Adidas PEST and SWOT Analysis

The Footwear Industry is a mature industry; it consists of giant players like Nike, Reebok, & Puma on one hand and millions of small retailers in the unorganised sector on the other. This industry presents a myriad of interesting observations – there are highly specialised segments where performance is the driving force – like running shoes, basketball shoes, and soccer shoes. But to some, a highly ‘fashionized’ shoe is the priority. Therefore the industry is in a creative phase where performance and fashion have now been merged to create a new hybrid, called lifestyle segment.

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The competition in this industry is mostly non-price atleast for the established legendary players like Nike and Adidas. They compete for mind share of the customer and aspects like marketing campaigns, brand ambassadors, product proliferation and branding, spell success. Brand Stickiness is high once a customer has experienced a brand and has been satisfied, indicating that price stickiness is less which is also due to affluent lifestyles, prosperity and rising purchasing power of the customer today.
Nike and Adidas are the two mammoths of the industry today. Nike is the world leader with a close follower as Adidas & Reebok combined (post Reebok’s acquisition by Adidas in 2006).
The report attempts to study the internal & external environment in which Adidas operates and competes. To give the study a 360 degree perspective, various aspects of the industry like market trends, customer profile, competitive analysis and are covered.
I. Corporate Mission
‘Mission Statements are an insight into a company’s intent, it tells various stakeholders the basic premise for the existence of an organisation – why does it do what it chooses to do, who does it deal with, what does it aspire to become – all these are essential elements of a company’s mission statement’, Rossiter, J. R., & Bellman, S. (2005). Marketing communications: Theory and applications.
The Mission Statement of Adidas is as follows:
“Adidas-Salomon strives to be the global leader in the sporting goods industry with sports brands built on a passion for sports and a sporting lifestyle. We are consumer focused. That means we continuously improve the quality, look, feel and image of our products and our organizational structures to match and exceed consumer expectations and to provide them with the highest value. We are innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product we bring to the market. We are a global organization that is socially and environmentally responsible, creative and financially rewarding for our employees and shareholders. We are committed to continuously strengthening our brands and products to improve our competitive position and financial performance.
In the medium term, we will extend our leading market position in Europe, expand our share of the US footwear market and be the fastest growing major sporting goods supplier in Asia and Latin America. The resulting top-line growth, together with strict cost control and working capital improvements, will drive over-proportionate earnings growth. “
(Mission Statement sourced from www.adidas.com)
Adidas is a German company by origin and it had acquired Salomon SA in 1998 as a part of its expansion strategy. It purchased Reebok in the year 2006 to re-strengthen its position and focus on its core businesses of athletic footwear and apparel. The company has been known for its continual zest for innovation, a trait mastered by its founder Adolph Dassler. A detailed analysis of the mission statement reveals the following – Post Salomon acquisition, Adidas was clear that it wanted to expand & establish itself in a gamut of sports and focus beyond athletic shoes and aptly be known as a sporting goods company. It always had lifestyle in mind while thinking of performance. Customer centricity was always high and a continuous improvement to provide more than the customers expected was essential to Adidas. The management realises that athletic performance is the ethos of the company and innovation is required to deliver high performance. Their mission statement also talks about the scale and the scope by mentioning that it is a truly global conglomerate. It realises its responsibility towards employees, shareholders and the society equally. It mentions that Europe, US, Asia and Latin America will be the focus; the company will strive to maintain its cost, increase its top line and deliver the best to all stakeholders.
Deliberating on the mission statement, it appears to be a well focused and an all encompassing one. After the acquisition of Reebok in 2006, Adidas has reinforced its core strategy which had got diluted post Salomon take over as the product line got too diversified to gel with each other or to enable smooth management of the business overall.
If one were to write a revamped Mission statement for Adidas considering the current competencies, its focus and the industrial environment in mind, the following can be a suggestive and an all compassing attempt –
Adidas Mission Statement
“We will exploit technology judiciously in our entire product lines of footwear and apparel, both in performance and fitness segment, to extend benefits to all our stakeholders globally – either in the form of more comfort, better technique in sports, advancement in the materials used, competitive prices, more eco-friendly use of raw materials and maximum growth to enable them to get the best value proposition from us”.
II. Core Competencies
The Core competencies form the basis of edge over the competition. It signals what one company does superbly better than the other, by virtue of which it can reap excellent benefits. Adidas has the following core competencies –
Living the three core values
The vision got established in 1920 when Adolph Dassler started designing the first shoe ever. And ever since then to now, three things have not changed and that is the three genuine intentions of the company – manufacture each shoe as a masterpiece for the requirement of the sport, avoid the sportsman from injury and make the product long lasting and value for money. Adidas has sworn by these three values and even over decades, these core values have never been disintegrated. Even when athletes talk of performance, they vouch for Adidas. Continuous innovation and mastering the art of perfection, Adidas believes in outdoing itself each time and this is clearly visible in the vast product range it offers. Be it athletics, tennis or soccer, Adidas is a name integral to success of sportsmen alike.
Strategic Expansions & organic integrations
Management at Adidas has made the right decisions at the right time. Whether it be entering into a merger or divesting, such strategic activities have been well thought of and well timed. In 1999, Adidas wanted to expand beyond athletic shoes and apparel and that is when it bought Salomon which had huge established inroads into other sports such as skiing, skating and golf. It also had presence in bicycle production. Thus Adidas became a true sports equipment, shoe and apparel manufacturer but it retained the identity of different brands, a wise decision as it became easy to disintegrate with Salomon around 2005, when it could no longer handle the vast & mutually exclusive set of businesses. In 2006, Adidas’s decision to acquire Reebok was equally strategic; it was a two pronged strategy as firstly Adidas & Reebok combined together could compete with Nike, the industry leader in a more vigorous manner. Secondly it gave Adidas a platform to create its presence in the lifestyle segment where it was earlier non-existent. Adidas was always known as a performance brand and Reebok as a lifestyle and a fitness brand; the coming together of the two is a lethal combination as it presents a complete proposition to all kinds of customer segments. The decision for both the brands to maintain their brand identity is again a well informed decision as it avoids cannibalisation.
Technology & Innovation
The core competence of Adidas is its continuous zest to innovate. It lives and maintains its performance image very meticulously. At the same time, it has constantly believed in innovating, this was exemplified to the world, when in 2002, Adidas along with the Japanese designer Yohji Yamamoto launched an exclusive range of sneakers which were sold at a whopping $590.
Branding & Internet
In the year 2000, Adidas launched its website with e-commerce applications functional. Adidas knows that the footwear and apparel industry is very mature; in order to stay abreast against fierce competition it is vital to invest in web marketing and branding. The site ensures ease of use, speed and easy navigation. It has both – brick and mortar own brand outlets and a vast network of retailers, distributors and online stores. The self branded stores enable a direct contact with customers and reading their pulse, building face-to-face relationships with them and personifying the brand with the POP merchandise at thee outlets. Internet has enabled Adidas to reduce its cost and increase its reach drastically. E-commerce has provided Adidas far fetching benefits over the competition, the customer data retrieved through the net can be researched upon to understand the customer profiles and their buying behaviour. This enables the management to design highly customer centric communication, discounts and offerings. Though Nike has been a close player reaping all these advantages, other major companies like Converse, Puma, K-Swiss are no way near.
III. PESTL Analysis
PESTL analysis is an excellent technique to gauge the external environment in which a company operates. These factors are mostly if not always, uncontrollable and an organisation has to find its position within this cloud.
Political
Adidas enjoys presence in the entire Europe market, post its acquisition of Reebok in 2006 it has created inroads in the US as well. The company has expansion plans in Asia & Latin America. At most of these places, the political domain remains stable as they are largely democratic set ups. This implies that the government will not pose undue restrictions or introduce stern impractical decisions to be followed blindly by the organization.
Elections every four or five years, (in UK & most Asian countries respectively) also do not impact Adidas much as it does not really get impacted by the ruling party. There are other aspects like stable currency, minimum wages, hygienic working conditions in factories, stipulated working hours per week that are more critical factors for Adidas to adhere to. This is one reason as to why most of these big players are shifting their manufacturing base to Asian countries like India and China while retaining the R&D and designing at their home countries.
Economic
Economic conditions have a considerable impact on the sales & operations of Adidas. The inflation rate, the purchasing power of customers, consolidation and buy-outs hugely affect the revenues. World economy suffered one of the biggest recessions in the past two years; with the fall of Lehman Brothers and the shaking of the entire financial sector, people lost jobs and unemployment touched a historical high figure. Purchasing power fell drastically as most of the people all over the world, especially in the US and Canada started living on their savings. The economic crisis in Asian countries also mean that labour and manufacturing costs would now rise impacting the net earnings for Adidas.
The stability of government and of currency, tax rates, inflation, import and export duties, special economic zones and subsides; all these are critical economic factors that can impact Adidas and other players in the industry.
Social
This comprises of the culture, beliefs, demographics, psychographics, education levels and spending habits and lifestyle of the target audience. A factor that is too significant for any player to ignore especially when it enters into a new market; this is the most important factor that can break or make a brand.
Culture, social groups, race, religion impact how people live in a society and thus marketers have to pick up the cues sensibly as to how to operate in that environment. Adidas has used this knowledge wisely. Its famous slogan – ‘Impossible is nothing’ captures it beautifully as it gels with the youth today globally. The youth today is characteristic of breaking the rules, exploiting their potential and wanting to unfold the undiscovered. It is this spirit which associates the brand with this audience perfectly.
The education level and the pace at which the society moves are reflected in advertising today. Reebok’s advertising of its range Easy Tone is another example to demonstrate this aspect. Today women are highly conscious of their figure; Reebok’s advertising where it claims that Reebok shoes and slip-ons will enable the users to have a well toned figure could not have found acceptance a decade back.
With the arrival of internet, the way people shop is also changing. Now Adidas and other major companies have started selling through online stores and promote the same by giving heavy discounts.
Technological
Continuous innovation and the use of technology is a great imperative in the industry. The breakthrough use of technology signifies some definite improvement – more comfort, superior running performance, more support and cushion, better hold on the ground, reduction in manufacturing costs or in customer price!
The original perforated technology of Geox which claims that it enables its shoes to breathe and overcomes the problem of sweaty feet is a remarkable achievement for the brand’; it not only creates a niche for itself but enables the company to sell its range at a high premium.
Nike’s 360 air max, Adidas 1 and Crocs colourful shoes for outdoors, are all examples of constant innovation in the industry.
Legal & Regulatory
Legal & Regulatory impact the advertising & branding significantly. Let us take an example of Nike when it was planning to enter the Spanish market – Nike could have faced the biggest challenge of establishing its mark in Spain because of a trademark issue. This was a decade long litigation case where the Supreme Court found out that the Nike name was a registered trademark of a former distributor called Cidesport. Nike could only use it’s swoosh but not its name on any of the products. This could have been a great set back and would have demeaned the brand equity. However Nike got lucky when in 2009 Supreme Court reversed its ruling post Nike’s appeals.
“Adidas need to make sure all their promotions give a true representation of the products being advertised, as to not break the laws of the Trade Descriptions Act. It needs to make sure all of their retailers have sufficient knowledge of Adidas products in order to obey the Trade Descriptions Act, as if Adidas give the retailers sufficient information and they give customers incorrect information about the product, then it is the retailer breaking the Trade Descriptions Act rather than the manufacturer”, (www.adidas-salomon.com/en/news/archive/2000/2000-07.asp, August 2010)
IV. Market Analysis
Let us analyse the athletic footwear market through Porter’s Five Forces model to gain a holistic view of the market –
Barriers to Entry – High to Moderate
Brand Loyalty is extremely high; economies of scale and scope also restrict entry for small players as the industry is dominated by few giant players who reap huge benefits from the volumes and the supply chain integration. Economies of scale include advertising & marketing costs, R&D spent in addition to voluminous production and economies of scope would include benefits like umbrella branding, available to large conglomerates like Nike & Puma. However, a new entrant will not find it difficult to find suppliers or raw materials largely of the fact that is a billion dollar industry which is still largely unorganized.
Bargaining Power of Buyers – Moderate to High
Switching cost is low for the buyers as options are endless except in the case where brand loyalty is extremely high. Buyers have easy access to the products through online shopping as well. Though the big players dominate the industry’s rate but they cannot decide these prices ignoring customers. Billions are spent by these players on market research and studying consumer profiling and buying patterns which shows that buyers have high bargaining power in the market.
Bargaining Power of Suppliers – Extremely Low
The raw materials used in this industry are rubber, cotton and foam. The giants like Nike & Adidas lay out stringiest norms which a supplier has to comply with in order to mean quality. Switching between suppliers is also very high in the industry. The supplier power is extremely low, most often than not, these suppliers work at norms and prices governed by the big players of the industry.
Threats of Substitutes – Low
The substitution is quite low as it is not possible for sneakers to be replaced by fashion or high- heeled shoes. Similarly between tennis shoes and running shoes, there cannot be a replacement.
Rivalry among Existing Competitors – High
The rivalry amongst firms is extremely high and mostly being non-price. Each firm lives and dies by the brand identity it creates. There is fierce competition between Nike & Adidas. Specialty shoes like Geox, Rockport and Ecko also compete in niche segments.
V. Customer Analysis
Adidas has a brand identity of being performance oriented, technically superior and with strong European roots. Therefore to study the customer type, Adidas looks at three broad types of customers –
Governed by Superior Performance: This is typically a customer who looks for premium performance. Be it an athlete, a tennis player, a soccer lover or a college going student who values technological advancement would choose Adidas over other brands.
Fitness & Health: This segment is best captured by Reebok as it promotes fitness and aerobic shoes. These days the campaign is running globally by Reebok for its Easy Tone shoes where the slogan is ‘take the gym with you’. Be it running shoes, aerobic shoes or shoes for casual wear, Reebok has captured huge market share. This range is particularly selling like hot cakes both in US and Asia amongst women as they are constantly worried about toning their thighs and hips. Adidas has wisely let Reebok focus in this segment so that there is no cannibalisation in sales.
Lifestyle Shoes & Apparel: Reebok and Adidas have had significant increase in the market share, competing very closely with Nike in the apparel industry. Easy Slippers, T-Shirts, jackets and jumpers enjoy brand loyalty by customers. Adidas does big promotions in this segment. The recent FIFA World Cup championship saw players wearing Adidas T-Shirts with the legendary three stripes logo.
Customers of these big brands generally have a very gullible temperament and that’s the reason these big players engage in celebrity marketing in a big way. Celebrities are chosen with great caution and deals worth millions of dollars are done with these sports sport stars. The idea is to have a rub off effect on the brand and establish strong associations. For e.g. Nike and the coming together of Michael Jordan promoted the shoes in the basketball segment successfully. Even after when he retires, Nike’s Air Jordan segment collected significant revenues for the brand. Adidas had tied up with David Beckham and was one of the official sponsors for World cup in 2006; later years saw the sale of Adidas mount like never before. Even till date Adidas leads the industry in soccer shoe sales.
VI. Competitive Analysis
The footwear and apparel industry is in a mature phase with fierce competition for market and mind share of the customers.
Nike is valued at around 14 billion dollars and is the market leader, followed closely by Adidas & Reebok combined at around 12 billion dollars (as per the 2006 statistics captured from their websites). Mostly the firms compete on brand image, web site designs, service, advertising & celebrity endorsements and innovation. Nike has had a slight edge over its competitors from the time it launched its products as it has considerably invested in R&D and high tech designs. But Adidas has narrowed this gap drastically in recent years.
Brand image focus is very high in the industry. Example of this can be seen in the case of Nike. Nike chooses to sell its regular range through high end retailers only, it had refused to sell through Sears post the Sears – Kmart tie up as it feared brand dilution, it instead started retailing its low priced Starter range through this channel.
Technology focus and specialisation is high. Nike focuses on performance plus style, Adidas as seen as a high end performance shoe and it leads the market in the soccer industry. Reebok is deemed as a fitness and health conscious brand. New Balance talks only performance and is seen as a no-nonsense brand. Crocs has positioned itself as an outdoor wear brand is predominantly used for boating. Puma is seen as a stylised brand both for footwear and apparels, it has never really spoken of high end sports performance and this focus has helped the brand create its space in the lifestyle segment. Hence it is imperative that each player positions itself well and delights the customer in that segment rather than being all over the place.
Below is a diagram of the total market share of competing firms (post Reebok & Adidas integration)-
(Chart sourced from www.hoover.com)
To conclude, one analyses that it would be prudent for close rivals to think of innovative ideas to increase the overall market for performance and lifestyle shoes than just competing on the market share with each other.
VII. SWOT Analysis
“SWOT analysis refers to the technique of mapping the strengths, weaknesses, opportunities and threats for an organisation.” (P. Kotler, S. Adam, L. Brown and G. Armstrong 2001) While the first two are internal to a firm, the last two are more from an industry orientation overall.
Strengths

Adidas has an image of high performance and a favoured brand for buyers who seek technology over style
The acquisition of Reebok complements the brand as it allows a larger portfolio of high end performance based shoes (Adidas) and fitness & lifestyle range (Reebok)
Known for its constant innovation, Adidas and Reebok Easy Tone being the case in point
Association with sports championships enable the brand to be positioned as the leader for Soccer segment
The intellectual quotient of management is seen as very high, as Adidas has been known to take the right decisions at the time (evident from all the mergers & acquisitions which the brand has done)
Association with celebrities like David Beckham adds to the Brand value and high TOMA (Top of Mind Awareness)
User friendly and high brand appearance web site enabling high online presence
Vast product portfolio to choose from – Shoes for running, tennis, soccer, skiing, golf and related line of apparel, jumpers, watches etc.

Weaknesses

Adidas has a vast product portfolio but still has a high dependence on soccer shoes as compared to Nike which has several high revenue bearing products
Has become synonymous with market-follower tag and Nike being the market leader, to most customers it becomes a second choice only
The Adidas/Reebok acquisition results in cannibalisation of each other’s sales rather than targeting competitors. This is because there is a lack of well defined differentiation between both the brands
Not seen as innovative as Nike and is alleged to copy Nike in its advertising, promotions and celebrity endorsements

Opportunity

Highly brand conscious youth wanting to own a pair of branded shoes only
Increasing love for Soccer where Adidas is perceived as the official brand leader
High value placed on fitness & sports for a healthy lifestyle, resulting in an increase in the overall industry
Advanced technology available
Use of internet, online marketing and e-commerce widening geographical markets and connecting the globe virtually

Threats

World Economy recession which has impacted the purchasing power of consumers drastically
Competition from online stores who have presence only through e-commerce and sell shoes at heavy discounts because of their low cost manufacturing strategy
Changing consumer preferences and lifestyles
Reducing popularity of sports because of frantic working lives
Increasing power of suppliers to set terms, e.g. Wal-Mart
New competitors entering the market
Price war between competitors
Cheap replicas available in the market

Conclusion
Adidas has come a long way over the decades and is now positioned second largest & most popular player in the athletic footwear industry. Each company in the industry today is trying to reduce its manufacturing costs by shifting the production to Asian markets. Adidas & Reebok have strengthened their combined market, post the integration. This is a well suited strategy to compete with Nike and grow by expanding into the emerging markets – US & Asia. It would be wise if Adidas focuses on its core competencies and engage into aggressive marketing & branding. Critical areas for success are summarised as follows –
Three critical focus areas which Adidas should be focusing on currently are –
1. Strong & Highly differentiated Brand Positioning for Adidas & Reebok Brands: A serious attempt must be made to create a positioning for both the brands. What does Adidas stand for as compared to Reebok? The Company must strategise Adidas as a sports performance brand and create a niche for athletic, tennis, golf, soccer, both in sports & apparel. It should position Reebok as a fitness brand and let it handle aerobics, running, walking and casual shoes and apparel.
2. Focus on increasing the total market by innovative marketing: Adidas should creatively focus on increasing its total customer base, it should look at promoting soccer in clubs and schools and offer scholarships and start interacting with the children at an early age so that they become loyal customers for life. Reebok should tie up with gyms & could offer discounts on Reebok shoes and apparel. It can tie up with specialty clinics fighting obesity and over-weight, sponsor health check up camps and give aids for other related causes. This will help the brand in two ways – one is that it would help create an image of a socially responsible company and secondly reinforce the strategy to capture the ever increasing health conscious customers of today.
3. High end use of technology: Undoubtedly R&D & technology will remain the catalyst of this industry. Adidas will only be able to survive if it continuously focuses on improving the quality & performance of its shoes. So when Nike says ‘Just do it’, Adidas should scream aloud the spirit ‘Impossible is nothing’.
 

Financial Analysis Of Adidas

The story of Adidas Company takes it start in the beginning of 20th century. In 1920, Adi Dassler makes his first shoe of canvas for runners in his workshop in Germany. When producing shoes, A. Dassler followed three main principles: produce the best shoes for the requirements of the sport, protect athlete from injury and make product durable. The trademark of Adidas was registered in 1949 – 3 stripes. In 1984, Olympic Summer Games in Los Angeles 259 medals are won in products with the Three Stripes. (Herzogenaurach)

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In 1989 Adidas becomes a corporation, but still retains family ownership. 6 years later Adidas becomes one of the most interesting new listings in German market. Adidas bought Salomon Group in 1997 and was now known as Adidas-Salomon AG. In 1998 Adidas Company’s shares were added to the DAX and became one of 30 largest German companies. In the same year Adidas becomes official supplier to Argentina, Germany, Yugoslavia, Romania and Spain. (Herzogenaurach)
In 2000 Adidas Company received the title of “Advertiser of the year” and was presented with the prestigious Clio Award in New York. In the same year Adidas-Salomon AG becomes industry leader on sustainability issues. In the year 2001 Adidas-Salomon AG achieves “record-breaking sales” of €6.1 billion. In the year 2003 Adidas becomes official sponsor of European Football Championship 2004 and Official Sponsor for the 2006 FIFA World Cup Germany. In 2004 Adidas-Salomon AG’s gross margin reached all-time high of 47.2%, net income increased to 21% and sales grew by 7% reaching €6.478 billion. (Herzogenaurach)
Financial Performance of Adidas
Income Statement
In this section we will focus on mainly 3 years which is 2009, 2008 and 2007. According to data given, for Adidas Company 2008 was very successful. Total revenue for 2008 was $10799, which in comparing with 2007 grew by 4%, Gross profit increased by 7.6%, income after taxes increased by 16%, net income increased by 16.5%.
As a result of World Financial Crisis the year 2009 was a difficult period for the company, as total revenue decreased to 4.1%, gross profit fell by 11% in compare with 2008. Operating income decreased by more than for 50% and a decrease of 53.5% in sales. Profit after tax also fell by 61.9% and due to the influence of the above factors the net income also fell by 61.8%. (Adidas Group, 2009)
Cash Flow Statement
In 2008, Adidas AG showed very strong financial positions and Net Income increased to € 904 million versus € 815 million in the end of 2007. In 2009 Net Income decreased to € 358 million. In 2008, Adidas AG had showed weak positions, only € 497 million on cash from operating activities. The thing is that that year the company had quite big reductions in cash: Accounts Receivable € -236 million and Inventories € -324 million. However in 2007 Adidas AG showed € 780 million from cash operating activities. 2009 was the most successful year for the company among these three periods. In 2009, cash from operating activities increased quite high and was € 1,198 million, which is almost three times more than in 2008. In 2008 year was the lowest cash from operation activities and amounted € -444 million. There are several reasons of such low amount. The firs reason is that the company has invested in purchasing of fixed assets € -316 million and second reason is purchasing of intangibles € -60 million. As a result, capital expenditures amounted at € -376 million. In 2007, Adidas AG shows also quite low cash from investing activities € -285 million. However in 2009, cash from investing activities amounted at € -162 million. Years 2009 and 2007 has quite similar results in cash from financing activities € -512 million and € -509 million accordingly. The reason is that these years Adidas AG paid dividends and in addition issuance of stocks and issuance of debt, € -415 million and € – 424 million accordingly. However in 2008, the company reported that cash from financing activities was € -106 million. The reason of such high index is that in 2008 company reported of Issuance of debt was € 402 million. (Thomson Reuters)
Balance Sheet
Before evaluating AG’s financial performance in the last three years, we should take the global economy which has impact on AG’s development into consideration. The global economy expanded by 3.6 % in 2007. The global economic crisis intensified from October in 2007. In 2008, the global economic growth was at its lowest level in six years. And following a sharp slowdown in economic growth in 2008, the global economy fell into recession in 2009 with decreased GDP of 2.2%. In 2008, Adidas Group delivered strong financial performance. At the end of 2008, total assets increased 15% to € 9.533 billion versus â‚¬ 8.325 billion in 2007. In 2009, total assets decreased 7% to € 8.875 billion. This was mainly a result of changes in current assets. Group inventories increased 22% to â‚¬ 1.995 billion at the end of 2008 versus â‚¬ 1.629 billion in 2007. However, group inventories decreased 26% to € 1.471 billion in 2009. This mainly attributed to reduced production volumes and clearance of excess inventories at all brands. As to the growth in 2008, that may be due to a high volume of product shipments in anticipation of future price increases. In 2007, Group receivables increased 3 % to € 1.459 billion (2006: â‚¬ 1.415 billion) and in 2008 11%. Group receivables decreased 12% to € 1.429 billion in 2009. Difficult economic situation and strict discipline in the Group’s trade terms management may be main reasons. Fixed assets increased 9% to â‚¬ 4.074 billion in 2008 versus â‚¬ 3.726 billion in 2007 while decreased 7% to € 3.794 billion in 2009 compared with 2008. Continued expansion of retail activities and investment into the Group’s IT infrastructure influenced changes in fixed assets. To be mentioned, currency translation had different effects on fixed assets. In 2008, currency translation had a positive effect of â‚¬ 120 million. However, in 2009, negative currency translation effects in an amount of € 80 million on fixed assets. Due to a high volume of production and product shipments, accounts payable increased 43% to € 1.218 billion at the end of 2008 versus â‚¬ 849 million in 2007. But it declined 4% to € 1.166 billion at the end of 2009 compared with 2008. Shareholders’ equity rose 12% to â‚¬ 3.386 billion in 2008 versus â‚¬ 3.023 billion in 2007 and an increased of € 3.771 billion in 2009. (Thomson Reuters)
Ratio analysis
Liquidity Ratios
For Adidas Group, a ratio for 2008 year of 1.35 indicates that current assets provide a 35 percent cushion over and above current liabilities. Current assets for 2007 year for Company is €4138 million and current liabilities are €2615 million , what in result gives us 1.58 times more current assets that current liabilities. Thus is good for company because lower index of current liabilities would show of possible company’s insolvency. In 2009 year, current assets for the company are €4485 million and current liabilities are €2836 million, as a result we have 1.58 times more current assets that current liability. The same result as in 2007 and it is good for company.
A quick ratio for 2008 of 0.8 indicates that Adidas’ liquid assets would not be adequate to pay off its current liabilities, and a force payment of the 20 percent gap would require liquidating inventory. A quick ratio for 2007 is 0.96 that is higher than the same ratio in 2008 year. These show that company does not have enough current assets to pay off its liabilities. The quick ratio for 2009 is 1.06 that compared to the last three years is the best and is means that the company has enough liquid cash to cover the liability.
Profitability Ratios
Thus, AG earned a little more than 11 percent operating profit margin on its sales after covering production and other operating costs. In 2009 Operating Income to Sales was 0.10 which is 10%. Thus, AG earned 10 more percent operating profit margin on its sales after covering production and other operating costs.
Return on Assets, or ROA, shows overall profitability of company’s investment in assets. Return on assets is a ratio of net income and total assets of company. For Adidas Company net income for 2007 year made €551 million and total assets for the same year was €8325 million. Thus ROA for Adidas Company in 2007 year was 0.07, or 7%, that is not very high. That means that from each dollar tied up in the business company earns 7 cents. Adidas Group earned a little less than 7 percent on its asset base in 2008 and only 2.76 percent in 2009, which very low index for Adidas AG.
For Adidas Company return on equity for 2007 year is 0.18, or 18%. It means that owner receives back 18% from invested assets that is a good index. So for Adidas Group in 2008, 18.96% AG earned a return of about 19 percent on its 2008 shareholders’ equity investment. Notice that the ROE is larger than the ROA. With the use of debt, the AG can purchase more assets thank it could with equity alone. Any additional return on these assets enhances the total return and improves the ROE. In 2009 ROE was very low, only 6.50%. As in previous case, please notice that the ROE is larger than the ROA.
Leverage Ratio
DEBT TO EQUITY.png
For 2009 debt to equity ratio is 1.35. In 2008, the AG’s debt to equity ratio is 1.8. In 2007 year AG had index of debt to equity of 1.75. That shows that in 2008 company used more debts, what is shown by higher index of debt to equity. As more debt is used, the Debt to Equity Ratio will increase. Returns to shareholders are higher but also is risk higher.
Debt Ratio.png
For 2008 and 2007 year debt ratio is the same, what is 64%, but in 2009 it is 57%. Cares must be taken in interpreting either of these ratios because there is no absolute level that can be referred to as being better than another. Differences in the size of the ratio may reveal management attitude toward risks. For AG, it takes low risks and has sufficient assets to cover its debt load.
Financial Forecasting
There are various models that help to forecast a company’s financial situation they are Time Series Models which include Moving Average, Weighted Moving Average, Exponential Smoothing and Seasonal Forecast for the purpose of better evaluation Moving Average, Weighted Moving Average and Exponential Smoothing will be based on 10 years of Sales, Costs and Profit where as the Seasonal Forecast will be based on quarterly figures for Sales, Costs and Profits. For the purpose of this report only the best possible outcome will be considered and the actual calculation for all the forecasting will be shown in the appendix.
The way to find the best possible outcome is using the MAD (Mean Absolute Deviation) which makes it easier to come to a specific conclusion about the different motels. The best possible outcome for Moving Average for sales were calculated to be the 3 years moving average for which the MAD was 1339.68, where as for Weighted Moving Average it was calculated to be 1091.03 with W1=0.1, W2=0.3, W3=0.6 and for Exponential Smoothing gave the MAD of 1211.68 based on the α being 0.4. Thus we can clearly see that the Weighted Moving Average for sales would be the best option to be considered for the future for sales.
As for the profit the MAD for Moving Average was 150.84 with a 3 years moving average, for Weighted Moving Average was 133.48 with W1=0.1, W2=0.3, W3=0.6 and the Exponential Smoothing was calculated to be 128.45 where α was 0.4. This again gives a clear picture that in this case the Exponential Smoothing was the better of the 3 options. As for the cost, this has direct influence on profits of a company as an increase or a decrease of profits depends on the costs of the company. The MAD for costs was calculated to be 1107.86 for 3 years Moving Average, 859.51 for Weighted Moving Average where W1=0.1, W2=0.3, W3=0.6 and 1045.99 for Exponential Smoothing with α being 0.4 thus we could say that in terms of cost the MAD of Weighted Moving Average was the least and can should be considered to be the best possible option for the forecasting of costs.
The last forecasting method which is the Seasonal Forecast took a totally different calculation than that of the other methods as in this case the information was based on quarterly financial statements so as to help in getting accurate information. The Seasonal Forecast of sales for 2010 quarter 1 was $2578.67 and for quarter 2 it was $2459.33 which is approximately the average of what the company’s sales has been in the last 3 years as for profit the 2010 quarter 1 was calculated to be 101.00 and for quarter 2 it is 76.33, this on the other hand may be a little lower than the normal trends of the quarter 1 and 2 of the last 3 years and as for the last forecast which is for cost the Seasonal Forecast for quarter 1 and 2 was 2420.00 and 2332.67 respectively which is very similar to the trends of the last 3 years.
Table 1: Financial Forecasting of Sales
Financial forecasting for Sales.png
Table 2: Financial Forecasting of Profits
Financial Forcasting of Profit.png
Table 3: Financial Forecasting of Costs
Financial Forcasting of Cost.png
Evaluation and Comments
As mentioned in the previous sections the world is going through a global recession which is affecting every company in one way or the other. Adidas being mainly focused on sports have not been able to get away from this recession and thus we can clearly see the falling of the profits in the last 3 year which in the year 2009 fell by more than 60% from the year 2008. This is not the only factor that affected Adidas as the recent fluctuation of the currencies has not helped the cause for the company as they are now ending up spending more in their costs and due to the low demand for their products they are forced to reduce their rates worldwide. The only boost for them would be their football division as due to the recent purchase of stars like Cristiano Ronaldo, Kaka, Di Maria, Khedira, etc. by the Real Madrid F.C. who were Adidas products only has attracted the clubs followers to purchase their products and to show their love for the team. In terms of the forecasting of sales, cost and profit these can only be considered to be estimates as because of the recession and the purchase of star players by Real Madrid F.C. the future sales, costs and profit could take another turn for the good as it also seems that the recession is starting to get better and this is only good news for the company.
Further Information
To add to this report there could be a lot of more information that could be included, which will make this assignment a lot more interesting. To prepare a very detailed financial report of Adidas AG it would be really helpful to compare using Benchmarking with other competitors like Nike, Kappa, Puma, etc. Also it would be nice to pay more attention on dividends for Adidas as it is the vital part of any company, because this way a comparison of the company’s financial situation can be made and this data could be included in future forecasting section. The effect of global economic environment plays a big role on the profits of a company thus it would be smart to include the factors that are influencing Adidas AG. It would be helpful for to focus on the influence of global economic crisis on competitors and compare results with Adidas AG and see whether the influence is only affecting Adidas AG or the other competitors as well. All the above recommendations would really help the researchers to get an indebt look of the company’s true financial strengths and weaknesses, thus being able to give more specific recommendations to this research.
 

Adidas and Pizza Express Marketing Strategies

Introduction to Marketing

 

In this assignment I will be talking about Adidas and Pizza Express. I will be describing the research methods Adidas uses in order to develop their market plans, I’ll also explain some of the limitations of marketing research. For both Adidas and Pizza Express I will pick two products of each business and talk about how the market is segmented for the products. Lastly, I will talk about the marketing mix of adidas.

Task 1

a)

Market Research

Market research is the practical gathering, recording and analysis of information about problems relating to the marketing of products and services. Some of the uses of marketing research are:

It helps the marketing planning process on decisions about objectives, strategies and tactics.

Marketing research is essential for establishing what customers want and how to reach them. Adidas would have to find out the requirements of customers to come up with strategies on new product development.

It looks at the changes in society and technology. Adidas can use social media to find out the new fashion trends to find out what customers are interested in.

The business can find out about competitors. For example, it can help Adidas to identify competitor’s products and prices and that way the business can come up with tactics.

Primary and Secondary Research

There are two types of research: primary and secondary. This type of information can be gathered internally (within the business) or externally (outside of the business).

Primary research is information that the business has gathered first-hand and has not been gathered before and it is data that is gathered for a specific purpose. Adidas’ internal information can be the sales figures for their products and their external information can be focus groups, face to face interviews in which the researcher meets the consumer and asks them questions on things they like. Mystery shoppers (mystery shoppers are people who visit a shop without revealing their true identity so they can assess the quality of products), questionnaires and surveys so they find out what customers want and to see how successful their products are.

Secondary research is information that has already been gathered before and it is easy for the business to access it. Adidas’ internal information can be reports from sales which is to see how much each customer spends or how often they shop. Previous market research which can help Adidas decide on tactics for the future. Their external information can come from magazines, books, newspapers, government.

It is more cost effective for Adidas to do the secondary research first before the primary research. This will allow the business to have an understanding of the market and it allows the business to develop assumptions about what customers like which means that the business can use the primary research to test the assumptions.

Qualitative and Quantitative Research

This is another type of research.

Qualitative research is subjective and often open-ended. It involves finding out a person’s views on something and they get results in wide range of answers based on personal experiences. Adidas would use qualitative research to ask customer questions about their goods and services like what they think of the product they bought or why they bought it and come up with ways to improve this to the standards of customers.

Quantitative research involves numbers and figures that can be analysed. If there are no numbers involved then it is not quantitative research. Adidas might use this kind of research to find out how many people buy the same product or how many people like sports that way they can see how popular the product is and they can aim their products to a certain type of audience. They can also use questionnaires since they have questions that give a series of answers to choose from.

b)

Adidas would use the results of market research for marketing planning. Marketing planning is developing marketing strategies that will help a business achieve their goals. They would use marketing research to develop:

Objectives – They are goals that the business sets for itself. Objectives can be expressed in terms of profitability and growth or market share. With the market research Adidas could have objectives like increasing sales, by the end of the year

Strategies – It is a long-term plan for success. Adidas can use Ansoff Matrix for their market planning. Ansoff Matrix is a growth strategy developed by Igor Ansoff in 1957 and it looks like this:

Product / Market

Present

New

Present

Market penetration

Product development

New

Market development

Diversification

Market penetration – is when a business sells the same product in the same market. Adidas make sportswear products such as clothing and shoes so their market would consist of people who are into sports. The business could grow if they increase the share of current markets with current products through lower prices to increase the market share and sales volume. Adidas would use secondary research since they already have information about the market they are selling.

Market development – This is when a business sells the same product but in a new market. For example, Adidas could sell their products in another country. By doing market research, Adidas can find out how successful their products would be in new markets. The business would use primary research to find out about the new market.

Product development – This is when the business develops a new product to sell to an existing market. Adidas could use qualitative data to find out what customers like and therefore develop a product using their feedback.

Diversification – This is selling a new product in a new market. For example, Adidas could sell a new sportswear product that would enter a completely new, unrelated area. The business would have to carry out a quantitative and qualitative research about the new products and new market.

Tactics – They are plans and methods used to achieve a particular short-term aim. It is a marketing mix that provides a good framework for developing marketing plans. This includes the 4 P’s:

Product – A product is anything that can be offered to the market to satisfy customers. Products can include physical goods, services, events, places and experiences which is a combination of goods and services that are offered to the clients. By doing marketing research, Adidas could develop their products in ways that are up to customers’ standards.

Price – This is the amount of money that customers would have to pay for a product. Prices can be controlled and be flexible. For example, Adidas offers student discounts for their products. Adidas can use marketing research to come up with prices that are suitable for their clients.

Place – It involves where and how customers can get their products. For example, Adidas has physical stores all over the world but they also have an online store where customers can buy things in case, they can’t go to the store physically.

Promotion – This involves advertising, sales promotion, public relations and personal selling. These are ways in which a business makes sure that customers know about the products. By using market research, Adidas can develop ways to attract their customers.

c)

There are some limitations of the marketing research methods in part a. It doesn’t matter how big or small a market research project may be, any research that is not done correctly will not get accurate results. When a business such as Adidas is making a decision based on their research, it must take into account the limitations that there are. Both primary and secondary research have their limitations which means that the results may not be valid and accurate. Some limitations can be that:

The sample size may be too small which means that there will be limited results.

The business may have researched the wrong people. For example, a sportswear business like Adidas asking musicians about sports.

Validity: A valid method is when the result that is given is truthful. Secondary research can be a disadvantage to Adidas since some of the information may be old as the data has been collected in the past. This means that the business will not be able to use secondary research because the results will not match their idea for new product or service. The information wouldn’t be valid either because the organisation or individual that carried out the research in the past could have altered the results and this could be a problem for the business because they would do market planning with fake results which can create a failure in their new product or service. They also wouldn’t be able to use the information as it is not done truthfully.

The research is conducted in the wrong place or the wrong time and the researchers don’t have the right skills to carry out the research and it can cause the research to be biased.

Cost and time effectiveness: This is how much it costs to do market research and how long it takes to do the research. The business may have to spend a lot of money to use the right techniques and avoid making a wrong decision in which it can be expensive to the business. Research can also be time consuming as different techniques take more time than others. For example, the manager may not have the results of the research at the moment he/she wants to make a decision and if the research is rushed then the results may not be reliable. Some of the limitations of primary research is that it can cost a lot of money to hire people to carry out the research, it can also cost money to train workers who don’t have the right skills to do the research. People would also have to travel from one place to another. Travelling can cost money and it can also be time consuming since travelling can take hours. Another reason why primary research is time consuming is because sometimes researchers can have difficulties in accessing information.

Accuracy: Sometimes research may not be accurate because researchers will not be using the appropriate technique or people in a focus group may not reveal their true opinions.

Market research can only provide the information, it cannot provide the business with a strategic decision. Doing observations will also be a limitation for the researcher as it does not give accuracy of age or social class.

d)

Some recommendations that have the ability to improve the validity of the marketing research used to contribute to the development of Adidas’ marketing plan would be that Adidas would need to make sure that the sample size that will be used for their research is big enough to get the right amount of information. In the event that the business decides to use primary research such as questionnaires as a form of market research, they need to make sure that they know the number of customers and the type of audience that they will send the questionnaires to. For example, if Adidas were to send around 200 questionnaires for their research and they only get back 15 questionnaires then the data will not be reliable. This can be due to the fact that the questionnaire was too long which made it boring to complete or the questions were too complicated so it was difficult for people to answer them. However, if the business receives 100 questionnaires out of the 200 that they sent then the data will be reliable and they can also make the questionnaires better using that data that is received. When gathering qualitative data, Adidas would need to make sure that their questions are easy to understand so people can answer them and that are quick to answer. In addition to this, Adidas would also need to make sure that the questions are straight to the point and specific to what the company needs so time is not wasted. When questionnaires are designed carefully it can improve the validity of market research for the business. Some other recommendations that have the ability to improve the validity of marketing research can be that for Adidas, the company should train researchers on how to carry out a research or they can also hire a person who has experience in market research. Training researchers can be useful due to the fact that can save up money and by hiring a specialist, it will be a quicker method for market research and it can also help the business grow. By doing this, it will avoid bias and the information will be accurate which will help Adidas to create a very good product or service. Researchers in Adidas need to make sure that when doing primary research, they do research on the right people. For example, since Adidas is a sportswear business, they would usually target athletes and anyone who is into sports. They should also carry out their research in the right place and at the right time so they can gather more accurate results. Lastly, If Adidas decides to use secondary research then they will need to make sure they get the information from reliable sources such as Mintel. This can be useful given the fact that the company will be using information that is up to date, the results will match with the strategies the company has in mind and the information will not be altered which means that the data will be more accurate.

Task 2

Market segmentation is the sub-diving of a market into distinct subsets of customers where any subset may conceivably be selected as a target market to be reached with a distinct marketing. If a business sells a certain product, the market would be anyone who might buy the products. A business can’t make and advertise only one product that meets the needs of everyone. Each market segment has different types of needs and preferences so marketing has to be targeted towards meeting the needs and preferences of customers. Customers may be influenced by a wide range of factors. There are 4 different types of segmentation:

Geographic segmentation – this depends on the regions/countries, cities/rural

Demographic segmentation – this is grouping customers on the basis of age, gender, income, religion, family size

Psychographic/Lifestyle segmentation – segmenting customers depending on activities, interests, opinions

Behavioural segmentation – purchase occasion, benefit sought, user status, end use

Pizza Express products:

 

Adidas products:

 

Product/Service

Type of customer

Segmentation method

Why is this method used?

Vegan Giardiniera

Healthy Men and Women

Psychographic

Pizza express has segmented their market psychographic by people’s interests and opinions. Not all people eat normal pizzas. This is due to the fact that people have different lifestyles. Some people may decide to become vegan. There are different reasons why people might decide to have this product. It can be due to the fact that people want a healthy lifestyle or that they don’t like to eat anything out of an animal and want to save the environment. Pizza Express wants to meet up the needs and preferences of their customers to increase sales and having different types of foods will attract more people.

Piccolo Sundae

Kids/Adults

Demographic

Pizza Express has segmented this product by ages. Most of the sweets and desserts such as ice cream are mainly aimed towards kids given the fact that it is quite common for them to want something sweet after a meal. However, some adults can also get ice cream after a meal. Pizza Express wants to meet up the needs and preferences of their customers by having products or services for all ages.

Pompom Beanie

Men or Women

Geographic/Demographic/

Psychographic

Adidas has segmented this product by regions / countries. Especially in areas where seasons change from warm to cold. A beanie provides protection for people who live in areas of cold weather. However, it can also be psychographic due to the fact that people have different interests and styles so the product can be used as a fashion trend for young adults. It can also be demographic because of age and gender so people of all ages and genders can use this product. Adidas wants to meet up the needs and preferences of customers by making sure they have products or services that are required for different places, different age groups, genders, and interests.

Phone Case

Young/Adult Men and Women

Psychographic/Behavioural

This product is segmented by people’s interests and special occasions. This product can be psychographic given the fact that there are a lot of people who have phones so the reason why they might buy a phone case can be so they protect the phone from breaking and that way they save up money or it can be used as fashion and it is very popular to have a phone case. It can also be behavioural due to the fact that a phone case can be given as gift for a friend or family member.

 

 

Task 3

 

a)

 

Marketing mix is sometimes referred to as the four P’s. These are ideas that are considered when marketing a product. The product that I have chosen to develop a marketing mix is Adidas super star originals shoes.

Product

A product can be seen in different levels. For example, level 1 is The Core product which is the benefit of the product that makes it valuable to someone. Level 2 is The Actual product and this is the physical item. In this level, branding and other features are added to differentiate the product from competitors and level 3 is The Augmented Product which is the additional value beyond the physical product.

The product life cycle recognises distinct stages in the sales history of a product. In the introductions of the product life cycle there are low demands so it takes time to find the acceptance by clients and therefore the business will have low profits, there will also be high promotion spend, a few competitors and a high failure rate at this stage of the product life cycle. The second stage of this cycle is the growth. In this stage, profit begins to take place since the increase of production reduces the unit costs, competitors start to enter the market and they may drive prices down. The next stage that follows is maturity and this is usually the longest period of success of the product’s life. This is where there are higher sales volume but then eventually sales will fall, innovative production may be needed and marketing activity is based on strengthening the brand and it will reinforce loyalty. The last stage of the product life cycle is the decline. This happens when sales fall remarkably and it will lead the business to abandon the market.

Price

Price is the element of marketing mix that produces income. A business must set a price a price for a product. There are three factors that affect price and these are:

Cost – There are different types of costs such as the fixed cost which are the costs of running a business, like wages and rent. The variable cost are costs that varies with the level of sales and the total.

Competition – The business needs to know the competitors’ costs, prices and offers so they can compete against them. The business can set prices that are relative to the competition or the business can target an alternative segment.

Demand – Having strong demands may lead to a high price and low demands may lead to low prices.

Place

This refers to where the product is purchased. The business might use two different types of distribution direct or indirect. Direct distribution is when a business sells and distributes their products directly to their clients. For example, Adidas sells their product online and they send them directly to the person who bought the product. Indirect distribution is when a business sells products through a person that acts as a link to distribute to clients. For example, Adidas can pass its products to a wholesaler which is then passed on to a retailer and then to the customer.

Promotion

This part of the marketing mix is designed to raise awareness of a business, the products they sell and its services. Promotion should persuade, inform and persuade a client to buy a product. They can do this through the promotional mix which involves:

Advertising – this is a way to send a message to customers and persuade them into buying the product. They can use celebrities as a way to increase the attention.

Sales promotion – this is a short-term method to promote a product. It can include things like coupons, samples, displays and other promotional efforts.

Personal selling – this is where the seller presents the product to the customers in which is often face to face but it can also happen in other ways. This kind of method requires good skills and sometimes it might require training.

Public relations – it covers a firm’s relationships and communications with the public. This includes customers, employees, suppliers, the government, stockholders and more.

Another way of doing this is through AIDA which stands for:

Attention – it has to gain the attention of the audience.

Interest – targeted messages will help customers identify the business and products they sell.

Desire – the business needs to make sure that their product/service makes customers want to buy it.

Action – the audience needs to know where and how they can purchase the product and motivates them to buy it as soon as possible.

b)

The 4 P’s are targeted at particular segment of the market because the product has a link to those customers who like shoes. The product also links to the ages within the target audience because young people are more likely to buy the product because of the fashion/trend which would fall into the demographic and psychographic segment. The price would be targeted at the demographic segment because it depends to who is able to afford the product. Young people wouldn’t be able to get the product since they don’t have enough money for it but older and wealthier people are willing to pay for the product. The place links to geographic segmentation because a business would sell their products in a place where people shop often and they would have to make products according to the area that people live in so customer buy products according to their needs in the place they live. When promoting products, the business needs to consider the area where they promote. The business needs to target large groups so a lot of people are aware of the business and the products/services they have and so they can go to purchase them.

Penetration pricing is when a product/service is being sold into a market at a low initial price in order to make sales before the price is increased. Businesses do this in order to help break down barriers to the market and generate sales volume. This method can be used as a short-term strategy to get market share. Price skimming is a pricing strategy that is used for business products in a particular market segment because at the launch of a new product there is less competition in the marketplace. This involves by setting the product at a reasonable high price in which wealthy people will be willing to buy the products at the price that is initially set. Over time, the price of the product will be reduced. As competitors enters the market, and customers that bought the product previously are satisfied, the firm lowers the prices to attract more customers who can afford the product.

When a business has produced a product or service, they need to think about how that product will be distributed and how they are going to sell them to the customers. There are three factors that influence the decision in selecting the distribution channels for a particular market segment are:

Customers – The number of the potential customers, their geographical location and their buying habits are an important influence when selecting a distribution channel. The use of mail order for customers who have limited mobility is an example of the influence of customers on channel design.

Product – The characteristics of a product have an effect when selecting a distribution channel. For example, customisation. Customised products tend to be distributed direct. When a wide range of options is available sales may be made using demonstration units, with customised delivery to follow.

Competition – Sometimes, a supplier’s brand will be alongside its competitors’ products. For other products, distributors may stock one name brand only and in return be given an exclusive area.

A promotional mix that Adidas would use to reach a particular market segment would be advertising. This way, it will persuade customers to buy their products and what they will be advertising is a lifestyle or an image about the product. They can do this by advertising their products through the media such as television, newspapers, magazines, the internet and billboards.

Bibliography:

Integrated Marketing Communication Effectiveness of Adidas

                                                                 Abstract

The purpose of this paper is to analyze the Integrated Marketing Communication effectiveness of the Fortune 500 Company Adidas. There are multiple aspects to a business, and analyzing them can help other businesses to understand how a company is operated successfully. Examining the company also allows us to understand what strategies could help the company improve. Certain areas of marketing communication are vital in business, this paper will examine the communication process and tactics of the Adidas Company.

    The analysis will contain the history of Adidas and how it has evolved their marketing communications strategies over the years. The paper will also analyze the direct marketing and personal sales of the company. The analysis of the Adidas communication campaigns and the reflection of their core values will also be discussed in the paper. Adidas is a global brand that is facing extreme competition from other brands such as Nike. The comparison of both companies will be discussed in the analysis.

        The strengths weaknesses, opportunities, and threats of the company will also be analyzed in the paper. The company’s financial growth regarding their new branding strategies over the years also will be discussed.

    

The Adidas Company started in 1949 when Adolf Adi Dassler at the age 49 set off to work with 47 employees in Herzogenaurach, Germany. Dassler submitted the original shoe that included the famous Adidas 3-Stripes. The notable shoes were screw-in-studs that were designed as lightweight football boots. The football boots, better known as soccer cleats, were first used by the German football team when they defeated Hungary in the 1954 FIFA World Cup final.

The game was believed to be a miracle because Hungary was an undefeated team at that time. Germany’s defeat of Hungary would later be heard across the world for decades. Adidas and Dassler then became household names on football fields around the world. The Adidas shoe would later become one of the most popular athletic shoes in the world.

The first piece of Adidas clothing apparel was created in 1967 when the Franz Beckenbauer tracksuit debuted. This original piece of apparel would open doors for Adidas in the future by allowing them to venture in the fashion world. The tracksuit opened a whole new apparel clothing segment to the company.

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The three-stripe was a trademark that allowed the Adidas brand to be distinguished from all the rest. The brand became prominent in the athletic world as they began to evolve and gain trusts from world-class athletes. Adidas continued to produce innovative products for athletes performing in different sports. The athletes believed that the shoes allowed them to perform better. Dassler’s best marketing strategy was meeting with the athletes in personal , and asking them what could be improved or invented to support their athletic needs. The best athletes around the world gained trust in Adidas because they believed the company catered to them, and cared about their specific needs. The Adidas brand continues to excel today because of its consistent goal of meeting athletic needs.

According to the Adidas mission statement, the group continually aims to be the global leader in the sporting product industry with brands built for a sporting lifestyle. According to The Adidas group is dedicated to continuously strengthening their brands and products to enhance their competitive position.

Every rand strives to become the best in their product industry, but Adidas aims to be the best by constantly improving their sales strategies. The goals of the Adidas Company are rapidly changing as they continue to take on new ideas and business endeavors.  Adidas is merging into one of the most popular sporting brands in the world and being stagnant on product marketing is not one of their goals.

 The Adidas group strategy is ‘Creating the New’ because they believe that they have the power to change lives through sports. Everything they strive to do is rooted in sport and lifestyle. As the health and fitness trends begin to reach their peaks sports are becoming a way of life. Sport is beginning to play a progressively significant role in people’s lives whether it be on or off the athletic fields.

As the Adidas group continues to operate highly in the sporting apparel industry, they are motivated to push the expansion of products. Adidas also strives to excel in customer experiences and services to influence product desire. They believe doing so will help to capitalize on the growth opportunities in sports, as well as in sporting casual and active wear.

The Adidas group believes that the sports are the central to almost every culture and society and is also the center to a person’s mental and physical health. Initially the Adidas brand strives to inspire and allow individuals to utilize the power of sport in their lives.

     As time progresses the Adidas company has allowed their brand to advance into the fashion industry. Years ago, you could find Adidas sporting apparel being worn by the best athletes in the world. Today high fashion models such as Kendall Jenner and Gigi Hadid are spotted wearing Adidas apparel on the runways of New York Fashion Week. Adidas has transcended their brand into more than just an athletic footwear company.

  On February 8, the Adidas Company collaborated with an upcoming fashion designer Daniëlle Cathari.  Cathari’s collection for Adidas made its debut at the brand’s New York Fashion Week preview. After a month-long release schedule, her collection dropped in New York, London, Paris, and Shanghai.

Cathari mentioned that is was simple collaborating with Adidas because of their willingness to accept fresh innovative designs that would appeal to consumers. Cathari said “I had a lot of freedom. It was very naturally collaborative – 50% their DNA and 50% mine. It could have been so hard, but it was truly so easy to collaborate.”

  The Adidas Company has generated a massive amount of idolization from consumers in the high fashion industry because of their desire to expand beyond their original designs. The Adidas Company has also collaborated with hip-hop rapper Kanye West. The “Yeezy Boost” are the official collaboration sneaker by Kanye West and Adidas.

  Kanye West has released twelve sneaker designs with Adidas within the past four years. The shoes have further allowed Adidas to expand their brand passed the street wear classic 3-stripe sneaker. Although the Yeezy Boost are an Adidas collaboration, the sneaker has allowed Adidas to push pass Nike in their variety of footwear.

     Strategies such as collaborations, will allow the Adidas Company to become successful while gaining consumer attention around the world.

     Other successful strategies of the Adidas Company are gaining a strong social media presence. In order to have an effective business a strong social media presence is required. According to Growth Gorus, social networks are the fastest growing industries in the world. Social media marketing also expands the brand’s identification and awareness. Today, about 78 percent of small businesses use social media apps to lure in new customers. The remaining, 33 percent of customers recognized social media as how they view new brands and products.

     Overall a strong social media presence helps with marketing to consumers while validating the company’s brand.  The company’s social media presence allows consumers to know the specific brand is always present, and focused on advancing in communication with them. According to The Marketing Insider Group, 63 percent of consumers who search for businesses online will most likely use ones with the strongest social media platforms. The Adidas Company’s social media platform allows them to connect with their consumers while increasing awareness about their brand products. This specific strategy allows them to boost their leads and sales using social media platforms.

The Adidas Company uses social media platforms such as Twitter, Instagram, Snapchat, YouTube, and Facebook to advertise their products. They also use social media to connect with their audiences globally. The Adidas Company thrives on all social media platforms because of their favored content. Each of their channels use a relevant and specific campaign focused featured video.

     The Adidas twitter account has over 3.54 million followers. This account retweets other brands affiliated with Adidas, while combining the entire Adidas brand as a whole. The retweets posted by the brand accounts are mainly of videos and images of Adidas clothing, shoes, and fitness products being promoted. Adidas uses real-life sporting events to promote their products. For example, at the UEFA Champions League Final, athletes such as Luis Suarez and Alvaro Morata who used Adidas equipment during the match were tweeted on the account. Under the Adidas hashtag their pictures were tweeted on the accounts page. This is a strategy of Adidas marketing that Twitter uses for global branding.

  The Adidas Facebook account is similar, where they have an exceedingly large fan base. Adidas remains one of the most dominant companies on social media because their process of integrating their brand channels into existing channels. By liking and sharing content of other company pages such as Nike or Puma, the Adidas brand also gets their content shared on these brand pages .

The Adidas YouTube account has 851,238 subscribers and 55 videos. There YouTube account features seven other Adidas brand channels. The account also features several Adidas campaigns such as the most recent ‘See Creativity’ campaign. This new ‘See Creativity ‘campaign is one of the latest chapters of Adidas. This campaign is told through the lens of female athletes from all over the world. The campaign builds on the company’s belief that hard work can only get you so far. The ‘See Creativity ‘campaign includes a multi-athlete video that appreciates creators from around the world who are confident and courageous.

The Adidas Instagram account has 22.3 million followers, and is primarily used to generate brand and product awareness. Consumers are highly influenced by the visual content posted on the account page. The Adidas Company’s effective advertising techniques on Instagram has allowed them to market to consumers globally. For example, Adidas supplied the match balls in the FIFA Women’s World Cup played in Montreal. The company posted an image of the final match ball with a view of the stadium while using the location Montreal so that people searching for this location would find the content posted. This is an example of how the company’s strong social media presence allows them to advertise without hashtags.

Adidas has created several memorable campaigns using their social media platforms. One of the most memorable campaigns was the “Calling All Creators” created in 2017. The campaign invited athletes from around the world to find creativity within themselves. The campaign believes that all athletes should be identified for their creativity, not only for their athletic abilities. The final result of the campaign is a celebration of athletes across multiple sports who choose to use their creativity to change the world.

The “Calling All Creators” campaign has reached multiple media surfaces because of the brand’s choice identifiable creators from sports, music, fashion and entertainment. The campaign featured the biggest names in pop culture and sports today. The campaign cast included stars such as James Harden, Lionel Messi, Paul Pogba, Von Miller, Pharrell Williams, Kris Bryant, DeAndre Hopkins, Pusha T, Damian Lillard, David Beckham, and Alexander Wang.

In 2017, the “Unleash Your Creativity” campaign was created to show how individuals should take an extra step to creatively make a difference in the world of fitness.  In this process, Adidas recorded influential women in culture, and female athletes to explain how they constantly challenge themselves mentally to make a physical difference. The campaign reads that “Hard work only gets you so far.” “To make a real difference, you need something more powerful. Your creativity. Unleash it and see how far you can go.”

The campaign featured high fashion supermodel Karlie Kloss, professional kickboxer Ruqsana Begum, and social media figure Hannah Bronfman. Several other influential women featured in the campaign show how they go beyond average as they use their creativity to discover the fitness world in their own innovative ways.

In 2016, the “I’m Here to Create” campaign was created to redefine the true meaning of sports. The advertisement featured several female athletes such as WNBA player Candace Parker, tennis icon Caroline Wozniacki, street athlete Robin Arzon and DJ Hannah Bronfman. The campaign consisted of a series of films of female athletes showing how they add creativity to their sport. The unscripted series was created to show how each of the female athletes bring their own perspective on creativity to sports. At the time, the new Adidas brand footwear PureBOOST X was advertised in the campaign. The series was broadcast in over 50 countries during events such as the Grammys, UEFA Champions League matches, the BRIT Awards, and the Oscars.

Overall these campaigns have been effective, and have received many positive responses from audiences over the world.  Over the years, these campaigns have empowered people to thrive through their creativity whether they are a professional athlete or not. These campaigns also inspire women globally to challenge themselves to explore their creativity through athletics. These campaigns have become favorited by female audiences because they have allowed women to interrupt the preconceived notions that come along with them in the athletic world.

The Adidas Company’s Global Brand Marketing is ran by Eric Liedtke. Liedtke is responsible for all communications, marketing research, and public relations. He has worked with the Adidas Company for over 12 years. With his leadership skills he has managed to progress the brand’s communication efforts in the North American market. Liedtke continues to strengthen the brand because he knows its weaknesses. He has worked and operated with the Global Communications team and agency network.

The global primary agency for Adidas’ sports is 72andSunny. The agency was founded by John Boiler, Glenn Cole, and Robert Nakata in 2004. The advertising agency also has offices in Amsterdam, Los Angeles, and New York City. This advertising and marketing agency creates global brand campaigns such as “Unleash Your Creativity”, and “Calling All Creators”.

 The agency is responsible for creating campaigns for basketball, soccer, and running efforts. 72andSunny has made outstanding campaigns that have received positive reviews globally. While the Adidas Company plans to be aggressive in their marketing campaigns, their intent is to continuously go big.

The Adidas Company remains dominant in marketing through their sporting campaigns. The “Adidas All In” marketing campaign was the largest in their history.

The brand displayed their presence amongst different lifestyles and cultures that combine the sports world. It captured the passion of athletes, artists, and musicians who love what they do. This campaign allowed the brand to create a powerful relationship with audiences and consumers by inspiring and recognizing a blend of interests and passion that brought all creators together.

Adidas marketing strategies have allowed them to remain dominant as one of the best sporting brands in the world. Their unique marketing strategies have allowed them to inspire while reaching consumers.

Besides their dominance in marketing campaign efforts, the company struggles in premium price ranging, outsourced manufacturing, and their limited product line. According to Marketing91, the high price range due to new technology and production procedures have made Adidas difficult to purchase for consumers in third world countries. The Adidas brand also has only two brands under their group, which means that there is more range for a product line expansion in the future. 

Opportunities for the company come in different ranges such as market development, expansion in product line, backward integration, and increasing demand of premium products.  As a global brand, the Adidas Company faces threats from their competition from the Nike Company that remains one above Adidas.  Other threats include supplier dominance and government regulations in other countries. Because a majority of the Adidas productions are outsourced, the company does not have as much bargaining power as the suppliers. Import regulations in China and Asia also play unfavorable roles with pricing and affluence of the brand.

Overall, the Adidas Company is ranked number five in the apparel industry, and 61 for the World’s Most Valuable Brands. Over the years, the company has positioned itself as powerful leaders in the world market. Its drive by innovation and fuel for creativity has set them apart from other apparel brands in the apparel industry. As they continue to assist athletes in making a difference in their performance they continue to grow as a brand. The Adidas brand believes they have the power to change lives through sports and creativity.

The brand will continue to excel by creating the best products and services for their consumers around the world, while allowing them to explore and create new dimensions of sports and athletics.

 REFERENCES

https://www.marketing91.com/adidas-swot-analysis/

https://www.thestreet.com/story/14091819/1/adidas-is-latest-major-brand-to-have-a-serious-pr-nightmare.html

https://www.marketingweek.com/focus/adidas/

https://lbbonline.com/news/adidas-2018-brand-campaign-invites-the-world-to-see-creativity-in-sport/

https://www.72andsunny.com/

 

Market Structure and Analysis of Spotify and Adidas

Spotify case

Spotify has added over 20 million subscribers in the past year despite keeping its subscription prices the same.

Major divers of demand for Spotify’s subscriptions

According to Amadeo (2019), there are five major drivers of demand, including income of customers, price of the goods or service, price of related goods or service, expectation and preferences of consumers. In the case of Spotify, the very first driver of demand is cost of substitute product because customer can listen to a song in Spotify at much cheaper price than purchase a CD.  For instance, a subscription a younger Mexicans paid $10-$20 for a CD that contain one or two dozen songs maximum, only need to pay $5 to get access to Spotify and listen to 30 million songs. Therefore, it is rational for customers to change from listening to music from CD, to listen to music from Spotify, which offer better value at lower price. Secondly, preference of customer was also an important driver of demand. As it was mentioned in the article, massive growth in number of subscribers of Spotify in Mexico was not forecasted and prepared by the company. The reason is Latin America have half of population under the age of 30, who are major target customers of Spotify, middle class is expanding, which mean people could expense more for their entertainment activities and last but not least, Latin market customers are radio-driven, which is match with Spotify very well. Analyst Mark Mulligan further added that the establishment of Spotify as an aspirational and premium brand is key to success in Mexico.

a)     Supply side factors influence success of Spotify

In supply side, the success of Spotify could be explained as supply curve shift to the right, which lead to significant increase in demanded quantity as price per unit decrease and equilibrium point move along the demand curve. Firstly, technology innovation that enabled customers to listen to music from an app on smartphone significantly reduce the cost of providing the service as well as increase the number of songs that customer could access. In comparison with 10-20 songs in a CD, now customers can choose from list of 30 million songs on Sportify. Secondly, the input price or cost of operation decreased as supplier need much less cost to provide customers with music service. It was mentioned that only 90 employees of Spotify are working for customers in Latin America, about 20% of total customers.  Therefore, in the market of listening to music or music service, the supply curve shifted to the right due to technology change and decrease in price input.

b)     Cross-price elasticity of demand and example

According to Busterna (1997), cross-price elasticity of demand refers to the responsiveness in price of a good in response to changes in price of the other goods, which is the percentage ratio of change in quantity demanded one good to the change in price of the other good. In case of Apple and Spotify, it is clear that Apple music is substitute good to Spotify. Therefore, increase in price for Apple music subscription will lead to increase in demand of Spotify.

For example, if price of Apple music subscription increase by 10% lead to 15% increase in demand of Spotify in the same market, the cross-price elasticity of demand between Apple and Spotify equal change in quantity demanded over change in price = 15%/10% = 1.5

Taylor Swift boycotted Spotify for three years from 2014 until 2017.

Impact of top musicians’ boycott on Spotify’s competitiveness

The refusal of broadcasting on Spotify of Taylor Swift and other top musicians lead to decrease in competitiveness of Spotify because it reduces the attractiveness of the music service that they offer. According to Hernandez (2014), Taylor Swift had 19 million fans on Spotify. Therefore, as she boycotted Spotify, utility of at least 19 million customers reduced as they were not satisfied with Spotify like before. As economic theory suggested that consumers attempt to maximize utility or satisfaction within budget constraint (Yaari, 1965), the competitiveness of Spotify in the market reduced because customers will seek for competitors within the same service and price.

In addition, if consider that Spotify is a market, in which musicians are sellers, the boycott of Taylor Swift equal with reduce in number of sellers, which cause the supply curve to shift to the left. As a result, with no change in subscription fee, customers actually paid higher for a song than before.

Impact of Taylor Swift’s termination of boycott.

As it was mentioned in previous question, as boycott of Taylor Swift considered as reduce in number of sellers and cause demand curve to shift left, her return on Spotify equal with increase in number of sellers, which cause supply curve to shift right. From the graph, it can be seen that when Taylor Swift boycott Spotify, the Supply curve shift left and equilibrium point was at E1. However, as she removes the boycott, new sellers added into Spotify market and cause the equilibrium point change from E1 to E2, back to the original place.

Adidas case

Adidas and market structure

Market structure and main competitors

As it was mentioned in the news article, Nike is the main rival of Adidas which dominated the UK market. However, besides Adidas and Nike, there are several sportwear brands like Under Armour, Puma, the North Face, etc. Moreover, competition in the sportwear market is not purely in term of price while it is not likely that companies in the market could collaborate to act as monopoly. The freedom to enter the market is high and companies tried to differentiate their products. Consequently, the market structure of US sportwear market could be defined as monopolistic competition.

Effects of celebrity endorsers on equilibrium price and quantity of product sold

The standard consumer model that is widely used by economist assumes that consumers always rank options in accordance with personal preferences and always choose to want they like best (). Therefore, by having celebrity endorsement, Adidas can tap on the personal preferences of customers to be ranked 1st in their list of choice. As it was also mentioned, positive change in consumer taste could shift the demand curve to the right, thus, increase the demanded quantity and increase equilibrium price.

In term of competitiveness, Fujita (1988) mentioned that in monopolistic market, companies compete with each other by differentiating their products. Therefore, besides differentiation in design and material, endorsement of celebrity also causes products of Adidas to be differentiated with rivals’ products.

The article states that Adidas increased its investment in digital warehousing to boost sales.

Aggregate demand impacted by increase in investment of company

According to the Keynesian analysis, aggregate demand equal sum of government spending (G), Investment (I), consumption (C) and net import export (EX). Therefore, in the case of Adidas, increase in investment of Adidas as well as other companies in market lead to increase in aggregate demand, which shift the aggregate demand curve to the right.

Simply stating, increase in investment lead to more job created, not only in Adidas but also in companies that supply the digital services and products to Adidas. Moreover, to keep competitive advantage, rivals like Nike, Puma or Under Amour will also invest in digital solution, which further enlarge the impact of Adidas’s investment. As more jobs created, it is rational to assume that the unemployment rate would decrease and the aggregate income of household increase. With all other factors remain constant, increase in income would definitely lead to increase in consumption and aggregate demand curve will shift to the right. As a result, new equilibrium point will move along the aggregate supply curve, from E1 to E2 while price increase from P1 to P2. In general, increase in investment of company like Adidas, Nike and large competitors lead to direct increase in investment and indirect increase in consumption.

Potential macroeconomic risks of such continuous increases in investment.

As it was mentioned and illustrated in previous part, Investment lead to increase in income of customers, thus, indirectly lead to increase in consumption. However, the graph indicated that as the demand curve shift to the right, the equilibrium point moves up along the aggregate supply curve, to E2 position, which feature higher product price and higher quantity of demand. This phenomenon is inflation.

In short run, this phenomenon lead to increase in quantity of supply as company produce more product to meet increase in demand. However, in long-run, economist believed that the aggregate supply is a perfect vertical line, which can only by shifted by technology innovation that reduce production cost (Tarshis, 1979). Therefore, without technology innovation or other factors that cause the long-run aggregate supply to shift to the right, increase in income of customer only cause the equilibrium point to move up along the short run supply curve. As price continue to increase, increase in consumer’s income could not meet with increase in price, customer would start saving and choosing lower price products, cause aggregate demand to shift left. Because sellers could not change their production or business plan immediately as consumer, there will be surplus in the market, which cause loss to sellers. Consequently, many sellers could go bankrupts or downsizing and increase in unemployment rate. Ultimately, it lead to decrease in income of consumers, decrease in consumption and further shift the aggregate demand to the left.

In other word, continuous investment without control will lead to bubble or unstable growth of the economy. Without sustainable development, Aggregate supply remain unchanged and investment will only lead to increase in price or inflation and economic crisis when the economic bubble burst.

Macroeconomy

US real personal consumption vs real gross domestic product analysis for period from 1995 to 2018.

Trend analysis and comment with focus on recession periods

Overall, from 1995 to 2018, both real gross domestic product value and real personal consumption value increase gradually every year, except 2008 and 2009. However, the percentage of growth is higher in real personal consumption, which increase from $6910 to $12,887 (186%) while real Gross Domestic Product growth was just 174% (from $10,543 to $18,324). In which, Gross Domestic Product decreased by 525.443 in 2009 while real personal consumption decreased 22.507 in 2008 and further decrease by $132.867 in 2009. In other word, real personal consumption decline before Gross Domestic Product decline.

Connection between Gross Domestic Product and real personal consumption

Through the graph, it is clear that there is positive correlation relationship between real gross domestic product and real personal consumption because both indicated similar trend throughout the period from 1995 until 2018. Therefore, it is possible to assume that there is connection between gross domestic product and real personal consumption in the United States.

Firstly, the connection could be explained by the formula or definition of gross domestic product which is the sum of personal consumption expenditure, government expenses, investment and net of import and export activities (Johnsson, 2002).

Gross Domestic Product = Consumption (C) + Government Expenditure (G) + Investment (I) + Net export – import (NX)

Based on the formula of gross domestic products, which equal C+G+I+NX, increase in gross domestic products indicated increase in all or each of components. However, real personal consumption contribute 66-70% in the gross domestic product of the United States, it is clear that increase in gross domestic product could be directly explained as increase in personal consumption. According to the United States Bureau of Economic Analysis (2008), personal consumption expenditure measures the prices that people in the United States pay for goods and service that they purchase or purchased on their behalf. Therefore, the real personal consumption indicates living standard of people in the United States as well as their purchase power. Data from FRED indicated that the real personal consumption contributed 66% to GDP of the country in 1995 but gradually increase and reach 70% of GDP in 2018, which suggested that throughout the period, living standard of people increase and consumer could afford higher consumption. From economic point of view, increase in real personal consumption can only be explained by increase in income of consumer in the market. In other word, from increase in personal consumption, it is rational to assume that from 1995 to 2018, there is significant increase in income of consumer, which shift the aggregate demand curve to the right. Thus, the gross domestic product and real personal consumption influence each other. The higher the gross domestic product, the higher the consumption power and vice versa.

Impact of increase in Gross Domestic Product on Spotify and Adidas

As it was explained in previous part, increase in gross domestic product equal increase in personal consumption. Therefore, increase in gross domestic product lead to increase in the power of consumption or the spare budget to consume of personal customers. It is noteworthy that increase in customer’s power of consumption is not increase in price of product. Therefore, from economic point of view, increase in GDP cause the aggregate demand curve to shift to the right. Consequently, quantity of demand increase and products could be sold a higher price as equilibrium point move up in the supply curve.

However, in long-run, high price lead to entry of new sellers, to gain benefit from high price. Thus, both Spotify and Adidas need to compete with more competitors in the market. Therefore, in long-run, the price will fall back to the original equilibrium point or even drop to lower level if sellers provide surplus of products and services. For this reason, in order to avoid the war price with new sellers, both Adidas and Spotify need to crease sustainable competitive advantage. In case of Spotify, the company could develop new function or app that target different customers group or expand to new market. Similarly, Adidas could find new market or produce products that separated from its core sportwear items, such as perfume. Ultimately, it is clear that increase in gross domestic product lead to increase in demand in short run but force companies like Spotify and Adidas to change their business strategy and create sustainable completive advantage to survive in a fiercer competition.

References

Amadeo, K. (2019). 5 Determinants of Demand with Examples and Formula. [online] The Balance. Available at: https://www.thebalance.com/five-determinants-of-demand-with-examples-and-formula-3305706 [Accessed 9 May 2019].

Busterna, J.C., 1987. The cross-elasticity of demand for national newspaper advertising. Journalism Quarterly, 64(2-3), pp.346-351.

Fujita, M., 1988. A monopolistic competition model of spatial agglomeration: Differentiated product approach. Regional Science and urban economics, 18(1), pp.87-124.

Hernandez, B. (2014). Taylor Swift removes all music from Spotify after ‘1989’ bickering. [online] Mashable. Available at: https://mashable.com/2014/11/03/taylor-swift-removes-music-spotify/ [Accessed 9 May 2019].

Johnsson, R.C., 2002. Why the GDP Shows No Bust, But GDR Does. University of Uppsala, Sweden.

Tarshis, L., 1979. The aggregate supply function in Keynes’s General Theory. In Economics and Human Welfare (pp. 361-392). Academic Press.

Telser, L.G., 1995. The ultimatum game and the law of demand. The Economic Journal, 105(433), pp.1519-1523.

United States Bureau of Economic. (2018). Personal Consumption Expenditures Price Index | U.S. Bureau of Economic Analysis (BEA). [online] Available at: https://www.bea.gov/data/personal-consumption-expenditures-price-index [Accessed 9 May 2019].

Yaari, M.E., 1965. Uncertain lifetime, life insurance, and the theory of the consumer. The Review of Economic Studies, 32(2), pp.137-150.

 

Case study of the Management and Organisation of ADIDAS

Adidas is a Germany shoe, clothing and apparel company that also owns Reebok, Taylor Made and Rockport. Adidas is the largest sportswear company in Europe and is the second only to Nike as the largest sportswear company in the world. The company sports the recognizable logo of three slanted parallel bars of ascending height.
Adidas was founded in 1924 by Adolf Dassler, but it did not become a fully registered company until 1940. Its headquarters are located in Herzogenaurach, Germany, the hometown of its founder. Although many believe that Adidas stands for “All day I dream about soccer” the true origin of the name comes from the amalgamation of Adolf’s nickname, Adi, and the first three letter of his last name.
Adidas specializes in the design and manufacturing of footwear, sportswear, sports equipment and, yes, even toiletries, most notably, deodorant. However, the company first gained international recognition in 1936 at the Summer Olympic in Berlin, where it outfitted U.S. track star Jesse Owens with its track shoes. Owens won four gold medals in the games.
With a specifically stated Corporate Strategy, the company needs to ensure that their organizational structure will allow for and be flexible to this strategy being sought after. Their objectives outlined in the corporate strategy ensure the mission statement will translate into action, while also guiding and coordinating decisions. There is no purpose in having well thought out strategic objectives, but no structure and cohesion to attain these objectives. The Adidas Group comprises of a four person executive board, including one Chief Executive Officer and three board members representing the shareholders and six members representing the staff. The Supervisory Board advices and supervises the executive board in matter concerning the management of the company. It is the role of the supervisory board to ensure that the pathway and vision determine by the executive board is forthrightly followed by the rest of the organization from the top, all the way down to those entrusted with manufacturing their products.

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The strengths of ADIDAS are strong management team and good corporate strategy in North American and overseas markets, brand recognition and reputation, diversity and variety in productions offered on the web (footwear, apparel, sporting, equipment, etc.), strong control over its own distribution channel, strong customer base, and strong financial position with minimal long term debts. Weakness of ADIDAS is negative image portrayed by poor working condition in its overseas factories, and E-commerce is limited to USA.
Planning
Planning is one of the most important project management and techniques. A plan is like a map, when following a plan, you can always see how much you have progressed towards your project goal and how far you are from your destination. Knowing where you are is essential for making good decisions on where to go or what to do next. The most important is to ensure that everyone is clear of what to accomplish. Planning meaning is how setting goals and defining the actions necessary to achieve the goals, in light of the situation. That is situation must be analyses or understood and the appropriate goals and actions must be determined in order to take advantage of opportunities and how to solve problems. Basic management function involving formulation more than one detailed plans to achieve optimum balance of needs or demands with available resources.
First, the planning process is identifies the goals or objectives to be achieved and formulates strategies to achieve them. The Managers throughout the organization must develop goals, strategy, and operational plans for their work groups that contribute to the success of the organizations as a whole. Planning is also crucial for meeting your needs during each action with your time, money, or other resources. With careful planning you often can see if at some point you are likely to face a problem. It is much easier to adjust your plan to avoid overcome crisis, rather than to deal with the crisis when it comes unexpected time. Example Adidas plans to expand their operations in Europe, so they need consultation to the Government of Germany. They have been granted landing rights in Paris and are awaiting further details from authorities. In addition, planning has a different meaning depending on the political or economic context in which it is used. Two attitudes to planning need to be held in tension on the one hand we need to be prepare for what may lie ahead, which may mean contingencies and flexible processes.
There is one thing on which every manager can expect to be appraised, the extent to which he or she archives his or her unit’s goals or objectives. Whether it’s a work team or a giant enterprise, the manager in charge is expected to move the unit ahead, and this means visualizing where the unit must go and helping het there. Organization exits to achieve some purpose, and if they fail to move forward and achieve their aims, to that extent they have failed.
On the other hand, our future is shaped by consequences of our own planning and actions. Planning in organization and public policy is both the organizational process of creating and maintaining a program. In the psychological process of thinking about the activities required to set a desired target or goal on some scale. Business planning is like water to a thirsty plant. It keeps our business vital and thriving. Without business planning, business will never improve as it could may even loses or bankrupt. Many small business or stall owners don’t have the business planning so they can’t earn so much profit when their doing business. Their business unable further progress and stagnant it is, eventually as to close to close shop or behind other competitors.
The rapid of change in today’s business world and globalization is making it increasingly necessary that mangers keep their plans current. Strategic management is the application of the basic planning process at the highest levels of the organization. Through the strategic management process, top management determines the long-run direction and performance of the organization by ensuring careful formulation and strategies. For example, top management may ask middle and lower-level managers for inputs when formulation top-level plans. Once top-level plans have been finalized, different organizational units may be asked to formulate plans for their respective areas. A proper strategic management process helps ensure that plans throughout the different levels of the organization are coordinated and mutually supportive.
The slogan of Adidas is “Impossible is Nothing”. The mission of Adidas is to be Best Sport Brand in the world. They had achieved the mission but in this strong competitive era, too many company like Nike and Reebok also want to be globally recognized brand, but they will work hard to achieve their goals. Adidas is passionate about all sports. So Adidas Company will try their best for planning new product or equipment for athletes. As part of their End-to-End Planning initiative they have been focusing on implementing an optimized demand planning process and system more than 20 countries in Europe. They standardized or partially automated certain planning functions to increase forecast accuracy. Following the first wave of implementations in 2008, they continued the roll-out to the remaining European countries throughout 2009. Hereafter, they expect to continue the roll-out to other key Adidas Group markets such as Japan.
They set up a dedicated Profitability Management department to monitor macroeconomics trends, forecast the impact on product and supplier cost and devise their supply chain profitability strategy. In addition, their development teams also contribute significantly to this initiative by engineering their products with a stronger focus on price. Throughout 2009, they also engaged their supplier with the aim to increase transparency and predictability in costing. Such as, they closely tracked raw material costs and leveraged this information to consolidate volumes. This allowed them to negotiate more effectively and offset cost increase. In addition, their sourcing teams improved their products allocation process to better utilize supplier’s capabilities and take into account of total supply chain cost. Moreover, by leveraging consolidated volumes, their Transport and Customs team success negotiated reduced transportation cost and optimized shipment routes with their service providers.
In conclusion, planning is very important for the organization to achieve their goals and objectives. Especially, current globalization every organization is using latest technology to do the market analyses and compressive planning. In order for them to survive and growth, for example, in year 2008, financial crisis, many banks in US will decline bankrupt. This is because of their poor planning.
Organizing
Organizing (also spelled organising) is the act of rearranging elements following one or more rules. For a company organization is means to an end to achieve its goals, which are to create value for its stakeholders (stockholders, employees, customers, suppliers, community). The Study of organisations includes a focus on optimizing organisation structure. According to management science, most human organizations fall roughly into four types. They are pyramids or hierarchies, committees’ juries, Matrix organisations and Ecologies. Organising is the managerial function of making sure there are available the resources to carry out the plan. “Organising involves the assignment of tasks, the grouping of tasks into department, and the allocation of resources to department” Organising is the managerial function of arranging people and resources to work toward a goal. The purposes of organizing include but are not limited to determining the tasks to be performed in order to achieve objectives, dividing tasks into specific jobs, grouping job into department specifying reporting and authority relationship, delegating the authority necessary for task accomplishment, and allocating and deploying resources in a coordinated fashion. Managers must bring together individuals and tasks to make effective use of people and resources. Three elements are essential to organizing to develop the structure of the organisation. Organising are also acquiring and training human resources. In addition, organising are establishing communication patterns and networks. Determining the method of grouping these activities and resources is the organizing process.
Organising is the process of defining and grouping activities and establishing authority relationships among them to attain organisation objectives. Organisation is the process of identifying and grouping of the works to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most efficiently. Organising can be viewed as the activities to collect and configure resources in order to implement plans in a highly effective and efficient fashion. Organising is a broad set of activities, and often considered one of major functions of management. Therefore, there are a wide variety of topics in organising. The following are some of major types of organising required in a business organisation. Organising is the structural frameworks within the various efforts are co-ordinated and related to each other. Organising is one of the basic functions of management. Organising is referred to a creating a structure of relationship for the efficient management of the enterprise. In other words organisation means a group of persons working together to achieve some common objectives. It is related with building up of a framework or structure of various inter related parts.This is the process of allocating and arranging human and non human resources so to achieve organizational goals. Issues of organisational culture and human resource management are also related to this function. Furthermore, organising also includes the activity of acquiring the resources that the organisation needs to achieve its aims. In many organizations, staffing and sourcing of funds and raw materials take up much time and effort. Anything is commonly considered organized when it looks like everything has a correct order or placement. But it’s only ultimately organized if any element has no difference on time taken to find it. In that sense, organizing can also be defined as to place different objects in logical arrangement for better searching. Organizations are groups of people frequently trying to organize some specific subject, such as political issues.
So, even while organizing can be viewed as a simple definition, it can get as complex as organizing the world’s information. Organising also means creating an organisation structure that is suitable for the achievement of the agreed objectives. Work has to be allocated, lines of authority and responsibility defined, and a system of rules and procedures that guide the conduct of employees laid down. The structure should not be regarded as permanent but as constantly changing to suit the organisation’s needs. The organisation is where resources come together. Organisations use different resources to accomplish goals.
The major resources used by organisation are often described as follow:

Human resources financial resources
physical resources
information resources

Managers are responsible for acquiring and managing the resources to accomplish goals. Organising will work towards maximum efficiency and minimum waste. Organising helps organisation to reap the benefit of specialization. Organising provides for optimum utilization of resources. Organising helps in Effective administration. Organising channels for expansion and growth. Organising achieves co-ordination among different departments. Organising creates scope for new change. The advantages of this include easy communication due to shared specialization, better performance evaluation within the team, and quicker decision making as they are all on the same perspective. The main disadvantage is that coordination between different departments become more difficult. Divisional, which is based on product, market or geography has the advantage of functions being able to focus on a specific good, service or customer. This promotes high quality products and customer service. The risk is in conflict arising between division if they begin to compete for organisational resources or pursue individual objectives. Other than that, organising plays a central role in management process. Once plans are created the manager’s task is to see that they are carried out. Given a clear mission, core values, objectives, and strategy, the relationship. It identifies who is to do what, who is in charge of whom, and how different people and parts of the organisation relate to and work with one another. All of this, of course, can be done in different ways. The strategic leadership challenge is to choose the best organisational form to fit the strategy and other situational demands. When organising, managers must take decision about the division of labour and work specialization, departmentalization, chain of command, span of management, centralization, and formalization. Collectively, these decisions are often called organisational design. There is no standard formula for the best way to organise an enterprise. Several factors have been shown to influence organising decision. Among the most important of these factors are strategy, size, environmental conditions, and technology. Managers organise in order to achieve the objectives for the enterprise for which they work.
Thus, the strategy of the enterprise affects organising decision. Change in strategy frequently necessitates changes in the way the enterprise is organised. Small enterprise tend exhibit less formalization, centralization, and complexity in their organisational structure. Nevertheless, enterprises of the same size may be organised quite differently because of differences in strategy, environmental conditions, and technology. The key factor in the external environment that is relevant to organising is uncertainty. Some enterprises face competitive environments that change rapidly and quite complex, while others face relatively stable conditions. Generally, turbulent environments call for organising decisions that lead to less formalization and centralization in the organisational structure. The processes by which an enterprise transforms inputs into outputs may also affect organising decisions. Some research suggests that organising decisions that lead to high degrees of formalization, centralization, and work specialization are more appropriate for routine technologies and that the converse is true for non-routine technologies. Competition is tough but is steady and manageable, the handling of cost leadership is reasonable and such differentiation follows an organized pattern is such focused activities and events of the company. Adidas will be sustaining capital investment and access to capital and apply process engineering skills in such ideal supervision of labour in giving good brand value to such products being designed for manufacturing purposes as they have applied a structured organisation and responsibility driven business ways that narrow. Adidas ability to maintain enough of price differential to offset competitors’ brand image for differentiation. The need for strong coordination among functions in R& D, product development and marketing and focus on company policies as directed in such strategic target.
Leading
Leading is organizing a group of people to achieve a common goal. The leader may or may not have any formal authority. Students of leadership have produced theories involving traits, situational interaction, function, behavior, power, vision and values, charisma, and intelligence among others. Leading has been described as the “process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task.” Definitions more inclusive of followers have also emerged. Leading is ultimately about creating a way for people to contribute to making something extraordinary happen.” Leading needs to be distinguished from posturing .The following sections discuss several important aspects of leading including a description of what leading is and a description of several popular theories and styles of leading. This article also discusses topics such as the role of emotions and vision, as well as leading effectiveness and performance, leading in different contexts, how it may differ from related concepts of management, and some critiques of leadership as generally conceived.
Leading as one of four functions of management, leading can be both extremely important and challenging. Along with planning, organizing and controlling, all managers will execute these four functions of management. From managing a local store to managing a large corporation, every manager will perform each of the functions at some point in their jobs. Ideally all managers should be good leaders; it is a way of establishing a cohesive group which moves towards organizational goals and objectives with spirit and vigor. While handling people a good leader will not only manage his own resources well, he or she also can motivation the worker, employee to complete their work that been given. A leader should strive to become an inspiration to the rest of the employees. Employees will follow a leader because the leader have the authority that given by boss to leading the employee. However, a leader that is an inspiration means that employees follow that person because they believe in what the leader is doing and they are trying to help the company achieve its goals. Finding ways to inspire employees means coaching them and motivating them to succeed as integral parts of the company. Significant relationships exist between leading and such individual traits as intelligence, adjustment, extraversion, conscientiousness, openness to experience, and general self-efficacy. Considering the criticisms of the trait theory outlined above, several researchers have begun to adopt a different perspective of leader individual differences – the leader attribute pattern approach .In contrast to the traditional approach, the leader attribute pattern approach is based on theorists’ arguments that the influence of individual characteristics on outcomes is best understood by considering the person as an integrated totality rather than a summation of individual variables.
In other words, the leader attribute pattern approach argues that integrated constellations or combinations of individual differences may explain substantial variance in both leader emergence and leader effectiveness beyond that explained by single attributes, or by additive combinations of multiple attributes. In response to the early criticisms of the trait approach, theorists began to research leading as a set of behaviors, evaluating the behavior of ‘successful’ leaders, determining a behavior taxonomy and identifying broad leading styles. For example, Leading takes a strong personality with a well developed positive ego. Not so much as a pattern of motives, but a set of traits is crucial. To lead self-confidence and a high self-esteem is useful, perhaps even essential. The researchers evaluated the performance of groups of eleven-year-old boys under different types of work climate. In each, the leader exercised his influence regarding the type of group decision making, praise, criticism and feedback , and the management of the group tasks project management according to three styles is : authoritarian, democratic and laissez-faire. Authoritarian climates were characterized by leaders who make decisions alone, demand strict compliance to his orders, and dictate each step taken; future steps were uncertain to a large degree. The leader is not necessarily hostile but is aloof from participation in work and commonly offers personal praise and criticism for the work done. Democratic climates were characterized by collective decision processes, assisted by the leader. Before accomplishing tasks, perspectives are gained from group discussion and technical advice from a leader. Members are given choices and collectively decide the division of labor. Praise and criticism in such an environment are objective, fact minded and given by a group member without necessarily having participated extensively in the actual work. Laissez faire climates gave freedom to the group for policy determination without any participation from the leader. The leader remains uninvolved in work decisions unless asked, does not participate in the division of labor, and very infrequently gives praise. Positive reinforcement occurs when a positive stimulus is presented in response to a behavior, increasing the likelihood of that behavior in the future.
The following is an example of how positive reinforcement can be used in a business setting. Assume praise is a positive reinforcement for a particular employee. This employee does not show up to work on time every day. The manager of this employee decides to praise the employee for showing up on time every day the employee actually shows up to work on time. As a result, the employee comes to work on time more often because the employee likes to be praised. In this example, praise is a positive reinforcement for this employee because the employee arrives to work on time more frequently after being praised for showing up to work on time. The use of positive reinforcement is a successful and growing technique used by leaders to motivate and attain desired behaviors from subordinates. Used reinforcement to increase productivity and also increase in performance. Additionally, many reinforcement techniques such as the use of praise are inexpensive, providing higher performance for lower costs.