Adidas History and Analysis

Introduction

Adidas was founded in 1924 in Germany by two bothers Adi and Rudolf Dassler. The company was first named Dassler shoes and later became Adidas. By the Dassler shoes being seen in the Olympics this really helped the company get its name known. However, in 1948 Rudolf Dassler leaves to start his own company which is now known as Puma. Once Rudolf left his brother came up with the famous three stripes logo and changed the name to Adidas. The 3 stripes were created to keep the foot stable, but ended up being the logo.

Throughout the years Adidas was seen in the Olympics, and it was the leading brand making their shoes highly sought after by Olympic athletes. In 1978, Adi Dassler passed at age 78 and his wife Kathe ran the company. Six years later Kathe passed and the company was left for their son Horst Dassler to run, and three years later Horst passed at age 51.

After Horst’s death Adidas ran into some major financial problems, and later Bernard Tapie comes to make an attempt to save the company.

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Well to be honest, later down the road a hip-hop group named Run-DMC came and put Adidas on another level just like Jordan did for Nike, and the rest is history! They even made a song called “My Adidas”, and it was a hit all around the world. After Run-DMC came to Adidas they even had their own signature line. Run DMC is still making Adidas money today just like Jordan is still making Nike tons of money these guys are true legends to the “Shoe Game”.

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Adidas has worked with many famous people and has a signature shoe line for Stan Smith, Kevin Garnett, Tracy McGrady aka TMAC, Missy Elliot, and many others. (The Shoe Game)

Adidas America, Inc. manufactures and wholesales sports footwear, apparel, and accessories. It offers tennis, running, and basketball shoes; women’s and misses’ outerwear; men’s and boys’ clothing; and women’s and children’s clothing, as well as rubber or plastic footwear. Adidas America, Inc. was formerly known as Sports, Inc. and changed its name to Adidas America, Inc. in 1993. The company was incorporated in 1975 and is based in Portland, Oregon. Adidas America, Inc. operates as a subsidiary of Adidas AG. (Inside View) Sportswear giant Adidas gets a new headquarter for its 1700 staff members in Herzogenaurach, Germany. Their new home surely matches the German reputation for quality engineering. I also love the excess of white used for the interior design, pretty sure their cleaning company has a great time doing their job. (Nimvo)

Competition and competitive markets are common in every industry. Especially since Globalization is influencing our economy, companies need to stay competitive in order to survive against new rising competitors, which are basically rooted in the Middle East Asia. Analyzing own strengths and weaknesses and capturing new opportunities or avoiding threats, are one of the most important factors for reaching this goal. This paper is dealing with the German apparel “Adidas”, which is one of the world’s largest manufacturers for sportswear and sport utilities. But why are they one of the leading global players in this certain industry? There are some key factors, which influenced their worldwide success. A part of different departments, e.g. : research and development, human resources and in-and outbound logistics, which are working together in a fluent way, elements like customer relationship management and brand recognition are the main drivers for capturing new customers and the retention of regular customers. The intention of this dissertation will be, to explain Adidas’ internal strategies and the construction of their individual competitive advantage.

One important basis for this competitive advantage is the “resource based view model“.The resource-based view as a basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable intangible and tangible resources at the firm’s disposal. (Crook, T. R., et. al., 2008). In this scientific paper, I will conduct an internal organizational analysis of the firm. I will figure out how and why Adidas is one of the most important companies in its industry and will identify their success.

General Information and Organizational Structure

The Adidas AG (Adidas Group) is a German multinational corporation, which designs and produces sportswear, accessories and sport utilities. The company is based in Herzogenaurach, Bavaria, Germany. The corporation basically consists of three companies, “Adidas”, the brand itself, “Reebok sportswear” and “Tailor-made-Adidas Golf Company”. Reebok is a subsidiary of Adidas since 2005 and also a manufacturer of athletic shoes, clothing and accessories. “Tailor-made-Adidas Golf Company” designs and markets all products which are related to Golf. The Adidas group is the largest sportswear producer in Germany and Europe and the second manufacturer in the world, right behind “Nike”. The company was founded in 1924 as the “Gebrüder Dassler Schuhfabrik”, but was officially registered in 1949 by Adolf Dassler, after the split of “Gebrüder Dassler Schuhfabrik” between him and his older brother Rudolf. One of the most important competitors of Adidas was and still is, “Puma”, which was established by his brother Rudolf Dassler in 1949.

The structure of the organization is very well defined. There are different functional departments such as marketing, production, R&D, customer services, operations, distribution, and human resource with clearly defined jobs at all levels. The vision of the Adidas Group is to be the leader in the sportswear industry, with sub-brands built upon a passion for sports and a sporting lifestyle. In order to achieve the goal a profound understanding of the consumer and customer is essential. To satisfy the needs of the customers it is essential to build a strong customer relationship in order to understand their buying behavior (AdidasGroup, 2013). Adidas´revenue in 2012 was listed at 14.488 billion euros and profit was listed at 1185 million euros. In 2010, Adidas worked with 1,236 independent factories, in 69 countries. 69% of these factories where located in Asia and the rest in Europe and the U.S. 27% of the Asian factories are based in China. In 2006 the sales of Adidas´ in the Asian regions and in the emerging countries (South Korea, Romania, Russia, Croatia, and Brazil etc.) increased up to 147,8%. (Annual Report 2012, 2013)

Mission of the Company

The adidas Group strives to be the global leader in the sporting goods industry with sports brands built on a passion for sports and a sporting lifestyle.

  • Adidas is consumer focused and therefore it continuously improve the quality, look, feel and image of its products and its organizational structures to match and exceed consumer expectations and to provide them with the highest value.
  • Adidas is innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product it bring to market.
  • Adidas is a global organization that is socially and environmentally responsible, creative and financially rewarding for its employees’ and shareholders.
  • Adidas is committed to continuously strengthening its brands and products to improve its competitive position.
  • The Company is dedicated to consistently delivering outstanding financial results.

Mission of the Marketing Plan

To devise a marketing plan and formulate strategies which would help in the achievement of the marketing objectives of the company which are, Market penetration – gaining market share across all markets in which it compete Market development – expanding into new markets and addressing new consumers Awareness – increasing awareness and visibility across all brands, providing clear and consistent messaging and supporting product initiatives at the point-of-sale.

Target Markets -The target market of Adidas is the urban youth with the brand proposition competition to lifestyle. The principle consumption centers namely the metros are also a potential target market!

Market Needs:

  • Comfort
  • Durability
  • Style
  • Price
  • Brand

Situation Analysis of the Challenge Competitive Scopes of Adidas

Porter’s five forces of competition framework view the profitability of an industry as determined by the five forces of competitive pressure. It is a simple but powerful tool for understanding where power lies in a business situation. It helps a firm in understanding its current strength in the industry. It also brings into light the strengths of the competitors. With a clear understanding of where power lies, a firm can take reasonable advantage of a situation of strength, improve a situation of weakness, grab the opportunities and keep away from taking wrong steps. This makes it an important part of planning a strategy for any firm in any industry. At the same time, the tool helps in identifying whether new products, services have any future prospect and the potential to be profitable.

(Scribd) Five forces analysis for Adidas:

  • Threat of entry (Low-moderate)
    Threat of Substitute (LOW)
    Supplier Power (Low)
    Buyer Power (High)
    Rivalry (HIGH)

Expectation of Suppliers

Global Sourcing is a key organization of the adidas Group and its primary responsibility is the creation and implementation of sourcing strategy, supporting the diverse needs of all the brands (adidas, Reebok and Tailor-Made-adidas Golf), product divisions, categories and regions within the Group. The Company strives to become the leading organization in the industry by establishing an adaptive supply network which excels in speed, innovation, agility and connectivity. This could not happen without the support and commitment of its product suppliers. Thus this is essential for them to share the same values and principles so as to drive the success of the supply chain as a whole.

What Does Adidas Look for in Its Product Suppliers?

Overall Competence

Regarding its product suppliers as strategic business partners, Adidas recruit them based on a number of criteria which comprise the overall competence of a supplier:

  1. Vision: with a vision to become the leading organization in the industry through establishing an adaptive supply network which excels in speed, innovation, agility and connectivity, Adidas expect it suppliers to share this vision, and participate proactively in developing these core capabilities and contribute to the overall supply chain.
  2. Supplier Partnerships based on Shared Values: adidas Group seeks suppliers who have close alignments with their values and demonstrate great passion for adidas Group products and brands. Adidas suppliers should strive to become leaders in the fields of performance culture, social and environmental affairs, quality, efficiency, price/value, and innovation.
  3. Technical Capability: the Company seek product suppliers with advanced technical capabilities, not only limited to product innovation and quality, but also with the ability to perform business electronically and flexibly enough to upgrade their systems to adapt to future market demands. It suppliers should continuously promote communication and information visibility throughout the supply chain.
  4. Leadership: adidas Group seeks suppliers who have a clear and aligned vision for their organization. The suppliers’ leadership teams are expected to build positive working culture and lead their workforce to achieve improvement and performance targets on a continuous basis.
  5. People Management: The Company looks for suppliers who commit to talent management. Suppliers should maintain a professional organization structure which includes dedicated development / merchandizing, planning, industrial engineering, quality and information technology teams, as well as committing to deliver lean operations, competitive cost structure, and cost transparency.
  6. Workplace Standards and Ethics: The Company believes better working conditions yield higher quality, efficiency and flexibility to meet customer needs. Suppliers should provide their workers with competitive wages, safe and good working and living environments as well as proper incentives for higher quality and productivity (e.g. lower average working hours in general, decent accommodation and fringe benefits, etc.).
  7. Financial Stability: The Company seek suppliers who are financially stable and comply with international and local statutory regulations for the interest of maintaining a viable supply chain and protecting adidas Group shareholders and consumers in the long term. Suppliers should be willing to share selective financial information with adidas Group upon request.

Risk Management

To minimize risks in Adidas business operations, the adidas Group and its suppliers should actively build and take action plans to manage the following types of risks:

  1. Social -They adhere to their established Code of Conduct, the “Workplace Standards” of Engagement (SOEs)
  2. Political – They minimize asset and cash exposure in countries which are considered to be politically unstable.
  3. Regulatory – They actively review and adjust sourcing strategies annually to minimize trade restrictions exposure
  4. Legal – They utilize extensive legal procedures to combat counterfeit operations in order to minimize the risk of infringement of trademarks and patent rights related to adidas Group products
  5. Natural – They maintain high safety standards and have disaster recovery plans in place to deal with such circumstances

Business Culture

To ensure Its business operates in an efficient and effective manner, adidas Group has established a unique business culture which comprises the following:

  1. Right Product at the Right Time – Suppliers are expected to deliver the right products at the right time and in the right quality. The aim is to shorten the end-to-end supply chain lead time from raw materials sourcing to the delivery of final products.
  2. Quality Excellence – Quality is one of the main focuses for adidas Group. Its suppliers should ensure all products manufactured meet the defined set of standards.
  3. Continuous Improvement – Product suppliers are expected to continuously embrace and drive positive changes and make necessary investments to achieve operational improvements in their organizations.
  4. End-to-End Mindset – Suppliers are expected to share equal responsibilities with adidas Group in building an optimum supply network so as to achieve maximum and sustainable total profitability for all stakeholders.
  5. Performance Culture – Suppliers should instill a performance culture by continuously setting and meeting aggressive yet reasonable business targets.

Customer-Focused

In today’s fast-moving world with ever-changing consumer needs and demands, it is crucial for adidas Group and its supply base to keep abreast with the changes and align its development and product allocation strategies closely to market trends. The Company expects its suppliers to instill this customer-focused mindset and be fully committed to the implementation of its development and product allocation strategies.

Cost Efficiency

As part of a global organization, Adidas focus on the best interest of the entire supply network. It achieves this by driving Performance Culture, Quality, Reliability and Innovation which will enable its suppliers to offer leading price and value. Adidas suppliers are expected to collaborate on improvement programs that continuously increase efficiency and reduce cost. This means that suppliers should utilize productivity and efficiency gains to offset increasing cost drivers and minimize impact on customer prices (Adidas Group)

Resource Based View

Tangible/Intangible Criteria

In every business are many types of resources and assets. Some resources are clearly visible and tangible and others may not. The Resource Based View is a device to assess the amount of tangible and intangible resources, in order to capture possible capabilities with the goal, to build a sustain competitive advantage. The device is differentiating between intangible and tangible resources. Intangible resources are skills, services, corporate reputation or knowledge a firm can provide. The collective knowledge of a firm’s workforce represents a tremendous resource. Intangible assets are difficult to quantify in financial terms and often impossible to sell. Education and experience are the main drivers for the knowledge of a corporate workforce, and grows within the structure of a particular industry. Tangible resources are known as raw materials, products or workforce. Corporations that are committed in primary resource extraction have holdings of very tangible goods or resources and often own the land outright on which their resources are located or manufactured (Freiling, J., 2001).

Furthermore, but less a tangible resource, the corporation owns the rights to the coal, oil or any other raw material, that is located on public land. In both cases, the resource is a physical reality, more or less tangible and the value of which can be financially determined by observing the going market value of a certain good. Regarding “Adidas”, as one of the most important global players in their industry, it is also possible to distinguish their resources. Adidas is holding more than 50.000 employees, all over the world into their workforce. CNC machines are used in the assembly line for the mass production of shoes, which is more or less their cash cow and keeps them successful. The Research and Development departments are equipped with CAM. Software’s for creating cutting edge designs. The main manufactories are located in Vietnam and China and the bases for the organization are based in Portland, Oregon (U.S) and in Herzogenrauch, Bavaria (Germany) (AdidasGroup, 2013). Patents, partnerships, sponsorships and cooperation’s with universities are intangible assets, which Adidas owns.

Capabilities

Especially in times where raw materials and resources are gaining more and more value, companies need to use their assets and resources in the most efficient way, in order to stay competitive. These opportunities are called “capabilities”. Capabilities can be described as organizationally embedded non-transferable firm-specific resources. (Crook, T. R., et. al., 2008). Capabilities can be divided into distinctive and threshold capabilities. On the one hand, Threshold capabilities or resources are fulfilling the general criteria a firm has to provide, in order to survive on the market. Regarding our example of Adidas, the threshold criteria for their certain industry are buildings, land, workforce, several departments and outsourced manufactories. But on the other hand, there are distinctive capabilities, which should not just keep the company alive, but deliver a competitive advantage. (Porter, M.E.1980).

Also known as core capabilities, distinctive capabilities are the talents and unique elements that are embedded within the organization. These essential characteristics are considered highly preferred, since they provide the business with what it needs to be competitive in the marketplace and also provides the firm a competitive advantage. Therefore distinctive capabilities are generating the core competencies of an organization and are the key driving forces for a company to achieve its competitive advantages. Adidas utilizes its key resources and capabilities to create value and performance excellence. Distinctive capabilities that Adidas holds are e.g., Special R & D departments and correlations (universities), sponsorship agreements (FIFA/ NBA) , diversified operations, network and portfolio, good reputation as mid-priced brand in the industry, distribution network and strategic innovation. (AdidasGroup, 2013).

Value Chain Analysis

Understanding what a particular business or firm is all about, it is necessary to analyze the specific activities the company is going through in their daily work process. The competitive advantage is build up on added values the enterprise is giving their products. Michael Porter´s “Value Chain” is modeling a chain of different activities, companies are performing in order to deliver and provide valuable products or services. Porter is differentiating between primary activities and supporting activities. Primary activities are more or less focusing on generating profit margin and to exceed the cost structure of particular products. These activities are mainly enabled by supporting activities, which are industry-specific (Daft, L.R., 1983). By sourcing the activities, process flows can be mapped and can be used to isolate specific activities, in order to decrease the cost structure. Focusing back on Adidas, the company is separating their activities as following; in-/ and outbound logistics, operations, marketing and sales and services as primary activities. Supporting activities in their key industry are; procurement, research and development and human resource management. Value chain analysis examines business’ units and examines how products pass through the chain, in order from inbound logistics to service, market & sales and other sections. The information provided shows where in the chain products are slowed or altered from the intended design or its usage.

Competitive Advantage

One of the most important goals of Adidas has been, to develop a strong competitive advantage, in order to stay successful and survive against the large number heavyweight competitors. The industry, in which Adidas interacts, is characterized by a set of many specific features. The extreme rivalry between Adidas and its competitors, Nike, Puma or New Balance is higher than ever before. Nevertheless, most of these brands outsourced their production and re-defined themselves as brands or marketing organizations. Despite the fact that Adidas currently ranks right behind Nike in the segment of sports shoes and sportswear market, Adidas still has been a successful business enterprise right from the beginning of their establishment by Dassler in 1945. The encouragement and application of a spirit of constant and updated technological innovation and excellence has resulted in generating such a powerful competitive advantage for Adidas that its market opponents find it hard to beat. The high performance, market orientation, technological development and brand promise, created the expected value for customers. Especially the company’s policy and corporate culture, that includes providing their customers with the necessary technological applications, in order to meet and satisfy the full needs of their end-consumer. (Kumar, V. & Reinartz W. 2012).

Ultimately, this translates to tailor-made performance products for individual customers. Tailor-made is concentrating on especial product line and a particular market segment. Therefore technological superiority of its products is the primary factor of market penetration for Adidas. Nevertheless, an intense and targeted marketing mix and strategy is the second most important key driver of success. An important fact and promotional tool for products has been, to integrate celebrities and professional sport idols into their marketing mix. This strategy seemed to be very successful and generated a steady source of profit and sales. Consumers appreciated and enjoyed the emotional experience, to share the same daily products with their idols or people, who are influencing them. Furthermore, Adidas is following the main rules of Customer relationship management. Feedback from regular customers and surveys about particular products or advertisements created a high level of customer involvement and loyalty, what turned out to be the most effective strategy. These methods and tools helped Adidas to develop and build a long-term profitable customer relationship.

Conclusion

SWOT / TOWS

During the economic crisis in year 2009, many companies and enterprises suffered turnover, profit and had to restructure their business. Many different factors were key drivers for this crisis, but not successfully adapted strategies regarding supply and demand. Consultants, who are analyzing and advising enterprises, implement different methods and tools, in order to improve the client’s business. One of these powerful tools is the SWOT- Analysis. But what is SWOT? How should companies or consultants use this tool, in order to succeed? And the most important question is, is Adidas using or ever used this methods, if yes how did they? SWOT is expecting from its users to examine, internal strengths and weaknesses of their business and to summarize external opportunities and threats, in order to develop new strategies for improvement. (Böhm, A., 2008). After developing these ideas, the proper implementation of them is important as well as the examination itself. The TOWS-matrix ore the TOWS-analysis involves the same basic process of listing strengths, weaknesses, opportunities and threats like the SWOT analysis is claiming from its users. But furthermore the TOWS analysis is a tool that enables managers to take advantage of opportunities and minimize threats by exploiting strengths and overcoming weaknesses.

In case of Adidas the strengths are mainly, their strong brand value as one of the most successful brand, a strong and proven marketing strategy, networks and strong franchising, their leading position in the industry as one of the largest player in the industry, diversified operations in different parts of the world and the most important strength is their competitive pricing. But the enterprise has also some weaknesses. Some of the weaknesses Adidas might has to struggle with are the bad performance of Reebok in non US markets, stiff competition and similar big brands which means customers have high brand switching, high cost structure and the dependency on sport industry/athletes/sponsorships (Borowski, A. 2011). External factors are including the threats and opportunities. Increasing prices for raw materials, forged product-imitation and the tough competition in the sector with Puma and Nike are the key threats, which could menace Adidas (AdidasGroup, 2013).

It is possible to use strengths to avoid threats and to capture opportunities, with the help of the TOWS-matrix. Therefore strategies, which Adidas could use in order to capture opportunities and avoid threats could be, to use diversified operations in different parts of the world and strong brand recognition for sponsorships in growing markets and the well-considered usage of celebrities (not just for advertisement, also for opening private sport academies). To minimize internal weaknesses by capturing opportunities, the enterprise should keep their focus on their strong and proven marketing strategy, networking and their strong franchising, in order to stay competitve and build close long-term customer relationships (Borowski, A. 2011). A part of that, the acquisition of competitors could decrease cost structure and rivalry within the industry and safe their status quo for the future.

Bibliography

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  2. AdidasGroup, (2013) Retrieved on 18th of March from http://www.adidas-group.com “Annual Report 2012”. Adidas. Retrieved on 10th March 2013 from http://www.adidas-group.com/en/investorrelations/financial_data/default.aspx
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  8. Freiling, J., (2001). Resource-based View und ökonomische Theorie: Grundlagen und Positionierung des Resourcenansatzes. Heidelberg: Deutscher Universitäts-Verlag.
  9. Kumar, V. & Reinartz W. (2012). Customer Relationship Management – Concept, Strategy, and Tools. Berlin/Heidelberg: Springer Verlag.
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  17. http://www.adidas-group.com/supplierrecruitment/expectationonsuppliers.aspx?loc=en

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Adidas History and Analysis. (2021, Jun 12). Retrieved from http://studymoose.com/adidas-history-essay

Adidas History and Analysis

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