Running Head: ADIDAS GROUP ANALYSIS

04-75-100 Introduction to Business

Adidas Group
Analysis
November 1, 2016

Presented to: Professor. Roger Bryan

Presented by: Group 4
Mohammed Faysal 104648980
Stephen Holland 104557091
Alex Hristoff 104196876
Nick Ludin 104464199
Dylan Maitre 104578757
Nicolas Tremblay 104570399
University of Windsor

ADIDAS GROUP ANALYSIS

1. EXECUTIVE SUMMARY
Adidas is a German multinational corporation that designs and manufacture sportswear, shoes,
and other sports accessories. The company is headquartered in Herzogenaurach, Germany.
Adidas is the largest sportswear producer in Europe and the second greatest in the world. The
company employs more than 55,000 individuals in more than 160 nations, and produce more
than 778 million item units each year and generate sales revenues of 17 billion per year; figures
from the 2015 yearly reports (Adidas Group, 2016).
Expanded worldwide rivalry combined with monetary vulnerability and changing consumer
needs, is compelling Adidas to reconsider its strategies, keeping in mind the end goal to have the
capacity to successfully contend in the focused worldwide business sector.
The point of this report is to give Adidas with the direction and course it needs to accomplish its
central goal of being the world's leading producer of sportswear, shoes and accessories. This
report will layout business and corporate level procedures for Adidas to embrace, keeping in
mind the end goal to convey on its guarantee of advancement of portability, manage an upper
hand, separate itself from its rivals, and drive future development.
This report incorporates definite data on Adidas's history, its current focused circumstance
examination and business environment projection to give the organization an exhaustive
comprehension of its present position and to help in accomplishing its objectives and mission.

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. COMPANY HISTORY AND DESCRIPTION
4. CURRENT COMPETITIVE SITUATION
4.1 Industry Analysis
4.2 Competitor Analysis
4.3 Competitive Position
4.4 Business Level Strategy
4.5 Corporate Level Strategy
5. 5 YEAR BUSINESS ENVIRONMENT PROJECTION
5.1 Political Factors
5.2 Economic Factors
5.3 Socio-Cultural Factors
5.4 Technological Factors
5.5 Eco-Environmental Factors
6. STRATEGIC MODELS
6.1 SWOT Analysis
6.2 Strategic Discussion
7. CONCLUSION
8. APPENDICES
8.1 Appendix A Graphs & Figures
9. REFERENCE LIST

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2. INTRODUCTION
The reason for this report is to fundamentally break down the strategies system of Adidas. Adidas
will be assessed and its strategies analyzed. The point will then be to prescribe business and
corporate level technique changes for Adidas, to receive with a specific end goal to keep up its
industry-driving positions now and as well as in the future.
3. COMPANY HISTORY AND DESCRIPTION
In 1900, Adi Dassler was born. 116 years later, the family company he created in 1924 is still
thriving. The century old company has faced a couple setbacks since its inception. Using solid
marketing plans, creation of innovative quality sportswear, expansion of the brand with
partnerships/ collaborations and logically acquiring strong companies, Adidas created a great
well-rounded, professional name. In its best interests Adidas, has become a part of Adidas Group
(AG) and all the companies included all have the same goal; to provide innovative, quality sports
gear. Adidas is the 90th ranked company on Forbes The Worlds Most Valuable Brands list and
the highest ranked in the AG. This company proves that impossible is nothing through its
triumphant story (Adidas Group, history, 2016).
In 1954, Adidas won international recognition for their lightweight football boots when the
German national team wore them while, playing against the Hungarians in the World Cup. Four
years later, J.W. Foster and Sons renamed themselves Rebook, which will have an impact on
Adidas around 50 years later. In 1967, Adidas made their first tracksuit. In 1970, Adidas made
the first Telstar football for the FIFA World Cup that year. The introduction of the trefoil, the 3
leaf symbol happened in 1972. In the 1980s Adidas began creating a culture representing art
and sports which opened up its market and its demographics. Adidas merged into being active
with art and music. Quality, artistry and sport all merged into one through Adidas. The street

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fashion trend, thanks to partnerships with RUN DMC, became an intrinsic part of the Adidas we
know today. The most troubling part of Adidas history was in 1992 when they almost went
bankrupt from a switch in management after it was no longer a family business. But with another
change in management, the slogan we knew then, we know now came to fruition and
represented the companys direction (Adidas Group, history, 2016).
In 1997, Adidas was changed to Adidas Salomon- AG and the acquired companies such as
Taylormade, Mavic and Bonfire. But as Salomon left the team in 2005, the companies (other
than Taylormade) were sold to Amer Sports. Continuing the in right direction, Adidas made a
lifestyle segment, collaborating with artists and athletes. This ran true to their art and sport
inspired past. The company then acquired Reebok, CCM Hockey and Rockport; bringing some
of the worlds most respected sports brands into the conglomerate known as Adidas-AG (Success
Story, 2016).
Adidas Group strengthened by acquiring Five Ten, launching Ashworth and Adams Golf,
merging streetstyle and sport under one Adidas campaign, Reebok signing a single, long term
partnership with CrossFit and by creating innovation technologies to enhance athletes. And with
a competitive, unique five-year plan Adidas-AG is set to become one of the most influential
companies in the world. AG is a powerful provider of sportswear and lifestyle marketing. As we
can see by Adidas and the AGs diverse history, the brands it has acquired are unique but all
have the same goals, being the most modern and innovative (Reference for Business, 2016).
4. CURRENT COMPETITIVE SITUATION ANALYSIS
4.1 INDUSTRY ANALYSIS
Adidas group finds itself amongst the top of the sportswear/sports apparel industry alongside
Nike and Under Armour. The growth of this industry is due to an increasing interest in

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professional sports leagues (NHL, NFL, NBA, ect.) and the advancements in technology which
has allowed many these professional leagues to take advantage of TV deals/partnerships. The
industry has shown a market growth of 9.43% dating back to 2010 as per the US Licensed Sports
Merchandise Market Report (PR NewsWire, 2016). These new deals and incoming interests in
this industry create an opportunity for companies like Adidas and Nike to capitalize on the new
consumers. The companies within the industry must gain these new consumers or they run the
risk of losing them to other up and coming substitutes. Companies like Adidas and Nike realize
the power they hold in terms of the pricing of their products. Both companies can control their
cost to retain performance advantage which allows them to block new entry to the industry.
Sports merchandise sells at a high price but companies must be aware of the other prices their
competitors have set. These prices depend heavily on how much volume consumers are willing
to pay and how much a provider is willing to sell. In Adidas case, they create and manufacture
their own products so the bargaining power of the supplier becomes irrelevant. This makes a
very difficult entry process for new competitors trying to enter the market because multibillion
dollar companies such as the ones listed above are so far ahead.
4.2 COMPETITOR ANALYSIS
The sportswear industry includes a wide range of companies selling a huge variety of sports
accessories, equipment and other merchandise. Adidas group is unique in that they sell not only
sports accessories (jerseys, balls, hats) but also equipment and athletic clothing to complement
the sports focus they have. This causes Adidas competitors to become multiplied as they aim to
sell various products in different markets. The notable competitors to Adidas in the athletic
footwear and apparel industry are Nike, Under Armour, Puma and Umbro. Other companies such
as Callaway and Bauer have been in competition with Adidas group but only with certain

ADIDAS GROUP ANALYSIS

products because Adidas sells such a large assortment of goods. These companies all pose a
threat to Adidas group, although none more so than Nike. Nike has reigned this market for years,
generating over 15 billion dollars in profits over the last 5 years as per Nike income statement
(Statista Nike income). This exceeds Adidas 5 year profits of 3 and half billion dollars (Statista
Adidas Net Income). In the eyes of Adidas, I believe its obvious that Nike is a main competitor
due to the company's power and well known trusted brand. Nike sells their brand at an
international level which separates them from other participants in the market. Adidas group has
recognized this tactic and have begun to sponsor international events to gain a competitive
advantage over North American competitors.
4.3 COMPETITIVE POSITION
Employing more than 50,000 people in over 160 countries, Adidas produces more than 778
million product units per year and generates sales of 17 billion as per the 2015 yearly reports
(Adidas Group, 2016). Creating the new is the headline for Adidass 5-year strategic business
plan and it is the attitude they expect to lead them into the future. In 2015, Adidas surpassed
their target and finished with a group sales total of 16.915 billion which becomes an increase of
10%. Their main competitors include Nike and Under Armor which are two organizations who
have made their mark on consumers and established a global brand. In comparison, Nikes total
revenue for the same year was $28.7 billion which is where Adidas hopes to one day achieve
(Nike, INC. 2015 Reports). Despite this, Adidas is a global organization that is currently on the
rise and who are showing no signs of slowing down.

Furthermore, Adidass size is what sets

them apart from the rest. Adidas Group controls operations for Adidas, CCM, Reebok and
Taylormade which helps differentiate the company by offering specialized brands for different

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sports such as golf with Taylormade, and hockey with CCM. By doing so, Adidas appeals to a
wider group of consumers and therefore have a larger growing capacity.
4.4 BUSINESS LEVEL STRATEGY
Adidas strives to always improve on their sustainability performance. As sales of their products
were falling, Adidas decided it was time for a change. Their new objective was to make Adidas
cool again. In hopes to gain more attraction, Adidas has recently taken their campaign up a
notch by signing several star athletes and one Grammy winning Hip Hop artist to their brand.
Connor McDavid who was selected 1st overall in the NHL draft in 2015 was one of the first to
sign under the new and improved Adidas brand. By signing the Phenom, McDavid becomes the
face of the company for years to come and one that will hopefully help them gain attention from
hockey fans in not only north America but around the world. To continue, in part of their goal to
make Adidas cool again, Adidas has recently signed a long-term partnership with Hip Hop artist
Kanye West in hopes to achieve that goal. Yeezy Boost represents Kanye Wests historic
partnership with Adidas Originals, bringing to life the ultimate in music, culture and fashion.
Yeezy Boost transcends footwear trends and champions the way of thinking about sneaker
fashion (Adidas Originals). This is the first non-athlete the company has signed in its history but
they hope that the company will use his fame and vision to grow their brand under a new regime.
4.5 CORPORATE LEVEL STRATEGY
To run a successful company, decisions need to be made to help the company grow. As a group,
Adidas has chosen three strategic choices that they wish to focus on. These strategies include
speed, cities and open source. Adidas wishes to be fast in satisfying consumer needs and fast in
internal decision making. They have identified 6 key cities in which they want to grow, share in
market, share in mind and share in trend. Finally, Adidas wishes to be the first sports brand to

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invite athletes, consumers and partners to be part of their brands as per the Adidas Strategy
Overview (Adidas Group, 2016). They displayed this interest by sponsoring the FIFA World Cup
until 2030 via Nike vs Adidas (World Finance). Adidas was the uniform and jersey provider for 9
countries in the 2014 World cup, Nike retaining sponsorship for 10 teams involved. Their
participation at international events such as the 2012 Olympics and the FIFA World Cup could
show a new direction for Adidas group. With the signing of a new deal with FIFA it seems clear
that the corporate level employees at Adidas group are seeking a new angle.
5. 5 YEAR BUSINESS ENVIRONMENT PROJECTION
5.1 POLITICAL FACTORS
According to Forbes and Adidas, the Adidas brand is valued as the third most expensive sports
brand in the world at 5 billion dollars (Forbes, 2016) and operates in over 160 countries around
the world (Adidas, 2016). Due to the groups vast size and international presence, several
political factors will affect the Adidas Group within the next 5 years. These political factors
include government stability in countries being operated in, tariffs, taxes, employee and
employer laws, political corruption, consumer protection laws, tax policy, health and safety laws,
and several more. One political factor that will have a major beneficial impact on the Adidas
Group is free trade. Due to its headquarters residing in Germany, the Adidas Group is subject to
European Union (EU) trade agreements. Currently, the EU has established trade deals with
dozens of countries and is in the process of establishing more. Within the next 5 years, the EU
expects to establish new trade deals with several more countries including Canada, Ecuador,
Vietnam and West Africa (European Commission, 2016). These free trade agreements will allow
the Adidas Group to export more products from Europe at lower prices around the world,
increasing the groups profit dramatically. A political factor that will be a disadvantage to the

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Adidas Group is rising minimum wages in countries where the Adidas Group produces its
products. For example, 65% of the Adidas Groups products are produced in Asian countries,
including China (Adidas, 2016). According to the China Labour Bulletin, most minimum wages
in cities across China have doubled in the last 6 years and are currently rising (China Labour
Bulletin, 2016). For the Adidas Group, rising minimum wages in countries like China, where the
group relies on low wages to maximize production, will reduce profits and increase production
costs in the next 5 years.
5.2 ECONOMIC FACTORS
The Adidas Groups existence in over 160 countries worldwide makes the group subject to
several economic factors. These factors include the increase or decrease of demand for Adidas
Group products, an increase or decrease of taxes in different countries, recessions in different
countries, and several more. Being a company that does large amount of importing and exporting
in multiple countries, a key economic factor that will affect the Adidas Groups business
environment in the next 5 years is exchange rates between the different countries the group
operates in. According to a Bloomberg report written by Aaron Ricadela in 2014, the Euro rose
24% against the Russian ruble due to Russias conflict in the Ukraine (Ricadela, 2014). In the
same report, Bloomberg reports that because of the fall of the Russian ruble, the Adidas Groups
profit in Russia, one of the Adidas Groups most profitable countries, fell dramatically, causing
the groups operating margin to fall short by 11% in 2015 (Ricadela, 2014). According to XE, the
Russian ruble has been consistently decreasing in comparison to the Euro (XE, 2016). This
information suggests that if the Russian ruble does not improve within the next 5 years, the
Adidas Groups profits in Russia will continue to struggle to increase. To combat this decrease in
profit in the next 5 years, the Adidas Group should find new markets to sell in.

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5.3 SOCIO-CULTURAL FACTORS

Within a company there are an astronomical number of social factors that affect a business. Two
major social factors that can affect a clothing company such as Adidas are: consumer preference,
and Consumer Income. Consumer Preference- consumer preference can change almost out of
nowhere on any given day. For example, a fashion trend that is in one day could go completely
out of style the next day. A merchandising company such as Adidas must try their best to stay
ahead of the latest trends to be prepared for a sudden change in consumer preference. The
company must consider how long it will take to roll out an idea and have the product available
for purchase. This is because consumer preference can change in this time resulting in a loss for
the company.
Consumer Income- a decrease in consumer income will directly affect the demand for luxury
items such as a premium brand clothing like Adidas. One of the most sought after products from
Adidas is the Yeezy line by Kanye West. This clothing line is limited in sale which results in the
price being very high and a black-market to be created in which aftermarket prices are doubled
or even tripled. If the public (middle class) cannot afford a more expensive product, the target
audience will in turn shrink to a very select few. The company must then decide if they are to
lower the cost of production to adhere to the public or to continue their current business strategy.
Adidas has shown interest in lowering the price of the Yeezy line and making it available in
your everyday department store such as Walmart- Kanye West
5.4 TECHNOLOGICAL FACTORS
Technology is a rapidly developing industry and whether a company chooses to utilize it is a
very important decision. Also, a company must find a way to properly use technology to improve
instead of hinder themselves. Technology and the merchandising industry correspond heavily

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with each other. Technological factors are influences (technology based) that affect how a
business operates, either for the better or worse. Technology can change the way a consumer
perceives the product. The introduction of the internet gave way to the creation of many
company websites. These websites allow the consumer to view and purchase the products put on
display by the producer. This can negatively affect a company because with the click of a button
consumers can compare prices with companys all over the world. The consumer will benefit if
they find a cheaper price elsewhere while the producer loses a potential sale. An example of how
technology has benefited the merchandising industry is the ability for a company to market their
product on a large scale. In the past, companies had to rely on things such as radio and television
commercials, billboards, etc. to advertise. Now through all new media platforms such as Twitter
and Facebook, companies can advertise their product and reach many more people.

5.5 ECO-ENVIRONMENTAL FACTORS

The environmental spectrum of factors that will affect the Adidas Group in the next 5 years is
large and ranges from enough water to grow cotton to make the groups products to the use of
energy-efficient methods during production, and even adopting new policy that follows ethical
environmental practices. A major environmental factor that affects the Adidas Group is the use of
cotton in their products. In 2015, the Adidas Group announced that it would be purchasing 43%
of its cotton from a cotton producer called Better Cotton (Adidas, 2016). The cotton produced by
Better Cotton is considered sustainable cotton and, according to Cotton Campus, is the ideal
material to produce clothing with because it is sustainable, biodegradable and renewable (Cotton
Campus, 2016). The Adidas Group further explained that all the cotton used by the group will be
sustainable by 2018, greatly improving their environmental impact in the countries where their
products are sold in the next 5 years.

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7. STRATEGIC MODELS
7.1 SWOT ANALYSIS
STRENGTHS

WEAKNESSES

Legacy & heritage: ventured out far to set

High price range due to innovative

up itself as a youth brand

Company has various item portfolios
Strong financial position: 2400 store all

technology & production methods

93% of production outsourced to 3rd party

globally accounting $4.3billions

Viable distribution system
Branding by making touch focuses with

manufacturers
Has only 2 brands under its group

the community
OPPORTUNITIES

THREATS

Steep rise in the demand of premium

Albeit Adidas being a global brand, it is

goods & services; healthy lifestyle

Development to enter new markets
Expanding its product line will open a

still facing fierce competition from other

new set of opportunities

Increasing demand of

products
Increasing attraction for sportswear

more bargaining power than the company

Government import regulations, duty &

and accessories

tariffs plays a critical role in the pricing

premium

brands such as Nike

Due to majority of its production being
outsourced to 3rd parties, suppliers have

and success of the company

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7.2 STRATEGIC DISCUSSION

Adidas has come a long way, the once started in the washroom company is now the largest
sportswear producer in Europe and the second greatest in the world. The company employs more
than 55,000 individuals in more than 160 nations, and produce more than 778 million item units
each year and generate sales revenues of 17 billion per year; figures from the 2015 yearly
reports (Adidas Group, 2016).
Considering Adidas' solid brands, premium items, broad worldwide presence and its dedication
to development and the buyer. Adidas aspire to outperform total market growth (both GDP and
sporting good market) and to keep developing its main concern quicker than its top line. What's
more, Adidas arrangements to establish the foundation for leadership in the sport goods industry
by exceeding its major rival in the upcoming next five years (Adidas Group, 2010). Adidas
targets a compounded annual earnings growth rate of 15% and wants to reach an operating
margin of 11% sustainably by 2015 at the latest (Adidas Group, 2010).
8. CONCLUSION
In conclusion, after cautious assessment of Adidas' present circumstance and strategies, different
suggestions to the business level and corporate level systems were made. In this manner, Adidas
must adopt the above proposed business and corporate level strategies, keeping in mind the end
goal to stay profitable and keep up its leadership position in both the sportswear and sports
accessories industries.

ADIDAS GROUP ANALYSIS

9. APPENDICES
9.1 APPENDIX A GRAPHS & FIGURES

15

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References

Couldnt format references because page counts exceeding too much

http://www.adidas-group.com/en/group/profile/
http://www.adidas-group.com/en/media/news-archive/press-releases/2010/adidas-grouppresents-2015-strategic-business-plan/
http://www.adidas-group.com/en/group/history/
http://www.forbes.com/powerful-brands/list/#tab:rank_search:adi
http://www.referenceforbusiness.com/history2/99/adidas-Group-AG.html
https://successstory.com/companies/adidas-ag
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http://www.prnewswire.com/news-releases/sports-merchandise-market-licensed-in-us---355-cagr-to-2020-forecast-with-sports-apparel-driving-growth-591305641.html
http://www.worldfinance.com/home/a-league-of-their-own-nike-vs-adidas
https://www.statista.com/statistics/241685/net-profit-of-nike-since-2005/
https://www.statista.com/statistics/269601/net-profit-of-adidas-and-puma/
http://news.nike.com/news/nike-inc-reports-fiscal-2015-fourth-quarter-and-full-year-results
http://www.adidas-group.com/en/group/strategy-overview/
http://www.adidas-group.com/en/sustainability/supply-chain/supply-chain-structure/
http://www.adidas-group.com/en/media/news-archive/press-releases/2016/adidas-group-exceeds2015-better-cotton-target/
http://www.cottoncampus.org/Cotton-Environmentally-Friendly-Sustainability/
http://www.adidas-group.com/en/sustainability/planet/environmental-approach/#/environmentalstrategy/
http://ec.europa.eu/trade/policy/countries-and-regions/agreements/index_en.htm
http://www.bloomberg.com/news/articles/2014-03-05/adidas-sees-significant-impact-fromcurrency-movements-in-2014
http://www.forbes.com/pictures/mlm45jemm/3-adidas/#6f3246292107
http://www.clb.org.hk/content/wages-and-employment
http://www.xe.com/currencycharts/?from=RUB&to=EUR&view=2Y