1.

0 CASE SUMMARY

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2.0 PROBLEM STATEMENT

There were several issues being raised in the Adidas case.

a) Business Line-up

At the time of Horst Dassler’s unexpected death in 1987, Robert Louis-Dreyfus, French
advertising executive merge with Salomon SA, a French sports equipment manufacturer that
are specialize in ski equipment, golf clubs, bicycle components, and winter sports apparel. The
acquisition had surpassed Reebok to become the world’s second largest sporting goods
company, with 1998 sales of nearly €5.1 billion. However, Adidas’s shares have decline due to
the high price Adidas agreed to pay for Salomon and how the company might finance the
acquisition. On top of that, there is question of Adidas’ core business to do with Salomon
business unit.

b) Corporate Strategies Approached

In 2005, Salomon divested all of its winter sports brands and Mavic bicycle components
to Amer Sports Corporation for €485 million. With Salomon divestiture to Amer Sports, Adidas
management acquired Reebok International Ltd for €3.1 billion to increase the company’s
revenue and at the same time to become the world’s largest sporting goods company. With the
three units based of Adidas’ core brands – Adidas, Reebok, and TaylorMade-adidas Golf, the
company is focusing on innovation, image differentiation, control its global supply chain
processes and activities in order to capture back as the leader of global sporting goods industry.

c) Footwear and Apparel

Adidas current footwear and apparel is based on the clothing needs of the consumer.
The company was runner-up to Nike in most other athletic categories. The problem here lies in
differentiating their footwear and apparel from Nike, thus capture the global sport industry as the
largest one.

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 d) The Position of Reebok and TaylorMade-Adidas Golf

Reebok was acquired by Adidas Ag in 2006 is to boost the company’s sales in North
America. Besides being developed to a variety of new styles and color combinations,
expanding distribution on specialty athletic footwear stores and discount family footwear
retailers, still Reebok’s net sales are declining. TaylorMade Golf sales in the golf equipment
industry have declined by about 5 percent between 2000 and 2007. This is due to the reduction
number of golfers in the United States from 27.5 million 1998 to 22.7 million in 2007. However,
the sales of golf apparel and golf shoes had increased to 28 percent and 18 percent,
respectively, between 2004 and 2007 through the continued introduction of new styles and
professional golfers. Adidas management might consider which business line is cash dog and
cash cow.

Having gone through all the problems, it can be summarized that the problem of this
case is to outline the necessary strategies for Adidas AG’s future marketing plan in order
to become the largest sports industry in Europe and Asia.

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 3.0 SWOT ANALYSIS

Internal Strategic Factors Weight Rating Weighted Comments

Score

Strengths
S1 good reputation 0.15 3.8 0.57 -High quality, artist choice

S2 Strong management 0.15 3.5 0.53 -acquired reebook

S3 Diversified business products 0.10 3.4 0.31 - footwear, apparel and golf set

S4 Customer loyalty 0.10 2.3 0.23 - women-reebok, athletic-

adidas

S5 Efficient suppy chain 0.05 2.0 0.10 -getting new products to market
quickly
Weaknesses
W1 Expensive prices 0.15 4.0 0.60 - not everyone able to buy

W2 High producing cost 0.20 4.8 0.96 - High cost, low profit

W3 Weak in marketing research 0.10 2.5 0.25 - latest trends, weak design of
products.

Total Scores 1.00 3.55

Internal Factor Analysis Summary (IFAS)

By seeing the weighed score 3.55 (>3.00, <4.00), shows a good sign for Adidas and show
Adidas have a balancing weight.

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 External Factor Analysis Summary (EFAS)

External Strategic Factors Weight Rating Weighted Comments

Score

Opportunities
O1 Overseas profesional designer 0.20 3.7 0.74 - different design, more group
of customers
0.15 3.0 0.45
O2 Joint Ventures - Tender offer for shares and
merger of joint ventures in
asean countries
0.10 2.3 0.23
O3 Organize sport awareness week - enhance people sports,
increase sales

Threats
T1 Economical and trends 0.20 3.0 1.00 - less population, economics
goes down

T2 Business practices 0.15 2.2 0.55 - Affect the achievement of its

growth objectives

T3 Competitive environment 0.10 2.5 0.30 - Number of factors outside of

its control

T4 Competition 0.10 3.0 0.10 - Getting tougher and growth

prospect getting smaller

Total Scores 1.00 3.47

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By seeing the weighed score 3.47 (>3.00, <4.00), shows a good sign also for Adidas and show
Adidas have a balancing weight.

Generating SWOT Matrix for Adidas

Strengths (S) Weaknesses(W)

Internal S1 good reputation W1 Expensive prices
Factors S2 strong management W2 High producing cost
S3 Efficient supply chain
W3 Weak in marketing
S4 Customer loyalty
Factors S5 Diversified business research
products

External Factors
Opportunities(O) SO Strategies WO Strategies
O1 Overseas • Increase product • Focus on more target
profesional designer
quality group.
O2 Joint Ventures • Joint ventures or • Reduce cost, increase

O3 Organize sport alliance with other sales

awareness week retailers companies in • Focus on medium

international market. income customers
• Widely target
market
Threats(T) ST Strategies WT Strategies
T1 Economical and • Research and • Country unstable
trends
development to retain politic
T2 Business practices its competition • Strong competitors

T3 Competitive position. • Loyaly customer

environment • Offer more

T4 Competition reasonable prices

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4.0 ALTERNATIVE STRATEGIES

I. Emphasize on Horizontal Growth Strategy with Focus on Diversification

Adidas can emphasize on horizontal growth strategy by focusing expanding its products-
line into other geographic locations for instance in emerging countries such as Russia, China,
India and Brazil. Since 2008, emerging markets had made Adidas the largest seller of athletic
gear in Asia. By lengthen the current products-line of Adidas’s into new scope is actually one
way to attract customers attention towards Adidas. For example, Adidas can harmonize new
design or style with Asian customers’ preferences or cultures.

In stand, horizontal growth results in horizontal integration which the degree to which
firm operates in multiple geographic locations at the same point on an industry’s value chain,
customer satisfaction and commitment is high. Other than that, Adidas can also consider to
diversify its sports products by using pricing strategy. For instance, under pricing strategy there
are premium prices with high quality products; medium price with high-high quality or high-
medium quality of products; or low price with average quality. By diversify such many pricing
strategy, customers will have much choices to choose and more facilitate depends on their
affordability.

In some other way, Adidas, Reebok and Taylor Made-Adidas Golf should expand their
products to more diversify customers. Adidas can expand its’ products to different target market,
such as medium income customers and low income customers. Adidas should produce more
low-cost products and make sure that their products been well-recognize by public. Not only

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focusing on certain retail outlet stores such as through its network of company-owned stores,
Adidas should also giving the same opportunity of selling its’ sporting goods to other small-
medium sports outlets.

II. Stability Strategy - Pause/Proceed-with-Caution Strategies

In stabilities strategy, pause/proceed-with-caution strategies are consolidating various

acquisitions to find economies and to encourage innovation among the business units. Adidas
can stop or limit its’ production towards some products to have an innovation and redesign. This
can help to increase the company’s products image and reputation.

This is because over produce products will causes the products low value and not be
appreciate because easy to get it, but if some products are limited produce and the value
towards this products will be increase.

III. Focus on Customer Specification as Customization

Adidas also can consider focusing on customer demand or specification as more to

customization rather than standardization. For example, by providing kiosk machine at retail-
outlet stores can also give chance to customers to provide their own design or style that they
would prefer to wear or gain from Adidas AG.

From there, Adidas can use the ideas given by the customers through special order.
Instead only producing sporting goods through standardization, Adidas can also increase its
market sales from this approach; also it can help to increase customer satisfaction and loyalty
towards Adidas AG.

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IV. High-Enforcement on Marketing Strategy

Until 2008, Adidas is focusing hardly on signing endorsement contracts with popular
athletes. Besides that, Adidas also getting involved in sponsoring sports events for instance,
Adidas was the official sponsor for the German national women’s team and UEFA soccer
league teams in Munich, Amsterdam, Milan, and Madrid. From these efforts, it can be examined
that Adidas focus more on advertising its sporting goods through people and events.

In that case, Adidas should enforce more on its marketing strategy by expand it to other
marketing tools such as through using online-marketing by maintaining the usage of current
endorsers, or through inviting or welcoming endorsers on the events organize by Adidas for
example organize “Health Awareness through Sports’ Week.

Other than that, to ensure that Adidas, Reebok and Taylor Made-Adidas Golf have good
sales and acceptable by all people, Adidas can set a producing seasonal to each of their
company. For examples, Adidas produce new design of shoes and will launching on August, in
other way, Reebok stop launching new products on this period and focus for other products. So,
the company does not have same products on the same time and customers do not have too
many choices on the same time and both can earn profit on the same time.

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5.0 EVALUATION OF ALTERNATIVE STRATEGIES

I. Emphasize on Horizontal Growth Strategy with Focus on Diversification

When Adidas decide on emphasize on horizontal growth strategy with focus on

diversification, there are several positive and negative outcomes that can be evaluate from it.
Some positive outcomes which can be deriving from this strategy are customers’ satisfaction will
always be taking good care. Besides, in this case Adidas has the ability to harmonize its’ design
with customers cultures.

Customers from different region also feel like that they are being respect by Adidas
management because their rights and priority also been considered. Other than that, this
strategy is actually one of the initiatives for Adidas AG to do more brainstorming synchronize
with the effort of Adidas in extending its leadership in product innovation. Product innovation is
very much needed to compete with other sporting goods competitors especially with Nike,
leader of the global sporting goods industry. At the same times, when Adidas also focusing on
different market segment which are for medium-and-low income customers, Adidas will have the
possibility of increasing its profit margin and demand for products also will be increase.

In different negative perspective, this strategy will involve high cost budget in order to
produce different style and design in such a way to harmonize with different region customers’
preferences and cultures. Besides, though Adidas full with new style and design as what the
company’s corporate strategy was focused on, this does not mean that customers will easily or

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always fit with the changes because some of the customers would still prefer to purchase or use
the current design or style compare with new.

When in the markets, there are too many new products line been distributed and
promoted, there are some chances that this can cause other products line to be omit. This is
because of too many products line and focusing more only on the new products, the
manufacturers could have lost sight for the other old product line.

II. Stability Strategy - Pause/Proceed-with-Caution Strategies

Under this stability strategy, Adidas will have the chances on stopping or limiting the
current production for some products line which can be seen as the way to make some
improvement or innovation towards those products. Similarly with the first strategy, this strategy
can also be seen from the context of positive and negative outcomes.

Some positive outcomes from using this strategy are this strategy is one way to help
some products which facing with difficulties to grow to be improve and to be enhance so that the
products can compete fairly with other competitors. For example, TaylorMade has the difficulties
in attracting potential golfers towards its golf equipment so; by “Pause” some other business
segments for instance Adidas and Reebok, this will help TaylorMade to redesign its golf
equipment by emphasize on product innovation.

Other positive outcomes, this strategy also can help in balancing all three business
segments in market share. With not only looking for one business segment as the main
contribution to Adidas market share, this company can retain Adidas market share through all
business segments which are through Adidas, Reebok and also TaylorMade. By doing so, the
chances of this company to grow and to gain high profit margin is much higher.

However, there are still some negative outcomes that can harm toward this strategy
which is the period of time for one products or one business segment to be develop or to be

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improve is taking much longer time to be implement. In the process of waiting, this would just
waste other products line from moving forward.

III. Focus on Customer Specification as Customization

Giving a chance to customers to create and design their own style in sporting goods is
also one of the ways that Adidas can consider to use to improve its’ strategies. Some positive
outcomes that can be seen from using this strategy is it can help Adidas in gaining more ideas
on creating, designing and producing new style and design of sports goods with the help from
the customers. Basically, business firm produce products and services with the main objective
to satisfy customers’ wants and needs so, by giving attention to customers opinion and ideas
also one way to satisfy their wants and needs.

Through this connection, giving chance to customer to brainstorm their own ideas will
help to build good relationship between Adidas and customers. In order to do so, it is important
for Adidas to be always maintaining and retaining its relationship with customers. By doing so,
customers loyalty will also be retaining because their welfare wants and needs have been taking
good care by Adidas. When those relationship has become one of the main focus for Adidas,
indirectly it will helps in increasing Adidas’s market sales production of sporting goods.

Still, focus on customer specification as customization also has several negative

outcomes such as focusing on customization will wasting time and involve high cost in
producing. Besides, at the same time, there are chances that customers’ expectation cannot be
fulfill by Adidas which is not similar with what they really expect from Adidas. When this happen,

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 this is actually involved there is no congeniality between Adidas and customers which may have
some misunderstanding happen between them.

IV. High-Enforcement on Marketing Strategy

Adidas could also consider to high enforcing its marketing strategy by using online-
marketing approach or by using seasonal marketing strategy. Some positive outcomes which
can be obtain from using this strategy is Adidas’s marketing strategy will always be more
advance compare with other sporting goods manufacturer. Through focusing on putting
endorsers in events that been organize will actually attract customers to come over with the
purpose to see the athletes in face-to-face. This also can increase the scope of customers’
attraction towards Adidas.

Meanwhile, some negative outcomes from using this strategy is certainly high-cost
budget are needed in order to invite and welcoming endorsers to the events that been organize
by Adidas for example “Health Awareness through Sports” Week. Other than that, there will be
a possibility that there is no increasing rate in customer rating.

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6.0 THE BEST STRATEGY AND JUSTIFICATION

Through the evaluation of each alternative strategy, we suggest that the best strategy for
Adidas case through high-enforcement on marketing strategy. As being performed by Adidas
group itself, in everything they do they are focused on strengthening and developing Adidas
brands to maximize the group’s operational and financial performance also creating shareholder
value. Leveraging opportunities across Adidas brand portfolio is the strength success of their
brands that within brand portfolio pursue two strategic priorities and they are:

a) Market Penetration - Gaining market share across all markets in which Adidas
competing
b) Market Development - Expanding into new markets and addressing new consumer
segments

Adidas multi-brand approach allows tackling opportunities from several perspectives, as

both a mass and niche player, providing distinct and relevant products to a broad spectrum of
consumers. In this way, each brand is able to concentrate on its core competencies. Across all
brands, Adidas focus on increasing awareness and visibility, providing clear and consistent
messaging and supporting product initiatives at the point-of-sale.

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 In addition, by commercial success also depends on leveraging the scale of the
organization and sharing best practice across Adidas group. In particular, continuing to priorities
the development and further integration through supply chain across all brands, turning it into a
long-term competitive advantage for Adidas group.

Customizing distribution by engaging consumers with unique interactive product

approaches and rewarding point-of-sale experiences. The brands must be competitive in this
environment where consumers make their final purchase decisions based on availability,
convenience and breadth of product offering. As a result, Adidas are continuously refining
distribution proposition, concentrating on two areas: expanding controlled space and improving
retail relationships. Controlled space includes own-retail business, mono-branded stores, shop-
in-shops, and joint ventures with retail partners and co-branded stores.

Controlled space offers a high level of brand control and ensures optimal product
offering and presentation according to brand requirements. It also includes on their own-retail
business including e-commerce and mono-branded stores whereby Adidas and Reebok
branded stores not operated or owned by the Adidas group but by franchise partners.

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7.0 IMPLEMENTATION

a) SHORT-TERM PLANNING

To overcome the problem, there are several plans in short term that can be implemented.

• Preparing the Adidas Business for Future

Like every world-class athlete, Adidas is continuously trying to be faster, stronger and
thus more competitive. To further focus on becoming a more efficient organization, should
commencing a comprehensive programme. The objective is to increase the efficiency of how
Adidas brings concepts to market, defining clear responsibilities, and ensuring optimal external
results in the marketplace which helping Adidas reduce costs.

In addition, this will reduce workload in the creation area going forward, facilitating higher
focus on key product initiatives. This programme should continue that providing a platform to
maximize future brand profitability and a more dedicated focus on the brand’s core strengths.

• Innovation Leadership through Personalization

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 Adidas’ innovation philosophy encompasses every facet of the brand’s business from
product design and development to brand marketing, promotion partnerships and distribution. In
this area, personalization represents a key focus. In marketing and distribution, personalization
includes providing tailor-made offerings that would be it online or in stores.

Personalization will be the brand’s lead innovation concept and a driving force of the
Adidas business going forward. It will guide all efforts in product design and development, digital
marketing and distribution.

• Increasing Cooperation with Retail Partners

Success in both Sport Performance and Sport Style requires an effective distribution
strategy and a solid network of reliable retail partners. The right presentation and availability of
consumer-relevant products as well as excellent customer service at the point-of-sale are critical
in this respect. Adidas currently generates high percentage of its business with its retail
partners. Two of the highest strategic priorities to drive future business growth with the brand’s
partners are:

a) Consumer-oriented range segmentation forms the foundation for closely targeted brand
activation plans. In this, Adidas is working very closely with its main retail partners to fully
align consumer propositions and to develop unique selling propositions in line with the
partner’s target audience. Adidas also seeks to broaden its distribution network with the
addition of new partners, in particular sports specialist or fashion specialist customers, as
the product offering is expanding continuously.

b) Retail space management such as shop-in-shops is becoming the most dynamic business
model for Adidas and is a key part of the brand’s controlled space expansion. In this, the
brand is cooperating with retailers along the entire supply chain all the way through to the
point-of-sale. These models secure high levels of product availability throughout the
season, allowing for quick adaptation to demand patterns. In addition, by increasing

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 control over point-of-sale presentation, regular brand statements and product updates
give Adidas higher flexibility to generate consumer awareness.

• Own Retail and E-commerce

Own-retail expansion is an important strategic driver for Adidas brand growth. While
serving as a mechanism to expand distribution where retail infrastructure is underdeveloped
such as in many emerging markets, own-retail activities also give the brand valuable insight into
consumer trends and product positioning in all markets where Adidas operates its own stores.

In addition, improving own-retail presence and processes will in the short run also is
beneficial for enhancing other controlled space initiatives as best practices in presenting brand
image can be incorporated in these concepts. Furthermore, a refreshed Y-3 store concept has
been launched and is already exceeding expectations. To fully exploit the potential of the new
Style Essentials range, Adidas has opened numerous dedicated stores via the Adidas franchise
partners.

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 b) LONG-TERM PLANNING

For the long term planning, Adidas can proceed by introducing its’ own fitness and
health firm in several countries which can be called as ADIDAS FITNESS CENTRE. Through
introducing its’ own firm, this could be an advantage for this company to use its’ own sports
goods and equipment. This is also one way to attract customers to come over to the firm with
the purpose of focusing on health awareness through using Adidas AG brands. The reasons
why implement ADIDAS FITNESS CENTRE is a good way is because due to the current trend
that people will also consider brand in their social lifestyle and price will be consider similar with
other fitness and health firms.

Other than that, Adidas might consider to joint venture or mergers with other companies
with different scope of business focus. For example, Adidas could do joint venture with Nestle,
the largest food and nutrition companies in the world. Through this joint venture, Adidas could
come several ideas such as organize fitness workout events with the purpose of promoting
Nestlé’s Fitness Cereal and stay fit with using Adidas brands or by signing endorsements
contracts with athletes and celebrity could also helps to build good relationships between
Adidas and Nestle.

In addition for long-term planning, Adidas could also implement its’ business by
sponsoring its’ sports goods and brands through television programme such as sponsoring in

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“The Biggest Loser” programme or doing the same television programme by emphasize on
Adidas brands in ADIDAS FITNESS CENTRE.

8.0 CONCLUSION

Adidas is a sportswear company which introduced in 1920 by Adi Dassler. In 2008, the
company was organized by three units which are Adidas, Reebok and TaylorMade-adidas Golf.
The problem statement in this case study is to outline the necessary strategies for Adidas AG’s
future marketing plan in order to become the largest sports industry in Europe and Asia. Adidas
wanted to increase the shareholder values and here, we have suggested doing an aggressive
marketing strategy in order to boost their sales worldwide.

In the short term, there are three suggested strategy which are by preparing Adidas
business for future marketing concept with maximizing future brand profitability and a more
dedicated focus on the brand’s core strengths, innovation leadership through personalization,
increasing cooperation in retail partners and also own retails and E-commerce strategy

As for the long term strategy, there are three suggested strategies that could be
implemented which are the first is by introducing new product line which is ADIDAS FITNESS
CENTRE. Due to the current lifestyle trend, people will consider what brand in anything they do.
Second, Adidas could also consider in doing joint venture in other business line for example, by
promoting their brand through Nestle’s product and come with Nestle’s fitness cereal. The last
strategy that has the possibility in booming the product sales is through reality show, which also
the current commercial trend. By having their own Adidas Fitness Centre, Adidas can organize

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a TV shows which has the collaboration with the current TV programme such as “the biggest
loser” and the concept is all about staying healthy with Adidas.

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