MARKS

FACULTY OF BUSINESS AND ECONOMICS

PPB 3143BUSINESS POLICY AND STRATEGIC MANAGEMENT

TITLE:STRATEGIC MANAGEMENT IN THE ANNUAL REPORT OF ADIDAS

BY :NAMEMATRIC. NOPROGRAM

NORZAINI BINTI BURKRID20111048248AT21

NURUL AMALINA KAMILAH BT. ABDULLAHD20121058460AT19

GROUP: ALECTURER: DR. MAT ITHNIN BIN SALLEH DATE OF SUBMISSION: 19 DISEMBER 2014

CONTENTS NO.CONTENTPAGES

1.0Introduction 1.1 Background 1.2 Organisation Chart34

2.0Mission And Vision Statement 2.1 Mission Statement 2.2 Vision Statement55

3.0Internal Audit 3.1 Internal Factors 3.2 Internal Factors Evaluation68

4.0External Audit 4.1 External Factors 4.2 External Factors Evaluation910

5.0Strategy Used In Adidas5.1 Diversification Strategy5.2 Differentiation Strategy5.3 Focus Strategy111112

6.0Strategy Analysis13

7.0Conclusion15

1.0 INTRODUCTION1.1 BACKGROUNDAdidas was founded in 1924 in Germany by two bothers Adi and Rudolf Dassler. The company was first named Dassler shoes and later became Adidas. By the Dassler shoes being seen in the Olympics this really helped the company get its name known. However, in 1948 Rudolf Dassler leaves to start his own company which is now known as Puma, which quickly became the business rival of Adidas. Once Rudolf left his brother came up with the famous three stripes logo and changed the name to Adidas. Both the Adidas and Puma companies still remain based in Herzogenaurach, Germany to this day.The 3 stripes were created to keep the foot stable, but ended up being the logo. Throughout the years Adidas was seen in the Olympics, and it was the leading brand making their shoes highly sought after by Olympic athletes. In 1978, Adi Dassler passed at age 78 and his wife Kathe ran the company. Six years later Kathe passed and the company was left for their son Horst Dassler to run, and three years later Horst passed at age 51. After Horsts death Adidas ran into some major financial problems, and later Bernard Tapie comes to make an attempt to save the company and he borrowed some of the money to buy Adidas.Tapie was at the time a famous specialist of rescuing bankrupt companies, an expertise on which he built his fortune. In 1992, unable to pay the loan interest, Tapie mandated the Crdit Lyonnais bank to sell Adidas, and the bank subsequently converted the outstanding debt owed into equity of the enterprise, which was unusual as per the prevalent French banking practice. The state-owned bank had tried to get Tapie out of dire financial straits as a personal favour to Tapie, it is reported, because Tapie was Minister of Urban Affairs (ministre de la Ville) in the French government at the time. In February 1993, Crdit Lyonnais sold Adidas to Robert Louis-Dreyfus, a friend of Bernard Tapie for a much higher amount of money than what Tapie owed. Robert Louis-Dreyfus became the new CEO of the company. He was also the president of Olympique de Marseille.Now, Adidas has global corporate headquarters in Germany, and many other business locations around the world such as Portland OR, Hong Kong, Toronto, Taiwan, England, Japan, Australia, and Spain. Mainly sold in the U.S., Adidas makes lots of assets from these countries and is expanding to more overseas countries. Adidas is on the move and always has been: It has had an adventurous history since it first grew out of a family business in Herzogenaurach, Germany in the 1920s. With the hostile separation of two brothers interests in the 1940s, nearly going bust in the 1980s and then executing two rescue operations, first by sending production offshore to Asia and then by reinventing itself into a design and marketing company, Adidas has riden the waves of change in the sports goods sector both up and down. Alongside its own brands, it owned the Saloman ski and sportswear brand for nearly a decade and now includes the Reebok, Taylormade Golf and Rockport brands in its stable.1.2ORGANISATION CHARTEXECUTIVE BOARD

2.0 MISSION AND VISION 2.1MISSION STATEMENTS TheAdidasGroup strives to be the global leader in the sporting goods industry with brands built on a passion for sports and a sporting lifestyle. We are committed to continuously strengthening our brands and products to improve our competitive position.1. We are innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product we bring to market - customers2. We are consumer focused and therefore we continuously improve the quality, look, feel, and image of our products and our organizational structures to match and exceed consumer expectations and to provide them with the highest value - products3. We are a global organization that is socially and environmentally responsible, that embraces creativity and diversity, and is financially rewarding for our employees and shareholders - concern of public images4. We are dedicated to consistently delivering outstanding financial results - concern of growth, survival and profitability.Mission review: Mission statement is about what an organization wants to be and whom it wants to serve. This Adidas mission statement is a good statement because its include most of the mission statement components such as customers, product, concern of public images and concern of growth, survival and profitability. Besides, this mission statement also broad in scope which is not include any monetary amount, percentages, ratios or objectives. Last, this mission statement not just reconciliatory and enduring, but also inspiring and reveal that Adidas is socially and environmentally responsibility.

2.2VISION STATEMENTTo enhance social and environmental performance in the company and the supply chain, thereby improving the lives of the people making our products.Vision review: A vision statement is about what the organization wants to become. This vision statement should be short which preferably only in one sentence and has as much as input from the managers to develop the statement. Adidas vision statement is a good statement because it answered the question what we want to become.

3.0 INTERNAL AUDITThe internal audit is carried out by the accountant employed by an organization. The purpose of internal audit is to assess the internal controls and record-keeping activities of the organization concerned. Group accountants perform internal audit work is referred to as internal auditors. Internal auditor is one of the most important jobs in an organization which is tasked to review the work of other staff and assess the efficiency and effectiveness of their work. The management organization providing this service for the internal auditors to determine the extent to which the staff of the organization can stick to the policies and rules of the organization, as well as achieve operational efficiency and effectiveness of the system of record keeping. It can be said that the role of internal auditors is to ensure compliance with internal control procedures of the organization. In addition, the internal audit's role is to convince management that the internal review and accounting system is effective in terms of design and operation and that the financial statements submitted to management can be trusted.Internal audit or internal assessment will emphasize the strength and weaknesses of the organization in the event of changes or events in the control of the organization. We will list some of the strengths and weaknesses of Adidas Group to form the matrix IFE (Internal Factor Evaluation). IFE matrix is an approach that can be used as a basis for assessing the organization's strategy. IFE matrix should focus on changes in the strengths and weaknesses in organizational management, marketing, finance, accounting, production, operations, research and development and computerized information systems.

3.1INTERNAL FACTORSSTRENGHTSWEAKNESSES

Good financial position Strong brand Competitive pricing Strong international distribution Sponsor many major sport events Has worldwide presence which has over 2400 stores. Effective market strategy Owns several sport brands Has a workforce of over 45,000 employees High brand value since 1924.

The products can sometimes be costly due to innovative technology or production method Stiff competition and similar big brands means customers have high brand switching Over pricing Low quality product/services Limited product line Web booking only offered in USA and some locations in Europe product popularity is dependent upon consumer loyalty Highly susceptible to downturns in local and international economies. invests much of its advertising funds not only in products but in athlete-spokespersons.

3.2INTERNAL FACTOR EVALUATION (IFE)Internal FactorsWeightRateWeighted Score

STRENGHTS

Good financial position0.1010.10

Strong brand0.0810.08

Competitive pricing0.0420.08

Strong international distribution 0.0710.07

Sponsor many major sport events0.0530.15

Has worldwide presence which has over 2400 stores.0.0720.14

Effective market strategy0.0810.08

Owns several sport brands 0.0430.12

Has a workforce of over 45,000 employees0.0520.10

High brand value since 1924.0.0320.06

WEAKNESSES

The products can sometimes be costly due to innovative technology or production method.0.0520.10

Stiff competition and similar big brands means customers have high brand switching0.0710.07

Over pricing0.0420.08

Low quality product/services 0.0330.09

Limited product line 0.0320.06

Web booking only offered in USA and some locations in Europe0.0420.08

product popularity is dependent upon consumer loyalty0.0610.06

Highly susceptible to downturns in local and international economies0.0320.06

Invests much of its advertising funds not only in products but in athlete-spokespersons.0.0430.12

Total11.70

4.0 EXTERNAL AUDITExternal audit or external evaluation focused on the identification and assessment of trends and events that beyond the control of the organization. These trends may be occurring because of the economic, social, cultural, demographic, political, technological and competitive that it is hard to change and outside the organization authorized to handle. Adidas should pay attention to these factors and operate in accordance with the changes that occur to avoid the risks of disability in the market in order to increase the profit and sells.External audit will focus on opportunities and threats of the organization in the event of changes or events beyond the control of the organization. We will list some of the opportunities and threats for Adidas Group to form the matrix EFE (External Factor Evaluation). EFE matrix is an approach that can be used as a basis for assessing the organization's strategy. EFE matrix can give clues to what extent the effectiveness of the company's strategy to act as a feedback on opportunities and external threats.4.1EXTERNAL FACTORSOPPORTUNITIES THREATS

generates close to 60 new foot-friendly designs each year in order to compete with other brands can joint venture with other companies in making more stylish designs and cuts Tie-up with emerging sports teams/clubs/players internationally Brand building by setting up sports academies Can bring the newly popular athletes to be the spokesperson Sponsorship of global sports events Change in customer lifestyle. Technological innovation Competition is highly intense in the sports apparel and footwear market. Competitors actions Growing the power of customer to set the price. Change in customers lifestyle Financial slowdown Price war between the competitors Growing the power of supplies to set the price New competitors entering the market

4.2EXTERNAL FACTORS EVELUATIONExternal FactorsWeightRateWeighted Score

OPPORTUNITIES

generates close to 60 new foot-friendly designs each year in order to compete with other brands0.1020.20

can joint venture with other companies in making more stylish designs and cuts0.1210.12

Tie-up with emerging sports teams/clubs/players internationally0.0830.24

Brand building by setting up sports academies0.0530.15

Can bring the newly popular athletes to be the spokesperson 0.0330.09

Sponsorship of global sports events0.0610.06

Change in customer lifestyle.0.0520.10

Technological innovation0.1010.10

THREATHS

Competition is highly intense in the sports apparel and footwear market.0.0610.06

Competitors actions 0.0520.10

Growing the power of customer to set the price.0.0320.06

Change in customers lifestyle0.0430.12

Financial slowdown0.0620.12

Price war between the competitors0.0620.12

Growing the power of supplies to set the price0.0330.09

New competitors entering the market0.0810.08

Total1.01.81

5.0STRATEGY USED IN ADIDASAdidas is one of the leading companies in the world that specialise in the production of wide variety and high quality sportswear and sports equipment. The head office of the company is located in Germany and has good brands through which it promotes its products. The company is carrying on its operations by using the three brands names of Adidas, Taylor Made-Adidas Golf, and Reebok. The company is widely operating in Europe, North America and Asia. Adidas has a strong work force of around 39,000 employees working in different parts of the world. The company has its operations in Europe, US and Asia in more than 150 subsidiaries and are purely focussed on manufacturing. Adidas focuses on sports and the brand specialises in footwear, apparel and accessories. Adidas is very popular with the sports division where the brand image of the company is promoted in sports like running, football, basketball, tennis and many more.5.1DIVERSIFICATION STRATEGIESAdidas being using diversification strategies to develop the business for these three years. For more specific, Adidas using related diversification strategy because we can clearly see that all the brand under the Adidas Group in the production of related products. For example, sport shoes and apparels, sport equipment, accessories such as glasses, eye pieces and bags. Related diversification strategy is the most popular distinction between the different types of diversification and is made with regard to how close the field of diversification is to the field of the existing business activities. This strategy occurs when Adidas adds to or expands its existing line of production or markets. In these cases, Adidas starts manufacturing a new product or penetrates a new market related to its business activity. Under related diversification the company makes easier the consumption of its products by producing complementing goods or offering complementing services.

5.2DIFFERENTIATION STRATEGYNext strategy is differentiation strategy. Adidas commitment to product innovation and this strategy should be pursued only after a careful study of buyers need and preferences to determine the feasibility of incorporating one or more differentiating features into a unique product that features the desired attributes. Normally, companies apply this differentiation strategy when there are many ways to differentiate the product, when technology change in fast speed and also when few rival firms are following a similar differentiation approach. The differentiation strategy would well fit Adidas to improve the market base as it has lot of advantages with technology. As Adidas is already making use of the e-commerce and the customers can design their own products over the internet, the product management team can do a lot of research with the new designs and release them into the market. Since Adidas is being identified as a brand that is associated with a particular segment and also very specifically to particular sports, it can use this as an added advantage in trying to be different in targeting people who are into sports, athletics and many more.

5.3FOCUS STRATEGY The last strategy that Adidas has been used in these years is focus strategy. Focus strategy depends on an industry segment that is of sufficient size, has good growth potential, and is not crucial to the success of the major competitors. Adidas is using this strategy because its target market niche is large, profitable and growing. When Adidas thinks of implementing the focus strategy, it can start focusing on different segments apart from sports as the infrastructure is available with the company. It needs to add up some more facilities, and try to focus on the entire foot wear segment suitable for all the age groups like Bata. There are certain negative effects for this strategy as it is a time taking process for the company to start its operations by focusing on a different market segment and customers. In the long run, the new focus area may be over looked by the company due to poor performance and the company will lose lot of money, time and more importantly, the profits may come down and the cost will go up. Adidas basically focus and target on consumers who play and love sports. They target on people in age 20-29 years old and also high school athletes around age 14-19 years old. The main sport that Adidas focus on is football, tennis, running and basketball.

6.0STRATEGIES ANALYSISWe strongly agreed to implement Boston Consulting Group (BCG) Matrix for Adidas Group. Boston Consulting Group (BCG) Matrix is defined by the Pearce (2013) as an approach pioneered by the Boston Consulting Group that attempted to help managers balance the flow of cash resources among their various businesses while also identifying their basic strategic purpose within the overall portfolio. The BCG Matrix is also known as portfolio techniques.This strategy is totally based on the market share of the product and the growth of the market. It is a typical strategy where the companies should have products with high growth in large markets and also products that have low growth but can generate more cash for the company. Based on such combinations of this matrix, there are four dimensions for this model based on which the companies can understand how much cash is being generated and consumed. There are four categories that a company can divide its products based on the BCG Growth Matrix. They are cash cows, stars, problem child and dog.RELATIVE MARKET SHARE POSITION

INDUSTRY SALES GROWTH RATEHighMediumLow

MediumSTARSIIQUESTION MARKSI

LowCASH COWSIIIDOGSIV

a) Cash cowsIn Adidas, the different kinds of products that are sold on the brand name of Adidas are the cash cows for the company. The reason behind this is that these are widely used by people and reasonable profit is generated from these products. By selling such products, Adidas is able to generate more cash for the company and this can be used either for the development of new products or investment can be done in some other business area. The main financial pillars for the company are Adidas products which are the cash cows and so the revenue generated from these cash cows is very crucial for the company to sustain.

b) StarStars are such kind of products that generate enough amount of revenue for the company, but at the same time these products need more cash to maintain its position in the market. The Adidas brand can be considered as a star according to our assessment as it is known for its fashion and it is a popular product among young people. Sales occurred from Adidas can generate revenue. In countries like India, Adidas is a popular brand, but the sale done and revenue obtain the profits from other products.

c) Question Mark (or Problem Child)Such products are made available in high markets and the market share is very less. They require lot of funds to improve their market share and it is uncertain whether they will grow or not. As the markets are growing phenomenally, Adidas has few problem Childs and these can be ignored by the company.

d) DogsThese are products that have fewer shares in the market and also have a very slow growth rate. The products dont consume a lot of investment and they dont generate huge revenue for the companies.

7.0CONCLUSIONThe Adidas Group strives to be the global leader in the sporting goods industry with brands built upon a passion for sports and a sporting lifestyle. Inspired by their heritage, the Adidas Group know that a profound understanding of the consumer and customer is essential to achieving that goal. To anticipate and respond to their needs, the Adidas Group continuously strive to create a culture of innovation, challenging their selves to break with convention and embrace change. By harnessing this culture, Adidas Group push the boundaries of products, services and processes to strengthen their competitiveness and maximize the Groups operational and financial performance. This, in turn, will drive long-term value creation for their company and stakeholders.

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