Cristina Barquín and Cristina Cerezo

Group 70

BUSINESS RIVALRIES

Throughout the years many new brands have come up, and many others have grown,
acquiring more popularity and power. One of the most important issues we have to take
care of before starting a business is the kind of market we are entering into. Depending
on this, we will face different levels of rivalry and competition, which will determine
our capacity to control the prices. But first of all, how can we define competition? Well,
a market can be defined as “a group of buyers and sellers of a particular good or
service” (Mankiw, 2015) If the number of sellers is higher, they will have less power in
order to control prices and buyers, and if the number of sellers is low, buyers will be the
ones affected. That’s why firms will try to differentiate themselves to appear unique and
special to the consumers. This is a quite simple explanation for market competition: the
firms’ fight for control. From perfect competition to monopoly there is a big spectrum.

There have been numerous fights between firms throughout history, and some of them
have even benefited both parties because they get known by the effort their rival makes
in order to turn them down. Beginning with Apple vs Samsung, McDonald’s vs Burger
King, Starbucks vs Costa; to the rivalry in the sports industry: Adidas vs Nike vs Puma.

Let’s start with the history of the three main companies in this sector.
Adidas and Puma started in Germany. The Dassler brothers (Adolf and Rudolf)
launched a company for producing footwear in their own home. However, as their
company started getting known and their sales started to increase, the brothers’
relationship became worse. In a family business it is easier for conflict to arise (2).
From that point the firm can go in different ways. In this case, at the end of the Second
World War, the company had already been split. Adolf, whose nickname was “Adi”,
named his company “Adidas”; whereas Rudolf started his business naming it “Ruda”
and changed it to Puma some time later.(3)(4)
In what concerns Nike, it was founded in 1964 by the runner Phil Knight and his track
coach Bill Bowerman (5). At first, they called it “Blue Ribbon Sports” (BRS). When
they improved from sneaker distributors (they distributed Japanese running shoes in
races) to manufacturing original designs, they changed the name to Nike (as the Greek
Goddess of victory).(Just Watch It, 2015)

They have grown to be rivals, but, are they really in the same page? To be certain about
this, it is relevant to know their income levels, debt levels, etc. According to data
obtained from Osiris’ database, we know that Nike’s billing in 2017 was of 34.350.000
mil USD, whereas Adidas’ was of 23.213.000 USD and Puma’s 4.301.000 mil USD
(updated the 19/12/2017). Also, this information can be contrasted with each company’s
annual report (7).
As we can see, Nike and Adidas are pretty close (there is still a great difference) in
terms of sales, but Puma is farther away. This leads us to think that the real “battle” is
between the two first sports companies.

However, is it really true? First of all, going back to 2012, Puma was struggling to
maintain its place in India. They continued with their “strategy of slow and sustained
growth“ (8) and it is already giving results. While Adidas, Nike and Reebok were facing
a hard time, the late entrance of Puma in the Indian market has given them the
advantage of learning of the other’s mistakes before making them again.

Having spoken about the weakest of all, it is time to really get to know Adidas and
Nike. Starting with the other brother, Adidas started thinking about merging with
Reebok back in 2005. At that time, Nike was the strongest of the market, so the idea of
merging and expanding in the US was a strategy that seemed interesting. (9)(10). This
merge gave a lot of advantages (as sharing technology and therefore reducing costs or
capturing emerging markets), but it also gave rise to obstacles and disadvantages; the
size of both firms made very difficult the process of bringing them under the same
management, and the sharing of the global markets could reduce the total market share,
too. Also, a merge in an oligopoly as this kind of market is, will make competitors to
start thinking about strategies to defend themselves (both companies feared a possible
future merge between Nike and Puma). The merger was a great success, but Nike is still
standing in the top of the market.

Having spoken about Puma and Adidas, and after seeing their strategies, we conclude
with the affirmation that, even though they have grown and improve, Nike can’t be
destroyed for the moment. So the question is, how did Nike become such a strong firm?
The answer can be found in the amount it spends in advertising: over 3 billion of USD,
focusing mainly in sponsorship, internet and email marketing, and multimedia
marketing campaigns. The firm has a strong department which chooses to focus in
selling a lifestyle, product quality and in having a wide variety of products (apart from
selling different kinds of items, it owns the brands of Converse, Hurley and Jordan). It
also bets for giving professional athletes a better performance, as we can see in the
following graph (11).

As time goes by, people are starting to realise how important is our health, and therefore
they are taking more seriously what they eat and they are also starting to do more sport.
These are good news for Adidas, Puma, Nike and any other sport brands due to the
increase of sales that they will have. Since there are many different brands that offer
similar products, they have to use different promotion strategies. As we can see in
Puma’s annual report, their advertising slogan was “Year of the Cat” making a
reference to their logo, which is a cheetah. This is one of the companies that spends
most money on advertising by using famous ambassadors such as Cara Delevingne in
fashion or Antoine Griezmann in football. (reference a los annual reports)

On the other side, Adidas focuses in three main strategies: speed, cities and open source.
Their market is mainly about sports; their interest in fashion compared to Puma’s is not
as wide. It can be observed in their annual earnings, as we mentioned before with the
data from Osiris, that although they do not have such a wide market as Puma, their
earnings are slightly higher. This could be due to the fact that they sponsor many
football teams, something by which they are very famous. According to a scholarly
journal depending on the brand that is sponsoring you, you have more or less
possibilities to win. As Adidas is more focused on sports, it is the one with the highest
probability of winning a match; whereas Puma or Nike have lower chances.

Following this train of thought, we can compare the three firms by their performance in
the World Cup 2010. In the WC 2010 in South Africa, twelve teams were sponsored by
Adidas, nine by Nike and seven by Puma. Only one of the Adidas teams got to the final
in all four WCs. Nike could do it three times and Puma just one. The category of “other
sponsors” only managed to get a team into the semifinals once. (12)

Business rivalries allow companies to grow, improve and progress, moreover in the
world we live nowadays, which is characterized by globalization. Globalization has
some great advantages (thanks to it we can find almost everything we want anywhere),
but it also has disadvantages as the loss of culture. It is a process that is affecting the
market we wrote about, making changes in the society reaching a point where we mix
sports and fashion. As you walk on the street you can see people wearing sport clothes
(bottoms, trainers, tracksuits…) as normal clothes (13) (something that might have
seemed something difficult to imagine a few years ago). But here we are, considering a
man with sports clothes as a fashion man, an up-to-date man, a trendy man.

In conclusion, after reviewing this topic, we’ve gained knowledge about how important
are for this business both rivalry and globalization, and how these two concepts are
highly related. We are waiting to see the companies’ next moves, because something we
have surely learned is that the competition between firms benefit us, consumers.

REFERENCES
(1) Mankiw, N. (2015). Principles of microeconomics (7th ed.). Mason (Ohio):
Cengage Learning.

(2) Alderson, K. (2015). Conflict management and resolution in family-owned

businesses. Journal of Family Business Management, 5(2), 140–156.
https://doi.org/10.1108/JFBM-08-2015-0030
(3) Dommenget, O. (2016). Duell der Brüder - Die Geschichte von Adidas und
Puma. Germany: Zeitsprung Pictures.

(4) Connolly, K. (2009). Adidas v Puma: the bitter rivalry that runs and runs | Sport
| The Guardian. The Guardian. Retrieved from
https://www.theguardian.com/sport/2009/oct/19/rivalry-between-adidas-and-
puma

(5) Nike Story - Profile, History, Founder, Founded, CEO | Footwear

Manufacturing Companies | SuccessStory. (2017). Successstory.com. Retrieved
13 December 2017, from https://successstory.com/companies/nike-inc

(6) Just Watch It. (2015). Retrieved from

https://www.youtube.com/watch?v=2U6vKwAAmqY

(7)
1. Adidas AG. (2016). Adidas Group Annual Report 2016, 226. Retrieved from
https://www.adidas-group.com/media/filer_public/a3/fb/a3fb7068-c556-4a24-
8eea-cc00951a1061/2016_eng_gb.pdf
2. Puma SE. (2016). PUMA SE Annual Report 2016, 218. Retrieved from
http://about.puma.com/en/investor-relations/financial-reports
3. Parker, M. (2016). NIKE, Inc, May 31, 2016 Annual Report /10-K, 83
http://investors.nike.com/investors/news-events-and-reports/?toggle=earnings

(8) Singh, R. (2015, Jun 11). Smart marketing & prudent attitude took puma to the
top of the sports shoe heap brand equity]. The Economic Times (Online)
Retrieved from https://economictimes.indiatimes.com/magazines/brand-
equity/smart-marketing-prudent-attitude-took-puma-to-the-top-of-the-sports-
shoe-heap/articleshow/47599897.cms

(9) Essays, UK. (November 2013). Adidas And Reebok Merger Marketing Essay.
Retrieved from https://www.ukessays.com/essays/marketing/adidas-and-reebok-
merger-marketing-essay.php?cref=1
(10) Geiger, M., & Geiger, M. Reebok Transaction and First Half Year 2005
Financial Results Presentation August 3, 2005, Conference Call 10:30 a.m.
(CET) (2005)., 1–14. From adidas-group.com

(11) Keller, C. (2017). Nike Strategy - How Nike Became Successful and the
Leader in the Sports Product Market. Profitworks.ca. Retrieved 13 December
2017, from https://profitworks.ca/blog/marketing-strategy/545-nike-strategy-
how-nike-became-successful-and-the-leader-in-the-sports-product-market.html

(12) Groot, L., & Ferwerda, J. (2015). Soccer jersey sponsors and the world
cup. International Journal Of Sports Marketing & Sponsorship, 16(5), 2-19.
http://dx.doi.org/10.1108/ijsms-16-05-2015-b002