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CASE OVERVIEW
WHO IS ADIDAS?
Adidas AG is a German sports apparel manufacturer and head company of the
Adidas Group which own the Following Brands
Reebok sportswear company
Taylor Made- Adidas golf company (including Ashworth)
Rockport
Besides sports footwear, the company also manufactures other products such as
bags, shirts, watches, eyewear, and other sports- and clothing-related goods.
Adidas was founded in 1948 by Adolf "Adi" Dassler, following the split of
Gebrder Dassler Schuhfabrik between him and his older brother Rudolf.
The brother had a conflict and Rudolf decides to start his own company
named Puma
In the year 2006, Adidas businesses were organized under three units
1. Adidas divided the brand into three main groups with each a separate
focus:
2. Reebok
3. Taylor-made Adidas Golf.
BRAND LOGO
The company's Brand Portfolio
The Adidas Group strives to be the global leader in the sporting goods industry with
sports brands built on a passion for sports and a sporting lifestyle.
We are dedicated
to consistently delivering outstanding financial results.
We are innovation and design leaders
who seek to help athletes of all skill levels achieve peak performance with every product we bring to
market.
We are consumer focused
and therefore we continuously improve the quality, look, feel
and image of our products and our organisational structures to
match and exceed consumer expectations and to provide them
with the highest value.
We are a global organisation
that is socially and environmentally responsible,
creative and financially rewarding for our employees
and shareholders.
We are committed
to continuously strengthening our brands and products to improve
our competitive position.
Company Slogan
SWOT ANALYSIS:
Internal Analysis External Analysis
STRENGHT: OPPORTUNITIES:
Styles are distinguished from other brand by three Big company opportunity in North America market
stripes applied to each side of the shoe. because it was the largest market for athletic apparel.
Product strongest category is soccer with market shares Market for sports lifestyle apparel and footwear is
of 50% than Europe. growing faster.
Product innovation on its features and used. Expand fashion marketing through more fashion based
Asia is Adidas largest market share endorsements rather than sports.
The upper and middle price market can be covered. Golf equipment selling price in Asia is higher than any
Reebok and Adidas can share R nD pattents and place in the world.
innovations.
WEAKNESSES: THREATS:
Adidas product small sales contribution is the street Declining attractiveness of the winter sports industry and
wear and lifestyle fashion integration problems between the Adidas foot wear and
Complexity of joining two corporate cultures apparel business.
Different values among management. (British and Nike strong reputation in the footwear and apparel
German) industry.
Nikes growing market share in sportswear, mainly
footwear
The Golf equipment industry reach the maturity on
product cycle.
Strategic Implication
The acquisition diversified the company footwear and apparel as ski equipment
golf club, bicycle components and winter sports apparel.
Diversification
1. Herbert Heiner see it can reduce costs by diversifying into closely related
businesses
2. Adidas powerful brand name can be transfer to Reebok to increase sales
and profits of footwear business.
Acquisition of Reebok (Related or Unrelated?)
Unweighted/Weighted Ratings
Athletic
Footwear & Casual Mens Hockey
Attractiveness Measure Weight Apparel Golf Equipment Footwear Equipment
Market size and growth rate
0.20 7/1.4 4/0.8 4/0.8 2/0.8
Intensity of competition
0.15 5/.75 6/0.9 4/0.6 10/1.5
Resource requirements
0.10 8/0.8 7/0.7 8/0.8 6/0.6
TaylorMade- CCM/Rbk
Strength Measures Weight adidas Reebok adidas Golf Rockport Hockey
Gross Profit Margin 48.2% 48.0% 44.9% 43.2% 42.6% 43.3% 43.9% 41.9%
Operating Profit Margin 10.7% 10.0% 7.8% 7.3% 7.8% 7.5% 9.0% 8.2%
Net Profit Margin 6.4% 5.6% 4.1% 3.5% 3.4% 3.1% 4.2% 4.0%
Return on Assets N/A N/A N/A N/A N/A N/A N/A N/A
Reebok -- -- -- -- -- -- -- --
TaylorMade-adidas Golf 7.1% 7.6% 10.5% 10.5% 11.6% 10.0% 9.2% 7.6%
Reebok -- -- -- -- -- -- -- --
TaylorMade-adidas Golf 7.2% 7.8% 17.1% 17.1% 19.9% 20.1% 19.2% 20.2%
In this adidas athletic footwear & apparel and TaylorMade Golf are the
financial strength of the portfolio.
From Table 4. The operating profit margins of both business units during
1998 - 2004 exceeded that of the Salomon business unit in each year
except 2000 and 2001.
In addition, the operating profits as a percentage of operating assets for
the adidas unit and TaylorMade unit were much better than that of
Salomon in all years between 1998 and 2004. Y
The exception of Salomons performance in 2004, Reeboks operating
profit margins are no more attractive than those recorded by Salomon.
The financial ratios shown in Table 5 provide further evidence that
neither Salomon nor Reebok are strong resource contributors to adidas.
Reeboks poor performance is largely responsible for the companys
overall decline in profit margins since 2005.
Cash Cow and Cash Hog 1998
Cash Cow and Cash Hog 2005
Table 6 Estimated Cash Flow For Adidas Business Units,
1998 - 2005
Operating Profit 693 564 365 343 352 391 431 412
Estimated Cash Flow 624 535 358 322 296 350 371 358
Reebok
Operating Profit -- -- -- -- -- -- -- --
- Capital expenditures -- -- -- -- -- -- -- --
Operating Profit 50 48 67 74 63 44 30 20
- Capital expenditures 17 9 12 49 16 12 10 16
The divestiture of the Salomon winter sports and Mavic bicycle components
businesses was a good decision. The two businesses offered little strategic fit
beyond what was possible in apparel and was a drag on earnings.
There are also on the ability of the Reebok International acquisition to
improve the companys poor performance in the North American marketplace
for athletic footwear.
Reebok branded footwear gave the company a combined market share of
approximately 21% in North America, there was little evidence that the
acquisition helped adidas close the competitive gap with Nike.
The Reebok acquisition was intended to address the companys weakness in
the mens basketball category of the North American athletic footwear market
but Reebok was no stronger in the basketball category than adidas.
Reeboks strength in footwear markets focused on beginning runners and
womens casual shoes contributed to its low profit margins because of the
likely strong price competition in those segments.
ANSWER: 5