Adidas Final
-
Upload
abinash-behera -
Category
Documents
-
view
30 -
download
0
Transcript of Adidas Final
Case Study
By
Nyasha Ganda
Jason Truscott
David Winn
Table Of Contents
Executive Summary...........................................................................................3Question 1 : How are changes in the external environment impacting the sporting goods industry?....................................................................................8
External Environment....................................................................................8 Political Environment.........................................................................8 Economic Environment......................................................................8 Global Environment...........................................................................8 Social Environment............................................................................9 Technological Environment.............................................................10 Demographic Environment..............................................................10
Industry Environment...................................................................................11 Threat of new entrants......................................................................11 Bargaining Power of Suppliers........................................................12 Bargaining Power of Buyers............................................................12 Threat of product substitutes............................................................13 Intensity of rivalry among competitors............................................14
Question 2: What are the strategies of Adidas, Nike and Reebok?..................15Adidas...........................................................................................................15Nike..............................................................................................................16Reebok..........................................................................................................16
Question 3: Compare the Resources and Capabilities of Adidas, Nike and Reebok..............................................................................................................17
Adidas...........................................................................................................17Nike..............................................................................................................19Reebok..........................................................................................................21
Question 4: Do a SWOT analysis of Adidas....................................................23Strength............................................................................................................23Weaknesses......................................................................................................24Opportunities....................................................................................................25Threats..............................................................................................................26Question 5: What should Adidas do to become more competitive?................27
2 of 28
Executive Summary
Introduction
Adidas went through turmoil since 1978 after the death of its founder, Adi
Dressler. After going bankrupt in 1990, and being handed over to Robert
Louis Dreyfus, Adidas has seen a remarkable turnaround. Dreyfus knew little
about the sporting goods industry, and as a result analysed the situation
similarly to as is shown below. The external environment is analysed, as well
as the industry forces. The firms, and competitors strategy was revealed, as
well as its capabilities and resources. Finally a SWOT analysis is performed,
and from this recommendations are derived.
External Environment
In analyzing the external environment, a number of factors should be
considered, including the general environment, industry environment, and
competitor’s environment. The general environment includes the traditional
factors which affect an industry, including the political, economic, global,
social, technological and demographic environments. The industry analysis is
performed using Porter’s five forces model.
General Environment
The shoe industry is showing rapid growth and development. World
demand is increasing, particularity in Asia. The entire dynamic of the
sports industry is changing, with sports equipment being used for leisure
wear as well. In addition with the development of new fun sports for
casual sportsmen/woman sports equipment is becoming a form of lifestyle
3 of 28
for use in all occasions. Shoe technology changes slowly, but results in a
long term competitive advantage. All firms have different key technologies
all achieving a similar effect of improving comfort. The sports industry
has two seasons and has to meet the needs of a wide combination of
customers, which is increasing including fashion conscious under 25’s and
women.
Industry Environment
The use of Porters 5 forces revealed that the sporting industry is moderately
attractive to operate in, as there is not a high threat of new entrants, and
bargaining power of both suppliers and buyers is low which makes conditions
easier to operate in. However, the threat of substitutes is high, with intense
rivalry between firms, which makes the industry more difficult and less
attractive to operate in. It is certainly an interesting industry to operate in,
which is not difficult to gain access to, but exceptionally difficult to gain a
market foothold.
Strategies
Adidas
Adidas uses the Integrated Cost Leadership Differentiation Strategy as their
shoes are sold at a lower cost to their competitors, while still have a high
technological quality focus – equal to that of their competitors. IN addition
Adidas focuses on 5 core markets.
4 of 28
Nike
Nike employs a differentiation strategy as it focuses on adding value to their
customers throughout the purpose process, from deliveries, customer service,
quality and technology. As a result of these efforts to satisfy customers in all
aspects, a premium price is charged.
Reebok
Reebok utilizes a differentiation strategy as it markets itself as a trendy,
fashion oriented sports company. Its sporting goods quality has been lost in the
eye in the consumer in the effort to clearly define itself as trendy and
fashionable.
Resources and Capabilities
Adidas
Adidas has a number of resources, including a large financial base on which to
operate. It has a strong R&D department both in the development of new shoe
technologies and production advancements. Through the ownership of a
number of its own factories it can ensure quality and assist in further supplier
technology development. Adidas’ capabilities include its effective marketing
at sporting events capturing the sporting market. Combined with an extensive
retail network, Adidas has developed the capability to maximise reach through
subsidiaries and licenses.
Nike
Nike has an exception resource pool, with enormous sales by in America. An
effective R&D team comprising of a number of sources to address all possible
desires in a shoe. Through outsourcing, Nike can harness its true skills in
5 of 28
marketing and designing of its products. Effective capabilities include the
ability to market by using top sports personalities that appeal to the market. In
addition, they have developed the capability to sell merchandise in 80
countries quickly through a strong preordeing system, accounting for 70% of
sales.
Reebok
Reebok has vast economic resources, and a business which is split into two
major divisions; Reebok and the Speciality business group with each division
being responsible for different lines, thus ensuring a differentiated product
line. Strong innovation has led to the development of a number of new
technologies to increase their competitiveness. Reeboks capabilities lie in their
ability to market effectively through different mediums, but primarily TV.
Their capability in distribution to sell in 140 countries through who9lly owned
subsidiaries is representative in their strength in logistics. Extensive
distribution:
SWOT Analysis
STRENGTHS WEAKNESSES OPPORTUNETIES THREATS Strong Brand•Good Quality•Strong R&D•Global Footprint•Control
European market•Licenses in
countries with import restrictions
•Revenue well divided between shoes and clothing
•Various
•High Clearance sales
• 90% of income from core products
• Pre-ordered stock arrives late
•Delivery with a 7 month lead time
•Not regarded as a fashion brand
•Not well regarded by woman and teens
• 1 TV advert per
•Sports market growth by 28%– Increasing woman
entering sports–Footwear used
casually as well–Development of
outdoor recreation sports
•Greater access to USA
•Development of fashionable image
•Global markets offer greater
• 80% of shoes sold in casual wear, where Adidas produces for sports
• Development of new sports, may encourage new market entrants
• Nike and Reebok entering the specialty
6 of 28
distribution channels
year•Loss of market
share in Britain, France and Spain
•Neglect of US market
•Turbulent management after death of Adi Dresser
opportunities market• Licensees may
decide not to produce Adidas
• Brash marketing by Nike and Reebok to earn teen market
Recommendations
To be more effective we would recommend a number of adjustment. The
Develop of more fashionable clothes and footwear is crucial to capture the
fashion conscious market. The low prices lowers the bottom line, and does not
give additional volume, so prices should be aligned with competitors. In
addition retail outlets should be used as opposed to wholesalers to increase
profit. Outsourcing all production would also lower costs, as quality assurance
from in house production does not earn a premium from the market. Poor
logistics should be urgently addressed, possibly by adopting a decentralized
approach, which also gives the benefit of customizing products to individual
market needs.
7 of 28
Question 1 : How are changes in the external environment
impacting the sporting goods industry?
In analyzing the external environment, a number of factors should be
considered, including the general environment, industry environment, and
competitor’s environment. The general environment includes the traditional
factors which affect an industry, including the political, economic, global,
social, technological and demographic environments. The industry analysis is
performed using Porter’s five forces model. The competitor environment is
analyzed in question 2 of this paper.
External Environment
Political Environment
o There is little information on any political factors which had an
impact on the shoe industry. However, certain countries restricted
imports of shoes, so as a results shoe manufactures had to find an
alternative method of servicing that market.
Economic Environment
o There is little information on any economic circumstances which
had an impact on the shoe industry. However, the shoe industry
was expected to grow by 28% to $55 Billion by 1998. This implies
that the shoe industry was growing rapidly, and as a result fierce
competition could be expected to capture a share of this lucrative
market.
Global Environment
8 of 28
o There is an increasing usage of global outsourcing, with 60% of
production facilities being based abroad. This resulted in
significantly cheaper production costs, and as a result all firms have
had to utilize this approach to remain competitive
o With Asian demand expected to double, as well as being huge
proportion of the world’s population, firms need to be aware of this
and be prepared to take advantage of this expected growth.
Social Environment
o There is an increasing trend of using sports equipment being used
for leisure purposes. This accounts for approximately 50% of sales,
and as a result people require quality durable multi-purpose shoes.
This is a trend that shoe firms should be prepared to embrace and
develop products specifically for this niche.
o With an increasing interest in health and sports, and the
development of aerobics development, a multi purpose shoe is
required by the market.
o Sport is increasingly no longer an elitist activity, with fun sports
developing such as basketball, soccer and mountain biking.
o 80% of shoes are used in casual wear, particularly in the under 25
age group, which indicates that firms should focus on this segment.
o With the development of outdoor recreation sports such as skiing,
golfing and hiking, functional outdoor clothing is also required.
However, this equipment is less prone to fashion changes, but with
a focus on authentic performance products. Thus sports firms need
9 of 28
to ensure that this segment is provided with quality performance
products with a lesser focus o fashion.
o Sports equipment is tending to become a form of lifestyle, with the
clothing being used in all aspects of clothing wear, thus it is
necessary for firms to develop products which are functional and
can be used anytime.
Technological Environment
o Sports technology is a key element of success in differentiation of
products between competitors. It is not rapidly changing, with
advances providing a long term competitive advantage.
o Typically 1-3% of sales are spent on R&D, with the aim of
increasing comfort and performance.
o The mayor competitors each have different technologies providing
similar advantages, with Nike having the Air sole technology to
reduce impact and shock. Reebok utilizes Hexalite, Graphlite and
Pump technology to make the shoes more comfortable, increase
stability, and improve strength. Adidas utilizes Torsion technology
to increase stability and strength. Thus all the manufacturers utilize
different methods to achieve the same objectives, thus lowering
any technological differences between them.
Demographic Environment
o There are two seasons in the shoe industry, with one for Spring and
Summer, and one for Autumn and Winter. Thus firms have to be
prepared and have different lines for the different seasons.
10 of 28
o The age groups of the major sports buying segment is changing,
with a trend of younger people making up a large proportion of the
industry. Firms need to be aware of this trend and cater for this
need, specifically in the fashion segment.
o With the development of aerobics, woman rapidly became another
segment in the sports industry market.
Industry Environment
Porters 5 forces
Threat of new entrants
o Economies of scale are required to enter the sports shoe industry, to
obtain the reach to be competitive
o Extensive capital requirements are necessary, in terms of physical
production facilities, and marketing to establish a firm in the
industry.
o It is difficult to establish a brand, as strong brands are already well
established, and extensive, expensive marketing would be required
to compete against them.
o There are very low switching costs, as it is easy for buyers to
change suppliers, thus it is relatively easy for a customers to buy
from a new firm.
o Access to distribution channels is not difficult to obtain, as a new
firm would easily have access to existing channels in department
stores and specialist sports shops.
11 of 28
o Strong retaliation would be expected by existing firms, as the
sports industry is lucrative thus they would wish to defend their
market share.
o Considering these factors the threat of new entrants is
regarded as moderate, as there are certain barriers to entry,
but not to the extent that the market is impossible to gain
access to.
Bargaining Power of Suppliers
o Switching costs are low, thus it is easy for a firm to obtain
suppliers
o There are few substitute inputs to produce shoes with the essential
elements of rubber, and fabric being the main ones which are hard
to substitute.
o There are many suppliers of raw materials, thus making it easy to
obtain supplies
o There is a strong threat of backward integration whereby the shoe
firm produces its own raw materials to ensure quality. However,
there is a very small threat of forward integration as the suppliers
do not posses a highly differentiated product.
o Bargaining power of suppliers is considered to be low as it is
easy to obtain supplies from a number of sources.
Bargaining Power of Buyers
o Bargaining Leverage
There is a low buyer concentration as there are many of
them, thus the individual consumers have little power.
12 of 28
However, there are a few large retailers which buy a
substantial volume, thus they have a high bargaining power
as they have the ability to leverage.
There is a low switching costs as it is easy for consumers to
change to another sports shoe brand without incurring any
costs.
It is difficult to integrate backwards as consumers lack the
resources to manufacture sports equipment.
o Price sensitivity
There are very few product differences which could be
regarded as significant to sway a customer, as essentially
the shoes have different technologies which produce the
same effects, thus price and design are factors which may
sway buyers, but with 2 similarly designed shoes, they will
be price sensitive.
Possessing a strong brand is a differentiating factor, thus
being an influential aspect when buyers choose a product.
o Bargaining powers of buyers is believed to be moderate, as they
do not have a significant ability to influence the industry as
individuals, but collectively they have considerable influence.
Threat of product substitutes
o There are low switching costs for the consumer, as it is easy to
change between brands and sports equipment suppliers
o There is a low propensity to substitute away from the industry as
the products provided are highly specialized.
13 of 28
o Counterfeits are a significant threat in the branded shoe sector,
being sold at a lower price, but at a perceived similar quality and
performance.
o The threat of substitutes has been evaluated as high, as there
are many substitutes available, and with extremely low
switching costs it is easy for customers to change.
Intensity of rivalry among competitors
o There are many competitors but with only a few major players who
have approximately equal resources which intensifies the
competition.
o There is rapid industry growth which would reduce the competition
to take market share away from competitors as there are sufficient
growth opportunities without engaging the competitors.
o There are few fixed costs thus rivalry between firms is reduced, as
they are not constrained by the capacity of their equipment, and
forced to produce large volumes to cover costs.
o There are few product differences thus customers are unlikely to be
loyal as many firms have products to satisfy their needs. As a result
there are low switching costs, thus increasing competition between
firms to capture the market.
o There is little diversity of competitors thus competition is increased
due to their inability to differentiate on the basis of product.
o There are low exit barriers as there are few specialized assets, few
labour agreements, as production occurs predominately in third
world countries. There are no strategic alliances, or emotional
14 of 28
barriers which could prevent a firm from exiting the industry or a
geographic segment.
o The Rivalry among competitors is considered to be high, as
there are few differences between them, thus forcing
competition to increase due to their inability to differentiate on
the product basis.
Question 2: What are the strategies of Adidas, Nike and
Reebok?
Adidas
Adidas uses the Integrated Cost Leadership Differentiation Strategy. This is
supported by the fact that their products are cheaper compared to the other
industry participants whilst it also looks at other different markets as a sports
leader. According to Adidas, the company “strives to be a global leader in the
sporting goods industry with sports brands built on a passion for competition
and a sporting lifestyle. Our strategy is simple: continuously strengthen our
brands and products to improve our competitive position and financial
performance.”
Reasons
o The company stresses performance and quality not fashion
showing a differentiated focus.
o Concentrates on five core products whilst having with a strong
focus on soccer, again showing a differentiated focus.
o Adidas markets its products at sporting events showing a
differentiated marketing approach
15 of 28
o High technological focus – tension technology and the use of new
materials showing a differentiation focus
o Goods are priced lower than competitors thus showing a cost
leadership strategy.
Nike
Nike employs a differentiation strategy as it focuses on customers who
perceive value in its products compared to the other products that are produced
and marketed by competitors.
Reasons
o Consistent manufacturing of attractive products
o Rapid responses to the unique customers desires
o Through excellent inventory management and consistent
production planning Nike is able to respond rapidly and deliver and
on time to retailers and distributors showing a differentiated
distribution strategy
o Makes use of a strong brand, with Research and Development
expertise and a strong marketing leverage with top sport stars to
differentiate the product.
o By offering support and sales personnel training to the 14 000
strong retailers Nike has a differentiation focus with regard to
customer service.
Reebok
Reebok utilizes a differentiation strategy. It markets itself as a trendy, fashion
oriented sports company.
Reasons
16 of 28
o Through Reeboks focus on branding in sport and fitness, they have
differentiated themselves, such that they are ranked as the number
1 sports and fitness brand
o The firm has separate divisions for athletics and sports thus
ensuring the complete differentiation of different lines of
equipment and apparel.
o Retain a differentiated focus by charging a premium as
They operate in 140 countries and emphasizes different
elements in each market, Reebok emphasizes the use of
high-quality retailers and avoiding lower margin
merchandisers and discount outlets.
Distributes through specialty retailers, sports stores and
department stores and clothes through specialty shops
Utilizes concept stores that sold a collection of Reebok’s
footwear and clothing
o Enhances its brand image by signing sports stars for sponsorship
Question 3: Compare the Resources and Capabilities of
Adidas, Nike and Reebok .
Adidas
Resources
Europe represents 32% of worldwide sales in sporting and footwear sales
and Adidas is the leader in this market.
Gross profit 38%, Net profit 5%
A strong R& D division
17 of 28
o Adidas was the inventor of “Torsion Technology”, which is a
system of a pair of cross supports running from the front to the
back of the shoe, allowing movement and at the same time
maintaining strength and stability.
o Product innovation is primarily focused on the creation of new
footwear and textiles.
Effective Production
o They however wanted to maintain a certain level of company
owned production to ensure quality and hence kept factories in
France and Germany.12% of the footwear and 7% of the textiles
are produced in-house. Outsourcing of production was divided
between Asia (70%) and Europe (30%)
Capability
Effective Advertising
o Adidas’ strength is in international and Olympic events in which
participants were amateurs, and endorsements were made with
national sporting associations rather than individuals. This built the
brand through event marketing rather than individual athlete
endorsements. Adidas supplies team athletes with products and
benefited from the resultant coverage.
o A large resource budgets accounted for Adidas spending $60
million on advertising in Europe which accounted for on average
6% of sales, of which 75% of the marketing budget was spent on
promotion.
18 of 28
o T.V. advertising was covered by a single spot which stressed the
quality of Adidas products and ran for a year without review.
Effective Distribution networks
o Adidas utilized various methods to ensure maximum coverage to
gain market share. They leveraged their capabilities in distribution
through subsidiaries and licensees. Germany, France, U.K. and
U.S. were the most important subsidiaries representing 43% of total
sales.
o Licenses are granted in countries with restrictions on imports e.g.
Argentina and Japan (18% of sales). Licensees paid royalties to
Adidas and distributed the Adidas brand whilst Adidas provided
guidelines on prices, provided representation and quality assurance.
o Adidas also had its own brand shops in Eastern European countries
e.g. Budapest, Prague, Moscow and Riga.
o Adidas delivered to its subsidiaries with a seven month lead-time,
resulting from considerable sourcing and production in Asia. On
average 50% of products were pre-ordered and the remaining 50%
consisted of on-demand re-ordering. However Adidas wasn’t
considered reliable and half the re-ordered stock consistently
arrived late.
Nike
Resources
Gross profit margin (38%), Net profit 11%
19 of 28
America accounted for approximately 50% of worldwide sales and Nike is
the leader with 32% of the market sales worth $3.4 Billion in 1992
Effective R&D
o Strong R&D team which consists of research committees and
advisory boards made up of coaches, athletes, trainers and other
experts to review designs, materials and concepts for product
improvement. They also developed the Air-Sole technology by
using air in the soles to reduce the shock of impact. This was
claimed to allow athletes to train longer and educe the risk of
injury.
Production
o By utilising outsourcing of production and manufacturing
agreements meant that Nike was able to harness their core
competencies, and behave like a marketing and design group,
utilising Indonesia, China, Taiwan and Thailand for manufacturer
because of the cheaper labour costs
Capabilities
Effective Marketing and advertising
o Nikes ability to leverage athlete endorsements meant that the
company chose top athletes with brash personalities- John
McEnroe and Andre Agassi (tennis), Ronaldo (soccer) and Michael
Jordan (basketball) - which particularly appealed to the young
market and portrayed the image Nike were seeking.
o Most of the extensive advertising budgets ($280 million) was
spent on television spots targeted at young customers. They sold a
20 of 28
lifestyle, a combination of sports and music, fashion and fun. On
average Nikes advertising budget accounted for 10% of sales and
in 1992 they spent $180 Million in the U.S. and about $100 million
in Europe. They then used these spots along with the athletes and
one catchy slogan “Just do it”.
o By harnessing their capability in the career management of sports
stars to promote Nike acted not only as a shoe company but as a
sports company
Extensive Distribution
o Nike sold its products to approximately 14,000 retail accounts in
the U.S. and in as many as 80 counties resulting in a huge footprint.
o Nikes strategy was to sell merchandise through different channels
to different target segments. They sold shoes for athletes in spots
shops, for amateurs in department stores, and for the mass
consumers in shoe stores. Nike further pioneered the future in pre-
orders. This was possible due to the strong demand for Nike
products and consequently, 77% of Nike footwear products were
pre-ordered in 1992. This strategy had considerable impact on
inventory management, production planning, and securing retail
accounts.
o Nike developed the Nike Town concept, a 20,000-square-foot mall
with 14 stores that sold equipment for 25 different sports.
Reebok
Resources
Gross Profit 40%, Net profit 8%
21 of 28
Reebok has harnessed their resources through two major divisions within
the business; Reebok and the Speciality Business Group. The Reebok
division was responsible for designing, producing and marketing the sports
shoes and accessories. The Speciality Business Group included “Above the
Rim” basketball clothes, “Tinley” running and cycling performance
clothes and “Weebok” for toddlers and infants.
Product research and Development
o Reeboks rise to success was fuelled by innovation which lead to
the production of the first aerobic/dance shoe “Freestyle”
designed for women. Freestyle captured the vast majority of the
female sporting market and branded Reebok as a fitness company
rather than a performance company. Although Reebok had
developed its own technology it was not branded as a sporting
company, despite having developed a strong line of technological
innovation (Pump, Instapump, Hexalite, Graphalite) which
increase shoe comfort, stability and strength. However, the
company’s strength lay in its trendy shoes.
Capabilities
Effective Marketing and Advertising
o With an advertising budget of $85 million in the U.S. $25 million
in Asia, and $10 million in Europe, Reebok had exceptional reach.
Of this 60% was used in television and the remaining 40%in
media. They effectively used their resources to optimise their
ability to create advertisements to appeal to their customers.
22 of 28
o They further made a strong strategic push in the sports market,
gaining increased visibility on playing fields and sporting arenas
worldwide through endorsement arrangements of prominent stars
in a multitude of sports.
o They utilised the resources available to them in the advertising
department to launch their first global campaign “Planet Reebok”,
further adopting a single global logo strengthening their global
brand position.
Production
o Outsourcing is the major form of production accounting for 80%,
although some of the clothing and footwear components were still
done in the U.S.
Extensive distribution
o Reeboks utlised their capbabililty in logistics to distribute and
market their products in 140 countries through wholly owned
subsidiaries in Austria, Belgium, Canada, Chile, France and
Germany.
o Reebok further had concept stores located in Boston, Santa Monica
and New York that sold a selection of Reeboks footwear and
clothing
Question 4: Do a SWOT analysis of Adidas
Strength
o Strong brand of performance and quality
o High quality
23 of 28
o Strong Research and Development in products and materials
utilized in production
o Strong culture of winning within the organization
o Global footprint
o Control the European sector of the shoe industry
o Sold licenses to give access to additional countries with import
controls
To produce according to specifications to ensure quality,
provide technicians
Check up to ensure brand was well represented
o Covers a broad range of sports, and secondary product such as
sports bags
o Regarded a genuine sports brand
o Strong soccer focus and reputation
o Popular with middle aged men
o Various distribution means to gain market share,
o Revenue well diversified between clothing and shoes
o Makes use of event advertising which shows their premium quality
Weaknesses
o High clearance sales (30%), with the industry average being 10%,
showing weak production planning
o Core products accounted for 90% of revenue, thus if market
changed rapidly and Adidas could not adjust they would have no
income
24 of 28
Pre-ordered stock often arrived late to retailers
Strong German influence, could be regarded as a negative factor to
foreigners, as little English possibly spoken
Centralized management approach, which results in all geographic
segments receiving the same marketing material and products, which may
not be appropriate to each region.
Delivery with 7 month lead-time
Not regarded as a fashion brand
Not well regarded by woman and teenagers
Only one advert on TV which is used globally, which suggests that
marketing in certain regions I not well targeted.
Neglect of the American market which is the largest market
Loosing of market share in Britain, France and Spain
Turbulent organizational and management changes after the death of
Alfred “Adi’ Dassler.
Opportunities
o The sports market that was expected to grow by 28 percent to $55
billion by 1998, indicating greater opportunities for expansion due
to
Increasing number of woman entering the sports or leisure
market, so offering the firm a larger possible customer base
Athletic footwear was no longer reserved for professional
exercise and competition but also has become a part of
leisurewear, thus the leisure market can be exploited
25 of 28
Development of outdoor recreation sports such as golfing,
skiing, jogging and hiking which was encouraging growth
of functional outdoor clothing,
o Greater access into the USA
o Develop more of a fashion image
o Price shoes higher to match competition, if regarded as better
quality, this is possible
o Endorse athletes to further enhance the premium quality sports
image
o Greater advertising to appeal to the younger generation, and
woman
o Greater control of licensees to control prices, and marketing
o Deliver faster to reduce lead time, which will allow greater
inventory control, and fewer clearance sales
o Global markets offer the firm more opportunities to obtain critical
resources for success
o Developing an internet distribution channel
o Can make use of E-Commerce and E-Business to improve
distribution as well as selling direct
o Changing the Adidas image to one of an attractive leisure sports
wear company while retailing their performance image
Threats
o 80% of shoes are used for casual wear, and this is increasing,.
However, where Adidas makes most of their sales in the sports
shoe segment
26 of 28
o The development of new markets such as street baseball, street
soccer, which may encourage more competitors to enter the market,
o Nike and Reebok further entering the specialty market, eroding
their market share
o Nike and Reebok moving more into Europe
o Licensees may decide not to produce Adidas
o New entrants into the leisure shoe industry such as Timberland
o Brash marketing campaigns from Nike and Reebok that were
supported by huge budgets that were targeting women and
teenagers with lower quality, more fashionable products, which
could erode market share
Question 5: What should Adidas do to become more
competitive?
Design more fashionable clothes and footwear to capture the a larger share
of the leisure market
Increase price of apparel as under priced compared top rivals
Utilize own production facilities in hard to reach countries
Deliver pre-ordered stock on time through faster delivery to reduce lead-
time and clearance sales. More effective distribution channel to achieve
this
Focus on USA as such a large market, as well as attempt to gain a first
move advantage in the emerging markets.
Use decentralized approach, with each country organizing itself, in terms
of marketing and production so that each can respond faster to changing
trends
27 of 28
Change Adidas image to one of a fashion designer as well as producing
high quality sports products.
Outsource the rest of production to Asian firms, as the additional quality
control does not allow a premium to be charged for this.
Open more retail outlets, as they mark-up by a 100% as opposed to 20%
when they sell to the wholesaler.
Have more distribution channels to target different segments, for example,
department stores for amateur products, chains for mass consumers,
28 of 28