BUSINESS LAW

The impact of brand loyalty on sportswear customers of adidas

Product safety is an imperative for adidas As a company adidas have to manage the risk of
selling defective products that may result in injury to consumers and/or impair the image. To
mitigate this risk, adidas have company-wide product safety policies in place that ensuree
consistently apply physical, chemical product safety and conformity standards across all brands
of the company. To ensure product quality and consumer-safe products, all materials and product
samples have to pass a rigid compliance process and are tested in accordance with standardised
material and product testing specifications and procedures. Adidas started filing applications to
customs for trademark protection from 2001 to 2002. It was among the first foreign brands
seeking customs protection in China. According to Mr. Tai, Adidas communicates regularly
with customs and organizes relevant trainings to teach customs officers methods of
distinguishing original and fake products. After a few years of working together, the cooperation
between Adidas and the Chinese customs is becoming much smoother. In recent years, the
annual number of confiscated cases at customs reached 150 to 200. By analyzing these cases,
Adidas has discovered that most of the counterfeits are exported to Latin America and Africa

Dedicated teams monitor the quality of adidas products on all levels of the supply chain through
rigorous testing prior to production, close cooperation with suppliers throughout the
manufacturing process, random testing after retail delivery, open communication about defective
products and quick settlement of product liability claims when necessary.

Besides ensuring safe and environmentally sound products within core product ranges, adidas
constantly monitor and educate branded product areas that may have special risk profiles. These
areas range from promotional items with bioactive textiles (ones that can interact with living
organisms) to personal protective equipment, electronic devices and childrens and babies
clothing.
adidas constantly track legal developments in the area of product safety and, where necessary,
update the policies and manuals, as we have done in the area of childrens clothing
adidas also continuously adjust policies and internal guidelines in keeping with developing
requirements such as the US Consumer Product Safety Improvement Act (CPSIA), the EU
system for Registration, Evaluation and Authorisation and Restriction of Chemicals (REACH),
the Korean KC mark and other country-specific requirements. adidas issue new information,
amendments and guidance material, and all adidas entities and product divisions implement
this on a continuous basis.

Not only do regularly consult with scientists and other experts about new legal requirements,
requests from consumer groups or critical materials, adidas also regularly inform our material
suppliers about new scientific findings and developments. They in return must prove that
materials comply with adidas standards by providing test reports from independent external test
institutes on a regular basis. Development and production samples are checked randomly.

To further strengthen our programmes, adidas is an active member in the Apparel & Footwear
International Restricted Substances (RS) Management Working Group (AFIRM), which the co-
founded in 2004, together with six other international brands.

The current common understanding is the application of particles with a diameter of <100
nanometres (nm). Nanotechnologies have been used for quite a long time in several product
categories, such as food, cosmetics, medical applications, household devices, inks and certain
textile applications.

Nano-sized material is characterised by an extreme ratio between big surface and small
volume. This ratio causes very high activity and provides physical, chemical, electronic or
optical properties which may totally differ from the same material in regular macroscopic size.

One of the uses of nano-sized materials in footwear, apparel and accessories is to enhance
product performance by increasing liquid repellency this heps the customer high protection.

In close consultation with scientific experts and key stakeholders, adidas is constantly reviewing
relevant information about manufacturing and use of nanotechnologies and nanoparticles to
understand all aspects and concerns that might derive from the wider application of this
technology with regard to people and the environment. This includes assessing possible impacts
on programmes for active consumer protection and health & safety for workforce and workers
in supplier factories, as well as the impact on the environmental initiatives. adidas have been
carefully studying and reviewing official publications of the US and German Environmental
Protection Agencies (EPA) and the German Federal Institute for Risk Assessment (BfR)
describing potential risk scenarios.

All studies report that nanoparticles are not expected to cause any potential risk. It is the so-
called free nanoparticles which raise concerns. These may occur during processing, usage,
ageing or degradation of nanomaterials. "Free nanoparticles" have to be seen as impurities or
residues similar to what appears within a lot of chemical preparations and their base chemicals.
Currently, there is no information about recommended threshold limits. adidas products do not
contain intended and verifiable free nanoparticles.
For adidas it is crucial to comply with legal requirements and widely recognised standards for
product-oriented health and environmental protection. adidas regularly inform the material
suppliers about new scientific findings and developments regarding legal requirements, demands
from consumer groups or critical materials.Adidas work closely with material suppliers and the
chemical industry to eliminate and to reduce the discharge of chemicals in our sphere of
influence as far as possible. it are also committed to promoting environmentally sound and
technically feasible solutions in the industry. This is why adidas joined a group of brands that
developed a joint roadmap towards zero discharge of hazardous chemicals (ZDHC) in the supply
chain by 2020. adidas commitment to the Joint Roadmap is rooted in our firm believe that the
goal of Zero Discharge demands collective action of the industry, regulators and other
stakeholders. Furthermore the elimination of hazardous chemicals does need collaboration and
partnership with industry peers, but also a holistic and integrated approach including all actors in
industry. So far, adidas has fully met all milestones of the roadmap.
Greenpeace recently tested various products, including some adidas products. None of the tested
products pose any health risk to consumers. All of the published results and concentrations fully
meet all legal requirements. None of the implied test results published by Greenpeace suggest
any deliberate use of these components in our materials.

adidas clearly rejects Greenpeaces attempt in making consumers believe that our products are
unsafe. From our point of view, this is completely unfounded and causes unnecessary concerns.

Just like all other adidas products tested - is fulfilling all legal criteria. The result underlines our
continued commitment to ensure a best practice approach in all of adidas products.

adiads is globally recognised as a leader in environmental sustainability. In fact, it have been

competition policy
Competition puts businesses under constant pressure to offer the best possible range of goods at
the best possible prices, because if they don't, consumers have the choice to buy elsewhere. In a
free market, business should be a competitive game with consumers as the beneficiaries.

Sometimes companies try to limit competition. To preserve well-functioning product markets,

Competition policy is about applying rules to make sure businesses and companies compete
fairly with each other. This encourages enterprise and efficiency, creates a wider choice for
consumers and helps reduce prices and improve quality.

Low prices for all: the simplest way for a company to gain a high market share is to offer a better
price. In a competitive market, prices are pushed down. Not only is this good for consumers -
when more people can afford to buy products, it encourages businesses to produce and boosts the
economy in general.

Better quality: Competition also encourages businesses to improve the quality of goods and
services they sell to attract more customers and expand market share. Quality can mean various
things: products that last longer or work better, better after-sales or technical support or friendlier
and better service.

More choice: In a competitive market, businesses will try to make their products different from
the rest. This results in greater choice so consumers can select the product that offers the right
balance between price and quality.

Innovation: To deliver this choice, and produce better products, businesses need to be innovative
in their product concepts, design, production techniques, services etc.

Better competitors in global markets: Competition within the EU helps make European
companies stronger outside the EU too and able to hold their own against global competitors.

The main competitor of Adidas in the market is the Nike which has a market share of almost
33%. In addition to Nike, there are also some other competitors in the market which are smaller
in size than Nike Asics, New Balance and Puma operating in United States and European
Countries. While in Asia, Li Ning is main rival present who mainly deals in athletic shoes
(Business Week, Aug 11, 2008). All these rivals are putting all of their efforts to rub Adidas out
of the market but still due to the strong market segmentation and positioning strategy of Adidas,
they are unable to do so.

The Barriers To Entry In The Sports Apparel Market Is Easy Because Of The Increase In
Exposures To Technology And Research. Moreover, Due To Increase In Number Of Suppliers,
Now It Is Easy To Produce Goods And Services Due To Low Costs. If We Study The Consumer
Behavior, Then We Can Easily Analyze That The Customer Is Really Quality Conscious Rather
Than Price Conscious And Willing To Pay A Higher Price For A Higher Quality. It Makes The
Sports Apparel And Accessories Market Very Attractive Because A New Company Can Easily
Earn Higher Revenues By Presenting The Product In Complete And Innovative Style.

Consumers are willing to pay a higher price for a higher quality and they can easily impose
quality by threatening the company by shifting towards a competitor. Adopting a consumer
product costs customers nothing because of the little difference in price of substitutes. Due to
product line horizontal and vertical extensions now the consumers has more options to buy a
customized product of their choice. Customer are more brand loyal to a company who has a
strong positioning and quality product.
Adidas used different kind of marketing strategies to become the market leader but the major
threat to these strategies was they were easily copied by competitors such as Nike. Now Starting
with Adidas, the company has a tradition of acquiring the sponsorship of different sports events
such as Olympic Games, FIFA world and different European Games. Adidas has sponsored the
event of Olympic Games in Beijing. Adidas also use to sponsor different soccer teams of
Germany because the origin of the company was in Germany. After acquisition of Reebok, it
also used to sponsor basket ball clubs and teams such as LA Lakers and Football teams such as
NY Giants. The Adidas has several celebrities working as brand ambassadors of the company
such as Venus Williams and Curt Schilling.

In the quest of becoming the market leader, Adidas acquired Reebok in 2005 to increase its
market share. The main strategy behind acquiring the Reebok was that it dealt in both sports and
normal life usage apparels. The Reebok at the time of acquisition, kept a share of 9.6% and also
in the leading markets such as United States market it had a market share of 12.2%. By
Acquiring Reebok, it opened the way for Adidas to had more celebrities as brand ambassadors
such as Yao Ming, Shakira (singers) and Christina Ricci (actor). After the acquisition of Reebok,
the Adidas used to develop a combined strategy to both Reebok and Adidas to beat the Market
Leader Nike

In response to the Nikes strategy to develop a strategic partnership with Apple, Adidas signed a
contract with Samsung to produce a shoe + phone promotional campaign. In this strategic
partnership, both the companies developed a phone to be used with shoes during training. The
Major function of this phone was that it used to motivate and guide players during training. In
the start the Adidas started with United States and German Market but now they are also
focusing on other parts of the world for example sponsorship of Olympic Games in Beijing. In
this event, Adidas used the largest Adidas store in Beijing during Olympic Games. Now they are
focusing more on China by increasing the number of stores in China to 6300 by 2010.
(uk.reuters.com, Jul 3, 2008)

As we all know that, the market contains quality conscious customers therefore by careful
articulating the market needs, the Adidas has a history of developed technologically sound and
innovative products for its customers. The main reason of brand association of professionals with
Adidas is that it has a culture of technology and has a history of achieving a strong position in
the minds of target customers.

As in the beginning, Adidas started from Germany and USA and then now it is operating in
almost the whole world where athletes and sports exist. The strategies Adidas is using are really
very good and great. Adidas has also a proposal of strategic decisions to survive in the present
economic conditions of the world and also against Nike. It has a tradition of Innovation and
Technology. Professionals from all over the world know Adidas as an innovation leader

The People

Competitors Strategy

Political, Social, Economical and Technical Conditions Surrounding the Company.

To be a viable concern, a company needs to keep its pace with all these three changing
conditions. Adidas is performing well in all of these three areas. Firstly in the people, they are
providing quality and innovative products because people are quality conscious. Secondly, on the
competitor side (Nike), they are responding well (Purchasing of Reebok) and while in the
changing environment they have left no room for keeping in pace for changing conditions. Thus,
if Adidas use to continue these strategies, it can easily lead Nike and can earn more and more
revenues over the year.

Intellectual propety-adidas case

Along with human creativity and inventiveness, intellectual property is all around us. Every
product or service that we use in our daily lives is the result of a long chain of big or small
innovations, such as changes in designs, or improvements that make a product look or function
the way it does today. Take a simple product. For example, a pen. Ladislao Biro s famous
patent on ballpoint pens was in many ways a breakthrough. But, like him, many others have
improved the product and its designs and legally protected their improvements through the
acquisition of IP rights. The trademark on your pen is also intellectual property, and it helps the
producer to market the product and develop a loyal clientele.
And this would be the case with almost any product or service in the marketplace.. Its design
may be protected by industrial design rights.

Regardless of what product your enterprise makes or what service it provides, it is likely that it
is regularly using and creating a great deal of intellectual property. This being the case, you
should systematically consider the steps required for protecting, managing and enforcing it, so
as to get the best possible commercial results from its ownership. If you are using intellectual
property that belongs to others, then you should consider buying it or acquiring the rights to
use it by taking a license in order to avoid a dispute and consequent expensive litigation.

Almost every SME has a trade name or one or more trademarks and should consider protecting
them. Most SMEs will have valuable confidential business information, from customers' lists to
sales tactics that they may wish to protect. A large number would have developed creative
original designs. Many would have produced, or assisted in the publication, dissemination or
retailing of a copyrighted work. Some may have invented or improved a product or service.

in the field of IPR protection and counterfeits combating, the most important issue is to
distinguish original products from the fakes. How is Adidas dealing with this problem? Mr. Tai
responded with check the labels. He explained, in order to gain support from law enforcement
with regard to cracking down on counterfeits, Adidas products have to be coherent and the
labels have to be consistent so that it can be explained simply and clearly to law enforcement
officials, which products are original and which products are fake. Currently, Adidas is using a
globally unified label, developed by the European headquarter in 2002. The label includes not
only the product number, factory number, production date and sizes in different countries, but
also a dot pattern. Although the pattern does not seem to be out of the ordinary, each dot has its
special meaning, known only to the Adidas staff.

Currently, Adidas has applied for more than 300 trademark registrations in China, covering more
than 10 categories. With regard to the trademark protection, Adidas efforts have also been
highly effective. The most successful is the handling of the 3-stripes counterfeits. In May of
this year, Adidas won a lawsuit against American footwear retailer Payless and was compensated
US$300 million. Payless was selling fake Adidas sports shoes, including counterfeits bearing 2
stripes, 3 stripes and even 4 stripes marks. In China, Adidas has also strengthened
trademark protection in recent years. Recently in a civil trademark infringement case, the
Shandong Yantai Court determined in the first trial that the 3-stripes is a trademark of Adidas,
and the infringing manufacturer and retailer should bear the legal liability.