Current battle with Nike regarding gaining market share in North America

1. adidas Group
Brad Andal
Jeff Leong
Kyle Mattson
Joel Myers
Sudhir Pathak
November 28th, 2012
Mgmt 4090

2. Key Strategic Issues
• Specific Focus on North American Sporting Apparel
Market
• Direct Competition again Nike
• How does adidas gain a larger market share in
North America?
North American Shoe Market
• Nike has 43.1%
• Adidas has 13%

3. •Company overview
•Culture
•External Environment
•Internal Environment
•Financials
•Recommendations
•Conclusion

4. adidas Group Overview
• Founded in 1949 by Adolf Dassler
• “Adi” = Adolf “Das” = Dassler
• Focused on athletic shoes and Apparel
• Three main units: Adidas
Reebok, Taylor-Made
• Over 170 subsidiaries
• Over 42,000 employees

5. Corporate Culture
• Leadership: Adolf Dassler/Hebert Hainer
• Talent/Succession Management
• Rewarding Employees
• Work Life Balance
Ethics
• Accusations
• Cancelling Contracts

6. External Analysis
High Rivalry among Competitors
• Intense rivalry between adidas & Nike for
market share
• Powerful competitive strategies
used by market leaders

7. External Analysis
Low Threat of New Entrants
• Strong brand preferences and customer
loyalty
• Market leaders benefit from
significant economies of
scale
• Difficult for new entrants to
establish distributor/retailer
networks

8. External Analysis
High Threat of Substitute Products
• Substitutes are readily available and
attractively priced
• Low Switching Costs
• Low Supplier Power
• Manufacturing is outsourced
to low cost producers

9. External Analysis
High Buyer Power
• Buyers benefit from intense rivalry for
market share
• Low switching costs for buyers
• Buyers have discretion in
purchasing products
• Buyers are well informed on
purchased products due
to intense marketing

10. PEST Analysis
Political
• Employment laws
• Environmental Regulations
Economic
• Recession
• Economic Growth
• Oil Prices/Cost of inputs

11. PEST Analysis
Social
• Consumer trends, age distribution
• CSR demands, safety
Technological
• Intellectual property
• Market Consolidation
know –how
• Constant innovation

12. KSF’s
 Well-known and well-respected brand
name
 Clever target advertising campaigns
 Strong distribution and retail channels
 Direct sales capabilities
 Expertise in sporting apparel
technology and R&D
 Constant Innovation
(live or die)

13. SWOT Analysis
STRENGTHS
WEAKNESSES
Strong financial Position All product outsourced
Strong brand recognition Wholesale business doesn't give adidas
Large portfolio of IP & patents control over customer experience at point of sale
Established online presence Wide breath of brands and products
Large portfolio of strategic partnerships may spread resources thin causing lack of
with designers, teams, & athletes focus on core competencies
Diverse distribution channels
Diverse breath of brands and products
OPPORTUNITIES
THREATS
Emerging high growth markets: China Cut throat competition
Apply technologies across multiple brands Increase in the cost of inputs
and product lines Government regulations in countries where
Use of social media as marketing tool products are produced
to capture the important youth demographic Economic slowdown
Growth through acquisitions/merger Negative PR (partnerships/CSR/etc.)
Lots of room to carve market share from
competitors

14. Financial Analysis
Key Metrics
Net Sales (€ in millions)
2010 2011
Sales
(year-over-year change) 9.0% 13.0%
Gross margin 47.8% 47.5%
Other operating expenses (% of
sales) 42.1% 41.4%
Operating margin 7.5% 7.6%

15. Financial Analysis
Liquidity & Debt
Metric 2011
Quick Ratio 0.92
Debt Ratio 0.53
Debt-to-Equity 1.13
Interest Coverage 7.2

16. Financial Analysis
Other Measures
Metric 2011
Marketing budget (percentage of sales) 10.2%
O
R & D budget (percentage of sales) 0.01%

17. Recommendations
Make Corporate Social Responsibility
a Focus
• Sensitive market
• Learn from Nike mistakes
• Labour Laws and Regulations
• Sustainable Materials
• Supernova Glide 3 running shoe
• DJSI
• #38 Corporate Knights list
• Promote/Advertise CSR accomplishments

18. Recommendations
Increase Marketing and R & D
http://www.youtube.com/watch?v=3Hp-u7LVXPQ
• Two biggest G & A expenditures that drive market
growth
• R&D
• Invest in product customization
• Marketing
• Athletes endorsement
• Social Media

19. Recommendations
Increase Own Retail Presence
• Customer Experience
• Control space
• Franchising
• Risks

20. Recommendations
Market Share Through Acquisitions
• Under Amour
• $5.67 Billion Market Cap
• Trading at $54 per share
• Lululemon
• $10.40 Billion Market Cap
• Trading at $72 per share

21. Summation
It will not be a quick and easy process to
gain market share from Nike in North
America

22. Questions?