School of BusinessA370A0401 Case-Course of BusinessTerhi Tuominen

Case Study: Amer Sports Oyj5 December 2013

Georgios Ballas 0415258

Andreas Bouris 0415339

Minna Pajunen 0373125

TABLE OF CONTENTS

1. INTRODUCTION...................................................................................................................1

2. USED THEORIES AND TOOLS OF ANALYSIS..............................................................2

3. METHODS OF DATA COLLETION....................................................................................2

4. DESCRIPTION AND ANALYSIS OF THE CASE FIRM..................................................3

4.1 MAIN PROCESSES...........................................................................................................5

4.1.1 PRODUCTS.................................................................................................................5

4.1.2 DISTRIBUTION...........................................................................................................6

4.1.3 PRODUCTION............................................................................................................7

4.2 FIELD OF INDUSTRY.......................................................................................................8

4.3 OPERATIONAL ENVIRONMENT..................................................................................10

4.4 STRATEGY AND COMPETITIVE ADVANTAGE........................................................12

4.5 ORGANIZATION AND STRUCTURE...........................................................................14

4.6 FINANCE...........................................................................................................................16

4.6.1. FINANCIAL TARGETS...........................................................................................16

4.6.2. SALES BY BUSINESS SEGMENT.......................................................................18

4.6.3. SALES BY GEOGRAPHICAL SEGMENT...........................................................19

4.6.4. NET SALES IN BALL SPORTS SEGMENT........................................................19

4.7 SALES AND MARKETING..............................................................................................20

5. CONCLUSIONS...................................................................................................................23

LIST OF REFERENCES............................................................................................................25

APPENDICES

Appendix 1. Structure of all Amer Sports' business areas

Appendix 2. SWOT –Analysis

Appendix 3. Learning Outcomes

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1. INTRODUCTION

This case report is part of Case-Course of Business in Lappeenranta University. The primary

purpose of this report is to learn about case-writing process. A case is not only a description

about a business practice but also a description about an actual situation of the company with

its problems and success factors. Our aim was to apply concepts from previous lectures and

course books to analyze the company we chose. All in all our aim was to form a broad

evaluation of company’s situation and simultaneously see how theory applies in practice.

The company we chose for this assignment is sporting goods company called Amer Sports.

The company owns brands that are known worldwide among consumers. Amer Sports is

Finnish in origin and its shares are listed on the NASDAQ OMX Helsinki stock exchange. We

selected this company, because it owns some of the world leading brands in sports

equipment and therefore has a valuable brand portfolio. Amer Sports itself is not very well

known name to consumers, even though its brands are. Each of these brands has its own

separate trademarks and operates as an individual business entity. Managing this big brand

portfolio makes Amer Sports interesting case to study. In addition company operates in many

geographical markets, which brings challenges for running the business and controlling all

brands. What is also remarkable about the company is that its stock exchange rate has risen

by over 50 % during this year.

First we will present the theoretical framework of the case. This section describes the chosen

theories and tools of analysis that we used to examine the case company. In addition, we will

describe the methods of data collection. Then we will move on to the description and

analyzing of the case firm. This is done by introducing the company in more detail: its field of

industry, strategy and competitive advantage, organization, finance and finally marketing and

sales. Because the company owns many brands in different sport fields, in some sections of

this report we will focus on analyzing only one field in detail. The field we chose was ball

games.

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2. USED THEORIES AND TOOLS OF ANALYSIS

In the strategy and competitive advantage chapter we used SWOT –analysis, which is very

common tool in the strategic management planning process. The SWOT analysis includes

company’s strengths, weaknesses, opportunities and threats. Framework is proposed by

many as an analytical tool which should be used to categorize factors both internal and

external to the organization. SWOT analysis is highly recommended for its simplicity and

value in focusing attention on key issues which affect business. (Pickton & Wright 1998, 101-

102)

For the sales and marketing section we used the framework referred to as the “4Ps” or

“marketing mix”. The framework identifies how company makes offerings suit consumers’

needs. The main reason why marketing mix is a powerful concept or a tool is that it makes

marketing easy to handle. The 4 Ps stands for product, price, place and promotion. The four

elements of marketing mix can be altered in different ways in order to create the best

combination for the company’s marketing strategy. Decisions cannot be made on one

element of the marketing mix without considering its impact on other elements. (Goi 2009)

We also found a couple scientific articles to assist us with the analysis. The other was related

to regional and global strategies of multinational enterprises. In this article Rugman and

Verbeke (2004) used the triad power concept to define how global companies are. The other

was a research about seasonality, which is very typical feature for the sporting industry.

Seasonality is a cyclical pattern that repeats itself each year (Jaditz 1994, 17).

3. METHODS OF DATA COLLETION

First of all we tried to contact our chosen company by sending email to Amer Sports

Corporate Communications department. We wanted to arrange an interview with someone

who could provide us information that is not otherwise accessible. Unfortunately we didn’t

receive any answer of any kind. Even though of this set back, we didn’t want to change the

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case company. We thought that we could manage also without the interview. Because Amer

Sports is publicly listed there is quite much information and financial data easily available

about the company, also in English. We looked for information mainly from the annual report

2012, interim report, company’s web pages and brand’s pages. In addition we searched

information from competitor’s web pages.

4. DESCRIPTION AND ANALYSIS OF THE CASE FIRM

Amer Sports, established in 1950, is today one of the leading sporting goods companies in

the world with its global brands Salomon, Wilson, Atomic, Arc'teryx, Mavic, Suunto and

Precor. Below we will analyze how Amer Sports developed from its establishment until today.

In 1950, Amer was founded by the name "Amer Tobacco Oy" and was a tobacco company. In

1960 Amer moved into ship-owning which was an efficient form of investment at this time

combined with the company's tobacco business. Amer acquired three ships, which were sold

later during the 1970's because of the excess capacity developed in the industry. Also in

1970's and 1980's Amer acquired several companies as Hyppölä (later known as Amerpap),

a Finnish paper merchanting and paper converting company, Hobart Mc/Intosh Paper

Company which was a Chicago based paper merchant, Weilin+Göös, a long established

Finnish printing and publishing business and Time/system International A/S, a global

producer and marketer of personal planning systems.

In 1973, Amer Tobacco Oy changed the company name to "Amer Group Ltd (Amer-yhtymä

Oy)". Later in 1974, Amer acquired Koho-Tuote Oy, manufacturers of "Koho" ice hockey

sticks and protective equipment and in that way entered the sporting goods industry for the

first time. In 1978 Amer acquired Koho Sporting Goods Corporation, based in Long Island,

New York, which was a distributor of Koho products in North East USA. Furthermore, in 1979

Amer acquired Les Industries du HockeyCanadien Inc., based in Drummondville, Quebec,

Canada, the manufacturer of the "Canadien" range of ice hockey sticks, as well as

Sherbrooke Sports Division, St. Jean, Quebec, manufacturers of ice hockey protective

equipment. Also, in 1977, Amer obtained a listing on the NASDAQ OMX Helsinki Ltd and in

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1984 was listed in the London Stock exchange. The Sports Division was first constituted in

1986, when Amer acquired 80% of the MacGregor Golf Company from the world famous

golfer Jack Nicklaus. From 1989 to 2000 Amer made some, meaningful for the sports division,

acquisitions acquiring Wilson Sporting Goods Co., Atomic, Suunto and DeMarini Inc. In 2001

Amer Group launched a new marketing name, "Amer Sports", combined with a new logo, to

be used in corporate marketing and advertising and in 2004 changed its official name into

Amer Sports Corporation to highlight the company's focus on sports equipment. In the same

year Amer withdrew from tobacco business. Moreover from 2002 to 2011 Amer was focusing

in the expansion of its sport segment by acquiring brands and companies related to sports

equipment such as: Precor, Volant, Atec, FPI, Salomon, Mavic, Bonfire, Arc'teryx, Cliché,

Nikita. In 2005 Amer shares were delisted from London Stock Exhange but continued to be

traded on the main list of the OMX Nordic Exchange Helsinki. (Amer Sports 2013a)

Today Amer Sports is one of the leading sporting goods companies in the world and aims to

improve performance and increase the enjoyment of sports and outdoor activities.

Mission

Their mission is to provide everyone from first-time participants to professional athletes with

the world’s best sports and fitness equipment, footwear and apparel.

Vision

Their vision is to be the industry’s leading sports company, fueled by authentic brands that

inspire athletic achievement and enjoyment.

Values

The Amer Sports staff represents a number of nationalities and different business cultures.

Their shared values support and guide their operations around the world. Success in

competition requires the determination to win, team spirit, fair play and innovation. (Amer

Sports 2013b)

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It is very interesting how Amer started from a tobacco company and after several years of

continuous changes in its structure ended up being a sporting goods company. It seems that

Amer's management was continuously adapting to the changing environment, always seeking

for new opportunities in the market. All these changes kept Amer going for many years.

4.1 MAIN PROCESSES

In this chapter we will analyze the main processes of Amer Sports, being products,

distribution and production.

4.1.1 PRODUCTS

Amer Sports is an interesting company in that the core company itself has no products

whatsoever and instead trusts its individual brands and their own companies with their

products. Amer owns a great variety of well-known sport brands covering every aspect of

sports equipment. Below we list those seven brands that construct Amer's portfolio.

Figure 1. Amer Sports brands (Amer Sports 2013c, 1)

Salomon is a world-leading mountain sports company which produces equipment for alpine

skiing, cross-country skiing, snowboarding and trail running. (Amer Sports 2013d) When you

think about winter sports the first thing that comes in mind is Salomon. The existence of

Salomon in Amer's portfolio makes Amer very strong and gives the company a competitive

advantage over its competitors in that business area.

Wilson is the world's leading manufacturer of ball sports equipment. Their core sports are

tennis, baseball, American football, golf, basketball, softball, badminton and squash. Wilson

has been very influential and intimately involved in shaping most of the ball sports history

such as tennis, golf, baseball and American football. (Wilson 2013) Wilson is a valuable asset

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for Amer as it is worldwide recognized in ball sports. The National Football League and also

NCAA (College Basketball) in USA use Wilson balls as their official balls. Furthermore, Wilson

has strong presence in many ball sports by sponsoring several well-known professional

athletes like Roger Federer and Serena Williams who are tennis champions.

Atomic is a company specialized in skiing equipment selling both alpine and Nordic ski

equipment. (Atomic 2013)

Arc'teryx is an outdoor clothing and sporting goods company producing high quality sports

outerwear and accessories, packs and climbing gear. Arc`teryx combines its unrivaled

designs with the best quality, highest performing materials and produces innovative and

durable products. (Arc'teryx 2013)

Mavic is a bicycle parts manufacturing company which produces wheelsets, hubs, brakes,

mudguards, pedals, apparel and cycling accessories. (Mavic 2013)

Suunto is a Finnish manufacturer of sport watches, diving equipment and accessories,

compasses and a variety of precision instruments. (Suunto 2013)

Precor designs and builds premium commercial fitness equipment for workouts that feel

smooth and natural. (Precor 2013)

As it is obvious Amer owns a lot of well-known brands. For that reason, Amer does not use its

brand name for advertising but instead its individual brands are promoted. The final customer

does not know Amer most of the times because he/she does not need to. He/she only knows

that he/she buys Salomon or Wilson brands. The customers are familiar with these brands

and sometimes are loyal to them. For that reason Amer chooses to be advertised this way.

4.1.2 DISTRIBUTION

Amer Sports has five main regional distribution centers which support several Group brands:

the Überherrn in Germany, Lyon in France, Altenmarkt in Austria and Irvine in the UK facilities

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serving the EMEA region and the Nashville facility in Tennessee serving the USA. Amer

Sports’ logistics facilities also include factory-specific warehouses and regional or country-

specific warehouses. Products are transported from distribution hubs to trade customers or to

Amer Sports’ own stores. Third-party transportation companies are employed to transport the

Group’s products by truck, rail, plane, and sea. (Amer Sports 2013e) It is obvious that Amer

focuses in European market as it comes to distribution priority. Its main distribution centers in

Europe are in economically and politically stable countries, minimizing Amer's risks. However,

Amer's presence in terms of distribution is strong in USA too as sports like baseball and

basketball are very popular there. In that way, Amer reduces logistic expenses by trying to

satisfy regional demand by regional distribution centers.

To improve the quantity and quality of their distribution Amer continues to expand distribution

networks and in-store excellence in their core markets. Moreover, Amer has focused on

expanding in China, Russia and Latin America and has already achieved a combined growth

of 19% in 2012. In addition to that Amer has opened 30 new retail stores in 2012 focusing on

emerging markets in order to strengthen their own retail chain. (Amer Sports 2013c, 3) It is

logical for global companies like Amer to expand in emerging markets like China these days,

in order to benefit from the rapid growth that it is observed. Sometimes these expansions

serve to offset reduced revenues from operations in markets suffering from recession such as

European market. China is also considered to be an opportunity in the future for many global

companies due to the large population and the rapid growth.

4.1.3 PRODUCTION

Amer constantly adjusts its "make or buy" strategy in order to achieve cost savings and

operational efficiency. Amer Sports has 12 manufacturing sites and its most important own

production facilities are located in Austria, Bulgaria, France, Finland, Canada and the United

States. The company manufactures approximately 30% of its products itself and

approximately 10% is produced by partially outsourced vendors. The remaining 60% of

Amer's total production value is outsourced. This includes manufacturing in all racket sports

and golf products, most team sports products, most of the apparel and footwear and also

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most of products and components for a variety of winter sports equipment, cycling, sports

instruments and fitness equipment. Amer Sports’ production value is distributed

approximately 30% in China, 25% elsewhere in Asia Pacific, 30% in Europe and 15% in the

Americas. (Amer Sports 2013c, 6)

Obviously, outsourcing seems a vital part of Amer's production strategy. This strategy might

have its ups and downs thought. By outsourcing, we suppose that Amer is able to benefit

from the specialization of other more prominent manufacturers and probably reduce its costs.

Cost reduction can be achieved because Amer would not need to invest in building more

production plants and also because Amer might not be able to produce specific products

cheaper than can be outsourced from others. Also Amer might be restrained by its production

capacity and outsourcing might be an alternative solution. However, outsourcing has its risks.

The main risk can be the potential failure of Amer's suppliers to fulfill Amer's product needs.

That would result in unsatisfied demand for Amer and drive its sales downwards.

Amer Sports purchases the raw materials it requires - steel, rubber, and oil-based raw

materials and components - from a number of sources. These raw materials are used to

manufacture plastic components for bindings and ski boots, carbon fibers for use in rackets,

and the metal parts used in fitness equipment, binding components and ski edges. (Amer

Sports 2013f)

4.2 FIELD OF INDUSTRY

The global sports equipment market cannot be described as small in scale. The total revenue

of the market was around 74.8 billion dollars in 2009. The compound annual growth rate has

been 2.3% for the period of 2005-2009. The growth has been quite stable and on year 2009 it

was forecasted that there would only be a slight shift on growth so that during years 2009-

2014 compound annual growth rate would be 2.0 %. (Datamonitor 2010, 8) On the other

hand, the ongoing economical instability and the course of international trade are factors that

will also influence directly to sales of sports equipment. If economical conditions will continue

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unsecure for a long time, the industry will suffer even though there are otherwise good

circumstances for market growth.

Sports equipments are consumed almost everywhere in the world, so the market is huge also

in geographical size. The main markets for sports equipment are Americas, Europe and Asia-

Pacific (Datamonitor 2010, 11). Especially fast growing economics have potential for sports

equipment companies, because usually the increase in living standards and revenues means

that people have incomes and willingness to invest in hobbies and free time. This indicates

that growing economies for example in Asia, like India and China, are more and more

lucrative in near future because of the growing middle class (Kharas 2010, 8-9).

Ball sport equipment is one of the most profitable categories for the global sports equipment

market. In 2009 total revenues were 13.3 billion dollars which is equivalent to 17.8% of the

market's overall value. Other categories that come close are golf equipment (17.4% of market

value), adventure sport equipment (16.8%) and fitness equipment (15.5 %). It is typical that

suppliers are not usually exclusively dependent on only one type of sports equipment for their

revenues and therefore they often find alternative markets through diversification.

(Datamonitor 2010, 10-12)

There is a visible and growing recognition of physical and mental wellbeing across the world.

Majority of at least European and U.S. consumers feel that improving health is important. The

trend seems to be that consumers draw attention to healthier lifestyles and seeking a balance

between work and leisure. What is also noteworthy is that outdoor sports and activities in

nature are more and more popular. This creates opportunities for the whole industry to

develop products that make accessing healthier lifestyles easier and more enjoyable (Amer

Sports 2013g).

Sports equipment industry is quite challenging, even though there are major factors that make

business in this field beneficial. The main challenge is the seasonality, which is very typical for

many sports. What makes seasonality problematic is that the intensity can vary to a great

extent from year to year. The reasons behind seasonality are whether, regular calendar

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events such as Christmas and also social conventions. Taking seasonality in to account

means forecasting changes in business that are results of a certain event or occurrence.

Seasonality is a challenge, because it has an impact on many different departments in the

company. Changes in demand due to exceptionally good winter for example might affect to

the need of labor in production and also supply management. In addition it influences on the

revenues. Seasonality also affects how sales tend to concentrate on specific time periods.

This means that net sales and profitability are usually stronger in one or two business

quarters. (Jaditz 1994, 17)

Short term risks on the other hand for the industry are particularly associated with general

economic conditions as mentioned earlier, but also consumer demand development on

different geographical markets. In addition the ability to identify and respond to constantly

shifting trends and the ability to use advancements in technologies and to develop new and

attractive products is also a challenge. (Amer Sports 2013h, 9) Consumers are expecting new

products and technologies that increase their sporting experience. Companies have to invest

in research to find out what consumers want and also to create products that outsmart the

competitors. There are three themes that are closely related to sport equipment production:

research & development, innovation, and adoption of new materials (Datamonitor 2010, 12).

The global market for sports equipment is fragmented and consists of many players. There

are few larger companies that have also integrated to retail, but it is still possible to enter the

market on a more modest scale by producing, for example, small quantities of custom-made

products. Consumer loyalty is often more towards a particular company or a brand, rather

than to retailers and this is why most retailers will stock many different brands. This

strengthens buyer power and can leave retailers rather vulnerable. Sporting equipment

companies who also operate in the retail market through their own branded stores or online

sales are very strong players. Buyer power is assessed to be moderate in overall in the

industry. (Datamonitor 2010, 12)

4.3 OPERATIONAL ENVIRONMENT

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The sporting goods industry, as mentioned before, is highly competitive and includes many

regional, national and global companies. Amer Sports though, has no competitors that

challenge it across of all of its product categories but it faces competition from a number of

companies in most of its product categories. (Amer Sports 2013c, 10) The three main

competitors that could challenge Amer in specific business areas are Adidas AG, Callaway

Golf Co. and Head NV. (Yahoo Finance 2013) We will analyze all of them briefly.

Adidas Group is considered the biggest threat for Amer as it has worldwide presence and is

internationally recognized. Adidas Group consists of Adidas, Reebok, TaylorMade-Adidas

Golf and Rockport combining a very diversified product portfolio ranging from sports shoes,

equipments to clothing and accessories. Because of its size and magnitude, Adidas competes

with Amer in many business areas. Adidas' main strength against Amer is its well-known

brand name, widely recognized in customer minds. (Adidas AG 2013)

Callaway is a global leader in advanced golf technology, founded in 1982 by the late Ely

Callaway, a visionary entrepreneur who operated under a simple but profound business

promise: Deliver Demonstrably Superior, Pleasingly Different products and services. Under

the Callaway and Odyssey brands, Callaway manufactures and sells golf clubs and golf balls,

and sells golf apparel, footwear and accessories in more than 110 countries worldwide.

Callaway's main strenght is the company has a relatively large and diversified golf business

(including Drivers, Woods, Irons, Putters, Balls and Apparel) being so able to compete with

Amer's brand, Wilson, in the Golf segment but only there. (Callaway Golf Co. 2013)

HEAD NV is a leading global manufacturer and marketer of premium sports equipment and

apparel and their business is organized into five divisions : Winter Sports, Racquet Sports,

Diving, Sportswear and Licensing. Amer also operates in these segments making Head NV

an accountable competitor in these areas. Head NV sells products under the HEAD

brand(alpine skis, ski bindings, ski boots, snowboard and protection products, tennis,

racquetball, paddle and squash racquets, tennis balls and tennis footwear, sportswear and

swimming products), Penn (tennis balls and racquetball balls), Tyrolia (ski bindings) and

Mares (diving equipment) brands competing with Amer's brands : Atomic, Wilson, Suunto

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and Salomon. Head´s key products have attained leading market positions based on sales

and reputation and have gained high visibility through their use by many of today´s top

athletes. (Head NV. 2013)

4.4 STRATEGY AND COMPETITIVE ADVANTAGE

The strategy of the company and the competitive advantage is now analyzed through the

SWOT framework. There is also a table of our SWOT –analysis in Appendix 2.

Strengths

Amer Sports has an extensive brand and product portfolio, which can be definitely counted as

strength. The company owns brands in the most profitable and popular sports equipment

categories such as ball games and fitness. Amer Sports also operates in many different

geographical regions. The presence in different markets and sport fields reduce its business

risk. If demand drops in one sport equipment category there are other categories still

safeguarding the revenue stream. Same applies to different market regions. In addition the

extensive product portfolio reduces the risk of seasonality, which was mentioned to be a

challenge to the industry earlier in this report. Over exposure to a particular customer base is

also minimized, because there are very different types of consumers. Even though Amer

Sports faces competition from a number of companies in most of its product categories it has

no competitors that can challenge it across of all of its product categories.

Amer Sports’ strategy seems to emphasize consumer-centric product creation through

continuous research and development. It is a strength, if the company seeks to develop new

and better products from the consumers point of view and can at the same time think of the

trade customers. Because they have seven R&D and design sites globally serving the

different business areas they can think of local needs when designing new products. This is

the key for consumer-centric product creation. (Amer Sports 2013i)

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Weaknesses

Large brand portfolio and global business can also be a weakness, because the company has

to protect every brand and innovation from competitors, imitation and piracy. The company

invests money and time in R&D and also creating valuable brands, so it has to make sure that

nobody is exploiting its achievements. This can be done by taking advantage of intellectual

property rights such as patents, copyrights, industrial designs, and trademarks (Ministry of

Employment and Economy 2013). Litigations are time consuming and most of all expensive

so maintaining a large brand portfolio successfully is a challenge.

As mentioned before, approximately 60% Amer Sports’ total production value is entirely

outsourced. All racquet sports and golf products, most team sports products and most of the

apparel and footwear come from outside the company. (Amer Sports 2013j) This makes the

company quite dependent of outsourced manufactures in these product categories. Amer

Sports has to invest in good supplier and manufacture relationships and also in good quality

control system. It also has to be certain that the manufacturers respect the same values as

Amer Sports does and that they also operate in an ethical way. If manufactures are to be

caught using child labor or if they cause environmental or social hazard, it would immediately

cause bad publicity to Amer Sports and influence sales.

Opportunities

The growing health trends and interest in well being is an opportunity to the company. People

get easily excited about new sports and this creates possibilities to launch new products in

Amer Sports brands.

Previously there were distinct boundaries between sportswear and casual wear, but these

boundaries are becoming increasingly blurred (Datamonitor 2010, 12). This creates also

opportunities for brands to spread the product collection to soft goods such as casual clothes.

Different brands can be marketed also as lifestyles, because not all of the products are just

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equipment for the sporting activity. The brands can offer products that can also be used in

day to day basis.

Strong growth of middle class in emerging economies like China suggests optimistic

consumer spending in the future. Also e-commerce is a good opportunity, because the online

retail market in most countries, at least in Europe, is growing at a fast pace and the trend is

expected to continue.

Threats

Because Amer Sports’ sales are seasonal in nature, the company is highly dependent on the

local weather conditions. For instance, sales of the company's sporting goods equipment

increase during warm weathers and decrease during winter. The company's sales of skis, on

the other hand, increase during the colder months and decrease during summer. Sales of

winter products are also impacted if there is a radical change in weather conditions due to the

global warming.

Involvement in global business brings along many risks that can be related for example to

outsourcing, supply chain management, currency fluctuation and raw material prices. Oil is an

example of an important raw material that is needed. If oil prices goes up it has an impact on

the logistic costs and also material costs.

4.5 ORGANIZATION AND STRUCTURE

Amer Sports as mentioned before is divided in 3 business segments: Winter and Outdoor,

Ball Sports and Fitness segment which are also divided in different business areas. The

structure of those business areas is shown in Appendix 1.

As it comes to geographical segmentation Amer Sports operates in 3 segments: Americas

(including North, South and Central America), EMEA (including Europe, Middle East and

Africa) and Asia Pacific (including Japan and Australia). According to Rugman and Verbeke

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(2004), Amer Sports is a bi-regional company as it has between 20% and 50% of its sales in

two regions as can be found in the company's annual report. (Amer Sports 2013c, 4)

The control and management of Amer Sports is appointed to the General Meeting of

shareholders, the Board of Directors and the President and CEO according to the provisions

of the Finnish Companies Act and the Articles of Association of Amer Sports responsibility for

the control and management of Amer Sports. Shareholders participate in the control and

management of the company through the General Meetings. At the Annual General Meeting

the shareholders elect the members of the Board of Directors (from 5 to 7).

As elected by the Annual General Meeting on March 8, 2012 the members of the Board of

Directors are: Anssi Vanjoki (Chairman), Ilkka Brotherus (Vice chairman), Martin Burkhalter,

Christian Fischer, Hannu Ryöppönen, Bruno Sälzer and Indra Åsander. The Board of

Directors convenes 8–10 times a year according to a predetermined annual meeting schedule

and in addition when necessary. Their main duties are to make decisions concerning the

strategy that the company undertakes, plan the investments, confirm the business plan, elect

the President and CEO, evaluate the performance of the board itself and organize the annual

meeting of the shareholders. The President and CEO and the CFO also participate in the

meetings of the Board of Directors.

The President and CEO reports to the Board of Directors and keeps the Board of Directors

informed about Amer Sports’ business, including information about relevant markets and

competitors, as well as the Company’s financial position and other matters of significance.

The President and CEO is also responsible for overseeing the Company’s day-to-day

administration and ensuring that the financial administration of the Company has been

arranged in a reliable manner. The President and CEO is assisted by the Executive Board.

The Executive Board consists of the President and CEO, the CFO and representatives of the

most important business areas of the company, with the president and CEO acting as the

chairman. Their primary duty is to ensure that the company’s actions are in accordance with

the Amer Sports Corporation strategy. (Amer Sports 2012)

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The board of Directors consists of seven people with five different nationalities (Finnish,

Swiss, Swedish, German and Austrian). Amer is a global company and that is also depicted

at the structure of its board as it is multicultural. A multicultural management team helps the

company's growth as people with different backgrounds and cultures cooperate and have

their own approach to matters related to the company. It is interesting to mention thought that

all the board members come from North and Central Europe restraining the advantages of a

multicultural management team and hence the welfare of the company. A member from USA

should also be included to the management team as Amer conducts a lot of its business there

and also an Asian member to support the company's expansion.

4.6 FINANCE

The information in that part was derived from the Amer Sports annual report 2012. The

currency used is EURO.

4.6.1. FINANCIAL TARGETS

Amer Sports has introduced 4 targets to achieve in 2012 and they largely accomplished 3 of

them. We will analyze all of them. (Amer Sports 2013c, 3-4)

• Sales growth: Amer Sports target was to reach a 5% currency neutral growth. They

achieved to reach 5.1%. Amer Sports’ net sales in 2012 were EUR 2,064.0 million (2011-

1,880.8). Net sales increased by 5% in local currencies, particularly due to sales growth in

Apparel, up by 23%, Sports Instruments, up by 12%, Fitness, up by 10%, and Footwear, up

by 7%. Individual Ball Sports was up by 7%, mainly due to tennis.

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2008 2009 2010 2011 20120

5001000150020002500

1577 1533 1740 1881 2064

NET SALES EURO million

Chart 1: Net Sales in Euro million from 2008 to 2012

As shown at the above chart the increase in net sales was 10% which is different from the

5.1% increase in sales in local currencies. We suppose that the difference is attributed to

exchange rate fluctuations between the EURO and the other local currencies.

• Free cash flow: The long-term financial target is to have annual free cash flow equal to

net profit. Amer Sports delivered a free cash flow which was 93% of net profit, a 90 million

improvement from 2011. (Amer Sports 2013c, 3-5)

Figure 2. Free cash flow/ net profit (excluding non-recurring items) from 2008 to 2012. (Amer

Sports 2013c, 12)

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• Net Debt/EBITDA: Amer Sports delivered 2.5, which is well within their balance sheet

ratio target of 3 or less, in addition to that they have all their mid-term refinancing needs

covered. (Amer Sports 2013c, 3)

Figure 3. Net Debt/EBITDA (excluding non-recurring items) from 2008 to 2012. (Amer Sports

2013c, 12)

• Operating profit: Amer Sports delivered a 6.6% EBIT margin and operating profit was

at the level of 2011, long-term EBIT target being at least 10% of net sales. Their profit was flat

due to their investments in the strategy execution, and the declined Winter Sports Equipment

profitability due to the lower sales. This is the only target they did not achieve. (Amer Sports

2013c, 3)

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Figure 4. EBIT MARGIN (excluding non-recurring items) from 2008 to 2012 (Amer Sports

2013c, 12)

4.6.2. SALES BY BUSINESS SEGMENT

At the figure bellow we can see the net sales by business segment in 2012 and 2011. As it is

shown and mentioned before there is an increase of net sales (10%). Winter and Outdoor

segment plays the most important role in the company sales having 1,221.2 out of 2,064.0

million euro sales. (Amer Sports 2013c, 4)

*) In local currencies

Figure 5. Net sales by business segment (Amer Sports 2013c, 12)

4.6.3. SALES BY GEOGRAPHICAL SEGMENT

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Amer Sports remains strong in EMEA, and increases its sales a lot in Americas and Asia

Pacific. (Amer Sports 2013c, 4) The general rapid growth in Asian market can probably justify

the huge increase in sales in that area (21% in EURO,14% in local currencies). The fact that

Amer managed to increase its sales even in a period of economic turbulence is very hopeful

and promising for its future. Even in Europe where the effects of the economic crisis are more

intense a 5% increase in sales seems like a great achievement.

Figure 6. Geographic breakdown of net sales (Amer Sports 2013c, 12)

4.6.4. NET SALES IN BALL SPORTS SEGMENT

As mentioned before, we will focus in Amer Sports ball sports segment. In 2012, Ball Sports’

net sales were EUR 569.7 million when in 2011 were EUR 511.0 million, up by 5% in local

currencies. Geographically, Ball Sports’ sales increased in local currencies by 4% in the

Americas, which is the biggest area of Ball Sports, by 13% in Asia Pacific and by 2% in

EMEA.

Ball sports segment is divided in two business areas, individual ball sports and team sports.

Both business areas grew. Individual Ball Sports’ net sales in 2012 totaled EUR 318.8 million

(EUR 283.0 million in 2011) and increased by 7% in local currencies. The biggest product

category was tennis rackets, representing 29% of net sales. Net sales of tennis rackets

increased by 14% due to the new performance tennis racket product line, Japan’s recovery

from natural disaster in 2011 and bringing third party distributor operations in-house in China.

Sales of tennis balls, representing 18% of Individual Ball Sports sales, grew by 6%.

Geographically, the Americas accounted for 43% of the net sales, EMEA 36% and Asia

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Pacific 21%. In local currencies, Asia Pacific increased by 14%, the Americas by 7% and

EMEA by 2%.

Team Sports’ net sales in 2012 were EUR 250.9 million (EUR 228.0 million in 2011) and

increased by 3% in local currencies. The biggest product categories were American footballs,

representing 22% of net sales, baseball and softball bats, representing 20%, basketballs,

representing 15%, and baseballs and gloves, representing 19%.Geographically, the sales

were divided: Americas 93%, Asia Pacific 6% and EMEA 1%. In local currencies, sales

increased in Asia Pacific by 11%, the Americas by 3% and in EMEA by 2%. (Amer Sports

2013c, 7-8).

4.7 SALES AND MARKETING

Amer Sports seems to trust more or less in standardized international marketing strategy. It

means marketing products with uniform consistency throughout the global market. This is an

opposite approach to an adaptation strategy, under which multinational companies

differentiate their product and adapt it to fit the unique needs of countries. The overriding

benefits of a standardized marketing strategy are consistency throughout the world and cost

savings. Increased globalization contributes to more similarities among international

marketplaces. (Samiee, Katsiekas & Theodosiou 2009, 303-318) What is important to notice

is that sports and the need for sporting experiences is a phenomenon worldwide. For example

ball sports are common in every part of the world and the experience and the feelings related

to it are quite universal.

However, Amer Sports has adapted to some extent marketing messages regionally, so it

does not standardize everything. In 2012 Amer has reinforced its regional consumer

marketing organizations. These organizations are responsible for improving local consumer

understanding and implementing all brand programs. (Amer Sports 2013k)

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In the following section we will examine sales and marketing through the 4 Ps framework. It

consists of four different marketing elements, which are product, price, place and promotion.

These create the marketing mix.

Product

The products of Amer Sports consist of a wide range of sports equipment. The company has

mostly focused on high-end products, which have a longer lifetime. The products are high in

quality and therefore they have a slower buying cycle. All products are results of long

development processes, and new products are being designed all the time. Amer Sports also

develops new technologies and materials. Products are innovative and the goal is to design

world leading products.

Amer Sports products appeal more to high-involvement buyers. These buyers tend to seek

maximum satisfaction on products and their choices are reflective of their lifestyle. High

involvement purchases involve emotional selection and criteria. High-involvement buyers first

become aware of a brand and then seek information of the brand because of the risk of

making a bad choice. After investigating the brand and product, high-involvement buyer can

try the product. This means that high-involvement buyer must be convinced that the brand will

give them satisfaction before they make a purchase. (Percy, L. 2008, 180-181)

Price

Deciding the right price involves examining customer perceptions and competing products, as

well as costs of manufacture and promotion. The prices of Amer Sports products are

somewhat over the average if compared to company’s competitors. The pricing varies within

different brands, but all in all the prices are higher than average. The high quality is something

that affects the pricing of the products. Amer Sports does lots of research and development,

which raises the prices. Also the image of being a professional sports gear company would

not be believable with cheap prices. The promotional activities such as sponsoring of athletes,

is also something that need to be included in the pricing of products.

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PlaceAmer Sports has many distribution and sales channels. First of all, Amer Sports sells its

products to trade customers. These include sporting goods chains, specialty retailers, mass

merchants, fitness clubs and distributors. The company also owns brand stores, outlets and

ecommerce sites that sell products directly to consumers. (Amer Sports 2013k) This means

that the company’s distribution strategy is quite intensive: the product category is competitive,

which means that in order to increase their market share and sales volume, they must ensure

that the availability of their products is comprehensive throughout the market.

The increasing importance of e-commerce as a sales channel in B2C-markets appears also in

Amer Sports distribution strategy, even though the usual brick-and-mortar retail approach still

remains as a primary sales channel. Integrating online and offline operations, also called as

click-and-mortar business model, aims at cost-efficiency and supports the intensive channel

distribution strategy mentioned earlier. Online shopping is becoming more common in almost

every product category in B2C-markets. The digitalization and the increasing preference of

buying goods online means, that it is important that Amer Sports has e-commerce as a sales

channel.

Promotion

In ball sports equipment field Amer Sports’ brand Wilson convince consumers by introducing

remarkable and famous athletes on their web pages that use Wilson’s products. This brings

credibility to the products and consumers can relate themselves being professionals while

using the same products as athletes. Wilson also highlights the innovation and technology of

their products, which are important features when trying to influence the consumer. Also what

Wilson emphasizes is the history of the brand. They state that no other brand has been as

influential and closely involved in shaping the games of tennis, golf, baseball and American

football as Wilson. (Wilson 2013)

In order to get sales, there has to be strong influence towards retailers and wholesalers that

also sell company’s products. This is not done by advertising as is the case with the final

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consumers, but with personal selling and building strong relationships. This requires good

connections and ability to convince retailers that Amer Sports can help retailers meet their

own goals by selling Amer Sports’ brands. Usually retailers have competing brands also

available in their stores, so the switching costs for consumer are quite low. This is why Amer

Sports need to offer also promotional support for retailers such as information about the

products and they have to encourage retailers somehow to sell more of their brands. All in all

Amer Sports’ brands need to have a good visibility in all retail channels.

5. CONCLUSIONS

After our case company analysis we have come to a conclusion that Amer Sports has a good

future ahead. Despite the economic crisis Amer Sport’s sales grew in all of its business

markets with a total of 10 %. It does not have any competitor that works in all business areas.

Amer Sports competitor can only compete with the company in individual business areas. The

presence in different markets and sport fields reduce company’s business risk compared to

competitors. Amer Sports has proved its adaptability to changing environments and capability

to benefit from possibilities during its evolution from a tobacco company to a global sports

equipment company. We believe that the company will adapt to the environment in the future

too, so that they remain profitable and achieve sustainability.

Even though there are good possibilities for a successful path, the company has also

weaknesses. In addition there are some threats visible, that has to be taken seriously within

the company. First of all Amer Sports has to protect its brands and innovations from

competitors, imitation and piracy. Litigations, if required, are time consuming and most of all

expensive. What is also a weakness, or at least a factor that causes challenges, is that

approximately 60% of Amer Sports’ total production value is entirely outsourced. This makes

the company quite dependent of their outsourced manufactures. Involvement in global

business brings also many risks that can be related for example to outsourcing, supply chain

management, currency fluctuation and raw material prices. As a result there are lots of

25

different concerns for the company. Amer Sports has to study all possible risks in advance

and come up with plans how to cope if any of the risks materializes.

What comes to completing the report, the length of the report was a challenge for us because

there were many more interesting aspects to analyze that we could have included in this

report. For example in the financial analysis we would have wanted to include risk

management analysis or a more extend competitor analysis. The lack of an interview was a

limitation as well. We would have liked to know how much Amer Sports influences on the

operations of its brands.

We were thinking if it would be better for Amer to build a more united brand image by

promoting the idea of a large multinational corporation behind many strong brands or continue

to be just owner and let the brands build their own separate image. If we had a chance for an

interview, we could figure out their intentions for the future in this matter. This could be a

subject for further research and analysis.

LIST OF REFERENCES

26

Adidas AG (2013) Adidas Group Profile [www document]. [Accessed 9 November 2013].

Available http://www.adidas-group.com/en/group/profile/

Amer Sports (2012) Corporate Governance Statement [www document], : [Accessed 8

November 2013]. Available http://www.amersports.com/midcom-serveattachmentguid-

1e276a38b0db5d676a311e2b0766101a774c75bc75b/

corporate_governance_statement_2012_final_20130214_clean.pdf

Amer Sports (2013)a Our History. [www document]. [Accessed 4 November 2013]. Available

http://www.amersports.com/about/corporate_structure/our_history/

Amer Sports (2013)b Mission, Vision and Values. [www document]. [Accessed 4 November

2013]. Available http://www.amersports.com/about/corporate_structure/mission-

vision_and_values/

Amer Sports (2013)c Annual Report 2012. Helsinki, Amer Sports Oy

Amer Sports (2013)d Amer Sport's Brands. [www document]. [Accessed 5 November 2013].

Available http://www.amersports.com/brands/

Amer Sports (2013)e Distribution and Transportation. [www document], [Accessed 6

November 2013]. Available

http://www.amersports.com/about/supply_chains_and_it/distribution_and_transportation/

Amer Sports (2013)f Manufacturing and Sourcing. [www document]. [Accessed 6 November

2013]. Available

http://www.amersports.com/about/supply_chains_and_it/manufacturing_and_sourcing/

Amer Sports (2013)g Industry trends [www document]. [Accessed 6 November 2013].

Available http://www.amersports.com/about/corporate_structure/our_industry/

Amer Sports (2013)h Corporation Interim Report January –September 2013. Helsinki, Amer

Sports Oyj.

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Amer sports (2013)i Amer Sports' R&D [www document]. [Accessed 6 November 2013].

Available http://www.amersports.com/about/research/

Amer Sports (2013)j Outsourcing. [www document]. [Accessed 7 November 2013]. Available

http://www.amersports.com/about/supply_chains_and_it/outsourcing/

Amer Sports (2013)k Winning in Go to Market [www document]. [ Accessed 10 November

2013].Available: http://www.amersports.com/about/strategy/winning_in_go-to-market/

Amer Sports (2013)l Amer Sport's Business Segments and Business Areas. [www document].

[Accessed 7 November 2013]. Available

http://www.amersports.com/about/corporate_structure/

Arc'teryx (2013) [www document]. [Accessed 5 November 2013]. Available

http://www.arcteryx.com

Atomic (2013) [www document]. [Accessed 5 November 2013]. Available

http://www.atomic.com/en/

Callaway Golf Co. (2013) [www document]. [Accessed 9 November 2013]. Available

http://www.callawaygolf.com/global/en-us.html

Goi, C. (2009) A Review of Marketing Mix: 4Ps or More? International Journal of Marketing

studies. 1,1,2.

Head NV. (2013) Investor Overview [www document]. [Accessed 9 November 2013].

Available http://www.head.com/corporate/investors/

Jaditz, T. (1994) Seasonality: economic data and model estimation. Monthly labor review.

December.

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Samiee, S., Katsiekas, C. & Theodosiou, M. (2009) Uniformity versus Conformity: The

Standardization Issue in International Marketing Strategy. In: Kotabe, M. & Helsen, K. (eds.)

International marketing. London, SAGE Publications.

Kharas, H. (2010) The Emerging Middle Class in Developing Countries. OECD Development

Centre. Working Paper No. 285

Mavic (2013) [www document]. [Accessed 5 November 2013]. Available

http://www.mavic.com/

Ministry of Employment and Economy (2013) Intellectual property rights (IPR) [www

document]. [Accessed 6 November 2013]. Available

http://www.tem.fi/en/innovations/intellectual_property_rights_%28ipr%29

Percy, L. (2008) Strategic Integrated Marketing Communications. Butterworth-Heinemann

Pickton, D. & Wright, S. (1998) What's swot in strategic analysis? Strategic Change, March -

April 1998

Precor (2013) [www document]. [Accessed 5 November 2013]. Available

http://www.precor.com

Rugman, A.M., & Verbeke, A. (2004). A perspective on regional and global strategies of

multinational enterprises. Journal of International Business Studies, 35, 3-18.

Suunto (2013) [www document]. [Accessed 5 November 2013]. Available

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http://www.wilson.com/en-gb/about/

Yahoo Finance (2013) Amer Sports Competitors. [www document]. [Accessed 9 November

2013]. Available http://finance.yahoo.com/q/co?s=AGPDY+Competitors

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APPENDICES

Appendix 1. Structure of all Amer Sports' business areas (Amer Sports 2013l)

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Appendix 2. SWOT –Analysis

Strengths Weaknesses

- Wide brand portfolio - Global operations

- Wide customer base

- Strong product development and research

- Brands, innovations and other competitive advantages have to be protected against competitors, imitation and piracy -> actions bind resources

- Dependency on outsourced manufactures

Opportunities Threats

- Emerging economies with growing middle class

- Health and wellbeing trends increasing

-Boundaries between sportswear and casual wear are becoming blurred ->possibilities to bring new products available under brands’ product offering

-Economic downturn

-Seasonality and global warming

-Global business brings along many risks that can be related for example to outsourcing, supply chain management, currency fluctuation and raw material prices

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Appendix 3. Learning outcomes

This course was quite different from our previous courses. We had free hands to decide how

to plan our schedule, what case company to study and how to operate. The course was all

about independent work. It felt that we were carrying out more of a project than a typical

course. There were for this reason of course some challenges, but we think that in the end

we also gained a lot.

First of all, we have not done a case company analysis of this scale before. Investigating the

whole operations was interesting. Instead of just focusing on one field, we had to think about

the company as a whole. This forced us to consider how different operations are linked to

each other. We got familiar with analyzing a case firm as well as learning how to build and

write a case. Because we had different educational backgrounds we had different ways of

looking the company. This helped, because we had more knowledge inside the group from

different fields.

Doing this type of a project ourselves taught us also about time management. We had free

hands to decide when to work on the report and what to do during the given timeframe. It was

a good learning experience about managing our schedule. We think that this kind of

experience is something that helps planning and dividing work for the future projects. We

started doing the report as soon as possible after the lecture. This was important considering

the amount of work needed for the planning and research stage. All in all, the schedule that

we had for completing the report was quite good and we managed to follow it.

Working in a group of different nationalities was also a learning experience, because we had

to operate all the time in English. Also cultural backgrounds were a bit different, which had to

be taken into account as working.

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