UNIVERSITY OF MODERN SCIENCE

COLLEGE OF BUSINESS

International Business

BUSN 407

Fall 2015-2016

Project

Submitted to / Dr. Mohammed Rizwan Alam

Submitted by/ Eissa Abdulla Alhamadi

201330316

Section 4

Table of ContentsIntroduction of Adidas.................................................................................................................................3

Profile......................................................................................................................................................3

Competitors.............................................................................................................................................4

Products..................................................................................................................................................4

SWOT analysis of Adidas..............................................................................................................................5

Strengths.................................................................................................................................................5

Weakness................................................................................................................................................5

Opportunities..........................................................................................................................................6

Threats.....................................................................................................................................................6

Challenges Facing Adidas.............................................................................................................................7

Political challenges..................................................................................................................................7

Economic challenges...............................................................................................................................7

Social challenges......................................................................................................................................7

Technological challenges.........................................................................................................................8

Environmental challenges.......................................................................................................................8

Legal challenges.......................................................................................................................................8

Conclusion...................................................................................................................................................9

References.................................................................................................................................................10

pg. 2

Introduction of Adidas Adidas is a multinational business organization that manufactures shoes and sport apparel. The

business was founded by Adolf Dassler who is German. The brand name created by the

combination of the name of the founder Adi Dassler, Basically the company was producing

shoes in 1920s. That make costumer, to recognize the brand Adidas with the three parallel

stripes of the same colour. The Adidas brand is structured in three divisions: Adidas Sport

Performance, Adidas Sport Heritage and Adidas Sport Style. For the past so many years, adidas

retains its trade mark as the global leader in producing sports goods, sports shoes, apparel, and

accessories. Adidas-Salomon, the parent brand, offers a variety of sports goods. Adidas has

more than 100 subsidisers and numeber of joint ventures all over the world mainly in US,

Europe, and Asia. The Adidas-Salomon Group products markets fewer than six brand names all

over the world: Adidas, Salomon, TaylorMade, Mavic, Bonfire and Erima.

Profile

Adidas

Parent

company

Adidas Group

Category Apparel and accessories

Sector Lifestyle and retail

Tagline/ slogan All in; Impossible is Nothing

Usp World renowned company for sports equipment, clothing and other accessories

STP

Segment Young men ,women and children who have passion for fitness and sports

Target group Urban upper-middle and upper class

Positioning Adidas stands for passion for sports

pg. 3

Competitors Nike

Reebok

Bata

Liberty

Puma

Fila

Products Footwear

Sportswear

Sports equipment

Toiletries

pg. 4

SWOT analysis of Adidas

Strengths 1. Legacy & heritage: With decades of heritage & legacy, Adidas has travelled a long way to

establish itself as a youthful brand. The brand was started in 1949 and has travelled a long way since then.

2. Diversified portfolio: Company has multiple product portfolios with varied range of footwear & accessories under brand name Adidas (premium segment) & Reebok (mid-range).

3. Strong financial position: With its 2400 store globally accounting $4.3billions, the company is in strong financial position.

4. Distribution network: By selling it from online stores to company owned stores to supermarket stores, Adidas has an effective distribution system for their products available through different channels.

5. Branding by creating touch points with the community: Celebrity endorsements & sponsoring major sports organizations such as FIFA, UEFA, NBA & Olympics has increased the awareness of Adidas in the market & hence it has increased the highly targeted customer base as well.

6. Collaborations & memberships: Strong relationship within the sustainability area with organizations such as International Labour organization, International Finance Corporation has given the company an edge over competitors so that they can have a sustainable business.

Weakness 1. Premium price range: High price range due to innovative technology & Production

methods have made the brand affordable to limited customers only, especially in developing countries.

2. Outsourced manufacturing: Adidas has 93% of production outsourced to 3rd party manufacturers (largely to Asia) to avail of low labour cost & easy availability of resources. They are running a risk of over dependency on outsourcing especially in Asian markets. Also, the overall quality of products perceived by the consumers of developed economies is a major concern as far as brand is concerned.

3. Limited product line: Adidas along with the recently acquired Reebok brands, has got only 2 brands under their group although they have got deep assortments within these brands. Thus, there is more scope for product line expansion.

pg. 5

Opportunities 1. Changing Lifestyle: With the saturation of developed economies, changing taste &

preferences, education & changing lifestyle of developing economies, there is a steep rise in the demand of premium goods & services.

2. Market development: Entering into new markets will be the only way to succeed in the future because developed economies are already having high competition.

3. Expansion in product line: Expanding its product line will open a new set of opportunities while at the same time it can differentiate itself from the competitors by following this strategy.

4. Increasing demand of premium products: If we only consider the Indian market then there is a growth rate of 33% in demand of premium products. This tells us the future business opportunity & expanding market size of developing economies.

5. Backward integration: This will be smart strategy if followed by Adidas as it will help Adidas to secure their patent rights & also integrate their R&D with the operational team in order to work in open system.

Threats 1. Competition: Although Adidas is a global brand but it is facing fierce competition from

other brands like Nike which is No.1 brand and Adidas being in 2nd Position in this premium segment. Besides this, there is regular competition from local players, substitutes and market penetrators.

2. Supplier Dominancy: Due to majority of its production being outsourced; Suppliers have more bargaining power then the company.

3. Government Regulations: With its 35% products manufactured in China & 93% of production happening in Asia, Import regulations, duty& tariffs plays a critical role in the pricing and success of the company.

pg. 6

Challenges Facing Adidas

Political challengesPolitical stability is an important factor in any country for adidas. Political and regulatory risks

include potential losses from expropriation, nationalization, civil unrest, terrorism and

significant changes to trade policies. In particular the adidas group faces risks arising from

sudden increase of import restrictions, charges in the taxation system of a country, minimum

wage policy, import tariffs and duties that could compromise the free flow of goods.

Economic challengesEconomic growth and interest rates are major factors for any economy in the world, if interest

rates are too high and keep rising, then the demand for products will fall, as it makes saving

more attractive and borrowing more expensive .

Whereas if interest rates are too low, people are encouraged to spend, as saving isn't attractive.

This means that there is more money going round in the economy and makes goods seem

cheaper, which is bad for the economy as it causes inflation to increase. This is why it is

important that interest rates are stable. Taxation, vat, inflation, unemployment and per capita

income highly affect the company's profitability.

Social challengesAdidas target market comprises of people from different social backgrounds. The adidas group

is affected by people's religion, race, culture, education levels, population, gender, buying

habits and lifestyle .different religions like hinduism, islam, christianity, judaism and many more

have different buying patterns and opinions for any products they buy . The adidas group has

penetrated most countries so all these social attributes play very important roles in deciding

the company's strategy.

pg. 7

Technological challengesTechnological advances in things like machinery will have an effect on the adidas group. The

latest technology can speed up production, save energy or cut down labour costs .currently the

world has become a small village and the use of the internet is increasing day by day all around

the world, so adidas needs to make sure that they keep up-to-date with the internet all the

time. It will help customers to buy online, and help it to advertise online and many other things.

Environmental challengesAdidas group has system based approach to manage environmental impacts on its operations.

They do have control and monitoring of restricted substances, reducing voc emissions (volatile

organic compounds), tackling climate change . In order to minimize environmental impact of

producing and distributing group products, in 2009 adidas group continued to proactively

engage in developing more environmentally sustainable products which included the first

products from their "better place" programme.

Legal challengesThe adidas group is exposed to the risk of claims and litigation for infringement of 3rd party

trademark, patent and other rights. To reduce this risk, new product technologies, designs and

names are carefully researched to identify and avoid potential conflict with the rights of third

parties. Adidas need to beware of all legal aspects that may be linked to the sportswear

industry, as adidas could get hefty fines if they do not comply with the law, legal constraints to

be considered include:

Press complaints commission (PCC)

Trade descriptions act

Sales and supply of goods act

Independent television commission (ITC)

Advertising standards authority (ASA)

pg. 8

ConclusionAdidas is corporation run by shares of the stake holders and is run on the stock exchange. It is

the second largest manufacturer and biggest seller around the world and the largest network in

Europe. Beside sports goods, the company is also associated with the manufacture of clothing

and wears accessories like shirts, bags, watches, belts etc. The company is Germany based and

is headquartered in Herzogenaurach after its formal registration in 1949. Since then Adidas has

experienced several owner’s shifts from Adolf to Bernard Tapie by 1990, in 1992 to Lyonnais

bank, and then finally to Robert Louis Dreyfus in 1997, who has made the empire much wide

spread and more renowned.

Adidas is one of the most popular athletic brands in the world. The brand itself targets all age

groups, providing sporting goods, athletic wear, and shoes. Adidas aspires to “strive to be the

global leader in the sporting goods industry with brands built on a passion for sports and a

sporting lifestyle!” This brand was determined to change the outlook on the industry of sports

and that’s exactly what Adidas did. Adidas changed the sports industry since 1949, from the

first day they started and now many athletes around the world are sponsored by Adidas

wearing their products while doing what they love best.

pg. 9

References Adidas Group Annual Report 2010

Nike Inc. Annual Report 2009

www.adidas.com

www.Nike.com

www.Investopedia.com

www.Wikiinvest.com

www.Wikiwealth.com

www.financeyahoo.com

pg. 10