Adidas Strategic Management Presentation (2)

• Prepared by Fazal Haq

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About Adidas Group

• Adidas is the largest sportswear manufacturer in Germany and Europe and the second biggest sportswear manufacturer in the world.

• A German multinational corporation that designs and manufactures sports clothing and accessories.

• Founded: August 18, 1949• Headquarters: Bavaria, Germany

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FOUNDER• Adolf "Adi" Dassler• His brother Rudolf returned

to Herzogenaurach to join his younger brother's business

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CORE VALUE• Performance

Sport is the foundation for all we do and executional excellence.• Passion

Passion is at the heart of our company and continuously moving forward, innovating, and improving.

• IntegrityThe company are honest, open, ethical, and fair. People trust us to adhere to our word.

• DiversityThe company takes people with different ideas, strengths, interests, and cultural backgrounds to make our company succeed. We encourage healthy debate and differences of opinion.

BRAND VALUE• Authentic• Passionate• Innovation• Inspirational• Committed• Honest

BRAND ATTITUDEImpossible is Nothing

KEY MARKETS• North America • Russia• Greater China

KEY STRATEGIC PILLARS• Gaining sales and market share with key

growth categories such as Running and Basketball within Adidas Sport Performance.

• Expanding Adidas Sport Style in the fast-fashion business.

• Maintaining adidas Originals’ strong momentum to serve the needs of the fashion-driven lifestyle consumer.

Target Markets• Sports personalities involved in various sporting activities such as

soccer, rugby, athletics and basketball. • Young people• Male and Female• Ages between of 10 to 30

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Competitors

Competitors of Adidas include;

• Nike

• Gucci

• Puma

• Lacoste

Adidas GLOBAL SHARES

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STRENGTH• Financial strength• Effective marketing strategy, distribution mix,

diverse brand portfolio and Supply Chain Management and Innovations

• Brand Value• The company has worldwide presence and is

internationally recognized.

WEAKNESS• High dependency of raw material prices• Low margin • Poor share price in U.S. Market• Customers have high brand switching

OPPORTUNITIES• Investments focused on highest potential

markets and channels• Technological innovations • Tie-up with emerging sports

teams/clubs/players internationally• Brand building by setting up sports academies

THREATHS• Price fluctuation in raw materials• Unstable currencies exchange• Other brands offer more styles and

varieties• Pirated/fake imitations affect brand

image

Strategies

Creating shareholder value Investments focused on highest-potential markets and channels Creating a flexible supply chain Leading through innovation Develop a team grounded in company heritage Becoming a sustainable company Brand’s Broad and Unique Product Portfolio Brand Extension Strategies

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Adidas Core Competencies – Technology– Customer focus– Brand recognition– Supply chain– Collaboratively competitive

Why Adidas is number two ?

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• Nike has an overall better selection of gym shoes, and basketball shoes compare to than Adidas.

• Nike have wider variation of types of shoes which ranges anywhere from boots, to basketball shoes.

• Nike also are endorsed by higher profile athletes than Adidas does. • Nike has players like Kobe, and Cristiano Ronaldo while Addidas has Kevin

Garnett, who is passed his prime. • Nike's shoes are also more stylish, and well known.• Nike have higher modification function for customers on design and technology

How to improve to rank no.1 in this market?

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• Adidas should improve its product lines substantially as variation in products could lead to better and improved sales which form a major objective of any business organization.

• Adidas should concern more on innovation along with strategic partnership, Now, Adidas signed a contract with Samsung to produce a shoe + phone promotional campaign. In this strategic partnership, both the companies developed a phone to be used with shoes during training

• Improve brand association of professionals with Adidas is that it has a culture of technology and has a history of achieving a strong position in the minds of target customers.

• Adidas should work towards improving market share and being at par with Nike which is currently the world leader in Athletic footwear. Adidas should focus on roping in more celebrities to promote their products

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Strategies Map

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2012 2013 2014Return on Equity(NI/Equity) 12% 12% 12% Measures profitability a company is for the owner of the investment, profitably a company employs its equity. - Accounting, Finance, ManagementNet income attributable to shareholders as a percentage of net salesEarning per share increased 10%-15% 12%-16% 14%-18% Indicator of the profitability of the company - Accounting, Finance, ManagementOperating Margin 8% 9% 10% From using ABC costing,ABM,EmployeeLeadershipProgram,BetterSupplyChainProcess,Outsourcing - Accounting, Production, ManagementOperating Expenses 40% 40% 40% From using ABC costing,ABM,EmployeeLeadershipProgram 2,500M Accounting, ManagementNet borrowing/EBITDA below 2 below 2 below 2 Strong balance sheet increased flexibility to the best interest of sharesholders - Accounting, Finance, Management Revenue increased 11% 11% 12% From using ABC costing,ABM,BetterSupplyChainProcess,Sales,Marketing,OnlineRetailer 1,500M Accounting, Management,Sales,CustomerService,R&DGross Margin 47.50% 48.0%-48.5% 49.00% From using ABC costing,ABM,EmployeeLeadershipProgram,BetterSupplyChainProcess,Outsourcing 2,000M Accounting, Management,Production,Purchasing

Increase Share Value Share Price increased above standard 10% 12% 15% Better performance of the company - Accounting, Finance, ManagementNew customers % increase new customers through registration 10% 15% 20% Promotions/ Advertisment/ Marketing/ New products 200M Marketing, R&DCustomer retention % repeated sales through database 72% 75% 78% Promotions/ Advertisment/New products, good quality,reasonable price 100M R&D, Marketing, Sales DepartmentCustomer satisfaction % repeated sales through database and

surverys 95% 95% 95% Value customer project/ Surveys 25-50M HR, Sales Department

Increase demand % increase sales: both new customers and old customers 60% 40% 60% Advertisment/ Marketing, more outlets/ New products 200M R&D, marketing

Reduce standard lead times for footwear and apparel Standard lead times 60 days < 60 days < 60 daysManufacturing flow mangement process/ Customer service management/ Warehousing management/ Physical distribution/Increase proximity to sourcing countries 2,000M

Production manager, logistics, customer service, regional manager

Product development, creation & innovation1. Increased number of new ideas % increase in R&D expenses 12% 13% 14%2. Improved quality of ideas No. of successful product launch 17 19 21

Create leadership excellence % global engagement survey 80% 83% 86% Leadership excellence programme / Best-in-class tools 2,300 Senior management

Enabling employee to reach their personal best Annual training hours by employee (in hours) 18 19 20 Targeted development programmes 1,200 All management levels

Employee satisfaction Turn over rate 1% 1% 0% Rewards programme / Global Salary Management System / Bonus programme, Profit participation programme, Long-term incentive programmes, Champion Bonus 1,900 HR Department

Creating an attractive work environment Average length of service (in years) 5 6 7 Work-life Integration Programme 700 HR DepartmentContinuing to be the employer of choice Retaining of Top talent employees Recruitment activities / Employee referral Programme 850 HR Department

Number or new system support 2 3 6 Learning Management System / Ask the Management / e-Learning 700 HR DepartmentNumber of employees 42,541 46,824 46,306 Recriutment process N/A HR Department

Reorganization of culture % product defection 25% 20% 15% Internal Training Programmes / Employee engagement surveys 2,300 Production and HR Department

Increase the propotion of women in management % Management position 28% 32% 35% Mixed leadership team / Work-life integration /Gender balance 2,300 HR Department

7,118MReduce product and supply chain cost Production manager, plant manager

N/A

Creating long-term value 20%-40% 20%-40%

Sustainable company

Revenue growth

% change in cost of sales 11.30% -7.00% -10%

Production creation system/Quality control management 130M Research & Develop manager/ Quality control manager

Cycle process system/ Supply chain and inventory management

Customers Perspective

Champion

Learn & Growth Perspective

TargetsPerspectives Objectives Measurements Programs Budget (€)

Online communication platforms to drive employee engagement and learning

Internal Process Perspective

20%-40% From using ABC costing,ABM,EmployeeLeadershipProgram,BetterSupplyChainProcess,Outsourcing 2,600M-5,200M Accounting, Finance, Management

Financial Perspective

Balance Scorecard

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34Financial Perspective

Customer Perspective

Internal Process Perspective

Learning and Growth Perspective

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Balance ScorecardLearning and Growth Perspective

Balance ScorecardInternal Process Perspective

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Balance ScorecardCustomer Perspective

Balance ScorecardFinancial Perspective

Conclusion

Adidas has grown 10 times every 10 years. This is due to their main marketing strategies and uniqueness from day one.

Despite a changing marketplace for athletic footwear, Adidas wants to expand their product lines and marketing reach to become a more powerful global brand.

The lesson from Adidas to new and old companies is very simple-”Adidas is all in”.

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