Adidas project

STRATEGIC MANAGEMENT (MGMT 524) 1
RESEARCH ON ADIDAS COMPANY
Presented to Ali DANIŞMAN
JESSE JOSHUA 15500411
ANTHONY E. ONYEAMA 15500032
ELVIN HASANOV 145392

ABSTRACT
Adidas, which is a force to contend with in the clothing industry, is at its best and improving
following the strategic choices the Company has made from the onset achieving its visions and
missions, capitalizing on its strengths, taking advantage of its opportunities to minimize
weaknesses and threats.
As one of the world’s largest manufacturers for sportswear and sport utilities, Adidas prides on
its quality and in this paper, evaluations of its internal and external environment and resources
would provide a clear understanding as to its successes and factors responsible from inception till
date.
INTRODUCTION
Adidas is a German multinational corporation founded by Adolf "Adi" Dassler that designs and
manufactures sports shoes, clothing and accessories headquartered in Herzogenaurach, Bavaria.
It is the largest sportswear manufacturer in Europe and the second biggest in the world. It is
the holding company for the Adidas Group, which consists of the Reebok sportswear company,
Taylor Made-Adidas golf company (including Ashworth), 9.1% of FC Bayern
Munich and Runtastic, an Austrian fitness company. Adidas revenue for 2012 was listed
at €14.88 billion.
Adidas was registered on 18 August 1949 by Adolf Dassler, following a family feud at
the Gebrüder Dassler Schuhfabrik company between him and his older brother Rudolf who later
started established Puma, which quickly became the business rival of Adidas and is also
headquartered in Herzogenaurach. The company's clothing and shoe designs typically
feature three parallel bars, and the same motif is incorporated into Adidas's current official logo.

VISION AND MISSION STATEMENT
Vision statement: The Adidas Group strives to be the global leader in the sporting goods
industry with brands built on a passion for sports and a sporting lifestyle.
MissionStatement: Adidas mission statement reads, “Our mission is to become the best sports
brand in the world. To that end, we will never equate quality to quantity. Our founder Adi
Dassler was passionate about sports. For Adi, the athlete came first. He gave those on the field,
the court and the track the unexpected and the little differences that made them more comfortable
and improved performance. This is our legacy. This is what the brand stands for. This will never
change.”
Basically Adidas’ mission is to always put the customer and their needs first. This suggests that
customer satisfaction is the most important thing to this company. They also want to be known
as the best sports brand around the world, they want to be the go-to sports brand for any athlete.
They value quality over quantity. They want to be the sports brand that puts in all the little extra
details that makes their product stand out among others. The founder of this company Adi
Dassler had this great passion for sports which implies he cared more about the product he was
putting out than how much money of it he was making or the money he made from it, that even
after his death, the company wants to keep his legacy and continue to put the customer first.
Adidas also wants to spread their message worldwide, “impossible is nothing”. They believe in
limitless opportunities, there’s nothing they cannot achieve. Adidas wants to move past the term
“impossible”. They want to bring what people believe to be impossible to life.
ADIDAS’ INTERNAL ENVIRONMENT FOCUSING ON UNIQUE RESOURCES AND
COMPETENCES THAT ARE CRITICAL FOR COMPETITIVE ADVANTAGE.
One of the most important goals of Adidas has been to develop a strong competitive
advantage in order to stay successful and survive against the large number heavyweight
competitors. The industry in which Adidas interacts is characterized by a set of many specific
features. The extreme rivalry between Adidas and its competitors, Nike, Puma or New Balance is
higher than ever before. Nevertheless, most of these brands outsourced their production and re-
defined themselves as brands or marketing organizations. Despite the fact that Adidas currently
ranks right behind Nike in the segment of sports shoes and sportswear market, Adidas still has
been a successful business enterprise right from the beginning of their establishment by Dassler
in 1945. The encouragement and application of a spirit of constant and updated technological
innovation and excellence has resulted in generating such a powerful competitive advantage for
Adidas that its market opponents find it hard to beat. The high performance, market orientation,
technological development and brand promise, created the expected value for customers.
Especially the company’s policy and corporate culture, that includes providing their customers

with the necessary technological applications, in order to meet and satisfy the full needs of their
end-consumer. (Kumar V. & Reinartz W. 2012).
Competition and competitive markets are common in every industry. Especially since
Globalization is influencing our economy, companies need to stay competitive in order to
survive against new rising competitors which are basically rooted in the Middle East Asia.
Analyzing own strengths and weaknesses and capturing new opportunities or avoiding threats,
are one of the most important factors for reaching this goal.
One important basis for ADIDAS’ competitive advantage is the “resource based view model“.
The resource-based view as a basis for a competitive advantage of a firm lies primarily in the
application of the bundle of valuable intangible and tangible resources at the firm’s disposal.
Resource BasedView
In every business there are many types of resources and assets. Some resources are
clearly visible and tangible and others may not. The Resource Based View is a device to assess
the amount of tangible and intangible resources in order to capture possible capabilities with the
goal, to build and sustain competitive advantage. The device is differentiating between intangible
and tangible resources. Intangible resources are skills, services, corporate reputation or
knowledge a firm can provide. The collective knowledge of a firm’s workforce represents a
tremendous resource. Intangible assets are difficult to quantify in financial terms and often
impossible to sell. Education and experience are the main drivers for the knowledge of a
corporate workforce, and grows within the structure of a particular industry. Tangible resources
are known as raw materials, products or workforce. Corporations that are committed in primary
resource extraction have holdings of very tangible goods or resources and often own the land
outright on which their resources are located or manufactured (Freiling, J., 2001).
Furthermore, but less a tangible resource, the corporation owns the rights to the coal, oil
or any other raw material, that is located on public land. In both cases, the resource is a physical
reality, more or less tangible and the value of which can be financially determined by observing
the going market value of a certain good. Regarding “Adidas”, as one of the most important
global players in their industry, it is also possible to distinguish their resources. Adidas is holding
more than 50,000 employees, all over the world into their workforce. CNC machines are used in
the assembly line for the mass production of shoes, which is more or less their cash cow and
keeps them successful. The Research and Development departments are equipped with CAM.
Software’s for creating cutting edge designs. The main manufactories are located in Vietnam and
China and the bases for the organization are based in Portland, Oregon (U.S) and in
Herzogenrauch, Bavaria (Germany) (Adidas Group, 2013). Patents, partnerships, sponsorships
and cooperation’s with universities are intangible assets, which Adidas owns.
Distinctive capabilities are the talents and unique elements that are embedded within the
organization. These essential characteristics are considered highly preferred, since they provide

the business with what it needs to be competitive in the marketplace and also provides the firm a
competitive advantage. Therefore distinctive capabilities are generating the core competencies of
an organization and are the key driving forces for a company to achieve its competitive
advantages. Adidas utilizes its key resources and capabilities to create value and performance
excellence.
Distinctive capabilities that Adidas holds are e.g. Special R & D departments and correlations
(universities), sponsorship agreements (FIFA/ NBA), diversified operations, network and
portfolio, good reputation as mid-priced brand in the industry, distribution network and strategic
innovation. (Adidas Group, 2013).
Technological superiority of its products is the primary factor of market penetration for
Adidas. Nevertheless, an intense and targeted marketing mix and strategy is the second most
important key driver of success. An important fact and promotional tool for products has been, to
integrate celebrities and professional sport idols into their marketing mix. This strategy seemed
to be very successful and generated a steady source of profit and sales. Consumers appreciated
and enjoyed the emotional experience, to share the same daily products with their idols or
people, who are influencing them. Furthermore, Adidas is following the main rules of Customer
relationship management. Feedback from regular customers and surveys about particular
products or advertisements created a high level of customer involvement and loyalty, what
turned out to be the most effective strategy. These methods and tools helped Adidas to develop
and build a long-term profitable customer relationship.
ADIDAS’ EXTERNAL ENVIROMENT
The external environment, originally known as the pestle analysis comprises of political,
economic, social, technological, legal and environmental factors. Adidas external environment as
a global company is surrounded with verse challenges which range from the above mentioned
factors.
Apparently, the political factors of the company deals with areas of government regulations
which includes tariffs in the forms of tax barriers or price and exchange controls, work schedule
laws, labor unions etc. Furthermore, giving instances with Germany as a stable political country
which is governed by Christlich Demokratische union (CDU), by the first female chancellor,
Angela Merkel with massive achievements like; reductions in organization tax, investment in the
areas of research and development (R&D), additional investments on infrastructure as well as
trying to balance the political and multinational needs with the general population, to mention
but a few.
Economic: Economically, Adidas profitability is affected in the areas of inflation, taxation,
unemployment as well as per capita income. However, there exists unstable stock market caused

by some fluctuations of interest’s rates leading to the growth rate fluctuations too. So with a
nominal GDP of 3.316 trillion US Dollar and has approximately an unemployment rate of 7.4%
in 2010 and has presented her the fourth largest economy in EU with no. 1 in terms of
purchasing power. The country is highly dominated in motor vehicles, machinery, chemicals etc.
Imports and exports of Germany is rated 2nd in world largest trader 2011.
Social cultural: As one of the leading countries of the world, Germany has various social-
cultural factors which affects its innovation. It therefore means that Adidas should take into
consideration these factors which include culture itself, religion, gender, language, race, buying
habits, life style in order to have a successful implementation of its strategies across regions by
verifying the obtainable cultures of the land and be able to adapt to the culture of the
environment. The net migration of the country is 0.54 migrants /1.000 population with two major
religions as Roman Catholic and Protestant with 68% faithful members, and with a below
poverty line of about 15.5% www.cia.gov, 2011.
Technology: As the application of science in industry and engineering for the invention of new
things and or solving of problems, Adidas employed technology in the making of the first world
smart shoe by putting a microchip and wireless mp3 player inside the shoe and it was very
appealing to the customers. More so, the company uses a heat-activated adhesives in their
packaging suitable for long distance, humid conditions and extreme temperature changes. And to
this effect, Adidas is highly committed to research and developments investments.
Legal: As an authorized company, Adidas is well aware and is fully utilizing all legal procedures
as ethically demanded and with due respect to legal constraints to trade description act , sales and
supply of goods acts (SSG), advertising standard authority (ASA), independent television
commission (ITC), import and export, and is plagiarized from a third party trademark.
Additionally, it considers laws regarding health, employment, financial regulations, product
safety, to mention but a few.
Environmental: In the light of environmental proceeds, Adidas aimed to a courageous use of
sustainable products and compromise to products quality and functional performance.
Consequently, the CO2 emission at its production and manufacturing plants processes were
reduced with regard to climate changes and nuclear face-out and at the same time, the products
quality is maintained with less pollution to the environment.

ADIDAS’ FIVE (5) FORCES MODEL
Obviously, Adidas five forces model is highly competitive especially with competitors like
NIKE and UNDER AMOUR (UA). Notwithstanding, the five forces model ranges from
Company Rivalry, Threat of New Entrants, Threat of Substitutes, Suppliers power and Buyers
power.
The company’s rivalry: This has to do with the all competitors in the sports industry which
includes Nike and UA. Competition here resides precisely on quality, price. This means that all
efforts are focused towards maintaining a good quality as well as affordable price by the
customers.
Threats of new entrants: It is a true fact that no person will trust to put money into a new
business where strong competitors abounds unless it has access to the resource fields with a
strong brand name trusted by customers especially from other companies, otherwise it stands
losing the investments. Furthermore, with dominant players like Nike, UA and Adidas, it will
always be a difficult competition to invest a start up with enough capital, for R&D, Marketing
and advertising and in-house or outsourcing bargaining of contracts.
Threats of substitutes: A substitute product is one that can serve exactly or partly what an
intended product can serve. In this case there are other industries which can produce non-sport
wears, like shoes, suits or accessories which can serve same purpose as products from Adidas,
Nike and Puma and are consumer friendly and at the same time threats to these companies.
Supplier’s bargaining power: It is very wise here to measure and know the suppliers
bargaining power in the current economic climate over Adidas because it helps to know if
Adidas has a higher bargaining influence over the supplier as to be on the gaining side or at the
losing side. Obviously over-all suppliers bargaining power of Adidas is low.
Buyer bargaining power: For the fact that “the customer is the king’’. The sensitivity of price
and the rate of new product inventions or innovations by competitors especially in this high
economic climate has always change the weather in favor of the buyers thereby increasing the
switching costs for substitute products with a high bargaining power to the buyer.
CRITICAL SUCCESS FACTORS FOR ADIDAS.
Critical success factor is essential for company to acquire its mission. Key success factors
are those some things that should go well to ensure success for a manager or organization and for
this reason, they represent those managerial or enterprise area, that must be given special and
continual attention to bring about high performance. Critical success factors include issues
stamina to an organization’s current operating activities and to its future success. Critical success

factor on these attributes are product features, service details that make the difference between a
good company and a great company.
Adidas key success factors inclusive effective advertising, innovation and new design, cutting
edge technology, a flexible supply chain, focusing on sustainability, long term shareholder value
and strong retail network. Adidas vision statement is to be the leading sports brand in the world.
Adidas brand mission statement focuses on being design leaders and innovation. We will focus
on how Adidas innovates for the 2014 football world cup.
Adidas used some of the cool tests, some of the machines and how come up with the next
greatest football product. AIT (Adidas Innovation Team) determines the future of sports; they
look 5 years out to understand where the game is going. Players are getting faster, the game in
general moves at a faster pace nowadays. So how do we determine what is next? Adidas focus on
that from different angles. One is what are the new technologies? What are the new materials
that we can use? But also it is about how can team think about the game in a new way and the
way that is should being very close to the athletes. Adi Dassler always talked about listen, test,
modify. It knows that weight is important. So how can doing as much weight out? Athletes when
they go and pick this jersey up and they realize it is 50% lighter. This is immediately gives them
this psychological sensation of I’m going to be faster, I’m going to perform better. Also, Adidas
used Vicon motion capture system. It is something that is used in the motion picture industry. If
creating 100 jerseys, Vicon motion capture system gives us the ability to understand, how it is
going to work in all sorts of conditions. How is it going to work in cold, heat, humidity and then
fine-tune the product from there?
VALUE CHAIN ANALYSIS (VCA).
Value chain analysis is aimed helping us understand how goods and services move
through an organization and value is added to them. Value chain analysis give an opportunity a
firm or company to better determines the costs associated with organizational activities from
building manufacturing facilities, developing cooperative agreements, buying raw materials to
designing products to marketing those products and identify its own weaknesses and strengths.
VCA consist of primary activities (inbound logistics, operations, and outbound logistics,
marketing and sales, service) and supportive activities (organization, human resources,
technology and purchasing).
Adidas company value chain analysis, we can clearly see that primary activities are more
important that supportive activities. Among those primary activities, we could still point out
three parts of the value chain that are directly responsible for competitive advantages that Adidas
have. They are; Inbound logistics. Adidas invest a huge amount of money in product quality.
Because of that, Adidas pay special attention to the raw materials that are bought. Besides
offering products in satisfactory conditions, the companies that do business with Adidas have

also to follow strict guideline. That will make sure that their supplier follows a pattern of quality.
Some examples of what is required of those companies; compliance with laws and governmental
regulations, strict prohibitions against child labor, proper health and safety conditions to
employees outbound logistics. Perhaps the most important part of the value chain. The
distribution system that Adidas have can be considered a strong competitive advantage. Adidas
has three different channels- Wholesale, e-commerce and Retail. Adidas has three store formats;
brand centers, core stores and factory outlets up to 2270 stores in the world marketing and sales.
Nowadays, Adidas is trying to build a lasting and more deeply relationship with its customers.
Adidas products preferred four regions around the world; North America, Europe/Developing
markets, Asia/Pacific and Latin America. Also some contract with competitors, like Christiano
Ronaldo, David Beckham, Caroline Wozniacki (tennis player), Derrick Rose (basketball player)
and Sergio Garcia (golf) impact shoppers to buy Adidas.
All the supportive activities like organization, human resources, technology and purchasing well
perform keeping in mind the company’s prestige, reputation, brand value and market status.
Adidas human resources policy, minimize the cost associated with high employee turnover, give
employees job security and opportunities- to learn new skills and gain more knowledge. Adidas
used a large amount on technology development and protect its infrastructure, control and
planning.
SWOT, SPACE, BCG, IE, AND QSPM MATIX
Adidas is a brand name which is one of the strongest in the world. We know Adidas as a
famous manufacturer for its shoes, clothing and accessories. We develop the SWOT, Space
Matrix, BCG Matrix, IE Matrix, QSPM analysis for Adidas Company below:
Table 1:
SWOT
Strengths Weaknesses
1. Diversification: Adidas is
a very strong brand name
and of this company has
multiple product portfolio
2. Strong financial position:
over 2400 store globally
accounting 4.3 $billions.
3. Legacy: Since 1949
Adidas has established as a
youthful brand.
4. Membership and
collaboration: The company
contains within the
organizations such as
1. Product line limitation:
Adidas holding only 2
brands; Adidas and Reebok.
2. The price premium: Due
to high technology and
production methods have
made the brand accessible to
limited customers ,
especially in developing
countries.
3. Outsourced
manufacturing: 93 % of the
production of Adidas is in
the hands of 3rd parties to

International Labour
Organization, International
Finance Corporation
5. Strong community :
Celebrity endorsements and
sponsoring such as FIFA,
UEFA, NBA and Olympic
games.
6. Distribution: Adidas is a
effective distributor by
using online e-commerce,
supermarket stores, through
different channels.
avail low labour cost and
easy availability of
resources. The overall
quality of products
perceived by the consumers
of developed economies and
it affects for the brand.
Opportunities
1. Integration
backward: It will be
successful if Adidas
will keep this strategy
2. Increasing demand:
In developing countries
will be more demand
premium products.
3. Product line
expansion: Farther
expansion of the
product will
differentiate the
company from the
other company’s
strategies those
competitors with the
same orientation.
4. Market
development: To enter
new markets will be
succeed because others
are having high
competition.
5. Lifestyle changes:
Because of lifestyle,
education of
developing countries
by saturation of
developed countries
there is an increase in
the demand of goods
and services.
SO-strategies WO-Strategies
1. Expansion strategy will
allow for Adidas to grow as
long as its strong brand
name. (S1,O3)
2. Effective distribution of
Adidas company will be
affect positively for its
expansion strategy. (S6, O3)
3. Strong financial resource
will help to increase amount
of production due to
increasing demand in
developing countries.
(S3,O2)
1. Increasing demand in
developing countries would
be affected for limitation of
premium products for
customers because of high
technology and production
methods by high
technology.(O2,W2)
2. Adidas has 2 strong brand
names under one but
integration backward
strategy will give more
power. (W1,O1)

Threats 1. Suppliers
dominance: Because of
majority production
being outsourced:
Suppliers have more
bargaining power.
2. Competition: Adidas
is lost 1 position to
Nike and there is
regular competition
from local players,
market penetration and
substitutes.
ST-Strategies WT-Strategies
1. Adidas is very strong but
there is Nike is N1. (T2,S,1)
2. Even Adidas is very
strong in diversification
products its competitors are
also competing.
1. It can negatively affect
Adidas position that Adidas
has only 2 brand names and
weaker than the Nike.
(W1,T2)
2. Adidas produces 93 % of
the products outside of the
country which is make for
suppliers have more
bargaining power.(T1,W3)
As we know Space Matrix also consists of two dimensions such as Internal- Financial
Strengths, Competitive Advantage and External- Environmental Stability and Industrial
Strengths. There is our Space Matrix given below Fig 1:
Fig 1: Space matrix evaluation for the Adidas Company
This is the evaluation of BCG (Boston Consulting Group) for Adidas Group of companies
below Fig 2:

Fig 2: BCG evaluation for Adidas.
QSPM analysis shows that according to major metrics such as strengths, weaknesses,
opportunities, and threat total attractiveness score for Acquire competitor is 2.42 and expands
internally is 2.83.
Adidas company holds four types of strategy such as Diversification, Backward Integration,
Product development, Market development due to company’s mission and vision.
Diversification strategy- Adidas is a well-known company with its multiple product and
also very successful brand name.
Backward integration- The Company is outsourcing in foreign countries specially in Asia.
The percentage of outsourcing is 93 % and it is very high. In this condition the suppliers have
high bargaining power.
Market Development- Entering to a new market will be successful due to there is a high
level of competition within the market, so in the purpose of company development the company
consider to growth.
Product development- Adidas Company believes that the development in the product line
will give benefits and will differentiate from those in the market.
Competitive profile matrix (IE)- Identifies firm’s major competitors and their strengths
and weaknesses in relation to a sample firm’s strategic position. If total weighted score for NIKE
is 2.85 then this indicators for Adidas is 2.72 and for Reebok 2.42.
Adidas is a first sportswear company in Europe but in the world Nike is leading with the
percentage of 39.2%. Then, Adidas with 15.1%, Reebok 10.9%, New Balance 9.4% and others.

CONCLUSION
It is possible to use strengths to avoid threats and to capture opportunities, with the help of the TOWS-
matrix. Therefore strategies,which Adidas could use in order to capture opportunities and avoid threats
could be, to use diversified operations in different parts of the world and strong brand recognition for
sponsorships in growing markets and the well-considered usage of celebrities (not just for advertisement,
also for opening private sport academies). To minimize internal weaknesses by capturing opportunities,
the enterprise should keep their focus on their strong and proven marketing strategy, networking and their
strong franchising, in order to stay competitive and build close long-term customer relationships. A part
of that, the acquisition of competitors could decrease cost structure and rivalry within the industry and
safe their status quo for the future.

References:
http://www.slideshare.net/SherylMehra1/ob-presentation-28764115
http://studymoose.com/adidas-internal-analysis-essay
Strategic Management Consepts and Cases Fred R.David, Forest R.David 252-260 pages.
http://www.adidas-group.com/en/group/strategy-overview/2016.

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