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1.0 CASE SUMMARY

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2.0 PROBLEM STATEMENT

There were several issues being raised in the Adidas case.

a) Business Line-up

At the time of Horst Dassler’s unexpected death in 1987, Robert Louis-Dreyfus, French

advertising executive merge with Salomon SA, a French sports equipment manufacturer that

are specialize in ski equipment, golf clubs, bicycle components, and winter sports apparel. The

acquisition had surpassed Reebok to become the world’s second largest sporting goods

company, with 1998 sales of nearly €5.1 billion. However, Adidas’s shares have decline due to

the high price Adidas agreed to pay for Salomon and how the company might finance the

acquisition. On top of that, there is question of Adidas’ core business to do with Salomon

business unit.

b) Corporate Strategies Approached

In 2005, Salomon divested all of its winter sports brands and Mavic bicycle components

to Amer Sports Corporation for €485 million. With Salomon divestiture to Amer Sports, Adidas

management acquired Reebok International Ltd for €3.1 billion to increase the company’s

revenue and at the same time to become the world’s largest sporting goods company. With the

three units based of Adidas’ core brands – Adidas, Reebok, and TaylorMade-adidas Golf, the

company is focusing on innovation, image differentiation, control its global supply chain

processes and activities in order to capture back as the leader of global sporting goods industry.

c) Footwear and Apparel

Adidas current footwear and apparel is based on the clothing needs of the consumer.

The company was runner-up to Nike in most other athletic categories. The problem here lies in

differentiating their footwear and apparel from Nike, thus capture the global sport industry as the

largest one.

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d) The Position of Reebok and TaylorMade-Adidas Golf

Reebok was acquired by Adidas Ag in 2006 is to boost the company’s sales in North

America. Besides being developed to a variety of new styles and color combinations,

expanding distribution on specialty athletic footwear stores and discount family footwear

retailers, still Reebok’s net sales are declining. TaylorMade Golf sales in the golf equipment

industry have declined by about 5 percent between 2000 and 2007. This is due to the reduction

number of golfers in the United States from 27.5 million 1998 to 22.7 million in 2007. However,

the sales of golf apparel and golf shoes had increased to 28 percent and 18 percent,

respectively, between 2004 and 2007 through the continued introduction of new styles and

professional golfers. Adidas management might consider which business line is cash dog and

cash cow.

Having gone through all the problems, it can be summarized that the problem of this

case is to outline the necessary strategies for Adidas AG’s future marketing plan in order

to become the largest sports industry in Europe and Asia.

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3.0 SWOT ANALYSIS

Internal Factor Analysis Summary (IFAS)

Internal Strategic Factors Weight Rating Weighted Score

Comments

StrengthsS1 good reputation

S2 Strong management

S3 Diversified business products

S4 Customer loyalty

S5 Efficient suppy chain

WeaknessesW1 Expensive prices

W2 High producing cost

W3 Weak in marketing research

0.15

0.15

0.10

0.10

0.05

0.15

0.20

0.10

3.8

3.5

3.4

2.3

2.0

4.0

4.8

2.5

0.57

0.53

0.31

0.23

0.10

0.60

0.96

0.25

-High quality, artist choice

-acquired reebook

- footwear, apparel and golf set

- women-reebok, athletic-adidas

-getting new products to market quickly

- not everyone able to buy

- High cost, low profit

- latest trends, weak design of products.

Total Scores 1.00 3.55

By seeing the weighed score 3.55 (>3.00, <4.00), shows a good sign for Adidas and show

Adidas have a balancing weight.

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External Factor Analysis Summary (EFAS)

External Strategic Factors Weight Rating Weighted Score

Comments

OpportunitiesO1 Overseas profesional designer

O2 Joint Ventures

O3 Organize sport awareness week

ThreatsT1 Economical and trends

T2 Business practices

T3 Competitive environment

T4 Competition

0.20

0.15

0.10

0.20

0.15

0.10

0.10

3.7

3.0

2.3

3.0

2.2

2.5

3.0

0.74

0.45

0.23

1.00

0.55

0.30

0.10

- different design, more group of customers

- Tender offer for shares and merger of joint ventures in asean countries

- enhance people sports, increase sales

- less population, economics goes down

- Affect the achievement of its growth objectives

- Number of factors outside of its control

- Getting tougher and growth prospect getting smaller

Total Scores 1.00 3.47

By seeing the weighed score 3.47 (>3.00, <4.00), shows a good sign also for Adidas and show

Adidas have a balancing weight.

Internal Factors

Strengths (S)

S1 good reputation

Weaknesses(W)

W1 Expensive prices

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Factors

External Factors

S2 strong managementS3 Efficient supply chainS4 Customer loyalty S5 Diversified business

products

W2 High producing cost

W3 Weak in marketing

research

Opportunities(O)

O1 Overseas profesional designer

O2 Joint Ventures

O3 Organize sport awareness

week

SO Strategies

Increase product quality

Joint ventures or alliance

with other retailers

companies in international

market.

Widely target market

WO Strategies

Focus on more target

group.

Reduce cost, increase sales

Focus on medium income

customers

Threats(T)

T1 Economical and trends

T2 Business practices

T3 Competitive environment

T4 Competition

ST Strategies

Research and development

to retain its competition

position.

Offer more reasonable

prices

WT Strategies

Country unstable politic

Strong competitors

Loyaly customer

Generating SWOT Matrix for Adidas

4.0 ALTERNATIVE STRATEGIES

I. Emphasize on Horizontal Growth Strategy with Focus on Diversification

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Adidas can emphasize on horizontal growth strategy by focusing expanding its products-

line into other geographic locations for instance in emerging countries such as Russia, China,

India and Brazil. Since 2008, emerging markets had made Adidas the largest seller of athletic

gear in Asia. By lengthen the current products-line of Adidas’s into new scope is actually one

way to attract customers attention towards Adidas. For example, Adidas can harmonize new

design or style with Asian customers’ preferences or cultures.

In stand, horizontal growth results in horizontal integration which the degree to which

firm operates in multiple geographic locations at the same point on an industry’s value chain,

customer satisfaction and commitment is high. Other than that, Adidas can also consider to

diversify its sports products by using pricing strategy. For instance, under pricing strategy there

are premium prices with high quality products; medium price with high-high quality or high-

medium quality of products; or low price with average quality. By diversify such many pricing

strategy, customers will have much choices to choose and more facilitate depends on their

affordability.

In some other way, Adidas, Reebok and Taylor Made-Adidas Golf should expand their

products to more diversify customers. Adidas can expand its’ products to different target market,

such as medium income customers and low income customers. Adidas should produce more

low-cost products and make sure that their products been well-recognize by public. Not only

focusing on certain retail outlet stores such as through its network of company-owned stores,

Adidas should also giving the same opportunity of selling its’ sporting goods to other small-

medium sports outlets.

II. Stability Strategy - Pause/Proceed-with-Caution Strategies

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In stabilities strategy, pause/proceed-with-caution strategies are consolidating various

acquisitions to find economies and to encourage innovation among the business units. Adidas

can stop or limit its’ production towards some products to have an innovation and redesign. This

can help to increase the company’s products image and reputation.

This is because over produce products will causes the products low value and not be

appreciate because easy to get it, but if some products are limited produce and the value

towards this products will be increase.

III. Focus on Customer Specification as Customization

Adidas also can consider focusing on customer demand or specification as more to

customization rather than standardization. For example, by providing kiosk machine at retail-

outlet stores can also give chance to customers to provide their own design or style that they

would prefer to wear or gain from Adidas AG.

From there, Adidas can use the ideas given by the customers through special order.

Instead only producing sporting goods through standardization, Adidas can also increase its

market sales from this approach; also it can help to increase customer satisfaction and loyalty

towards Adidas AG.

IV. High-Enforcement on Marketing Strategy

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Until 2008, Adidas is focusing hardly on signing endorsement contracts with popular

athletes. Besides that, Adidas also getting involved in sponsoring sports events for instance,

Adidas was the official sponsor for the German national women’s team and UEFA soccer

league teams in Munich, Amsterdam, Milan, and Madrid. From these efforts, it can be examined

that Adidas focus more on advertising its sporting goods through people and events.

In that case, Adidas should enforce more on its marketing strategy by expand it to other

marketing tools such as through using online-marketing by maintaining the usage of current

endorsers, or through inviting or welcoming endorsers on the events organize by Adidas for

example organize “Health Awareness through Sports’ Week.

Other than that, to ensure that Adidas, Reebok and Taylor Made-Adidas Golf have good

sales and acceptable by all people, Adidas can set a producing seasonal to each of their

company. For examples, Adidas produce new design of shoes and will launching on August, in

other way, Reebok stop launching new products on this period and focus for other products. So,

the company does not have same products on the same time and customers do not have too

many choices on the same time and both can earn profit on the same time.

5.0 EVALUATION OF ALTERNATIVE STRATEGIES

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I. Emphasize on Horizontal Growth Strategy with Focus on Diversification

When Adidas decide on emphasize on horizontal growth strategy with focus on

diversification, there are several positive and negative outcomes that can be evaluate from it.

Some positive outcomes which can be deriving from this strategy are customers’ satisfaction will

always be taking good care. Besides, in this case Adidas has the ability to harmonize its’ design

with customers cultures.

Customers from different region also feel like that they are being respect by Adidas

management because their rights and priority also been considered. Other than that, this

strategy is actually one of the initiatives for Adidas AG to do more brainstorming synchronize

with the effort of Adidas in extending its leadership in product innovation. Product innovation is

very much needed to compete with other sporting goods competitors especially with Nike,

leader of the global sporting goods industry. At the same times, when Adidas also focusing on

different market segment which are for medium-and-low income customers, Adidas will have the

possibility of increasing its profit margin and demand for products also will be increase.

In different negative perspective, this strategy will involve high cost budget in order to

produce different style and design in such a way to harmonize with different region customers’

preferences and cultures. Besides, though Adidas full with new style and design as what the

company’s corporate strategy was focused on, this does not mean that customers will easily or

always fit with the changes because some of the customers would still prefer to purchase or use

the current design or style compare with new.

When in the markets, there are too many new products line been distributed and

promoted, there are some chances that this can cause other products line to be omit. This is

because of too many products line and focusing more only on the new products, the

manufacturers could have lost sight for the other old product line.

II. Stability Strategy - Pause/Proceed-with-Caution Strategies

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Under this stability strategy, Adidas will have the chances on stopping or limiting the

current production for some products line which can be seen as the way to make some

improvement or innovation towards those products. Similarly with the first strategy, this strategy

can also be seen from the context of positive and negative outcomes.

Some positive outcomes from using this strategy are this strategy is one way to help

some products which facing with difficulties to grow to be improve and to be enhance so that the

products can compete fairly with other competitors. For example, TaylorMade has the difficulties

in attracting potential golfers towards its golf equipment so; by “Pause” some other business

segments for instance Adidas and Reebok, this will help TaylorMade to redesign its golf

equipment by emphasize on product innovation.

Other positive outcomes, this strategy also can help in balancing all three business

segments in market share. With not only looking for one business segment as the main

contribution to Adidas market share, this company can retain Adidas market share through all

business segments which are through Adidas, Reebok and also TaylorMade. By doing so, the

chances of this company to grow and to gain high profit margin is much higher.

However, there are still some negative outcomes that can harm toward this strategy

which is the period of time for one products or one business segment to be develop or to be

improve is taking much longer time to be implement. In the process of waiting, this would just

waste other products line from moving forward.

III. Focus on Customer Specification as Customization

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Giving a chance to customers to create and design their own style in sporting goods is

also one of the ways that Adidas can consider to use to improve its’ strategies. Some positive

outcomes that can be seen from using this strategy is it can help Adidas in gaining more ideas

on creating, designing and producing new style and design of sports goods with the help from

the customers. Basically, business firm produce products and services with the main objective

to satisfy customers’ wants and needs so, by giving attention to customers opinion and ideas

also one way to satisfy their wants and needs.

Through this connection, giving chance to customer to brainstorm their own ideas will

help to build good relationship between Adidas and customers. In order to do so, it is important

for Adidas to be always maintaining and retaining its relationship with customers. By doing so,

customers loyalty will also be retaining because their welfare wants and needs have been taking

good care by Adidas. When those relationship has become one of the main focus for Adidas,

indirectly it will helps in increasing Adidas’s market sales production of sporting goods.

Still, focus on customer specification as customization also has several negative

outcomes such as focusing on customization will wasting time and involve high cost in

producing. Besides, at the same time, there are chances that customers’ expectation cannot be

fulfill by Adidas which is not similar with what they really expect from Adidas. When this happen,

this is actually involved there is no congeniality between Adidas and customers which may have

some misunderstanding happen between them.

IV. High-Enforcement on Marketing Strategy

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Adidas could also consider to high enforcing its marketing strategy by using online-

marketing approach or by using seasonal marketing strategy. Some positive outcomes which

can be obtain from using this strategy is Adidas’s marketing strategy will always be more

advance compare with other sporting goods manufacturer. Through focusing on putting

endorsers in events that been organize will actually attract customers to come over with the

purpose to see the athletes in face-to-face. This also can increase the scope of customers’

attraction towards Adidas.

Meanwhile, some negative outcomes from using this strategy is certainly high-cost

budget are needed in order to invite and welcoming endorsers to the events that been organize

by Adidas for example “Health Awareness through Sports” Week. Other than that, there will be

a possibility that there is no increasing rate in customer rating.

6.0 THE BEST STRATEGY AND JUSTIFICATION

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Through the evaluation of each alternative strategy, we suggest that the best strategy for

Adidas case through high-enforcement on marketing strategy. As being performed by Adidas

group itself, in everything they do they are focused on strengthening and developing Adidas

brands to maximize the group’s operational and financial performance also creating shareholder

value. Leveraging opportunities across Adidas brand portfolio is the strength success of their

brands that within brand portfolio pursue two strategic priorities and they are:

a) Market Penetration - Gaining market share across all markets in which Adidas

competing

b) Market Development - Expanding into new markets and addressing new consumer

segments

Adidas multi-brand approach allows tackling opportunities from several perspectives, as

both a mass and niche player, providing distinct and relevant products to a broad spectrum of

consumers. In this way, each brand is able to concentrate on its core competencies. Across all

brands, Adidas focus on increasing awareness and visibility, providing clear and consistent

messaging and supporting product initiatives at the point-of-sale.

In addition, by commercial success also depends on leveraging the scale of the

organization and sharing best practice across Adidas group. In particular, continuing to priorities

the development and further integration through supply chain across all brands, turning it into a

long-term competitive advantage for Adidas group.

Customizing distribution by engaging consumers with unique interactive product

approaches and rewarding point-of-sale experiences. The brands must be competitive in this

environment where consumers make their final purchase decisions based on availability,

convenience and breadth of product offering. As a result, Adidas are continuously refining

distribution proposition, concentrating on two areas: expanding controlled space and improving

retail relationships. Controlled space includes own-retail business, mono-branded stores, shop-

in-shops, and joint ventures with retail partners and co-branded stores.

Controlled space offers a high level of brand control and ensures optimal product

offering and presentation according to brand requirements. It also includes on their own-retail

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business including e-commerce and mono-branded stores whereby Adidas and Reebok

branded stores not operated or owned by the Adidas group but by franchise partners.

7.0 IMPLEMENTATION

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a) SHORT-TERM PLANNING

To overcome the problem, there are several plans in short term that can be implemented.

Preparing the Adidas Business for Future

Like every world-class athlete, Adidas is continuously trying to be faster, stronger and

thus more competitive. To further focus on becoming a more efficient organization, should

commencing a comprehensive programme. The objective is to increase the efficiency of how

Adidas brings concepts to market, defining clear responsibilities, and ensuring optimal external

results in the marketplace which helping Adidas reduce costs.

In addition, this will reduce workload in the creation area going forward, facilitating higher

focus on key product initiatives. This programme should continue that providing a platform to

maximize future brand profitability and a more dedicated focus on the brand’s core strengths.

Innovation Leadership through Personalization

Adidas’ innovation philosophy encompasses every facet of the brand’s business from

product design and development to brand marketing, promotion partnerships and distribution. In

this area, personalization represents a key focus. In marketing and distribution, personalization

includes providing tailor-made offerings that would be it online or in stores.

Personalization will be the brand’s lead innovation concept and a driving force of the

Adidas business going forward. It will guide all efforts in product design and development, digital

marketing and distribution.

Increasing Cooperation with Retail Partners

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Success in both Sport Performance and Sport Style requires an effective distribution

strategy and a solid network of reliable retail partners. The right presentation and availability of

consumer-relevant products as well as excellent customer service at the point-of-sale are critical

in this respect. Adidas currently generates high percentage of its business with its retail

partners. Two of the highest strategic priorities to drive future business growth with the brand’s

partners are:

a) Consumer-oriented range segmentation forms the foundation for closely targeted brand

activation plans. In this, Adidas is working very closely with its main retail partners to fully

align consumer propositions and to develop unique selling propositions in line with the

partner’s target audience. Adidas also seeks to broaden its distribution network with the

addition of new partners, in particular sports specialist or fashion specialist customers, as

the product offering is expanding continuously.

b) Retail space management such as shop-in-shops is becoming the most dynamic business

model for Adidas and is a key part of the brand’s controlled space expansion. In this, the

brand is cooperating with retailers along the entire supply chain all the way through to the

point-of-sale. These models secure high levels of product availability throughout the

season, allowing for quick adaptation to demand patterns. In addition, by increasing

control over point-of-sale presentation, regular brand statements and product updates

give Adidas higher flexibility to generate consumer awareness.

Own Retail and E-commerce

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Own-retail expansion is an important strategic driver for Adidas brand growth. While

serving as a mechanism to expand distribution where retail infrastructure is underdeveloped

such as in many emerging markets, own-retail activities also give the brand valuable insight into

consumer trends and product positioning in all markets where Adidas operates its own stores.

In addition, improving own-retail presence and processes will in the short run also is

beneficial for enhancing other controlled space initiatives as best practices in presenting brand

image can be incorporated in these concepts. Furthermore, a refreshed Y-3 store concept has

been launched and is already exceeding expectations. To fully exploit the potential of the new

Style Essentials range, Adidas has opened numerous dedicated stores via the Adidas franchise

partners.

b) LONG-TERM PLANNING

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For the long term planning, Adidas can proceed by introducing its’ own fitness and

health firm in several countries which can be called as ADIDAS FITNESS CENTRE. Through

introducing its’ own firm, this could be an advantage for this company to use its’ own sports

goods and equipment. This is also one way to attract customers to come over to the firm with

the purpose of focusing on health awareness through using Adidas AG brands. The reasons

why implement ADIDAS FITNESS CENTRE is a good way is because due to the current trend

that people will also consider brand in their social lifestyle and price will be consider similar with

other fitness and health firms.

Other than that, Adidas might consider to joint venture or mergers with other companies

with different scope of business focus. For example, Adidas could do joint venture with Nestle,

the largest food and nutrition companies in the world. Through this joint venture, Adidas could

come several ideas such as organize fitness workout events with the purpose of promoting

Nestlé’s Fitness Cereal and stay fit with using Adidas brands or by signing endorsements

contracts with athletes and celebrity could also helps to build good relationships between

Adidas and Nestle.

In addition for long-term planning, Adidas could also implement its’ business by

sponsoring its’ sports goods and brands through television programme such as sponsoring in

“The Biggest Loser” programme or doing the same television programme by emphasize on

Adidas brands in ADIDAS FITNESS CENTRE.

8.0 CONCLUSION

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Adidas is a sportswear company which introduced in 1920 by Adi Dassler. In 2008, the

company was organized by three units which are Adidas, Reebok and TaylorMade-adidas Golf.

The problem statement in this case study is to outline the necessary strategies for Adidas AG’s

future marketing plan in order to become the largest sports industry in Europe and Asia. Adidas

wanted to increase the shareholder values and here, we have suggested doing an aggressive

marketing strategy in order to boost their sales worldwide.

In the short term, there are three suggested strategy which are by preparing Adidas

business for future marketing concept with maximizing future brand profitability and a more

dedicated focus on the brand’s core strengths, innovation leadership through personalization,

increasing cooperation in retail partners and also own retails and E-commerce strategy

As for the long term strategy, there are three suggested strategies that could be

implemented which are the first is by introducing new product line which is ADIDAS FITNESS

CENTRE. Due to the current lifestyle trend, people will consider what brand in anything they do.

Second, Adidas could also consider in doing joint venture in other business line for example, by

promoting their brand through Nestle’s product and come with Nestle’s fitness cereal. The last

strategy that has the possibility in booming the product sales is through reality show, which also

the current commercial trend. By having their own Adidas Fitness Centre, Adidas can organize

a TV shows which has the collaboration with the current TV programme such as “the biggest

loser” and the concept is all about staying healthy with Adidas.