We are providing Projects for your business growth and to meet new challenges. Here are some projects prepared by our team of "Developing New Projects" for the Guarantee of your business growth Table of Contents Executive Summary 1 Chapter 1: Introduction 1.1History 2 1.2 Logo History 4 1.3 Product Line 5 1.4 Creation of a Product at Adidas 8 Chapter 2: Company Profile and Industry Analysis 3 2.1 Company Profile Aiddas-Soloman 3 2.2 Profile of the Industry 2.3 Industry Entry and Exit Barriers 2.3 Opportunities and Threats of the Industry Chapter 3 3.1 Environmental Analysis 12 3.2 SWOT Analysis 14 Chapter 4: Strategies 19 Chapter 5: Organizational Design of Adidas 5.1 A review of the Organizational Design of Adidas 5.2 Organizational Culture of Adidas Chapter 6 Conclusion
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In 1925, in a small German village, the world got it's first taste of adidas. It was there, in avillage by the name of Herzogenaurach, located 12 miles to the north and the west of Nuremberg, that those simple three stripes were brought to life by adidas' founder, Adolf "Adi" Dassler. Adi created adidas after realizing the need for performance athletic shoes.
Adidas began small, producing soccer and running shoes, which ironically enough are stillthe main products that adidas is known for.
As Dassler’s experience grew, so did his reputation. Dassler became widely known as the"equipment manager of the world." His shoes were first worn in Olympic competition in1928, and from then on he worked with everyone from Olympic athletes to national soccer teams. Some of history's greatest athletic performances are in debt to Dassler and hiswork. Jesse Owens wore adidas track shoes, during his spectacular Olympic performancein 1936, where he earned four gold medals. And Armin Hary was the first athlete to run the100-m sprint in 10 seconds, also wearing adidas shoes. In 1949, Dassler created the firstsoccer shoe with molded rubber studs, adopting the trademark three stripes. The GermanNational team truimphed in the 1954 World Cup wearing Adi's soccer boots with screw-instuds, which enabled the game to be played under vastly different conditions withoutslipping. Hundreds of world records, Olympic medals and World Cup victories stand as atestament to Adi Dassler's life work.
One of Dassler's goals in producing athletic shoes was to design them according to eachsport's specific demands. Dassler's drive to fulfill this goal resulted in more than 700patents. His long list of sport shoe innovations includes nylon soles and running spikes. Heconsidered any material that might enhance the performance of his shoes. Dassler experimented with sharkskin as a sole material and kangaroo skin for the sides of hisshoes.
Whatever the athlete's needs, Dassler took them into consideration when designing ashoe. Gold medals, world records and personal athletic accomplishments are the truetestaments to Dassler's shoes and the effectiveness of Adi's innovations. Recognizing thegenius of Dassler's work, the American Sporting Goods Industry Hall of Fame inductedDassler in 1978 as its first non-American member. Today the world refers to Dassler as thefounder of the modern sporting goods industry.
Yet it was not Adi's creativity and mastery of shoe technology alone that catapulted adidasto the top of the athletic shoe industry. Dassler's wife, Kathe, and their five children all hada hand in the business. Horst, the Dasslers' first-born, perhaps made the most signigicantcontribution to his father's company. While Adi's were creative talents, Horst had a headfor marketing. With the combination of Dassler shoe quality and Horst's ability to market
that quality, adidas was bound for success in the athletic shoe market.
Dassler’s Legacy.
Today, the legacy of the Dassler family lives on in the design and manufacture of contemporary adidas products. The same meticulous attention is paid to athletes' evolvingneeds. adidas keeps abreast of sport technology, incorporating the most advancedmaterials into its shoes and apparel to ensure performance and safety. And the company'saggressive marketing strategy is aimed at communicating adidas quality to as large andathletic an audience as possible. Though times and technologies have changed, the goalof adidas today is the same as Adi Dassler's nearly 80 years ago: “to be the best sportsbrand in the world.”
Adidas has continued to gain momentum through the years. Many attribute this to adidas'quality, styling and reputation. Adidas is currently the largest supplier of athletic shoes in
Europe. Adidas ranks second worldwide, with their products selling in almost 200countries. In 1994 alone, adidas sales totaled 3 billion dollars. In late 1995, adidas wentpublic with its stock. It was a tremendous success and continues to trade internationally.
Adidas posted an amazing 40% increase in net sales in the first half of 1997.
Adidas, always on the cutting edge, launched their own website in 1996. The sitecontinues to evolve, yet maintains its simplistic and dazzling form, just like the brand with
the three stripes that is known the world over.
Logo History
For years the only symbol associated with adidas was the trefoil (flower) logo. This is thelogo on top of the three you see on the right. In 1991 a new adidas logo was introduced.This logo evolved to become the performance logo (on the bottom) featured on mostadidas products today. The performance logo was actually a part of the logo used for adidas' higher line of product's called adidas equipment. The equipment line began in1991 with a trio of soccer shoes. The trio consisted of the following.
equipment turf for turf surfaces (List $109.95)
equipment hard ground for grassy surfaces (List $161.95)
equipment soft ground for wet conditions (List $167.95)
These 3 shoes featured the adidas equipment logo (middle logo) and were the first of a
long line of adidas equipment products. Products in the adidas equipment line were quite
expensive (although not as expensive as today's Predator (List $181.95) ). At first the
equipment logo was only green, but soon a black version surfaced. The equipment line
continued on for a few years and then all of a sudden adidas started using the
performance logo on products that weren't part of the equipment line. The logo showed up
mostly on running and workout shoes at first. The only difference was that the word
"equipment" had vanished. Adidas continued to release shoes with the trefoil symbol as
well. In fact, it wasn't until 1997 that adidas soccer shoes started getting the performance
logo on them. This is ironic considering the performance logo started with the equipment
soccer shoes. Adidas still releases products under the equipment line but they aren't as
high quality (and cost) as they used to be.
Product Line
Adidas-Salomon produces under the following brand names:
· Adidas: footwear, apparel and hardware· Erima: Apparel· Bonfire: Apparel
• Adidas Apparel, net sales according to regionEurope: 64.4 %
Americas: 29.5 % Asia: 6.1 %
Creation Of a product at adidas.
An immense amount of work goes into the creation of an adidas product. First, Marketingconsults with the internal adidas sports and technical divisions and external sources, suchas athletes and coaches, to find out where a product is needed, or where other productsare falling short. After the consumers' needs and opportunities for product improvementsare identified, Marketing presents the concepts to our design department, which createsproducts to fill these needs with innovative technologies and functional design.Development makes the actual prototypes. Marketing presents these prototypes to theretail market.
Clearly, an adidas product is the result of the intense thought and creative energy of manydifferent people at adidas. Our goal is to crate a product that is honest. In other words,
adidas designs products that are intended to perform. The rule is simple, form followsfunction. The following is a gerneral outline of how an adidas product is created:
1. Marketing evaluates athletes' needs, develops a basic concept of how those needsshould be met, and presents the concept to Design.
2 . Design sketches possible prototypes to meet the needs expressed by Marketing.
3. Design and Marketing consider the prototype sketches together, narrowing the selectionto those they anticipate will most successfully meet athletes' needs.
4. Design works with Development to create a prototype.
5. Marketing, Design and Development meet to review and improve the prototype.
6. Samples are wear-tested to ensure the product meets adidas standards for performance and durability and stands up to the demands of the sport for which it was
In 1997, Adidas became Adidas-Salomon with its US$1.4 billion purchase of Salomon, aFrench manufacturer of skis and other sporting goods. The deal put Adidas one stepcloser to competitor and world market leader Nike, and one step ahead of Reebok.
Salomon, aside from its winter sport equipment, also owns golf club brand Taylor Made
and cycle brand Mavic. The merger makes Adidas/Salomon the second largest sportmarketeer in the world, and number one in Europe. Salomon is currently very strong inNorth America and Japan, and Adidas has the largest market share in Europe.
Position and perspectives--Solomon
Founded in 1947 by Georges Salomon, the Salomon Worldwide Group was established asa ski-edges workshop in the French Alps. Nowadays, the company is among the leaders insports equipment with strong brands: Salomon (winter sports, hiking boots androllerblade), Taylor Made (golf clubs and accessories), and Mavic (cycle components).
Salomon Worldwide‘s strength and philosophy lies in its reputation of designing true
innovative products, with both technical advantages and esthetics, resulting in a truepartnership with sport-oriented men and women. This strategy is supported by stronginvestments in R&D and marketing (respectively 5% and 20% of sales).
The company has proven its ability to quickly attain strong market positions andprofitability. Its strategy is to become a leader in the "freedom actions sports":
Facing the decline of its traditional markets (winter ski and fixations), Salomon —
still world leader in winter sports — has diversified its activities in the fast growing
snowboard and in-line skates markets.
Taylor Made is number two in metalwoods worldwide — driven by the success of Burner Bubble irons, it is the golf brand with the strongest growth on the American
market — and expects to confirm its position as an innovative brand.
Mavic is the world leader of top-level rims, and new products — such as ultra-
aerodynamic wheels — are currently being studied by the company.
Corporate Responsibility
Compared to US companies Nike and Reebok, Adidas has been slow to respond to issuesof corporate responsibility. It was only in June 1998 that Adidas adopted a code of conduct("Standards of Engagement") and an internal monitoring system. Until then, Adidas hadstated that it did not wish to develop a code of its own but favoured an industry-wide codesimilar to that drawn up by the World Federation of Sporting Goods Industry (WFSGI).
To monitor these standards, Adidas has initiated an internal monitoring program, withsubsequent audits of suppliers conducted all over the world by regionally located Adidas-Salomon personnel. The majority of Adidas suppliers have been evaluated for compliancewith the SOE and other action plans developed with individual suppliers to improveworking conditions. Adidas-Salomon has teamed up with Business for SocialResponsibility, a non-profit organization which promotes corporate citizenship, to trainmonitors and suppliers' representatives. With the assistance of experienced environmentalconsultants, a manual on health and safety and environmental issues has been developedwhich will help to make the SOE effective in practice. Manuals on labour issues are also
Next to that, Adidas-Salomon supports, through the WFSGI, projects which provideeducational opportunities for working children in Pakistan and thus alternatives to stitchingfootballs. A similar project is being developed in India. Both involve local sports goodsmanufacturers, the ILO, Save the Children, UNICEF and local NGOs.
In January 1999, Adidas appointed David Husselbee as global director of Social andEnvironmental Affairs. Husselbee used to work for Save the Children Fund and worked onWFSGI child labour projects in Pakistan.
Adidas sources most of its products from suppliers all over the globe. About 95% of itssports shoes and 60% of its garments are sourced from Southeast Asia. The increase in
Adidas sales of sports shoes and garments is due to a "strict control" of internationalsourcing costs. The Adidas Annual Report of 1996 already states that sourcing is at theheart of the business and a crucial factor in reducing production costs.
The consequences of this policy on working conditions in the supplier factories of Adidashas been described in detail which are as follow:
1. At the Formosa/Evergreen factory in El Salvador, there are about 1000 women who
work 60-70 hours per week for a monthly wage of US$133. Women becoming
pregnant are dismissed. Unions are being suppressed. (German TV broadcast
"Monitor" 13 August 1998)
2. The monthly wage in the Chinese shoe factory Han Tin is between US$47 and
US$72. Workers have to work seven days a week with forced overtime of up to
seven hours a day - paid at the normal rate of pay. (Asia Monitor Resource Center
and Hong Kong Christian Industrial Committee, October 1997) 3. The women workers at the Bulgarian knitting supplier Orfei earn 67 US $ per month.
(Documentation of the International Forum on Clean Clothes 30 April - 5 May
1998 Brussels)
4. At the Tainan factory in Indonesia, neither the minimum wage nor the legally
prescribed overtime pay are being paid. Overtime is forced and exceeds the legally
prescribed maximum number of hours. Union activities are being hampered.
Sanctions for mistakes are excessive in proportion to the wages paid. Health andsafety are neglected. Female workers are sexually harassed. ("Cheap production
in Indonesia for Germany's fashion TNCs: Steps towards alternatives",
SÜDWIND-Materialien Nr. 7, Siegburg/Germany, November 1999)
International pressure on Adidas has increased over the last couple of years, with the aimto press the company to go beyond internal monitoring. Subsequently, Adidas has startedto respond to letters from international Clean Clothes Campaigns sympathizers and to talkto the German Clean Clothes Campaign.
In 1999, Adidas became a member of the Fair Labor Association in the USA and appliedfor membership of the Ethical Trading Initiative in Great Britain. Although progress is slowand confined to selected cases of labour violations such as Formosa/Evergreen, Adidas
opted for corrective measures from the end of 1998. In June 1999 the US audit company"Verité", hired by Adidas, monitored Formosa/Evergreen and reported continued, grossviolations of labour legislation. This report was communicated to the Clean ClothesCampaign by adidas, as well as a correctional action plan dated October 1999. Over ayear after publication of the Formosa/Evergreen report, there is little progress, but at leastfirst improvements are beginning to be felt by the workers: workers applying for a job are
no longer asked if they are members of a union.PROFILE OF THE COMPETITOR
Reebok, in terms of their products, is not entirely different from Nike. Reebok is involved inthe design and marketing of both athletic and non-athletic footwear and apparel, as well asother various fitness projects. Reebok’s market share is a distant third in the footwear industry at 11.2% (compared to 30.4% and 15.5% for Nike and Adidas respectively).Reebok’s financial position has been gradually slipping for a number of years. This isevident in their declining stock price, which has fallen by over 80 percent in the last four years. Reebok’s financial woes are illustrated in their declining net sales. Reebok’s netsales declined 9% during the first three-quarters of fiscal year 1999. During that same
period, net income declined 17%. Taking these and other factors into account leavesReebok’s current financial position, as a whole, looking bleak.
PROFILE OF THE INDUSTRY
Industry Size
In 1998, Americans spent approximately $38 billion to purchase more than 1.1 billion pairsof shoes. The wholesale value of athletic shoes for the US market totaled $8.7 billion in1998 down 8.5% from the year before. According to the Sporting Goods Manufacturers
Association, athletic footwear accounts for almost 35% of all footwear purchases.
In general, consumers are spending less worldwide for athletic footwear. The current
domestic industry focus is on casual and comfortable shoes. Although athletic footwear sales appear to be recovering, demand is still leaning toward the "brown shoe" casualfootwear with a comfortable and rugged design. This switch is due to the increasingnumber of workplaces adopting casual dress codes.
Industry Profitability
The athletic footwear industry is a challenging and saturated market. Intense competition,fashion trends, and price conscious consumers have slowed growth in this industry.Manufacturers are combating sluggish sales with radical new styles, along with offeringmore styles at lower price points. Companies are looking for new ways to boost sales bycapitalizing on direct Internet sales to consumers. Many companies are also increasing
profitability by transferring production to cheaper offshore facilities.
This segment has reached a point of maturity in the domestic market and can look forwardto only modest sales growth for the long term. However, sales are improving slightly,especially in the areas of running shoes, cross-trainers and basketball shoes. Therefore,companies with strong brands will increasingly turn to international markets for growth.
Industry Seasonality
Overall, sales in the athletic footwear industry remain stable throughout the year. Theglobal variance in our market balances the seasonal fluctuations. Typical trends inseasonality appear for spring apparel, the back-to-school season, and the Christmas
holiday season.Industry Cyclicality
In fiscal year 1999, the economy was relatively favorable for footwear manufacturers. The
footwear industry and its profitability are closely tied to economic cycles. Modest inflation,low unemployment, and a booming stock market will all contribute to healthy consumer spending.
The theory behind the slowdown in sales is that growth in athletic footwear and apparel iscyclically sensitive to the Olympics. Historically, years of the Olympic Games havedemonstrated surges in growth followed by difficult sales periods. The outlook for
increased sales trends is optimistic due to the upcoming Olympic Games slated for thisyear. Nike can also look forward to a boost in demand from the World Cup events.
Industry Entry and Exit Barriers:
Entry Barriers
The athletic footwear industry is a very competitive and mature market. The leaders of thisindustry are very well established. Leaders like Nike and adidas have made the industrywhat it is today. Consequently, long-time competitors like Saucony and K-Swiss have beenstruggling for years just to keep their brands alive. This cutthroat environment hashindered the entry of new competitors.
Economies of scale also contribute to the lack of newcomers into this market. In order tohave an edge over the leaders, companies must be able to compete at all levels such asreasonable pricing, efficient production, and high product quality. These things are difficultto achieve without the resources of an established manufacturer.
Another key barrier to entry is the access of traditional distribution channels. Whencombing the shelves at stores like Sports Authority and FootLocker, it is evident that theleaders dominate the shelves. Lesser-known brands are viewed by retailers as being toorisky to replace an established brand name like Nike or adidas on the shelf.
These walls seem to be breaking down with the help of the Internet. The costs of overheadthat come along with traditional brick and mortar retail distributors are being significantlydiminished. New entrants are now able to slide into markets without these high startupcosts, making it more profitable to begin production.
Exit Barriers
When a company decides to exit from this industry it must be aware of things such asindebtedness and its ability to meet those obligations. A company must also be cognizantof lawsuits filed by its stakeholders and claims made on any residual assets.
INDUSTRY ANALYSIS:
Opportunities
The athletic footwear and apparel industries will benefit from the currently strongeconomic backdrop in the United States. Spending is high and is expected to result
in sales growth industry-wide.
Athletic shoes and apparel have become a staple in wardrobes worldwide. This is
due to both the increasing numbers of people exercising and the trend towards
casual apparel.
Competition is fierce at all levels in within the industry, especially among the
leaders. This creates a sense of security for the companies that have been able tocreate a niche.
Cost cutting due to restructuring of operations will give many companies the chance
to price products more competitively.
One area in the industry that is ever changing is research and development. The
strong departments will surely capitalize on the trends of tomorrow if their efforts are
successful.
Increasing financial recovery in overseas markets proves to be an area of
expansion for the athletic footwear and apparel industry.
E-tailing, or customer-designed internet merchandise, is threatening the traditional
distribution channels, thus eliminating the "middle-man" distributors and allowing for
increasing profitability.
Threats
The industry has reached a level of maturity. While style and technology in athletic
apparel and footwear has reached a leveling-off point, the important aspect now is
for companies to differentiate their lines.
Inflation is looming over the U.S. economy, which may spark a cutback in consumer
spending.
Consumers are becoming savvier and may lean towards discounted items.
In terms of market saturation, many of the key manufacturers in this industry havebeen around for many years. Consumers may be scanning the market for new and
Despite the tough times Reebok has recently come upon, reasons for optimism remain.Reebok has managed to hold the loyalty of a large portion of the industry’s femaleconsumers market. While Reebok’s spending on advertising has fluctuated, individualproduct designs have come and gone, female consumers have, as a group, remainedloyal to Reebok and their products.
Can Reebok use this distinctive competency to inflict damage on adidas?
Yes, Reebok can use their distinctive competency to wound adidas. If Reebok can expandtheir appeal to incorporate female consumers who are not currently Reebok customers,Reebok could expand their market share and take customers away from adidas products.
Can adidas protect itself against this threat?
Yes, adidas can protect its market share among female consumers within the industry bytargeting some of our promotions to female consumers.
The leading cause of Reebok’s recent tumbles stemmed from problems relating to poor marketing. Reebok’s shortcoming in the area of marketing is their key weakness. Whileother athletic shoe companies bombard the airwaves with commercials pushing their product lines, Reebok remains out of sight and out of mind.
Can Reebok’s key weakness damage their competitive position? Yes, Reebok’s chances of growing their market share are slim as long as their advertisingendeavors remain to be so unsuccessful. For Reebok to rebound from their currenteconomic woes, they will have to improve the quality of their overall marketing operations.
Can adidas take advantage of their competitor’s key weakness?
Yes, adidas can take advantage of Reebok’s marketing woes by doing extensive andaggressive marketing. Continuing it’s successful marketing programs should allow adidasto court the customers Reebok fails to draw in with their weak marketing initiatives.
Other External Forces
Demographics
Opportunity
Adidas once loyal market is currently aging. This means that its customers are not asathletic as they may have been in the past. However, this poses as an opportunity for adidas because they have the ability to influence the next generation of adidas customers.The older generation of adidas brand purchasers have the power to influence their children- part of the next generation of adidas loyalists. In addition, by marketing different types of shoes to this market, these existing customers will continue to be loyal to adidas.
Threat
The phenomenon of the aging of our most loyal market segment questions whether thereis a threat that the new generation will not be exclusively loyal to adidas. In the currentmarket there are a number of other competitors that are not mainly athletically oriented.Examples include such manufacturer-retailers as The Gap and Old Navy. Their clothingand shoes are competing with adidas. In addition, Nike is not keeping up with the latesttrends and styles like some of its competitors have been. For that reason, the newer generation is attracted by Nike and Tommy Hilfiger.
Pressure groups
Opportunity
An opportunity produced by pressure groups is the ability to react in a positive manner toconcerns of the public as well as customers. Consumer watch groups are payingespecially close attention to adidas use of sweatshops and child labor to produce our products. Adidas opportunity lies in being able to show the consumer force that they areindeed taking steps to reduce and eventually eliminate sweatshops and child labor throughnew policies and strict implementation procedures. Also, by responding to such consumer activism, they are portraying a positive image in that we are promoting ethics even whilewe are trying to be efficient and economical.
Threat
In the same manner, not responding to these consumer activist groups poses a threat to
adidas. The negative publicity the potential to ruin a company permanently. Bydisregarding the voice of concerned citizens, means disregarding their customers, one of our most important stakeholders.
The key opportunity for adidas currently is the booming economy of the United States.Currently the company has the ability and the resources to exploit this opportunity. Adidashas capitalized on the recent economic boom with higher sales and income. However, theyare not using their resources to the fullest degree. There are currently many areas in whichadidas is not paying attention. They have not catered to a large portion of the new
generation that demand the latest trends and styles. Also, adidas must take into accountthe changing demographics in this country. There is a much higher proportion of Hispanics, Asians, and African Americans than there was before. These groups havesomewhat different tastes that adidas should be able to satisfy.
To exploit this opportunity, adidas needs to focus on who the next generation of loyalcustomers will be and cater to their needs. In addition, the world economy is recoveringcurrently, which allows adidas to make an impression in foreign markets as well. adidas isstrong in many foreign countries, but we need to focus on the younger market of consumers. Adidas has been doing a great deal of research and development, but if theywant to increase their market share, they must look at trends while maintaining their high
standards of quality.KEY THREAT
The key threat for adidas. is market saturation. The problem is that the athletic shoemarket is already full of different brands and companies. Now, there is very little room for new companies. There is also very little room for new product innovation and growth of market share for companies like adidas. Since adidas is currently holding the secondposition in the market as far as market share, there is little room for them to expand.
Adidas. is now competing with other athletic companies as well as companies that just sellclothing or other types of shoes. If all of these other companies merely gain a smallpercentage of the market, adidas will be one of the main companies to start losing market
share.
In response to this threat, they have to focus on keeping and increasing their market shareand making sure that competitors like Nike, Rebook and Old Nay do not steal away themarket share. They could do this by focusing their efforts on a broader market. This wouldinclude the younger generation that is interested in sports as well as extreme sports.
Our mission is to be the best sports brand in the world. We will never equate quantity with
quality. Adidas founder, Adi Dassler was passionate about sports and committed to
meeting the demands and needs of athletes. He gave them the unexpected, the little
differences that made them more comfortable and improved performance.
This is our legacy.
This is what the brand stands for.
This will never change.
STRATEGIES
CORPORATE LEVEL STRATEGIES
During the time of Adi Dassler the corporate strategy was to deliver the right kind of footwear to the athletes: the foot wear that suits their needs. The focus was on manufacturing.
Even after the death of Adi Dassler, in lieu of aggressive competition from Nike and
Reebok there was no change in the strategy and the management kept its focus on
manufacturing. In a business driven by cutting edge marketing Adidas’s senior
management ignored market changes, taking a conservative course while letting Nike
steal its market leadership with innovative, aggressive marketing and products. Adidas
executives lost touch with their markets, which resulted in dwindling of Adidas market
share from an all time high of 70% to mere 2%.
In February 1993 Adidas acquired Sports Inc a US based sports marketing company
founded by former Nike executives Rob Strasser and Peter Moore. Sports Inc was later
merged with US operations of Adidas.
Turnaround of Adidas
In April 1993 Robert Louis Dreyfus, who had earned himself the reputation of doctor to
sick companies took over Adidas. Within weeks he changed the strategy of the company.
Adidas went from a Manufacturing to a Marketing company
“ All I did was borrow what Nike and Reebok were doing. It was there for everybody to
see.”
(Robert Louis Dreyfus)
Louis Dreyfus wanted to cut costs and move Adidas out of production. He closed down all
the company’s high cost factories in Germany and Austria except one. Now almost 80% of
the footwear is outsourced while rest is manufactured by Adidas itself. Adidas has shifted
more say in marketing the club and more visibility I the soccer world.
Making the Supply Chain a Competitive Advantage
In year 2001, Adidas embarked on an ambitious supplier consolidation plan which
improved its “end to end” supply chain solutions, optimizing partnerships with raw material
suppliers, manufacturers and retailers. The consolidation of supplier base will increase its
influence and power with suppliers. This focus will in turn allow Adidas Salomon to create
customized solutions; further improve social and environmental performance and lower
purchasing cost. This emphasis will allow Adidas to use supply chain as a competitive
advantage.
Joint Venture
Adidas has entered into a joint venture with Rugged Shark to license, produce and marketa men's, women's and children's collection of National Geographic casual footwear.
Licensing
Adidas acquired the rights and business of Australian designer and manufacturer, RoyalElastics (elasticized footwear).
BUSINESS LEVEL STRATEGIES
Considering the business level strategies of Adidas, Adidas follows product developmentand Market development strategies to enlarge its domain. Adidas while following marketdevelopment strategy freshened up the footwear line and sponsored tournaments in“streetball”, a street version of basket ball. It continuously follows product developmentstrategy with three new types of shoes hitting the market this year.
Under the new structure of Adidas each of the three divisions will produce its own footwear and apparel lines. Each division has been structured around different Market segmentsrather than product areas and each division will follow a different strategy.
FOREVER SPORT DIVISION: Engineered to Perform
The "Forever Sport" division will feature products that are aimed at the serious sports
participant. The main strategy followed by this division will be Focus Strategy because
this division will target athletes who want the highest level of functionality for their specific
sport. The products under this division are performance driven rather than image driven.
Forever Sport Division will use the Adidas Performance Logo.
The Forever Sport Division is where Adidas will compete with companies such as Nike,
Reebok, Puma, and Fila.
ORIGINAL DIVISION: “Once Innovative, Now Classic, Always Authentic”
The Original Division will target consumers who want to buy products exclusively for
Adidas Originals will primarily follow “Differentiation Strategy” in which it will have three
different product segmentations: The Original Division will have three different product
segmentations: Re-introduced, Re-interpreted, and Re-designed products.
Re-introduced products will be limited volume re-makes of classic products. Re-interpreted
products will be based on the original authentic sport version, with updated colors,
materials and details. Re-designed products will be inspired by the old Adidas originals in
style and craftsmanship, but put in today’s fashion context. All products will use the classic
Adidas Trefoil logo.
The Original Division is where Adidas will compete beyond its traditional competitors with
companies such as Polo, Abercrombie & Fitch, and the GAP. Increasing competition from
the fashion houses will require rapid product turnover and quick delivery times.
EQUIPMENT DIVISION: “Simply Unexpected”
The EQUIPMENT Division will focus on creating multi-functional sports products, with
cutting-edge designs, for the prestigious consumer. It will serve as the house of innovation
for cross-performance apparel and footwear. The contemporary, meaningful, aggressive,
and exciting design elements of the EQUIPMENT products will create a brand that is a
status symbol on and off the court or playing field. All products will use the new Adidas
EQUIPMENT logo.
According to the analysis conducted by the group the Equipment division will follow
“Focused Differentiation Strategy” as the distribution will be selective in chosen markets
like Germany, France and USA. The initial product launch in this division is scheduled for
fall/winter 2002.
FUNCTIONAL LEVEL STRATEGIES
Functional level strategy is a plan of action to strengthen organization’s functional and
organizational resources, as well as its coordination abilities in order to create core
competences. For this purpose the group has evaluated the strengths and weaknesses of
the functional level.
Marketing
Market Share
Adidas holds about 16% of the global market share whereas Nike holds an impressive
30.4% of the global market share. Reebok has a share of 11.2%. Adidas has the largestmarket share in the Europe. Adidas’s Achilles heel is still the American market where it
Adidas has one of its R&D site in Germany where its head quarters are located. The
categories most influenced by the European market are designed, developed, and
marketed globally from the international headquarters in Herzogenaurach, Germany. By
I994 Dreyfus decided the Lucerne R&D centre in Switzerland was not only too expensive
but also too far removed from North Americans' sporting tastes. The result was that he setup a biomechanics research centre and a regional marketing centre in Portland, Oregon in
the US, while materials research was consolidated in Scheinfeld in Germany.
Adidas is doing very well in R&D but Nike is way ahead of Adidas in R&D. Although Nike
conducts continuous, basic research that benefits numerous facets of the sports and
fitness industry, our primary focus is directed towards applied research. Applied research
focuses on short-term initiatives such as successfully developing new product lines.
Human Resource
Social Responsibility
Adidas feels a strong social responsibility and has a strong commitment towards it.
Social responsibility is an integral part of [their] brand values, and Adidas-Salomon has atradition of requiring its suppliers to conform to social and environmental standards. In1998 further steps were taken to ensure that there are acceptable working conditions inthe factories which supply Adidas-Salomon products. All suppliers are obliged to adhere tothe corporate Standards of Engagement (SOE) confirming the policy on minimumrequirements for labor, health, safety and environmental issues. The SOE is based on theWorld Federation of the Sporting Goods Industry model Code of Conduct and states that Adidas-Salomon will not conduct business with suppliers which use forced labor or child labor and do not comply with the employment laws of the country concerned. It has beentranslated for display in factories into the languages of the countries where products aresourced.
Nike is also strongly committed to social responsibility. In response to accusations byconsumer groups over unfair labor practices, Nike has developed a CorporateResponsibility Policy that discusses how it will improve working conditions for itsinternational employees. The Policy has the following mission, "To lead in corporate
citizenship through operations that reflect caring for the world family of Nike, our teammates, our consumers, and those who provide services to Nike." The policy includes,but is not limited to, the following initiatives: raising age limits in factories to 18 years,securing independent monitoring for our factories, extending a commitment to theenvironment, improving safety and health conditions, and developing programs to provideeducational programs. The policy shows Nike’s commitment to responding to the concernsof consumers, as well as a commitment to its employees around the world.
Distinctive Competency
The distinctive competency of Adidas lies in churning out products that fit the exact needs
of athletes. Adidas by creating an exclusive line focused on fulfilling the functional needs of
the athlete and by utilizing the best materials and athlete input in the tradition of Adi
Dassler. This helped in rejuvenating the Adidas brand in USA. It offered moisture
management, thermal insulation, weather protection, ease of movement, and safety,
helping the athlete to perform more efficiently.
An Adidas product is the result of the intense thought and creative energy of many
different people. Even today, the legacy of the Dassler family lives on in the design and
manufacture of contemporary Adidas products. The same meticulous attention is paid to
athletes' evolving needs. Adidas keeps abreast of sport technology, incorporating the most
advanced materials into its shoes and apparel to ensure performance and safety.
Whereas Nike’s distinctive competency lies in the area of marketing, particularity in thearea of consumer brand awareness and brand power. While the reasons that Nike issuccessful in marketing our products are numerous, this key distinctive competencytowers over our competitors. As a result, Nike’s market share is number-one in the athletic
footwear industry. Catch phrases like, "Just Do It," and symbols like the Nike "Swoosh,"couple with sports icons to serve as instant reminders of the Nike empire.
In this chapter, we have reviewed the Organizational Structure and Culture of Adidas.
Though Adidas-Salomon is a company, which is in the business of manufacturing and
marketing a wide range of products, the emphasis of our study is on the footwear business
(core business) of Adidas.
A Review on the Organizational Structure of Adidas
The Head Quarter of Adidas-Salomon is situated in a small town named Herzogenaurach
in Germany. This head office only manages the support function of Adidas such R&D,
marketing sales etc. and that too of the European, African and Asian regions only.
The American region is monitored by Adidas America, which is an autonomous division
and has been made to increase the market share of Adidas in USA. Adidas America hasgot its own support functions, which help it respond to the market needs as quickly as
possible.
In 1997, Adidas acquired “Salomon”, one of the world's leaders in sporting goods. The
acquisition broadened its product range through the addition of three leading sports
brands. “Salomon” for winter sports equipment, “Taylor Made” for golf equipment and
“Mavic” for cycle components.
The core brand of Adidas-Salomon is Adidas which is in the business of making athletic
equipment, footwear and apparel. Adidas has gone through a lot of structural changes
since 1924 i:e when two brothers Rudolf and Adi Dassler founded this shoe making
company.
In 1948, the two brothers split from each other and Rudolf founded a rival sporting
company named “Puma”.
Adidas started growing and to cut its prices short, it started manufacturing its productsoutside Germany. It moved to countries such as the Czech Republic, Hungry, Poland and
Russia.
As the company grew big, it was rent by family quarrels. As Adi’s son, Horst, split with his
parent and opened a rival branch in France, complete with its own designers and factories.
Horst eventually took over the parents company in 1985. By then, Adidas’ share of the key
American Market was crumbling. It had dwindled to just 2% from 70%. Adidas’ share was
taken by Nike and Reebok.
Horst died in 1985, leaving Adidas leaderless. His sister finally sold the company in 1989
shifted to flexible structures to deal with the environmental uncertainties. For example,
Nike and Reebok shifted to a “Network Structure”. A network organization is a collection of
independent, mostly single-function firms. The dynamic network structure describes not
one organization but the web of interrelationship between many firms. The network as
whole can display the technical specialization of the functional structure, the marketresponsiveness of the product structure and the balance and flexibility of a matrix.
In 2000, Adidas announced revolutionary new three divisional structure. This structure had
never been followed by any other organization before. In this structure, Adidas divided its
products into three divisions. The divisions were named as “The Forever Sports Division”,
“The Original Division” and “The Equipment Division”. The divisions are dealt as separate
organizations as all the three divisions produce different product to cater the differentsegments of the society. The competitors of these divisions are also different. Furthermore,
these divisions have a network structure within them. This new structure of Adidas is a
very powerful tool to handle all sorts of uncertainties of the different markets.
Given below is a sketch of the new and revolutionary Three Divisional Structure of Adidas.
In the figure, FSD stands for Forever Sports Division, OD stands for Original Division and
ED stands for Equipment Division.
A brief listing of the products and competitors of the three divisions is given below:
Forever Sports Division
The forever sports division spotlights “sports performance” products that Adidas aims at
fashion oriented customers. Forever Sports offers products that compete with Nike,
Reebok, Fila and Puma.
Original Division
Original Division focuses mainly on leisure products. The division offers three product
segments: Re-introduced, or limited volume remakes of the classical goods; Re-
interpreted, or updated products based on Adidas’ “sport” version; and Re-designed,
based on older Adidas styles, but as the company explains, “put in today’s fashion
context.” Adidas wants this division to compete with retailers such as Polo, Abercrombie &
The equipment division will be launched in winter 2002. This division will create
multifunctional sports products. The distribution of these products will be in chosen
markets like Germany, France and the US.
Adidas has undergone this structural change but one of its divisions has still not hit the
markets. This new structure of Adidas will provide Adidas with the dynamic framework that
it needs to aggressively expand its businesses and will enable it to deliver significant
growth rates in the coming years.
Organizational Culture of Adidas
Before 1993, that is when Louis-Dreyfus joined as the CEO of Adidas, Adidas was a very
formal and centralized company. All the top management was German and as Louis-
Dreyfus recalls, “it was a very self centered German company which was absolutely sure
that it was right.” There was a lot of bureaucracy in the company which had built up over
several generations. Louis-Dreyfus realized this fact on the very first day when he joined
as the President of Adidas, when he was asked to approve a salesman expense account
for $ 300. He soon realized that this was the company’s biggest enemy.
Adidas more or less tried to follow the lines of its rival Nike. Nike has a strong sports-oriented culture and is promoted through company practices such as paying employeesextra for biking to work instead of driving. Nike is recognized worldwide as an athlete’s
company which, hire former college, professional and Olympic athletes to design andmarket its shoes and clothing for sports enthusiasts. The company chooses to call itsheadquarters a "campus" instead of an office. Employees are called "players," supervisorsare "coaches" and meetings are "huddles."
Nike has been striving towards an inner culture that reflects this mantra. Employees aregiven an hour and a half for lunch to play sports or simply workout. The new Nike is not
just about shoes and slam-dunks, but about promoting a lifestyle. All new employees viewa video of sports highlights accompanied by a soundtrack that discusses the soul of theathlete and the competitive spirit. In addition, management sends weekly emails to updateemployees on the recent successes of Nike-sponsored athletes, and often hostsspokespeople to motivate and thank its staff for contributions to the sports world.
Adopting a new culture is not an easy job. The primary steps taken by Louis-Dreyfus were,
that as soon as he joined Adidas as its CEO, he replaced nearly all of the senior managers
and brought in young managers. He slashed the company's bureaucracy, adopted
American accounting rules and brought in international management talent. In a matter of
weeks, the entire German senior management had been fired. The company's chief
financial officer was Australian and the international marketing manager was a Swede.
English became the official language of the head office and no Germans remained on the
managing board of the company other than himself and some other trusted aides.
In another break with the traditional German workplace, corporate life was made almost