IE166-B1 Q1SY17-18

Group # 4

Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna
Francesca 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 joined 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 Louis-
Dreyfus 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 joined 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 1970s 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
Francesca 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 surpassing 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 passion for sports and a sporting lifestyle.

Adidass 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
Francesca 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
Francesca 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
Francesca H.

August 30, 2017

Case Title: Adidas in 2009: Has Corporate Restructuring Increased

Shareholder Value?


Porters Five Forces of Model Competition

Threat of New Entrants

Threat of
Bargaining Power Industry Substitute
of Buyers Rivalry Products or
Services

Bargaining Power of
Suppliers

Figure 2 Porters Five Forces of Model Competition

IE166-B1 Q1SY17-18

Group # 4

Mina, Allique Penn R., Santiago, Risha Angela H., Zamora, Anna
Francesca 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 Dasslers 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
Francesca 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
is valuable, especially the apparel and
footwear. This is because there are
already competitors producing same
kinds of products.
This only applies when limited editions
are released. However, Adidas products
are located almost everywhere.

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
Francesca 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 advertisements became more
innovative.

Retail store development and expsnsion helped the company to reach out to other
customers.

Support 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
Francesca 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. Nikes
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
Francesca H.

August 30, 2017

Case Title: Adidas in 2009: Has Corporate Restructuring Increased

Shareholder Value?


Strategic Implications

After analyzing Adidass 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 premium 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
Francesca 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.scribd.com/document/61372161/ADIDAS-Strategy-Analysis

Fontana, E. J. (2014, November 28). Adidas-strategy Case Study. Retrieved August 29,
2017, from https://www.scribd.com/document/248536799/Adidas-strategy-Case-Study