RESEARCH ON ADIDAS COMPANYPresented to Ali DANIMAN

JESSE JOSHUA 15500411ANTHONY E. ONYEAMA 15500032ELVIN HASANOV 145392

ABSTRACTAdidas, which is a force to contend with in the clothing industry, is at its best and improving following the strategic choices the Company has made from the onset achieving its visions and missions, capitalizing on its strengths, taking advantage of its opportunities to minimize weaknesses and threats.As one of the worlds largest manufacturers for sportswear and sport utilities, Adidas prides on its quality and in this paper, evaluations of its internal and external environment and resources would provide a clear understanding as to its successes and factors responsible from inception till date.

INTRODUCTIONAdidas is aGermanmultinational corporation founded by Adolf "Adi" Dasslerthat designs and manufactures sports shoes, clothing and accessories headquartered inHerzogenaurach,Bavaria. It is the largest sportswearmanufacturer in Europe and the second biggest in the world. It is theholding companyfor the Adidas Group, which consists of theReeboksportswear company, Taylor Made-Adidasgolf company (includingAshworth), 9.1% ofFC Bayern MunichandRuntastic, an Austrian fitness company. Adidas revenue for 2012 was listed at14.88 billion. Adidas was registered on 18 August 1949 byAdolf Dassler, following a family feud at theGebrder Dassler Schuhfabrikcompany between him and his older brotherRudolf who later started establishedPuma, which quickly became the business rival of Adidas and is also headquartered in Herzogenaurach. The company's clothing and shoe designs typically featurethree parallel bars, and the same motif is incorporated into Adidas's current official logo.

VISION AND MISSION STATEMENT Vision statement: 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.Mission Statement: Adidas mission statement reads, Our mission is to become the best sports brand in the world. To that end, we will never equate quality to quantity. Our founder Adi Dassler was passionate about sports. For Adi, the athlete came first. He gave those on the field, the court and the track the unexpected and 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.Basically Adidas mission is to always put the customer and their needs first. This suggests that customer satisfaction is the most important thing to this company. They also want to be known as the best sports brand around the world, they want to be the go-to sports brand for any athlete. They value quality over quantity. They want to be the sports brand that puts in all the little extra details that makes their product stand out among others. The founder of this company Adi Dassler had this great passion for sports which implies he cared more about the product he was putting out than how much money of it he was making or the money he made from it, that even after his death, the company wants to keep his legacy and continue to put the customer first. Adidas also wants to spread their message worldwide, impossible is nothing. They believe in limitless opportunities, theres nothing they cannot achieve. Adidas wants to move past the term impossible. They want to bring what people believe to be impossible to life.

ADIDAS INTERNAL ENVIRONMENT FOCUSING ON UNIQUE RESOURCES AND COMPETENCES THAT ARE CRITICAL FOR COMPETITIVE ADVANTAGE. One of the most important goals of Adidas has been to develop a strong competitive advantage in order to stay successful and survive against the large number heavyweight competitors. The industry in which Adidas interacts is characterized by a set of many specific features. The extreme rivalry between Adidas and its competitors, Nike, Puma or New Balance is higher than ever before. Nevertheless, most of these brands outsourced their production and re-defined themselves as brands or marketing organizations. Despite the fact that Adidas currently ranks right behind Nike in the segment of sports shoes and sportswear market, Adidas still has been a successful business enterprise right from the beginning of their establishment by Dassler in 1945. The encouragement and application of a spirit of constant and updated technological innovation and excellence has resulted in generating such a powerful competitive advantage for Adidas that its market opponents find it hard to beat. The high performance, market orientation, technological development and brand promise, created the expected value for customers. Especially the companys policy and corporate culture, that includes providing their customers with the necessary technological applications, in order to meet and satisfy the full needs of their end-consumer. (Kumar V. & Reinartz W. 2012).Competition and competitive markets are common in every industry. Especially since Globalization is influencing our economy, companies need to stay competitive in order to survive against new rising competitors which are basically rooted in the Middle East Asia. Analyzing own strengths and weaknesses and capturing new opportunities or avoiding threats, are one of the most important factors for reaching this goal. One important basis for ADIDAS competitive advantage is the resource based view model. The resource-based view as a basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable intangible and tangible resources at the firms disposal.Resource Based View In every business there are many types of resources and assets. Some resources are clearly visible and tangible and others may not. The Resource Based View is a device to assess the amount of tangible and intangible resources in order to capture possible capabilities with the goal, to build and sustain competitive advantage. The device is differentiating between intangible and tangible resources. Intangible resources are skills, services, corporatereputation or knowledge a firm can provide. The collective knowledge of a firms workforce represents a tremendous resource. Intangible assets are difficult to quantify in financial terms and often impossible to sell. Education and experience are the main drivers for the knowledge of a corporate workforce, and grows within the structure of a particular industry. Tangible resources are known as raw materials, products or workforce. Corporations that are committed in primary resource extraction have holdings of very tangible goods or resources and often own the land outright on which their resources are located or manufactured (Freiling, J., 2001).Furthermore, but less a tangible resource, the corporation owns the rights to the coal, oil or any other raw material, that is located on public land. In both cases, the resource is a physical reality, more or less tangible and the value of which can be financially determined by observing the going market value of a certain good. Regarding Adidas, as one of the most important global players in their industry, it is also possible to distinguish their resources. Adidas is holding more than 50,000 employees, all over the world into their workforce. CNC machines are used in the assembly line for the mass production of shoes, which is more or less their cash cow and keeps them successful. The Research and Development departments are equipped with CAM. Softwares for creating cutting edge designs. The main manufactories are located in Vietnam and China and the bases for the organization are based in Portland, Oregon (U.S) and in Herzogenrauch, Bavaria (Germany) (Adidas Group, 2013). Patents, partnerships, sponsorships and cooperations with universities are intangible assets, which Adidas owns.Distinctive capabilities are the talents and unique elements that are embedded within the organization. These essential characteristics are considered highly preferred, since they provide the business with what it needs to be competitive in the marketplace and also provides the firm a competitive advantage. Therefore distinctive capabilities are generating the core competencies of an organization and are the key driving forces for a company to achieve its competitive advantages. Adidas utilizes its key resources and capabilities to create value and performance excellence. Distinctive capabilities that Adidas holds are e.g. Special R & D departments and correlations (universities), sponsorship agreements (FIFA/ NBA), diversified operations, network and portfolio, good reputation as mid-priced brand in the industry, distribution network and strategic innovation. (Adidas Group, 2013).Technological superiority of its products is the primary factor of market penetration for Adidas. Nevertheless, an intense and targeted marketing mix and strategy is the second most important key driver of success. An important fact and promotional tool for products has been, to integrate celebrities and professional sport idols into theirmarketing mix. This strategy seemed to be very successful and generated a steady source of profit and sales. Consumers appreciated and enjoyed the emotional experience, to share the same daily products with their idols or people, who are influencing them. Furthermore, Adidas is following the main rules of Customer relationship management. Feedback from regular customers and surveys about particular products or advertisements created a high level of customer involvement and loyalty, what turned out to be the most effective strategy. These methods and tools helped Adidas to develop and build a long-term profitable customer relationship.

ADIDAS EXTERNAL ENVIROMENT The external environment, originally known as the pestle analysis comprises of political, economic, social, technological, legal and environmental factors. Adidas external environment as a global company is surrounded with verse challenges which range from the above mentioned factors. Apparently, the political factors of the company deals with areas of government regulations which includes tariffs in the forms of tax barriers or price and exchange controls, work schedule laws, labor unions etc. Furthermore, giving instances with Germany as a stable political country which is governed by Christlich Demokratische union (CDU), by the first female chancellor, Angela Merkel with massive achievements like; reductions in organization tax, investment in the areas of research and development (R&D), additional investments on infrastructure as well as trying to balance the political and multinational needs with the general population, to mention but a few.Economic: Economically, Adidas profitability is affected in the areas of inflation, taxation, unemployment as well as per capita income. However, there exists unstable stock market caused by some fluctuations of interests rates leading to the growth rate fluctuations too. So with a nominal GDP of 3.316 trillion US Dollar and has approximately an unemployment rate of 7.4% in 2010 and has presented her the fourth largest economy in EU with no. 1 in terms of purchasing power. The country is highly dominated in motor vehicles, machinery, chemicals etc. Imports and exports of Germany is rated 2nd in world largest trader 2011.Social cultural: As one of the leading countries of the world, Germany has various social-cultural factors which affects its innovation. It therefore means that Adidas should take into consideration these factors which include culture itself, religion, gender, language, race, buying habits, life style in order to have a successful implementation of its strategies across regions by verifying the obtainable cultures of the land and be able to adapt to the culture of the environment. The net migration of the country is 0.54 migrants /1.000 population with two major religions as Roman Catholic and Protestant with 68% faithful members, and with a below poverty line of about 15.5% www.cia.gov, 2011.Technology: As the application of science in industry and engineering for the invention of new things and or solving of problems, Adidas employed technology in the making of the first world smart shoe by putting a microchip and wireless mp3 player inside the shoe and it was very appealing to the customers. More so, the company uses a heat-activated adhesives in their packaging suitable for long distance, humid conditions and extreme temperature changes. And to this effect, Adidas is highly committed to research and developments investments. Legal: As an authorized company, Adidas is well aware and is fully utilizing all legal procedures as ethically demanded and with due respect to legal constraints to trade description act , sales and supply of goods acts (SSG), advertising standard authority (ASA), independent television commission (ITC), import and export, and is plagiarized from a third party trademark. Additionally, it considers laws regarding health, employment, financial regulations, product safety, to mention but a few.Environmental: In the light of environmental proceeds, Adidas aimed to a courageous use of sustainable products and compromise to products quality and functional performance. Consequently, the CO2 emission at its production and manufacturing plants processes were reduced with regard to climate changes and nuclear face-out and at the same time, the products quality is maintained with less pollution to the environment.

ADIDAS FIVE (5) FORCES MODELObviously, 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 companys 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.Suppliers 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.

CRITICAL SUCCESS FACTORS FOR ADIDAS.Critical success factor is essential for company to acquire its mission. Key success factors are those some things that should go well to ensure success for a manager or organization and for this reason, they represent those managerial or enterprise area, that must be given special and continual attention to bring about high performance. Critical success factors include issues stamina to an organizations current operating activities and to its future success. Critical success factor on these attributes are product features, service details that make the difference between a good company and a great company.Adidas key success factors inclusive effective advertising, innovation and new design, cutting edge technology, a flexible supply chain, focusing on sustainability, long term shareholder value and strong retail network. Adidas vision statement is to be the leading sports brand in the world. Adidas brand mission statement focuses on being design leaders and innovation. We will focus on how Adidas innovates for the 2014 football world cup.Adidas used some of the cool tests, some of the machines and how come up with the next greatest football product. AIT (Adidas Innovation Team) determines the future of sports; they look 5 years out to understand where the game is going. Players are getting faster, the game in general moves at a faster pace nowadays. So how do we determine what is next? Adidas focus on that from different angles. One is what are the new technologies? What are the new materials that we can use? But also it is about how can team think about the game in a new way and the way that is should being very close to the athletes. Adi Dassler always talked about listen, test, modify. It knows that weight is important. So how can doing as much weight out? Athletes when they go and pick this jersey up and they realize it is 50% lighter. This is immediately gives them this psychological sensation of Im going to be faster, Im going to perform better. Also, Adidas used Vicon motion capture system. It is something that is used in the motion picture industry. If creating 100 jerseys, Vicon motion capture system gives us the ability to understand, how it is going to work in all sorts of conditions. How is it going to work in cold, heat, humidity and then fine-tune the product from there?

VALUE CHAIN ANALYSIS (VCA).Value chain analysis is aimed helping us understand how goods and services move through an organization and value is added to them. Value chain analysis give an opportunity a firm or company to better determines the costs associated with organizational activities from building manufacturing facilities, developing cooperative agreements, buying raw materials to designing products to marketing those products and identify its own weaknesses and strengths. VCA consist of primary activities (inbound logistics, operations, and outbound logistics, marketing and sales, service) and supportive activities (organization, human resources, technology and purchasing).Adidas company value chain analysis, we can clearly see that primary activities are more important that supportive activities. Among those primary activities, we could still point out three parts of the value chain that are directly responsible for competitive advantages that Adidas have. They are; Inbound logistics. Adidas invest a huge amount of money in product quality. Because of that, Adidas pay special attention to the raw materials that are bought. Besides offering products in satisfactory conditions, the companies that do business with Adidas have also to follow strict guideline. That will make sure that their supplier follows a pattern of quality. Some examples of what is required of those companies; compliance with laws and governmental regulations, strict prohibitions against child labor, proper health and safety conditions to employees outbound logistics. Perhaps the most important part of the value chain. The distribution system that Adidas have can be considered a strong competitive advantage. Adidas has three different channels- Wholesale, e-commerce and Retail. Adidas has three store formats; brand centers, core stores and factory outlets up to 2270 stores in the world marketing and sales. Nowadays, Adidas is trying to build a lasting and more deeply relationship with its customers. Adidas products preferred four regions around the world; North America, Europe/Developing markets, Asia/Pacific and Latin America. Also some contract with competitors, like Christiano Ronaldo, David Beckham, Caroline Wozniacki (tennis player), Derrick Rose (basketball player) and Sergio Garcia (golf) impact shoppers to buy Adidas.All the supportive activities like organization, human resources, technology and purchasing well perform keeping in mind the companys prestige, reputation, brand value and market status. Adidas human resources policy, minimize the cost associated with high employee turnover, give employees job security and opportunities- to learn new skills and gain more knowledge. Adidas used a large amount on technology development and protect its infrastructure, control and planning.

SWOT, SPACE, BCG, IE, AND QSPM MATIX Adidas is a brand name which is one of the strongest in the world. We know Adidas as a famous manufacturer for its shoes, clothing and accessories. We develop the SWOT, Space Matrix, BCG Matrix, IE Matrix, QSPM analysis for Adidas Company below:Table 1:SWOT

Strengths Weaknesses

1. Diversification: Adidas is a very strong brand name and of this company has multiple product portfolio2. Strong financial position: over 2400 store globally accounting 4.3 $billions.3. Legacy: Since 1949 Adidas has established as a youthful brand.4. Membership and collaboration: The company contains within the organizations such as International Labour Organization, International Finance Corporation 5. Strong community : Celebrity endorsements and sponsoring such as FIFA, UEFA, NBA and Olympic games.6. Distribution: Adidas is a effective distributor by using online e-commerce, supermarket stores, through different channels. 1. Product line limitation: Adidas holding only 2 brands; Adidas and Reebok.2. The price premium: Due to high technology and production methods have made the brand accessible to limited customers , especially in developing countries.3. Outsourced manufacturing: 93 % of the production of Adidas is in the hands of 3rd parties to avail low labour cost and easy availability of resources. The overall quality of products perceived by the consumers of developed economies and it affects for the brand.

Opportunities1. Integration backward: It will be successful if Adidas will keep this strategy2. Increasing demand: In developing countries will be more demand premium products. 3. Product line expansion: Farther expansion of the product will differentiate the company from the other companys strategies those competitors with the same orientation. 4. Market development: To enter new markets will be succeed because others are having high competition. 5. Lifestyle changes: Because of lifestyle, education of developing countries by saturation of developed countries there is an increase in the demand of goods and services. SO-strategiesWO-Strategies

1. Expansion strategy will allow for Adidas to grow as long as its strong brand name. (S1,O3)2. Effective distribution of Adidas company will be affect positively for its expansion strategy. (S6, O3)3. Strong financial resource will help to increase amount of production due to increasing demand in developing countries. (S3,O2) 1. Increasing demand in developing countries would be affected for limitation of premium products for customers because of high technology and production methods by high technology.(O2,W2)2. Adidas has 2 strong brand names under one but integration backward strategy will give more power. (W1,O1)

Threats1. Suppliers dominance: Because of majority production being outsourced: Suppliers have more bargaining power.2. Competition: Adidas is lost 1 position to Nike and there is regular competition from local players, market penetration and substitutes.ST-StrategiesWT-Strategies

1. Adidas is very strong but there is Nike is N1. (T2,S,1) 2. Even Adidas is very strong in diversification products its competitors are also competing. 1. It can negatively affect Adidas position that Adidas has only 2 brand names and weaker than the Nike. (W1,T2) 2. Adidas produces 93 % of the products outside of the country which is make for suppliers have more bargaining power.(T1,W3)

As we know Space Matrix also consists of two dimensions such as Internal- Financial Strengths, Competitive Advantage and External- Environmental Stability and Industrial Strengths. There is our Space Matrix given below Fig 1:

Fig 1: Space matrix evaluation for the Adidas Company

This is the evaluation of BCG (Boston Consulting Group) for Adidas Group of companies below Fig 2:

Fig 2: BCG evaluation for Adidas.QSPM analysis shows that according to major metrics such as strengths, weaknesses, opportunities, and threat total attractiveness score for Acquire competitor is 2.42 and expands internally is 2.83.Adidas company holds four types of strategy such as Diversification, Backward Integration, Product development, Market development due to companys 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 specially 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 firms major competitors and their strengths and weaknesses in relation to a sample firms 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.

CONCLUSION It is possible to use strengths to avoid threats and to capture opportunities, with the help of the TOWS-matrix. Therefore strategies, which Adidas could use in order to capture opportunities and avoid threats could be, to use diversified operations in different parts of the world and strong brand recognition for sponsorships in growing markets and the well-considered usage of celebrities (not just for advertisement, also for opening private sport academies). To minimize internal weaknesses by capturing opportunities, the enterprise should keep their focus on their strong and proven marketing strategy, networking and their strong franchising, in order to stay competitive and build close long-term customer relationships. A part of that, the acquisition of competitors could decrease cost structure and rivalry within the industry and safe their status quo for the future.

References: http://www.slideshare.net/SherylMehra1/ob-presentation-28764115http://studymoose.com/adidas-internal-analysis-essayStrategic Management Consepts and Cases Fred R.David, Forest R.David 252-260 pages.http://www.adidas-group.com/en/group/strategy-overview/2016.

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