletes. There are noticeable fluctuations in the global economy. Adidas
marketing strategy should focus to select the markets to distribute and sell products
that will help to increase Adidas market share, brand loyalty and profitability.
Adidas is manufacturing more than 50% of products in China. But due to rising labor
cost the company has to transfer some of the production capacity to other
countries. Here rising labour cost is another economic factor to affect its
performance. On the other hand, Adidas must resolve the issues related to import
and export of goods

3. Socio-Cultural
Adidas mainly follows designing regarding fashion or creates distinctive design.
Products are best to use for any age, raise, lifestyle, and religion. It mainly focuses
on people who are athletic and love sports. The social factors do have effect on the
innovation and buying habits of every person. Factors need to be adequately
discussed and help to implement a strategy for an Islamic TV a proper and complete
outfit would be recommended.

4. Technological
For every sports brand embracing innovative technologies is a competitive
edge over competitors. Technology can not only be used in a product itself
but also in overall company operation for example product and process,
management and accounting system.
Though Adidas has opened few Speed factories to speed up production. It still
needs to expand this technology to other factories in Asia and other locations.
Furthermore it should incorporate data collection integration technology in its
products to measure performance athletes and other consumers. Adidas must
address these technological challenges to increase productivity, market share
and brand loyalty.

5. Legal

As above mentioned, the Adidas concern has to adhere a lot of regulations and laws
so that its´ productions and processes can go on smoothly. Additionally the company
is exposed to the risk that third parties assert claims because of infringements of
property-, patent- or other rights. Therefore the group extended its resources in the
industrial property right department.

Furthermore Adidas has to consider laws concerning health, employment, financial

regulations, product safety, environment and many more

6. Eco-Environmental
Adidas is trying to minimize the use of banned and restricted material in production, products
and stores. Another company commitment is to reduce carbon emission and attain green
company 2020 targets. Company is also looking to produce product and apparels followed
by “low waste initiative program”.

Conclusion

Adidas is one of the leading sports brand group worldwide. It has a lot of competitors
as Nike, Puma, Under Armour and many more. It is very important for adidas to have
a close check on BCG matrix for its divisions in order to take best managerial and
investment decisions.
Adidas can take following actions/steps to compete and grow in the market. For
Stars- As the shoes category is performing well, it should be maintained as it is. For
Cash cows-the apparel category should be focused on the product development and
try to get into stars by product development. Question marks-sports equipment bags
can try to get into cash cows by market penetration. For Dog- caps and hats needs
to divest as they aren’t making any profit.
These strategies can lead Adidas to the path of growth and success resulting in
Adidas as a market leader.