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IE166-B1 Q1SY17-18
Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
Overview Company Brief Adidas, which is now Adidas AG was founded by German baker Adolph (Adi) Dassler in 1920. In 1924, his brother Rudolph Dassler in 1924 ed the company, and it was then named Gebruder Dassler Schuhfabrik (Dassler Brothers Shoe Factory). At present, Adidas AG is a German sports apparel manufacturer and it the company consists of Reebok Sportswear Company, Taylormade-Adidas Golf Company, and Rockport. A restructuring in the company has been made by Herbert Hainer, who replaced LouisDreyfus as a president. It belongs to sporting goods industry. It is divided into three segments, athletic footwear, apparel and equipment. The athletic footwear makes up 33% of the sporting goods industry, apparel for 50% and equipment makes up the 17%. Company Highlights •
In 1924, his brother Rudolph Dassler ed the company and it was named Gebruder Dassler Schuhfabrik (Dassler Brothers Shoe Factory)
•
In 1960, 75% of track and field athletes competing in the Rome Olympic Games.
•
In the early 1970’s 78% of all athletes were wearing Adidas in the Munich Olympics.
•
The company expanded its product line in 1963 from shoes to soccer balls and athletic apparel.
•
In the early 1970s, Adidas the most popular jogging shoe
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
•
In 1997, merger of a French sports equipment manufacturer, Salomon SA, for an agreed €1.5 billion
•
This led to the company now suring Reebok to place it in the second largest sports manufacturer.
•
Adidas acquired Reebok which made their revenues doubled from $5.8 billion in 2006 to $10.1 billion in 2006
Company Mission The mission of Adidas AG is to strive to be the global leader in the sporting goods industry with brands built on a ion for sports and a sporting lifestyle. Adidas’s products include: Men Products: Footwear, Clothing and Accessories. Foot Wear: This segment consists of Performance and Originals Varieties in this segment are Football, Running, Training, Tennis, Basketball, Indoor, Outdoor, Swimming etc. Clothing: Jackets, Jerseys, Scarves, pants & Tights, Shirts, Shorts Sweatshirts, Tracksuits, Tops, Pants, Swimwear Accessories: Bags Eye Wear, watches Hardware Water bottles, Yoga, Mats, Fitness (Gripper) Spiking Football Pump, Wrist Band, Padding, Football, Basketball
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Women Products: Footwear, Clothing, Accessories, Football, Running, Training, Tennis, Indoor, Outdoor, Swimming. Clothing: Jackets, Jerseys, Scarves, Pants & Tights, Shirts, Shorts, Sweatshirts, Tracksuits, Tops, Pants, Swimwear, Underwear, Skirts, Dresses. Woman Accessories: Bags, Eyewear, Watches, Hardware, Hats, Socks Price Range: Men Shoes: $55 to $350 Sandals: $15 to $40 Women Shoes: $45 to $240 Sandals: $20 to $ 35 Adidas ’s primary market includes anyone engaged in sports, and various activities. This also includes people who are not active in sports, however collects shoes used and promoted by celebrities and other endorsers.
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
Internal/External Analysis PEST Analysis Political/Legal
Economics
This involves issue on thriving counterfeit
Global economic crisis leading to
of Adidas products in Asia.
recession Value of exchanged currencies
Social
Technological
Some celebrities and sports icons
There is a need for innovation, since
endorse the products of Adidas, while
there is a lot of competition in the
some endorsed other leading
industry it belongs
competitors. Figure 1 PEST Analysis
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Porter’s Five Forces of Model Competition
Threat of New Entrants
Bargaining Power of Buyers
Industry Rivalry
Bargaining Power of Suppliers
Figure 2 Porter’s Five Forces of Model Competition
Threat of Substitute Products or Services
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? 1. Industry Rivalry (Strong) a. Both Adidas and Nike strive to be the leading company on the sporting goods industry. b. Puma, a company founded by Adolph Dassler’s brother creates a small force, along with New Balance, since they only have low market share compared to the other two. 2. Threat of New Entrants (Weak) a. It needs a huge amount of capital to create a company, and even make and build an image on this industry. 3. Threat of Substitute Products or Services (Moderate) a. There is only a few brands to choose from. b. Customers’ preferences may switch due to various requirements and specifications, such as quality and price of the products. 4. Bargaining Power of Suppliers (Weak) a. This is due to the high amount of raw materials needed for production. 5. Bargaining Power of Buyers (High) a. Since there are other competitors that are of lower prices as mentioned above, this force is high. b. There are few competitors in the industry.
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Value, Rarity, Imitability, Organization (VRIO) Value
Rarity
For people engaged in sports, the brand
This only applies when limited editions
is valuable, especially the apparel and
are released. However, Adidas products
footwear. This is because there are
are located almost everywhere.
already competitors producing same kinds of products.
Imitability
Organization
Products are easily imitated by not only
Adidas has an efficient supply chain.
competitors, but various
Products are distributed across the
group/organization creating counterfeit
globe.
products.
Figure 3 VRIO Framework
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Value Chain Analysis Maldonado (2010) stated in his Strategy Analysis on Adidas that its value chain configuration is flexible supply chain which is one of the Adidas’ Group strategic pillars. Since, the company wants to be the leading brand in its industry, its implies that its goal is to become closest to every customer. This is done by building and managing supply chain that responds rapidly to changing market needs and demands. There is also an analysis by Maldonado indicates that the cost to produce and sell an item over the Internet costs almost 50% of the price of the item. Primary Activities Adidas’ operation in production of enough products at a low cost and distribution of products to the market on time is done by its efficient supply chain management initiative. Heavy marketing and advertising allows the company to grow its market share across the globe. After the restricting has been made, its ments became more innovative. Retail store development and expsnsion helped the company to reach out to other customers. Activities Continuous Research and Development along with technology helped Adidas to produce both classic and modern products that people would be attracted to.
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Human Resource Management of Adidas continues to train and hire competent employees, from choosing the right factories to sales personnel in retail stores. Financial Analysis A financial analysis on the same case by Fontana (2014) indicated that between 2006 and 2008, the four leading sellers of athletic footwear in the United States were Nike, Adidas, New Balance and Reebok. Below are there net sales in millions of dollars. Nike’s market share increased annually from 29.73% to 34.61%; New Balance decreased from 9.26% to 6.26% while Adidas declined from 10.62% to 5.86%. Even with the acquisition of Reebok International by Adidas, it declined from 4.68% to 2.66%.
Figure 4 Financial Analysis
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
Strategic Implications After analyzing Adidas’s Value Chain Analysis, it is extremely important that the chosen strategy take into consideration the Adidas has to maintain or better, improve its manufacturers and suppliers and to design and create products that would attract customers.
Goals and Long-Term Objectives Adidas ’s Goals and Long-Term Objectives include: 1. Outgrow all major competitors 2. Grow revenues
Strategy Selection The strategy selection for Adidas would be broad differentiation strategy. This strategy was selected for the following reasons: 1. Create inimitable products for every market segment that are difficult for other brands to imitate and people to counterfeit. 2. Can create pricing, especially for limited edition products 3. Increase customer loyalty
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
Recommendations Because Adidas is competing in mature markets, strategy options include: 1. Acquisition of a company. In this company, Adidas acquired Reebok, with a positive outcome of not just eliminating competitor, but also it helped Adidas gain more revenue. 2. Continues Research and Development. Adidas must strive for creating and providing more customer value by improving its products and services. 3. Improve value chain analysis from time to time, as other companies may copy it. 4. Use technology and innovation in improving different areas of the company.
References Gamble, et. al. (2010). Crafting and Executing Strategy: The Quest for Competitive Advantage, 18th edition Maldonado, E. (2011, August 1). ADIDAS Strategy Analysis. Retrieved August 28, 2017, from https://www.idoub.com/document/61372161/ADIDAS-Strategy-Analysis Fontana, E. J. (2014, November 28). Adidas-strategy Case Study. Retrieved August 29, 2017, from https://www.idoub.com/document/248536799/Adidas-strategy-Case-Study
Overview Company Brief Adidas, which is now Adidas AG was founded by German baker Adolph (Adi) Dassler in 1920. In 1924, his brother Rudolph Dassler in 1924 ed the company, and it was then named Gebruder Dassler Schuhfabrik (Dassler Brothers Shoe Factory). At present, Adidas AG is a German sports apparel manufacturer and it the company consists of Reebok Sportswear Company, Taylormade-Adidas Golf Company, and Rockport. A restructuring in the company has been made by Herbert Hainer, who replaced LouisDreyfus as a president. It belongs to sporting goods industry. It is divided into three segments, athletic footwear, apparel and equipment. The athletic footwear makes up 33% of the sporting goods industry, apparel for 50% and equipment makes up the 17%. Company Highlights •
In 1924, his brother Rudolph Dassler ed the company and it was named Gebruder Dassler Schuhfabrik (Dassler Brothers Shoe Factory)
•
In 1960, 75% of track and field athletes competing in the Rome Olympic Games.
•
In the early 1970’s 78% of all athletes were wearing Adidas in the Munich Olympics.
•
The company expanded its product line in 1963 from shoes to soccer balls and athletic apparel.
•
In the early 1970s, Adidas the most popular jogging shoe
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
•
In 1997, merger of a French sports equipment manufacturer, Salomon SA, for an agreed €1.5 billion
•
This led to the company now suring Reebok to place it in the second largest sports manufacturer.
•
Adidas acquired Reebok which made their revenues doubled from $5.8 billion in 2006 to $10.1 billion in 2006
Company Mission The mission of Adidas AG is to strive to be the global leader in the sporting goods industry with brands built on a ion for sports and a sporting lifestyle. Adidas’s products include: Men Products: Footwear, Clothing and Accessories. Foot Wear: This segment consists of Performance and Originals Varieties in this segment are Football, Running, Training, Tennis, Basketball, Indoor, Outdoor, Swimming etc. Clothing: Jackets, Jerseys, Scarves, pants & Tights, Shirts, Shorts Sweatshirts, Tracksuits, Tops, Pants, Swimwear Accessories: Bags Eye Wear, watches Hardware Water bottles, Yoga, Mats, Fitness (Gripper) Spiking Football Pump, Wrist Band, Padding, Football, Basketball
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Women Products: Footwear, Clothing, Accessories, Football, Running, Training, Tennis, Indoor, Outdoor, Swimming. Clothing: Jackets, Jerseys, Scarves, Pants & Tights, Shirts, Shorts, Sweatshirts, Tracksuits, Tops, Pants, Swimwear, Underwear, Skirts, Dresses. Woman Accessories: Bags, Eyewear, Watches, Hardware, Hats, Socks Price Range: Men Shoes: $55 to $350 Sandals: $15 to $40 Women Shoes: $45 to $240 Sandals: $20 to $ 35 Adidas ’s primary market includes anyone engaged in sports, and various activities. This also includes people who are not active in sports, however collects shoes used and promoted by celebrities and other endorsers.
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
Internal/External Analysis PEST Analysis Political/Legal
Economics
This involves issue on thriving counterfeit
Global economic crisis leading to
of Adidas products in Asia.
recession Value of exchanged currencies
Social
Technological
Some celebrities and sports icons
There is a need for innovation, since
endorse the products of Adidas, while
there is a lot of competition in the
some endorsed other leading
industry it belongs
competitors. Figure 1 PEST Analysis
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Porter’s Five Forces of Model Competition
Threat of New Entrants
Bargaining Power of Buyers
Industry Rivalry
Bargaining Power of Suppliers
Figure 2 Porter’s Five Forces of Model Competition
Threat of Substitute Products or Services
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? 1. Industry Rivalry (Strong) a. Both Adidas and Nike strive to be the leading company on the sporting goods industry. b. Puma, a company founded by Adolph Dassler’s brother creates a small force, along with New Balance, since they only have low market share compared to the other two. 2. Threat of New Entrants (Weak) a. It needs a huge amount of capital to create a company, and even make and build an image on this industry. 3. Threat of Substitute Products or Services (Moderate) a. There is only a few brands to choose from. b. Customers’ preferences may switch due to various requirements and specifications, such as quality and price of the products. 4. Bargaining Power of Suppliers (Weak) a. This is due to the high amount of raw materials needed for production. 5. Bargaining Power of Buyers (High) a. Since there are other competitors that are of lower prices as mentioned above, this force is high. b. There are few competitors in the industry.
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Value, Rarity, Imitability, Organization (VRIO) Value
Rarity
For people engaged in sports, the brand
This only applies when limited editions
is valuable, especially the apparel and
are released. However, Adidas products
footwear. This is because there are
are located almost everywhere.
already competitors producing same kinds of products.
Imitability
Organization
Products are easily imitated by not only
Adidas has an efficient supply chain.
competitors, but various
Products are distributed across the
group/organization creating counterfeit
globe.
products.
Figure 3 VRIO Framework
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Value Chain Analysis Maldonado (2010) stated in his Strategy Analysis on Adidas that its value chain configuration is flexible supply chain which is one of the Adidas’ Group strategic pillars. Since, the company wants to be the leading brand in its industry, its implies that its goal is to become closest to every customer. This is done by building and managing supply chain that responds rapidly to changing market needs and demands. There is also an analysis by Maldonado indicates that the cost to produce and sell an item over the Internet costs almost 50% of the price of the item. Primary Activities Adidas’ operation in production of enough products at a low cost and distribution of products to the market on time is done by its efficient supply chain management initiative. Heavy marketing and advertising allows the company to grow its market share across the globe. After the restricting has been made, its ments became more innovative. Retail store development and expsnsion helped the company to reach out to other customers. Activities Continuous Research and Development along with technology helped Adidas to produce both classic and modern products that people would be attracted to.
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Human Resource Management of Adidas continues to train and hire competent employees, from choosing the right factories to sales personnel in retail stores. Financial Analysis A financial analysis on the same case by Fontana (2014) indicated that between 2006 and 2008, the four leading sellers of athletic footwear in the United States were Nike, Adidas, New Balance and Reebok. Below are there net sales in millions of dollars. Nike’s market share increased annually from 29.73% to 34.61%; New Balance decreased from 9.26% to 6.26% while Adidas declined from 10.62% to 5.86%. Even with the acquisition of Reebok International by Adidas, it declined from 4.68% to 2.66%.
Figure 4 Financial Analysis
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
Strategic Implications After analyzing Adidas’s Value Chain Analysis, it is extremely important that the chosen strategy take into consideration the Adidas has to maintain or better, improve its manufacturers and suppliers and to design and create products that would attract customers.
Goals and Long-Term Objectives Adidas ’s Goals and Long-Term Objectives include: 1. Outgrow all major competitors 2. Grow revenues
Strategy Selection The strategy selection for Adidas would be broad differentiation strategy. This strategy was selected for the following reasons: 1. Create inimitable products for every market segment that are difficult for other brands to imitate and people to counterfeit. 2. Can create pricing, especially for limited edition products 3. Increase customer loyalty
IE166-B1 Q1SY17-18 Group # 4 Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna sca H. August 30, 2017 Case Title: Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value?
Recommendations Because Adidas is competing in mature markets, strategy options include: 1. Acquisition of a company. In this company, Adidas acquired Reebok, with a positive outcome of not just eliminating competitor, but also it helped Adidas gain more revenue. 2. Continues Research and Development. Adidas must strive for creating and providing more customer value by improving its products and services. 3. Improve value chain analysis from time to time, as other companies may copy it. 4. Use technology and innovation in improving different areas of the company.
References Gamble, et. al. (2010). Crafting and Executing Strategy: The Quest for Competitive Advantage, 18th edition Maldonado, E. (2011, August 1). ADIDAS Strategy Analysis. Retrieved August 28, 2017, from https://www.idoub.com/document/61372161/ADIDAS-Strategy-Analysis Fontana, E. J. (2014, November 28). Adidas-strategy Case Study. Retrieved August 29, 2017, from https://www.idoub.com/document/248536799/Adidas-strategy-Case-Study
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