University of Santo Tomas

College of Commerce
And
Business Administration

Case: Adidas in 2008: Has Corporate Restructuring Increased

Shareholder Value?

Submitted by:
Carlos, Amiel Rave
Catbagan, Joana Rey
Cendana, Kristina Barbara
Chua, Charmaine Jhoy
Chua, Joanne
Chua, Kimberline

4m2

Submitted to:
Professor So

Date: December 13, 2010

BACKGROUND

PROBLEM

Adidas’ strategy is to try and take over the number one position from Nike as the
leader of the global sporting goods industry. Will selling its Salomon ski
equipment business and its bicycle parts business, keeping the TaylorMade Golf
division, and acquiring Reebok turn out to be moves that will pave the way for
adidas to overtake Nike? Its strategy was acquisition that would build up its
capacity and capabilities and position it with greater power of bargaining, with
suppliers, acquire economy of scales, wide distribution network, and variety of
products and economies of scope.

OBJECTIVES

The company’s corporate strategy since 2008 was focused on extending its
leadership in product innovation, creating a differentiated image for the products
offered by each of its three business segments and expanding controlled retail
space through its network of company owned stores

SWOT

Strengths
• Strong management team and good corporate strategy in both North
American and overseas markets

• Created differentiated image of each of its three business segments

namely Adidas, Reebok and TaylorMade-Adidas Golf

• Diversity and variety in products offered on the web (footwear, apparel,

sporting equipment, etc.)

• Brand recognition and reputation

• Trademark "Impossible is Nothing"

• Strong control over its own distribution channel

• Strong customer base

• Strong financial position with minimal long term debts

• Innovative designs in footwear enabling consumers to design their own

shoes online
 • Brand reputation and recognition

• Emerging brand name

• Pricing strategy is competitive to Nike's

• Merger with Salomon will allow Adidas to gain a strong foothold in the
Skiing Industry

• Expanding controlled retail space through its network of company owned

stores

Weaknesses
• Negative image portrayed by poor working conditions in its overseas
factories

• E-commerce is limited to USA

• Direct sale to consumers is creating conflicts with its own resellers

• Not known for its research and development leading to innovative designs

• Currently available supply chain, manufacturing, and fulfillment

technologies aren't easily integrated with online build-to-order systems

• The e-commerce is limited to USA, however, has planned to expand to

Canada and international in the near future

• Online customer service not helpful or easy to find

• A line of shoes targeted towards athletes should not be so heavy

• Limited product line

Opportunities
• Partnerships with major exporting events around the world

• Increase female participation in athletics

• Sign-in contracts with famous athletes for endorsement

• New technology and innovation to stay on top of market needs

• Expand e-commerce to global markets

• Partnering up with other retailers to sell basketball footwear and apparel

• Change in consumer lifestyles

 • Available technological innovations

• Entering new markets

• Expand customer base geographically or through new products

• Expand product/service lines

• Market Diversification

• Invest in mergers or takeovers

Threats
• Competition from foreign markets
• Competitor's actions
• Change in consumer lifestyles
• Changing consumer patterns
• Growing power of customers to set the price
• Growing power of suppliers to set the price
• Financial slowdown
• New competitors entering the market
• Price war between competitors
• Negative image created by the sponsored athletes
• Continuing challenges in import/export duties

THEORETICAL FRAMEWORK

MISSION

To continuously strengthen our brands (Adidas,Reebok, TaylorMade) and

products to improve our competitive position and financial performance:

VISION

Strives to be the global leader in the sporting goods industry with sports brands
built on a passion for sports and a sporting lifestyle.

The Porter's five forces framework

• Threat of New Entrants

High due to the large economies of scale needed for manufacturing, distribution
and research and development

• Threat of Substitutes
Substitutes for Adidas products come from rival manufacturers such as Nike,
Puma, Asics, and New Balance. In addition to large rivals, substitutes come from
smaller and more localized companies around the world.
 • Bargaining Power of Buyer
Customers carry large bargaining power as they can always threaten to buy rival
products. Switching costs are typically very low due switch to a rival’s products if
the rival offered trendier or hotter product.

• Bargaining Power of Supplier

The suppliers’ bargaining power is high as well, since Adidas makes contracts
with famous athletes or teams (such as NY Giants, LA Lakers, David Beckham),
to promote.

• Rivalry between Competitors

Adidas largest rival is sporting apparel giant Nike, which controls over most of the
worldwide market for athletic shoes. In addition, other much smaller rivals in the
United States and Europe includes Puma.

Macro Environment :

Political
• control and monitor hazardous substance to protect human health and
environment
• protects and supports the rights of its employees by following all the
current employment laws
Economic
• decrease unemployment by increasing the number of employees every
year
Social
• products are always in fashion with unique design
Technology
• maker of world’s first smart shoes - microchip and wireless mp3 player
along with shoes

Adidas Map Position

AdidasValue Chain

ALTERNATIVE COURSES OF ACTION

• Strengthen the relationship with customers by reaching them in the

internet and ask for feedbacks for the purpose of knowing what the
customer prefers.
• Sponsorships with different athletes in different sports, to increase brand
recognition.
• Relate their products with different trends and technologies like allowing
athletes to connect their shoes with their iPod to count how many steps
they make while running and the like.
• Have a showroom for all their products like shoes and apparels. Organize
a fashion show for all their products.
• Conduct a market survey to know the customer’s perception and to be
able to come up with new strategies that will keep the customers loyalty to
Adidas.
• Intensify advertisements to retain the brand in the customers mind.
• Sponsor different sports events and give souvenirs to participants so that
they will relate the brand with their everyday lives.

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