Adidas – A Global Sports Strategy
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The goal of Adidas is to lead the sporting goods industry. To achieve this ambitious goal different strategies are applied in order to fuel eager business development in future oriented emerging markets and to facilitate growth in terms of market share in already penetrated countries. Let’s have a look at the Adidas group by using standard marketing tools:
Adidas believe that consumers want choice. Therefore, the group implemented a multi-brand strategy, which allows them to capitalise on opportunities from several perspectives, as both a mass and a niche player. According to that, the brand is able to keep a unique identity and focus on its core competencies, whilst simultaneously providing the group with a broad spectrum of products. International marketing is crucial for the group in its quest to generate substantial profits; as survival depends on their established presence on the global world market. What is more, the group is following the “Route 2015”; a strategic business plan incorporating all brands, sales channels and group functions globally. This is done in order to grow the revenues of the Adidas group to 50% currency neutral to 2015.
Consequently, the group’s investments are focused on the highest-potential markets and channels. Hence, Adidas is investing in markets with the best medium to long-term growth and profitability opportunities. Top priority is placed on emerging markets, particularly China and Russia; also building market share in underpenetrated markets such as the US. Several factors such as economic, fiscal, technological developments, legal requirements and the business environment are taken into account. Consequently, attention to existing and potential competitors in the business is paid. Especially, in the three identified “attack” markets of Adidas: North America, Greater China, Russia/CIS; which report directly to Adidas group CEO Herbret Hainer, in order to ensure that these markets receive the focus needed to achieve their goals.
Marketing Mix tailored to operate in both “worlds”:
The group has maintained a culture of providing high quality products aimed at providing the best value to the costumer. The products portfolio is continuously enhanced through creations and innovations throughout the companies various categories. This is pursued in order to cater to the various needs and wants of consumers worldwide. Well-known brands for sports apparels, equipment and accessories, the Adidas group has a diverse brand portfolio consists of: Adidas: footwear, apparel and accessories; Reebok: footwear, apparel and accessories; TaylorMade Adidas Golf: Golf Equipment, footwear, apparel and accessories; Rockport: Dress, casual and outdoor footwear, apparel and accessories; CCMHockey: Hockey equipment and apparel.
The group is using adapted pricing strategies, depending on which market they are operating in, so as to achieve its goals. Penetrating attack markets with lower prices or using market skimming tactics, for instance. In recognition of the intense competition in the global market, the company is involved in regular evaluation of its price to ensure that the products stay competitive at the point of sale.
The company has adopted an ambitious global plan to distribute its products to the consumer with a strong focus on controlled space, including: Own-retail business, e-commerce, Shop-in-Shop, Joint ventures with retail partners, mono-branded franchise stores, co-branded stores with sports organisations and other brands. Hence, a high level of brand control is provided. In addition, an “integrated distribution roadmap” has been set up to ensure further growth and to increase brand presence in under-penetrated, affluent cities, without cannibalising their own brands and distribution mix.
The Adidas group sells products in virtually every country of the world. Thus, different promotional tools are used in order to reduce the number of lost customers and to increase sales. The group has set up an unparalleled portfolio of promotion partnerships with international recognised sports associations (e.g. UEFA, FIFA, NBA, NFL, and NHL). Henceforth, commercials, ads, apps for smartphones, product placement, sponsorships for athletes and sport events (e.g. Berlin Marathon 2011) are implemented.
An essential strength of Adidas is its strong brand as it is recognised and respected. Financial strength – high Net Income – € 576 million in 2010, strong distribution chain as a link to success, effective marketing strategy, distribution mix, diverse brand portfolio, a high level of diversification, a wide range of sportswear, accessories and casual apparel; and are thus supported by potent sponsorships and promotion partnerships (e.g. UEFA, NFL, NBA), and are co-ordinated by affective Supply Chain Management, and ultimately leads to a high profit to earnings ratio.
High dependency on raw material prices (cotton price almost doubled in 2010). Lower margins in traditional wholesale business in comparison with own shops. Fierce competition with strong rivals (Nike). Poor share in the U.S.-market.
Investments focused on highest potential markets and channels – e.g. 500 new sales points in China . “Route 2015” and “U.S. Generation 2015”; this increased geographic growth to tap developing markets. Improved presence in the global market implies a significant potential for more business opportunities. Technological innovations – e.g. Micoach and Techfit compression jerseys.
Increase in raw material costs – Over pricing. New rising competition in developing countries (China: Li Ning, grew in five years from almost nothing to USD$882m – has pulled neck and neck with Adidas). Also a significant threat is the inherent unpredictable environmental patterns in foreign markets. In today’s business, international marketing for companies is crucial in order to succeed in the long term. The world has become a global village as the growth of technology has established. This provides businesses with a perfect opportunity to reach previously unreachable markets. Adidas disposes a well-established capital base ensuring that diverse marketing tools and techniques can be applied to penetrate untouched market segments. This contributes to their ability to cope with occurring inherent complexities and to evolve costly marketing concepts to gain additional market shares in order to prevail against strong multinational rivals. Mostly notably, in the development of BEM is a favourable opportunity to achieve significant growth and maximise the company’s profitability. The group’s performance is remarkable, taking into account that Adidas is coping well with the complexities of the developed and the developing world.