Leuphana Universität Lüneburg

Seminar: International Business

Lecturer: Prof. Dr. Bader

Summer semester 2015

Case Study: The Adidas Group

Written by:

Julia Hammann, BWL (3022438)

Niklas Mewes, BWL (3022103)

Habbo Seydel, BWL (3022124)

 

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Table of contents

Page

Table of contents

I. Introduction

II. Case study

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1. Scenario Description

2. Five Forces analysis according to Porter

2.1 Bargaining power of suppliers

2.2 Bargaining power of buyer

2.3 Threats of new Entrants

2.4 Substitute products

2.5 Rivalry among existing firms

2.6 Conclusion five forces

3. ‘Creating the New’ – The current long-term strategy of the Adidas group

4. Conclusion

5. Appendix

6. Sources

3 5 6 7 8 11 12 13 13 14 15 16

 

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I. Introduction

‘We started in a wash room and conquered the world.’1 Originally founded under the name of

‘Adi Dassler adidas Sportschuhfabrik‘, by Adolf Dassler in 1949, the adidas group introduces

itself with these words to the public, recalling the company’s roots of a start-up between the

Dassler brothers in their mothers laundry room and what has evolved to become one of the

major suppliers of sporting goods in todays time.

During this case study, we choose to set a focus on the company’s current situation as well as

an analysis of the strategy with which the adidas group is planning to meet its future goals. In

order to do so, we are going to discuss the events of the business year of 2014, which have

been leading up to the company’s current circumstances. Furthermore, we are going to

analyze the structure of the sporting goods industry according to the general driving forces of

industry competition, which where introduced by Michael E. Porter in 1980. During this

analysis, we are going to focus on the U.S.-market because of its noticeable potential to lead

the way for the observed industry as a whole. As aforementioned, we are going to introduce

the recently formed strategy of the adidas group, with which the company is planning to

compete in the business during the next couple of years, after which we are going to attempt

an assessment of said strategy with the knowledge gained from the lecture as well as related

literature. To conclude the assignment, we are going to form questions concerning the context

of the case study, for which we will present an outline of how to answer these questions later

on, in the appendix.

II. Case Study

1. Scenario Description

The Adidas group was unable to fulfill the long-run goals, set up by its ‘Route 15’ strategy,

which was aiming to increase the company‘s over all volume of sales to $17 billion by the end

of 2014. Furthermore, it had to experience a drop of over 40% in share price, making it the

worst performing DAX stock for the past year.2 In the following, we are going to present the

events which were particularly responsible for the predicament which the Adidas group has to

face since the closing months of the past financial year. Therefore, the recent situation of the

company is going to be the scenario from which this case study sets out.

                                                                                                                         1  adids-­‐group.com;  History  2  ‘Aktionäre  rechnen  mit  Hainer  ab‘  ;Wirtschafts  Woche,  07.05.2015  

 

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Within the final year of its ‘Route 15‘ strategy, the Adidas group was expecting to continue a

four-year success period, during which the company’s stock value had already quadrupled.3

As a permanent partner of the ‘Fédération Internationale de Football Association‘ (FIFA), the

soccer world championship, hosted by Brazil, was an anticipated factor for increased sales

compared to other years. This prospect was especially promising since the Adidas group is the

official provider of soccer gear to multiple national teams, including the German team.

Since the company’s expectations for 2014 have been briefly laid out, let us now look at what

really happened. One of the main factors, which were criticized during the general meeting of

shareholders earlier this year, was the company’s loss of ground to the industry leader Nike

on its core markets in North America and Western Europe.4 The chart below is showing the

currency-adjusted sales growth of both competitors for each financial quarter of 2014 versus

the prior year, on the two separate markets.

Market Company Q1 Q2 Q3 Q4 Total Western Europe

Adidas 0% 14% 9% (16%) 7% (9,75%) Nike 19% 18% 25% 24% 22%

North America

Adidas -20% 1% -1% (-4%) -7% (-6%) Nike 12% 10% 12% 16% 12%

Source: ‘Adidas in 2014: what a disappointing year!’; The Montley Fool, 06.01.2015 (Numbers in parentheses: ‘adidas group full year 2014 report‘; ‘major developments in Q4 2014‘; adidas-group.com)

With the subsequently added information drawn from a fourth-quarter report of the Adidas

group (shown in parentheses), which weren’t available to the author of the original source, the

difference between the two competitors can be seen in comparison of the average total growth

in sales. On both markets, Nike is achieving greater revenues than the Adidas group, while the

later is experiencing even a negative growth on the North American market.

Another factor, which emphasizes the poor performance of the Adidas group on the U.S-

market throughout its divisions, is the fact that the relatively new competitor Under Armour

was able to surpass Adidas in sales of sports apparel during the business year of 2014,

suspending the German company to the third place in the business.5 The chart below is

showing the individual stock price and its percentage change of the Adidas group (ADS),

Nike (NKE) and Under Armour (UA), earlier this year, which allows us to support our

                                                                                                                         3  ‘Adidas in 2014: what a disappointing year!’; The Montley Fool, 06.01.2015  4  See    footnote  number  2.  5  ‘Adidas Shareholders Upset With Leadership..‘; Sports Business Daily, 06.02.2015  

 

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argument of the loss of ground to its competitors, which the Adidas group is currently

experiencing.

Symbol Price Change %Change ADS 69,55 ê -0,89 -1,26% NKE 109,87 é 0,44 0,40% UA 84,59 é 0,33 0,39%

Source: ‘Can Adidas be 'cool' again? One exec thinks so‘; CNBC-online, 27.03.2015

After discussing a few factors, which were directly related to the performance in the

company’s core business, we feel the need to stress certain international events, which

weren’t within the power of the managing board of the Adidas group and therefore present

themselves as an example of the delicacy of global operations.

The geopolitical tensions between Russia and the EU and the therefrom-arising sanctions had

a restraining effect on the consumer sentiment in Russia where Adidas is occupying a market

leading position, resulting in a negative profit impact of roughly €100 million during the first

three quarters of the past year. Furthermore, the declining currency values (compared to the

Euro) of various emerging markets such as Brazil, where resulting in weakened sales.6

With all crucial factors combined, the Adidas group was forced to file a profit warning

towards its shareholders in late July. Also, the company had to release a statement

proclaiming the underachievement of its ‘Route 15‘ goals, since the overall sales growth of

merely two percent enabled the adidas group to raise its currency-neutral value of sales to

€14,5 billion instead of the anticipated €17 billion.7

2. Five Forces Analysis according to Porter

The Five Forces Analysis that was mainly shaped by Michael E. Porter is a way to analyse the

competition in an industry and to determine a useful strategy from that.

In order to do that, one has to analyse five different aspects of an industry and in how far the

company is positioned within. The first one is the Bargaining Power of Suppliers, which

analyses how much an industry´s flexibility is influenced by the suppliers that deliver

necessary goods to the company. Going on, one also has to find out how much power the

buyers have and to what extent they influence the operation with their actions, wishes or

                                                                                                                         6  See  footnote  number  3.    7  See  footnote  number  2.  

 

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behaviour. The third part that has to be analysed is the possible threat of new entrants, which

determines how likely it is for an unknown company to penetrate the existing market. Another

important aspect is the threat of substitute products, which could possibly be more attractive

to costumers and draw their attention away from already existing products.

Taking all of those steps into consideration, the last step is to analyse the rivalry among

existing firms because that is an important aspect in shaping the strategy of a corporation

since the goal is to expand sales and outrun possible rivals.

On the following pages we will do this analysis with the Adidas group to find out where they

are standing right now and how this might affect their strategy.

2.1 Bargaining Power of Suppliers

When looking at Porter Five forces, an important aspect is the power that the suppliers have

against the company, in our case the adidas group.

The power of the suppliers is substantial to the profit margin that the adidas group can get

from their sales, because expensive suppliers make a product less profitable for a company.

Influential suppliers don’t only control revenues of a product, to a certain extent, but can also

change the strategy of a company.

And to find out to what extent Adidas and their strategy is affected by suppliers we first have

to take a closer look on how powerful they really are.

To do that we have a couple of points by the Harvard Business review that determine if a

supplier has power over a company or industry. Because to talk about all of them would be

too consuming for this case study we will take a look at a few of them, but nevertheless will

this show to a significant level if the suppliers are powerful.

The first one is to see if “It is more concentrated than the industry it sells to”8, which means

that there are fewer suppliers than companies. In our situation regarding the adidas group this

is definitely not the case. The company itself works together with over 1100 independent

factories in more than 61 countries9 and there are several other suppliers who deliver to other

sporting goods producers.

Furthermore we have to look if “The supplier group does not depend heavily on the industry

for its revenues.” This means that that the supplier gets its earnings from more than one

industry so if they lose one as a contractor, they have other to rely on.

This is the case in our situation because manufacturers that produce sport clothing often

                                                                                                                         8  Harvard  Business  Review:  The  Five  Competitive  Forces  That  Shape  Strategy.    9  Adidas:  Supply  Chain  Structure.    

 

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produce other clothes as well and if they are not, they face very few switching costs of doing

so. That gives them an advantage over the adidas group because they don’t rely on the income

from them.

The last but definitely not least factor that we will have a look at is, if “Industry participants

face switching costs in changing suppliers”, meaning that it would be difficult and costly for

the observed company to switch between supplier. Since the textile industry is a very large

sector and the switching costs for a manufacturer to switch from, for example, dresses to

sporting goods is very low, the adidas group has no problems to switch between suppliers.

This is also due to the fact that the products that Adidas sells are very easy to produce and

specialised workers are not needed to do that.

In a conclusion you can say that the bargaining power of the suppliers is low, because there

are many of them, they produce simple products for a very low price and therefor are

individually not very valuable to the adidas group.

2.2 Bargaining Power of Buyers

In this paragraph we will analyse how much the buyer can affect the business of the adidas

group and why he has, or doesn´t have this power. Generally speaking the buyers have the

power to demand lower prices or higher quality by simply not buying products or switching to

a competitor.

There are several factors that affect and increase the power of buyers for example if the

products from the industry are standardized or undifferentiated which means in our case that

the competitors products, for example Nikes sports clothing, are quite similar to the products

the adidas group is selling. This is here the case and weakness for the company, because it is

not hard for the costumers to find another supplier who produces roughly the same product.

Adding to that are the low switching costs10, which empowers the buyers even more because

there are basically none. In most cases Nike, the adidas group and Under Armour are in the

same price category, making switching costs extremely low.

Another factor, granting more power to consumers, is the availability of information

nowadays. It is easy for them for them to compare prices and research demand, meaning

current trends spread really fast and that can make buyers switch to a competitor in a very

short time in large numbers. This affects strategy of the adidas group, because they always

have to stay ahead of current trends and use modern marketing techniques to keep consumers

interested.

                                                                                                                         10  Porter,  M.  (1998).  Competitive  Strategy.  New  York:  Free  Press  

 

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The conclusion we can draw from that is, that buyers are powerful and have an impact on the

observed company‘s strategy. The bargaining power of buyers probably is one of the most

important factors in the outcome of Porters Five Forces Analysis regarding the adidas group.

2.3 Threats of new Entrants

In Porters five forces, threat of new entrants refers to the threat new competitors pose on

existing competitors in an industry.11 A profitable industry will attract more competitors

looking to achieve profits. Growth in the global sports market and rising number of sporting

events is projected to encourage more and more people to participate in various sports.12 So

speaking in statistical number the sports market has grown with 7 percent between 2009 and

2013. The long-term prospects are also promising, the revenues for yearly events are growing

steadily, from $58 billion in 2009 to $75 billion 2013 and $80 billion in 2014. When you add

in sporting goods, apparel, equipment, and health and fitness spending, the sports industry

generates as much as $700 billion yearly, or 1 percent of global GDP.13

In theory, any firm is able to enter a market. Nevertheless as Porter states there exist certain

barriers, which reduce the rate of new firms entering the industry. From a strategic

perspective, barriers can be created or exploited to enhance a firm's competitive advantage.

This is what the adidas group did over the years and still puts a lot of emphasize on. In the

following six major sources of barriers to entry in the case of the adidas group are defined

more in detail.

2.3.1 Government policy

The adidas group has its origins in Germany, where the government opposes many safety

regulations to protect the workforce as well as the consumer and puts high standard for

environmental protection. It might be difficult for a new firm to enter in the foreign German

                                                                                                                         11  Threat  of  New  Entrants  (one  of  Porter's  Five  Forces)  •  The  Strategic  CFO  12  Reportlinker  (2015):  Global  Retail  Sporting  Goods  Industry  2015-­‐2020  -­‐  Trend  Profit  and  Forecast  Analysis.  PR      Newswire  13ATKearny,Winning  in  the  Business  of  Sports,  2014  

 

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market without being familiar with the existing laws and it is necessary to examine it in

advance.

The adidas group has outsourced various production steps and build a unique global supply

chain network, which might be hard to copy without having international expertise.

Actually currency rates are an issue worth to mention. Even global players like the observed

company struggle under the effects of an insecure exchange rate.14 So government policy

plays a role, but affects all members of the industry equally.

2.3.2 Access to distribution channels

The newcomer must secure distribution of its product or service. This is not a great challenge,

because the number of wholesale or retail channel is basically infinite when also taking online

shopping into account. The greater challenge in this case is to compete with the adidas group

and other established brands products in the same store. Why should a consumer buy a no

name brand, not a yet established one, maybe also recommended by the store staff?

2.3.3 Economy of Scale

Since the adidas group has a broad global demand of sporting clothes and accessories, they

are producing in large scale. This would force the new entrant to either enter producing in

large scale or to accept the cost disadvantage in not doing so. An opportunity to start

nevertheless would be via local monopoly especially differentiated at special key element

important to the execution of that sport.15 So economy of scale is recommended in order to

produce high profit margins but no precondition to enter in the industry

2.3.4. Capital requirements

The need to invest large financial resources in order to compete in sport clothes production is

rather low in comparison to start an airplane manufacturing for example. Therefore one can

assume at first glance that this does not seem to be an irreconcilable barrier in the sports

industry structure. However the initial capital investment is not only needed for fixed facilities

but also for the unrecoverable expenditures in up-front advertising or R&D. The entry barrier

newcomers have to face is the cost in the absorbing start-up loses until achieving a

comparable customer credit and supply chain network like the established one of the adidas

group. This is in a broad sense what Porter describes as the cost disadvantage independent of

size. The cost advantages for the observed company results out of the effects of the learning

                                                                                                                         14  “Adidas  profit  dented  by  foreign-­‐exchange  effects”  by  Ellen  Emmerentze    15  Porter´s  Five  Forces  

 

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curve and experience the adidas group gained through a long survival on the market and is

reflected in the customers’ loyalty and trust, which is explained more in detail in the next

point.

2.3.5. Product differentiation

The hardest entry barrier the adidas group did create for newcomer is the brand identification.

It forces entrants to spend heavily to overcome customer’s loyalty. The company gained

attention by actively supported young athletes in their performance ever since the foundation

of the company. Adi Dassler was the one who invented the football shoe with studs and with

that made possible the “Miracle of Bern” where the German soccer team earned victory in

July 1954 until now in the 2014 World Cup final- the adidas group sponsored both final

teams. 34,65 million16 German fans watched the Game at TV, which resulted in a new record

audience ratings for ARD. Also in the American Market where football never used to be that

popular more than 26 million people watched the World Cup final in the U.S. which made it

the most-viewed soccer game in American history17, where the adidas group plans further

expansions in their ’15 strategy. In being the top sponsor of successful sports idols the

company is fostering the brand image and further activate brand loyalty in their core

competence, not only in their origin nation but worldwide.

Products are not that differentiated which leads to the next point, but brands are well known.

This insistently lowers the threat of new entrants.

2.3.6. Low Switching Cost and Licensed property

From the previous point it got clear that brands are well known, but the problem is that the

products are not that differentiated as one might suggest. This point gets clearer when taking a

look at the switching costs for the consumer. Switching cost are literally extra-fees the

consumer has to pay in order to change a supplier.18 The consumer of a sports t-shirt or a shoe

does basically not have switching costs. Sportswear is a functional good, but as an ordinary

average sportsman you normally do not experience any difference among sport accessories. It

highly depends on the product category of course. In sport shoes there might be a more

remarkable difference than among clothing suppliers.

That is why existence of fake products portrays a major problem. The ground of the

differentiation lies to some extends rather in the brand name and the associated image than in

                                                                                                                         16  Deutschland  gegen  ArgentinienWM-­‐Finale:  ARD  knackt  Quotenrekord  -­‐  34,65  Millionen!    17  More  than  26  million  watch  World  Cup  final  in  US.  By  Associated  Press  and  Daily  Mail  Reporter  18  What  is  Switching  Costs?  definition  and  meaning.    

 

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the core functions it offers. On top of that the production process, as mentioned earlier, is not

too complex and therefore easy to copy. The names Adidas, tailor made or Rebook clearly is

licensed firm’s property, but anyways a high percentage of the consumers of the targeted

segment buy the branded product in order to express something rather than due to their

dependency on the quality or some unique features that are inimitable.

When conducting Porter’s 5 forces industry analysis, a low threat of new entrants makes an

industry more attractive and increases profit potential for the firms already competing within

that industry, while a high threat of new entrants presents a less attractive, unprofitable

business structure.19 From our point of view the current market situation provides a medium

threat of new entrants. Large capital costs are required for branding, advertising and creating

product demand are clearly limiting the amount of newcomers. But the highest entry barrier is

also the Achilles' heel of the industry: New unforecastable trends can appear overnight and

topsy-turfy the whole branch at once.

2.4 Substitute Products

A substitute product is a product from another industry that offers similar benefits to the

consumer as the product produced by the firms within the industry.20 Substitute products limit

the potential of the industry by placing a ceiling on prices it can charge.

In the light of the adidas group it depends on the product category and the usage purpose of

the consumer. If the consumer aims to buy an everyday sneaker, there are many substitutes

available to “the originals” by Adidas such as boots, sandals, dress shoes. On the other side if

the consumer buys it with the purpose to execute a certain sport, than the function of a

suitable shoe cannot be outperformed by a substitute yet.

The biggest threat of substitute products is that they are ever present but easy to overlook,

because they appear to be very different from the industry’s product. One example of this

scenario presents Under Armour’s success story. The 23-year old student Kevin Plank started

producing thermos-sports-underwear in 1996 at his grandmother's basement21. Their unique

selling proposition has been a moisture-wicking synthetic fabric22 to prevent the athletes from

sweating. Now in 2015 Under Armour is a global brand who no longer just sells underwear,

but footwear, apparel and accessories23. They recently surpass the adidas group in the North

American market being right behind the leading position of Nike. So the more substitute                                                                                                                          19  Threat  of  New  Entrants  (one  of  Porter's  Five  Forces)  •  The  Strategic  CFO  20  Threat  of  Substitutes  (one  of  Porter's  Five  Forces)  •  The  Strategic  CFO.  21  Under  Armour,  Inc.  -­‐  Kevin  Plank.    22  History  of  Under  Armour  Performance  Apparel  –  FundingUniverse.    23  „  Under  Armour  overtakes  Adidas  in  U.S.  sportswear”  by  Sara  Germano    

 

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offers a new attractive price performance trade-off, the more endangered is the industry’s

profit potential. But all in all we consider the threat as relatively low. The core competence of

the adidas group lies in ahtletic footwear, apparel and equipment which is needed to perform a

sport moderaltly and customers normally cannot substitute this products. On top of that the

company is attentiv to the ongoing developments in the market and even tries to shape them

activly by selfsetted performance improvements. The new strategy “Route 15” further

implements that aim within the point of “open source” referring to stakeholder activism.

2.5 Rivalry among existing firms

As the name of the force already states it determines the competition in the industry by

looking at factors such as the number of competitors, industry growth, switching costs and

exit barriers.

When investigating in the number of competitors it seems like they are not that many rivals

on the US market. The two biggest companies are Nike and Under Armour and in the last

year they both had better sales than the adidas group24. This is an indicator that the

competition is really high.

Adding to that comes the problem that the sports industry isn´t a very new market and

therefor the growth isn´t that strong resulting in the problem that companies have to fight for

every part market share, causing a rougher competition. Especially the adidas group is facing

problems because of that, because, as already stated, they have the smallest percentage of the

market and the didn´t bid for a renewal of their current contract with the National Basketball

Association (NBA) and also lost a sponsorship contract with the University of Michigan. All

that strengthens the rivals and increases competition.

What´s more is the problem of low switching costs between companies, explained in the part

of consumer power because of that companies have to fight for every consumer.

This results in a competition where every participant is striving for leadership, trying to have

the best brand recognition to increase sales. All those aspects combined determine that there is

a strong rivalry between firms. Especially on the US Market that’s why the adidas group has

to put a lot of effort into securing and expanding their market shares.

                                                                                                                         24  adidas  wagt  einen  Comeback-­‐Versuch./  Finanznachrichten    

 

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2.6 Conclusion five forces

When summarizing the five forces three forces hold medium to no threat which are threat of

new entrants, threat of substitute products and the bargaining power of suppliers. Therefore

these factors are not influencing the strategy significantly.

But so do bargaining power of buyers and the industry rivalry. They are or should actively

form the strategy of the adidas group, because outperforming competitors in those two fields

is the key to a sustainable success.

The cpmpany‘s competitive advantage lies in their strategic positioning of the brand in the

minds of their consumer. Sports clothes, equipment and apparel will always be

undifferentiated and therefore is a matter of taste. It is almost impossible to lower the power

of buyers because they are the driving force of the market. The adidas group has no other

choice but to go further go for the differentiation strategy and foster brand loyalty among their

consumers.

‘Creating the New’ – The current long-term strategy of the Adidas group

After the adidas group was unable to fulfill the goals of its aforementioned strategy, ‘Route

15‘, which expired by the end of the past year, the company prepared a new long-term

strategy called ‘Creating the New‘, which is going to run until 2020. In the following, we are

going to present the key points of this current strategy with which the adidas group is

planning to compete with its peers.

The company‘s main goal is going to be the acceleration of its growth in terms of sales and

therefore in market share. As mentioned earlier, the loss of ground to the industry leader Nike

was criticized by the company‘s shareholders at the general meeting, in the beginning of

2015. The adidas group is striving for a high single-digit growth in sales in each year of the

five-year strategy period. Also, the company is seeking an annual growth in consolidated

profits of fifteen percent. Further goals are the increase in sales via company owned selling

space to sixty percent of its total sales, as well as the increase of e-commerce sales to a value

of €2 billion. In order to reach the aforementioned goals, the adidas group is focusing on three

distinct aspects, them being ‘speed‘, ‘cities‘ and ‘open source‘.

‘We are living in a fast-changing world. Only what is new is relevant to the consumer.

Therefore, we have to relentlessly focus on ‘creating the new’ for our consumers.‘ 25 With this

                                                                                                                         25  adidas-­‐group.com;  ADIDAS  GROUP  TO  ACCELERATE  GROWTH  UNTIL  2020.  

 

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statement, the current CEO of the group, Herbert Hainer, is portraying a necessity for ‘speed‘,

which the company is planning to gain, by significant reductions in lead times. This means

that product innovations are supposed to be introduced to the market faster than before to

increase the in-season creation of the group’s core brands. Furthermore, the adidas group

conceives global trends to be shaped mostly in metropolitan areas and therefore plans to

increase its brand desirability by continuing ‘its growth in all relevant geographic markets

with a focus on six global key cities: Los Angeles, New York, London, Paris, Shanghai and

Tokyo. Across these cities, the adidas Group will over-proportionally invest in talent,

attention and marketing spend.‘26 With its third strategic concept, called ‘open source‘, the

adidas group wants to invite ‘athletes, consumers and partners to be part of its brands. We will

open up so that they can co-create the future together with us.‘27 By including these external

stakeholders into the process of product innovation, the company wants to create brand

ambassadors and thereby strengthen the consumer desire for its products.

3. Conclusion

So far, we have presented the scenario, from which this case study is setting out, as the events

of the business year of 2014, which put the adidas group in a problematic situation within its

industry. Furthermore, we analyzed said industry from the perspective of the observed

company based on the ‘structural analysis of industries‘ and its ‘five forces driving industry

competition‘28, which were introduced by Michael E. Porter in 1980. At last, we presented the

strategy, ‘Creating the New‘, with which the adidas group is planning to reach its goals over

the next five-year period. To conclude this case study, we are now going to draw three

questions from our work.

According to Porter, ‘an effective competitive strategy takes (…) action in order to create a

defendable position against the five competitive forces.’29 Therefore, our first question is, how

the three distinct aspects of the strategy, ‘Creating the New‘, are going to help the adidas

group to create such a defendable position against the effects of the industry’s competitive

forces.

Within the discussion on the intensity of rivalry amongst existing firms, Porter includes the

point of high strategic stakes in achieving success in a particular industry. He gives the

                                                                                                                         26  See  footnote  number  25.  27  See  footnote  number  25.  28  Porter  (1998)  ,Page  3  &  4  29  Porter  (1998),  Page  29  

 

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example of ‘foreign firms who perceived a strong need to establish a solid position on the

U.S. market in order to build global prestige or technological credibility‘30, during his time.

Our second question is addressing the strategic aspect of the ‘cities‘ in particular.

Which target or social groups, within the aforementioned cities, does the adidas group have

the highest strategic stake in to achieve success? Who does the company have to convince of

its products to build global prestige or (technological) credibility?

Our third question is whether or not the strategic aspects of ‘speed‘ and ‘open source‘

contradict themselves, when they are put into action. To us, the inclusion of athletes, partners

and consumers to be part of the brand seems rather time consuming. Therefore we ask

ourselves, if the adidas group will be able to incorporate the aforementioned stakeholders into

its innovative process and still be able to decrease the lead times on new products?

5. Appendix

In the following, we are going to present an outline of how the questions, which we drew

from our results in the case study, could be answered.

First of all, the question concerning the establishment of a defendable position against the

competitive forces in the sporting goods industry. As already mentioned during the

presentation of the strategy, ‘Creating the New‘, the adidas group is trying to increase its

brand desirability. In other words, the company is trying to become more attractive to

consumers. Also, the strategic aspect called ‘open source‘ is striving to create brand

ambassadors, by incorporating external stakeholder, such as consumers into the innovative

process. Thereby, the adidas group wants earn the brand loyalty of said stakeholders. The

anticipated effect, which this loyalty is supposed to have, is for example a customer’s lower

sensitivity to price. This lower sensitivity to price would defend the company against rivalry

among the existing firms within the industry, create entry barriers for new-comers, because

they would have to overcome said loyalty to gain market share, as well as soften the buyer‘s

power, because of lacking comparable alternatives to the products of the adidas group.31 The

bargaining power of suppliers and substitute products, which are the remaining two forces of

industry competition, were analysed to pose a low threat to the sporting goods industry earlier

in the text and will therefore be disregarded in the answer to the first question.

                                                                                                                         30  Porter  (1998),  Page  20  31  Porter  (1998),  Page  38;  Effects  of  Differentiation.    

 

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The second question was asking, which target or social groups, does the adidas group have the

highest strategic stake in to achieve success in the cities it plans penetrate. Or in other words,

whom does the company have to convince of its products to build global prestige or

(technological) credibility? We believe that the adidas group needs to find a way to earn the

brand loyalty of opinion leaders. Those people, who are able to draw public attention to the

products of the adidas group, might be able to transfer their own brand loyalty onto others.

The widely ramified social networks, like ‘facebook‘ and ‘twitter‘, online blogs or platforms

like ‘youtube‘, seem to us as potential tools to gain such attention.

In cooperation with these opinion leaders, the adidas group should be able to set trends and

thereby gain global prestige as well as credibility for their products.

The last question, which we drew from our case study, is asking, whether or not the strategic

aspects of ‘speed‘ and ‘open source‘ contradict themselves. We estimate the anticipated

effects of the ‘open source‘ aspect to be quite time consuming. To us, factors like contract

agreements and the creation of conformity over design or advertisement between the parties,

are baring the potential to loose time in the innovation process. This loss in time would

contradict itself with the goal to reduce lead times of new products. Therefore, we would

suggest the adidas group to carefully choose in which projects it is going to cooperate with

external stakeholders and at the same time, run innovations in seasoned product lines

according to the ‘speed‘ aspect of the companies strategy. This way, the adidas group would

be able to increase its in-season release of new products, as well as realize signature projects

with external stakeholders to prestige within the industry.

6. Detailed Sources

1. 2. 3. 4. 5. 6. 7.

�adidas-group.com; History. URL: http://www.adidas-group.com/en/group/history/ (last checked: 28.07.2015) �‘Aktionäre  rechnen  mit  Hainer  ab‘  ;Wirtschafts  Woche,  07.05.2015  (URL:  http://www.wiwo.de/adidas-­‐hauptversammlung-­‐aktionaere-­‐rechnen-­‐mit-­‐hainer-­‐ab/11744286.html  ) �‘Adidas in 2014: what a disappointing year!’; The Montley Fool, 06.01.2015 (URL: http://www.fool.de/en/2015/01/06/adidas-in-2014-what-a-disappointing-year/ ) �See footnote number 2. �‘Adidas Shareholders Upset With Leadership With Stock Price, U.S. Performance Down‘; Sports Business Daily, 06.02.2015(URL: http://www.sportsbusinessdaily.com/Daily/Issues/2015/02/06/Finance/Adidas.aspx ) �See  footnote  number  3  �See  footnote  number  2  

 

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