Adidas AG is one of the biggest multinational corporations in the sports goods industry created by Adolf and Rudi Dassler. The company is involved in the production of athletics apparel, footwear, and accessories for both male and female customers of any age (though the target audience falls into the age group between 18 and 29). The company is headquartered in Herzogenaurach, Germany, and has 170 subsidiaries in Europe, the United States, and Asia, each operating within its own segment of the market. The Group operates through several major brands: Adidas, Reebok, TaylorMade-Adidas Golf, FC Bayern Munich, and Runtastic (an Austrian company focused on fitness equipment) – the collective revenue of it amounted to 19.29 billion in 2016. Adidas is currently the leader of the industry in Europe (taking the second position in the world rating) (Ratten & Ferreira, 2016).
The Company Profile
Year of foundation: 1924.
Year of brand registration: 1949.
Founders: Adolf and Rudolf Dassler.
Key products: male and female sportswear, sports equipment, accessories (including bags, watches, glasses, etc.), perfume, cosmetics.
Subsidiaries: Adidas, Reebok, TaylorMade-Adidas Golf company, FC Bayern Munich, and Runtastic.
Brand slogan: “Impossible is nothing” (Ratten & Ferreira, 2016).
Business Vision and Mission
Adidas views itself as an innovative, rapidly developing company aimed to provide sustainable high-quality sports apparel, equipment, and accessories that empower every person related to sports (ranging from amateurs to professional athletes) to achieve his/her maximum potential (Rothaermel, 2015).
According to the mission statement of the company, it does its best to reach the position of the world leader in the given industry and continue to build its brands on an unceasing passion for sports and fitness lifestyle. Moreover, Adidas strives to meet customers’ requirements in quality while exceeding their expectations in choice. This is achieved by creating a wide variety of sports goods belonging to the last generation as for their use of technologies in order to ensure quality, comfort, and creativity of design. Operating in a highly competitive industry, Adidas leaders are deeply committed to the further development of their brands and can guarantee excellent performance results to all shareholders as well as career opportunities to their employees. Moreover, the company claims to be environmentally responsible, which manifests itself in the use of sustainable materials and special production techniques (Rothaermel, 2015).
The company states that its major target market consists of sports professionals, who are striving to achieve the highest level of performance. However, Adidas also aims to satisfy the needs of those who are not in professional sports but who are inspired by fitness lifestyle. Fitness apparel the company produces is designed to suit athletes and non-athletes of all levels of physical activity and preparation. In its strategic positioning statement, the corporation indicates that it produces goods for people of any age and gender through their strongest market consists of athletes and amateurs aged between 20 and 29. However, Adidas is also planning to strengthen its brands to be able to meet the needs of the next generation of young people (app. 14-19 years old) as the company believes that this consumer group has a potential to become the most influential in the market (Ratten & Ferreira, 2016).
Sportswear industry has seen significant growth in the United over the last decade due to the increasing popularity of healthy lifestyle and fashion for casualization of dress codes (wearing sports clothes and shoes for performing daily activities). A huge number of companies currently enter the industry, which accounts for its high competitiveness. The present-day unquestionable leader is Nike holding a 22% value share. The company shares its target audience with Adidas although its products are more committed to fashion (Ratten & Ferreira, 2016). The industry is expected to remain strong and continue to grow at a high speed. This is explained by the trend of making everyday apparel casual and functional: It is likely to become acceptable to wear sports clothes at various social gatherings. Such popularity of sportswear outside the world of sports will allow current leaders to expand their target audience and will certainly bring new players to the market. This implies that Adidas will need to develop a more rational strategy to be able to stay afloat and maintain its popularity (Rothaermel, 2015).
Strengths (Nemati & Sajadi, 2015):
- Positive brand image: Along with Nike, Adidas is the most popular agent in the market. It is the leading brand in Europe and Japan while Reebok is also among the top manufacturer in the United States. The company has managed to ensure customer loyalty.
- Strong infrastructure: Adidas has an extensive marketing infrastructure allowing it to reach a wide range of customers by selling goods in retail stores and franchised shops.
- Geographically diversified operations: Adidas operates in Europe, Asia, North America, and Latin America, which implies that it can acquire greater economies of scale in the future.
- Successful presence in the 2010 FIFA World Cup: The company acted as an official sponsor, supplier, and licensee of the event, which had an enormous impact on the brand mostly due to the unprecedented coverage of the competition by mass media. Immediately after the beginning of the FIFA World Cup, Adidas achieved its record sales and was consequently brought to a new performance level.
Weaknesses (Ratten & Ferreira, 2016):
- Dependence on third party suppliers in production: The company has already outsourced 95% of its manufacturing to suppliers to Asia (32% of which are located in China).This resulted in substantial savings but also led to the loss of control over quality.
- The decline of soccer footwear sales: Adidas soccer shoe production is now experiencing a decline, while Nike footwear is gradually winning the European market.
- Use of sweatshops: The corporation is often criticized for resorting to cheap labor and sweatshops with inhumane conditions in Asia.
Opportunities (Ind, Iglesias, & Schultz, 2015):
- Sponsorship contracts: Adidas now has such agreements practically for all major international events (FIFA, UEFA, Olympics, etc.). If the company extends its partnership with organizers of these competitions, it will safeguard its profitability and enhance brand equity, which is sure to attract new customers.
- The growing role of sports in the solution of obesity problem: Since obesity has become an issue of paramount importance, a lot of government and private organizations promote a healthy and active lifestyle. This gives the company a chance to promote its products in a new direction.
- Women apparel: Currently, the major revenue of the corporation comes from male sportswear; however, the female segment shows a promising potential especially in design issues.
- Footwear market: Despite worrying tendencies in soccer shoe sales, Adidas can gain a lot from the footwear market, which is now steadily growing.
Threats (Rothaermel, 2015):
- Macroeconomic hazards: Sales development largely depends on consumer spending affected by economic declines, political problems, public unrest, and other factors that may hit the regions where the company operates.
- Unpredictable demand: Since consumers have a great choice, they are now very picky, which makes it hard for Adidas to anticipate their response to new products. The demand for particular categories of goods may fall unpredictably.
- Customer bargaining power: The market of sportswear is customer-dominated. Their bargaining power is growing due to the high competitiveness of the industry. This can have a negative effect on revenues.
- Increasing competition: Adidas has to compete with other industry giants while new players continue to enter the market. This also creates a potential hazard for the company’s success.
Adidas manufactures a huge mix of various products for a number of sports: running, football, tennis, table tennis, basketball, cricket, golf, boxing, hockey, martial arts, taekwondo, skateboarding, etc. The products include fitness equipment, shoes for all the enumerated sports, tops, jackets, pants, socks, sweaters, jerseys, shorts, tights, tracksuits, swimwear, sleeves, undergarments, scarves, sleeveless, shirts, fleeces, jumpsuits, denim, dresses, football kit, racquets, bands, balls, helmets, gloves, punching bags, golf bags, travel gear, hats, umbrellas, belts, karate uniform, judo uniform, electronic body protectors, ropes, mats, eyewear, watches, miCoach (apps for all platforms), etc. (Nemati & Sajadi, 2015).
The corporation uses both competitive pricing and skimming. The former policy is used for products that are offered by a number of companies and allows keeping in mind big actors of the industry (such as Nike, Puma, Under Armour, etc.). The latter pricing strategy is used for originally designed goods that have no alternatives or have just been introduced to the market. Judging by prices, the target audience is upper-middle and high-class customers who can afford luxury sportswear. The company uses penetrative pricing that enhances brand equity. Adidas rarely drops its prices (Rothaermel, 2015).
Adidas promotes its products launching numerous advertising campaigns that help communicate their commitment to innovation and tell great success stories motivating potential customers to follow the example. Television commercials act as a major promotion format, especially during popular sports events. Most of them feature a song or a melody to make the product more memorable. Besides, Adidas also makes use of celebrity power (e.g. David Beckham) and sponsors entire teams to increase the prestige of their brand (Nemati & Sajadi, 2015).
As far as distribution place is concerned, the corporation has its own network of retail and franchise stores. Its products are also distributed in a number of multi-brand showrooms alongside their competitors’ apparel. There is an official site of the company; however, purchasing Adidas goods is equally possible via online fashion stores (Nemati & Sajadi, 2015).
The distribution channel can be represented by the following scheme (Rothaermel, 2015):
- Production > Adidas stores > Customer;
- Production > Distributor > Multi-brand showrooms > Customer;
- Production > Online stores / Adidas website > Customer.
Critical Comments on Marketing Plan of the Organization
A critical assessment of the company’s marketing plan reveals that its strategies are most successful (which is evidenced by the increased revenue and ongoing expansion). The pricing and distribution policies are well-developed and effective. However, its leading market position achieved due to quality, diversified operations, and strong infrastructure, maybe undermined with the appearance of new competitors in the market, which is already highly dense. In addition, the use of sweatshops mars the reputation of the brand. The company has to address this point in their marketing plan as the majority of its customers are not indifferent to the brand image. Another aspect that gives concerns is extensive outsourcing, which may tell on the quality of the product. These issues have to be resolved for Adidas to maintain its position in the market.
Ind, N., Iglesias, O., & Schultz, M. (2015). How Adidas found its second wind. Strategy+ Business, 1(80), 1-5.
Nemati, C. K., & Sajadi, S. N. (2015). Green marketing mix impact on the sporting goods consumers’ purchase behavior (case study: Adidas consumers). Journal of Social Issues & Humanities, 3(8), 140-144.
Ratten, V., & Ferreira, J. J. (Eds.). (2016). Sport entrepreneurship and innovation. London, UK: Routledge.
Rothaermel, F. T. (2015). Strategic management. New York, NY: McGraw-Hill.