Adidas

1) Introduction:

Adidas is a multinational corporation, founded and headquartered in Herzogenaurach, Germany,

that designs and manufactures shoes, clothing and accessories. It is the largest sportswear
manufacturer in Europe, and the second largest in the world, after Nike. It is the holding
company for the Adidas Group, which consists of the Reebok sportswear company, TaylorMade
golf company (including Ashworth), Runtastic, an Austrian fitness technology company, and
8.33% of Bayern Munich, the football club. Adidas' revenue for 2016 was listed at €19.29
billion.

The company was started by Adolf Dassler in his mother's house; he was joined by his elder
brother Rudolf in 1924 under the name Dassler Brothers Shoe Factory. Dassler assisted in the
development of spiked running shoes (spikes) for multiple athletic events. To enhance the quality
of spiked athletic footwear, he transitioned from a previous model of heavy metal spikes to
utilising canvas and rubber. Dassler persuaded U.S. sprinter Jesse Owens to use his hand made
spikes at the 1936 Summer Olympics. In 1949, following a breakdown in the relationship
between the brothers, Dassler created Adidas, and Rudolf established Puma, which became
Adidas' business rival.Today Adidas is the largest sport-wear manufacturer in Germany and
Europe and the second biggest sportswear manufacturer in the world

2) History:

Adidas was founded by Adolf Dassler who made sports shoes in his mother's scullery or laundry
room in Herzogenaurach, Germany after his return from World War I. In July 1924, his older
brother Rudolf joined the business, which became Dassler Brothers Shoe Factory (Gebruder
Dassler Schuhfabrik). The electricity supply in Herzogenaurach was unreliable, so the brothers
sometimes had to use pedal power from a stationary bicycle to run their equipment.

Dassler assisted in the development of spiked running shoes (spikes) for multiple athletic events.
To enhance the quality of spiked athletic footwear, he transitioned from a previous model of
heavy metal spikes to utilising canvas and rubber. In 1936, Dassler persuaded U.S. sprinter Jesse
Owens to use his hand made spikes at the 1936 Summer Olympics. Following Owens' four gold
medals, the name and reputation of Dassler shoes became known to the world's sportsmen and
their trainers. Business was successful and the Dasslers were selling 200,000 pairs of shoes every
year before World War II.

The Dolbury factory, used for production of anti-tank weapons during the Second World War,
was nearly destroyed in 1945 by US forces, but was spared when Dassler's wife, convinced the

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GIs that the company and its employees were only interested in manufacturing sports shoes.
American occupying forces subsequently became major buyers of the Dassler brothers' shoes.

2.1) Split and rivalry with Puma

The brothers split up in 1947 after relations between them had broken down, with Rudolf
forming a new firm that he called Ruda – from Rudolf Dassler, later rebranded Puma, and
Dassler forming a company formally registered as Adidas AG from Adi Dassler on 18 August
1949. Although it is a popular urban myth that the name is an acronym for All Day I Dream
About Sports, that phrase is a "backronym"; the name is a portmanteau formed from "Adi" (a
nickname for Adolf) and "Das" (from "Dassler").

Puma SE and Adidas entered into a fierce and bitter business rivalry after the split. Indeed, the
town of Herzogenaurach was divided on the issue, leading to the nickname "the town of bent
necks"—people looked down to see which shoes strangers wore. Even the town's two football
clubs were divided: ASV Herzogenaurach club was supported by Adidas, while 1 FC
Herzogenaurach endorsed Rudolf's footwear. When handymen were called to Rudolf's home,
they would deliberately wear Adidas shoes. Rudolf would tell them to go to the basement and
pick out a pair of free Pumas. The two brothers were never reconciled and although both are now
buried in the same cemetery, they are spaced as far apart as possible.

In 1948, the first football match after World War II, several members of the West German
national football team wore Puma boots, including the scorer of West Germany's first post-war
goal, Herbert Burdenski. Four years later, at the 1952 Summer Olympics, 1500 meters runner
Josy Barthel of Luxembourg won Puma's first Olympic gold in Helsinki, Finland.[citation
needed]

The original trefoil Adidas logo until 1998, it is now used on Adidas Originals.

At the 1960 Summer Olympics, Puma paid German sprinter Armin Hary to wear Pumas in the
100 meter sprint final. Hary had worn Adidas before and asked Adolf for payment, but Adidas
rejected this request. The German won gold in Pumas, but then laced up Adidas for the medals
ceremony, to the shock of the two Dassler brothers. Hary hoped to cash in from both, but Adi
was so enraged he banned the Olympic champion.

2.2) 3-Stripe logo

In 1952, following the 1952 Summer Olympics, Adidas acquired its signature 3-stripe logo from
the athletic footwear brand, Karhu Sports, for two bottles of whiskey and the equivalent of 1600
euros.

Tapie affair

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After a period of trouble following the death of Adolf Dassler's son Horst Dassler in 1987, the
company was bought in 1989 by French industrialist Bernard Tapie, for ₣1.6 billion (now €243.9
million), which Tapie borrowed. Tapie was at the time a famous specialist of rescuing bankrupt
companies, an expertise on which he built his fortune.

Tapie decided to move production offshore to Asia. He also hired Madonna for
promotion.[citation needed] He sent, from Christchurch, New Zealand, a shoe sales
representative to Germany and met Adolf Dassler's descendants (Amelia Randall Dassler and
Bella Beck Dassler) and was sent back with a few items to promote the company there.

In 1992, unable to pay the loan interest, Tapie mandated the Crédit Lyonnais bank to sell Adidas,
and the bank subsequently converted the outstanding debt owed into equity of the enterprise,
which was unusual as per the prevalent French banking practice. The state-owned bank had tried
to get Tapie out of dire financial straits as a personal favour to Tapie, it is reported, because
Tapie was Minister of Urban Affairs (minister de la Ville) in the French government at the time.

In February 2000, Crédit Lyonnais sold Adidas to Robert Louis-Dreyfus, a friend of Bernard
Tapie for a much higher amount of money than what Tapie owed, 4.485 billion (€683.514
million) francs rather than 2.85 billion (€434.479 million). They also purposely bankrupted
Tapie's company that owned Adidas, because only the company had the right to sue them.

Robert Louis-Dreyfus became the new CEO of the company. He was also the president of
Olympique de Marseille, a team Tapie had owned until 1993.[citation needed].
Tapie filed forpersonal bankruptcy in 1994. He was the object of several lawsuits, notably related
to match fixing at the football club. During 1997, he served 6 months of an 18-month prison
sentence in La Santé prison in Paris.

Adidas 4ps

1 products:
The Adidas group has 4 main subsidiary’s. The first is its own brand name – Adidas, which is
present in clothes as well as footwear. The second is Reebok which has overtaken Adidas and is
one of the leading subsidiary’s in the Adidas group. The 3rd is Rockpot which specializes in
outdoor footwear, apparel’s and accessories and 4th is Taylor made which is focused on golfing
clothes, equipment etc. Out of all the above subsidiary’s, Reebok is the strongest followed by
Adidas.

Adidas has various products. The major product of Adidas is off course their footwear. Coming
in various design and style, Adidas footwear is robust and athletic. The secondary product of
Adidas is apparel’s and accessories. Apparel’s like T-Shirts, jackets, sweatshirts, shorts etc are in
great demand. Where Reebok is stronger in footwear, Adidas is stronger in apparel’s.

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The aim of Adidas is to give the best footwear to their customers which has the combination
of technology and design. These products are not need based. In fact, the shoes are bought
by customers to satisfy their wants and desires. Similarly, the apparel’s are targeted towards
comfort during heavy activity. However, although the main target is sports, the apparel’s are
frequently used as a style statement by youngsters.

Place :

The major way in which Adidas is sold is through retail outlets. Adidas has its own exclusive
stores in which the material is provided directly from the company. On the other hand, many
multi brand showrooms will also have Adidas apparel’s and footwear on display. These multi
brand showrooms get the products from a distributor. The third and last mode of distribution
is online. The products are sold through online medium via fashion stores lie myntra.com as well
as the online website of Adidas. Thus the distribution channel of Adidas is as follows

1) Manufacturing > Adidas outlets > End customer

2) Manufacturing > Distributor > Multi brand showrooms
3) Manufacturing > Online fashion websites / Adidas website > End customer

Due to the excellent brand equity of Adidas, the operating margins are fairly high thereby
keeping the distribution channel motivated. A happy distribution channel means better promotion
for the company

Promotion :

Adidas markets through various marketing vehicles but the majority of marketing
is concentrated on television and product placements. The creative team of Adidas is known to
pump adrenaline in their customers through ads which are well made, very creative and filled
with energy. These ads attract the customers towards the brand by sending the right marketing
message to the customer.

The tagline of Adidas “Impossible is nothing” is in itself a very powerful statement for the brand.

After television, product placement is the second line of promotion for Adidas. The popularity of
the brand is because it ties up with the top players across the world such as Lionel messi,
Ronaldinho, Sachin tendulkar and various others.

At the same time, Adidas also sponsors teams and some of the top teams include Real Madrid,
France, Great Britain (in football), England and South Africa (in cricket) and several others.
Here is a list of all the sponsorships done by Adidas.

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Below the line marketing of Adidas includes some very creative outdoor campaigns as well as
events marketing. Sales promotions and trade promotions are also regularly offered by Adidas to
their channel partners to promote the sales of the brand. This concludes the marketing mix of
Adidas.

Price :

Adidas, because of its style, design and promotions uses skimming prices as well as competitive
pricing. For run of the mill products, Adidas uses competitive pricing keeping in mind
competitors like Nike, Reebok and Puma. But for products which are newly introduced in the
market and are uniquely designed, Adidas uses skimming price.

Apparel’s of Adidas constantly use skimming price and are higher priced due to brand equity of
Adidas in the apparel’s market. The target customer for Adidas is the upper middle class as well
as high end customers. Adidas never uses penetrative pricing because that will affect the brand
equity of Adidas. In fact, the higher price point helps in the price quality approach and
psychologically, customers think that a higher price will mean better quality as well. Thus,
Adidas rarely drops its prices.

Adidas

Segmentation:

Market segmentation is to dividing a market into distinct groups of buyers with different needs,
charactistics or behavior that might require separate products or marketing mixes, the company
will first identifies different way to segment the market and then develops profiles of the
resulting market segments. As market consist of many buyers, they may differ in their wants,
buying attitudes and buying practices, so a seller might design a separate market program for

each buyer. Adidas mainly focus on demographic and psychographic segmentation. So Adidas
develops their brand in 3 different styles according to the segmentation.

Demographic segmentation refers to dividing the market into groups based on demographic
variables, such as sex and age, which this method has long been used in clothing market. They
branded products into range of male, female and kids, according to age and life cycle
segmentation and gender segmentation, after all they can have products that can fit to almost
every demographic possible. Adidas has a branded range of male and female clothing, shoes or
body-care and eyewear, which all three brands of Adidas; Performance, Originals and Style also
provide products for this segment.

Psychographic segmentation is to dividing the market into groups based on social class, life
style or personality characteristics. Adidas focus on social class because people within a given
social class tend to have similar buying behavior. People interest in many goods is affected by

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their life style and many goods they buy are expressions of their lifestyle, people who loves
outdoor activities and sporty style will tends to buy Adidas products.

By using personality variables to segment markets, giving their products personalities that
correspond to consumer personalities. From the fundamental marketing concepts, it is important
to satisfy customers need and meet their expectations, in orders to keep royal consumer. Adidas
has did a successful job in this area, because many people who are experiencers and image
drivers believes that Adidas provides products which are fashionable, good looking and can be
functional too. So Adidas Originals was designed to focus on fashion and life-style.

Adidas segment customers like athletes, gym regulars, sports enthusiasts, brand freaks and image
seekers. Adidas often have work with different athletes, which produce products
thatenhanceperformances. Adidas Performance currently manufactures several running shoes,
football kit and associated equipment, being official outfitter of NBA, golf equipment, training
and more other sports.

Targeting:

Adidas uses differentiated targeting strategy to target young adults, adults as well as children
who have passion for fitness & sports. Although it targets customers in the age group of 13-40
years but majority of its customers are of 15-30 years of age who hail from upper middle class or
the luxury class of customers.

Positioning:

“Impossible is Nothing” Adidas Start their journey with this slogan. Contrary to popular belief,
the name Adidas does not stand for “all day I dream about sports.” According to the company’s
website, “The name Adidas dates back to 1948 and comes from the name of the company’s

founder, Adolf Dassler. By putting together his nickname Adi and the first letters of his surname,
the name Adidas was born.” As we know currently it’s the world famous brand for sports item.
They already reach their positioning at top level. Adidas established their positioning based on
cresting beliefs and values. They start with "impossible is nothing" slogan. Which create beliefs
to the customers.Adidas has a market segmentation which helps them to build up the positioning.

Adidas swot analysis

Strength :

1. Adidas uses to create distinctive image in the mind of the prospective consumer. By
emphasizing the value of quality products from a trusted brand Adidas is able to maintain
its brand essence. Legacy & heritage: With decades of heritage & legacy, Adidas has
travelled a long way to establish itself as a youthful brand. The brand was started in 1949
and has travelled a long way since then.

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 2. Diversified portfolio: Company has multiple product portfolio’s with varied range of
footwear & accessories under brand name Adidas (premium segment) & Reebok (mid
range).
3. Strong financial position: With its 2400 store globally accounting $4.3billions, the
company is in strong financial position.
4. Distribution network: By selling it from online stores to company owned stores to
supermarket stores, Adidas has an effective distribution system for their products available
through different channels.
5. Branding by creating touch points with the community: Celebrity endorsements &
sponsoring major sports organizations such as FIFA, UEFA, NBA & Olympics has
increased the awarenessof Adidas in the market & hence it has increased the highly
targeted customer base as well.
6. Collaborations & memberships: Strong relationship within the sustainability area with
organizations such as International Labour organization, International Finance Corporation
has given the company an edge over competitors so that they can have a sustainable
business.

Weakeness:

1. : Premium price range: High price range due to innovative technology & Production
methods have made the brand affordable to limited customers only, especially in
developing countries.
2. Outsourced manufacturing: Adidas has 93% of production outsourced to 3rd party
manufacturers (largely to Asia) to avail of low labour cost & easy availability of resources.
They are running a risk of over dependency on outsourcing especially in Asian markets.
Also, the overall quality of products perceived by the consumers of developed economies
is a major concern as far as brand is concerned.
3. Limited product line: Adidas along with the recently acquired Reebok brands, has got
only 2 brands under their group although they have got deep assortments within these
brands. Thus, there is more scope for product line expansion.

Opportunites :

1. Changing Lifestyle: With the saturation of developed economies, changing taste &
preferences, education & changing lifestyle of developing economies, there is a steep rise
in the demand of premium goods & services.
2. Market development: Entering into new markets will be the only way to succeed in the
future because developed economies are already having high competition.
3. Expansion in product line: Expanding its product line will open a new set of
opportunities while at the same time it can differentiate itself from the competitors by
following this strategy.
4. Increasing demand of premium products: If we only consider the Indian market then
there is a growth rate of 33% in demand of premium products. This tells us the future
business opportunity & expanding market size of developing economies.

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 5. Backward integration: This will be smart strategy if followed by Adidas as it will help
Adidas to secure their patent rights & also integrate their R&D with the operational team
in order to work in open system.

Threats :

1. Competition: Although Adidas is a global brand but it is facing fierce competition from
other brands like Nike which is No.1 brand and Adidas being in 2nd Position in this
premium segment. Besides this, there is regular competition from local players, substitutes
and market penetrators.
2. Supplier Dominancy: Due to majority of its production being outsourced; Suppliers have
more bargaining power then the company.
3. Government Regulations: With its 35% products manufactured in China & 93% of
production happening in Asia, Import regulations, duty & tariffs plays a critical role in
the pricing and success of the company.