CHAPTER II-COMPANYPROFILEHISTORYAdidas is a multinationalcompany and it was founded, and its head office is located Herzogenaurach whichis in Germany, the company designs and manufactures various commodities like shoes,clothing and accessories and said to be the largest sportswear manufacturer inEurope and the second largest in the world after Nike, which is its rivalcompany.Adolf Dassler in hismother’s house started the company and was joined by his elder brother Rudolf laterin 1924 under the name Dassler Brothers Shoe Factory.
In 1949, due to thebreakdown in the relationship between the brothers, Dassler created Adidas, andRudolf established Puma, which became Adidas’ business rival.The three stripes logo byAdidas, which is used on the company’s clothing and shoe designs as a promotionlogo – The branding of Adidas was bought from Finnish sports company KarhuSports which Dassler described Adidas as “The three stripes company”as the branding become very successful. After the split up inrelations between the two brothers in 1947 which led to the formation of newfirm by Rudolf which he named Ruda and was derived from Rudolf Dassler whichwas later rebranded as Puma, and Dassler formed his company on 18 August 1949,which was formally registered as Adidas AG, derive from Adi Dassler. “All Day IDream About Sports” is said to be the acronym for Adidas, though it is a mythbut in real, the name is formed due to the combination of two words i.e. “Adi”(a nickname for Adolf) and “Das” (from “Dassler”).Puma and Adidas hadbecome bitter business rivalry after the split of Dassler Brothers Shoe Factoryin 1947, and due to this even the town of Herzogenaurach was divided on theissue which lead to the nickname “the town of bent necks” and at thattime people looked down to see which shoes strangers were wearing.
Even twofootball clubs of the towns were divided as Adidas supported the ASVHerzogenaurach club, while Puma supported 1 FC Herzogenaurach. When anodd-jobber were called to Rudolf’s home, the used to wear Adidas shoe deliberatelyso that Rudolf Dassler would tell them to go to the basement and pick out apair of Pumas shoe for free. PRODUCTPROFILEAPPARELA wide range of clothingitems is sold by Adidas ranging from tracks, t-shirts, leggings, socks,jackets, hoodies, etc.Franz Beckenbauertracksuit was the first Adidas item of apparel created in1967. The largest manufacturer of sports bras in Europe is Adidas, and is also thesecond largest manufacturer in the world. SPORTSWEARAND SPORTS EQUIPMENTSA wide range of sportwearrequired in different sports like cricket, basketball, football, tennis,skateboarding, khabaddi is also manufactured by Adidas. Moreover, adidas alsomanufactures sports equipment like cricket bat, football and has been officialsupplier of the match ball in FIFA world cup.
Since different sportsgames require different outfits and so a wide range of different shoes are alsomanufactured by Adidas like boots worn by football players, running shoes forathlete, shoe worn by cricket players, tennis players, etc.Sports equipment of golf arealso manufacture by Adidas under the sub-head ‘Adidas Golf’.ACCESORIESAdidas manufacturesaccessories for both men and women ranging from watches, eyewear, bags, baseballcaps, and socks. As well, Adidas also has a branded range of male and femaledeodorants, perfumes, aftershave and lotions. Mobile accessories alsomanufacture by Adidas. CLIENTPROFILEClient of Adidas includesathletes, sports personalities from different sports and also Adidas is theofficial sponsorship of various teams in different sports, players fromdifferent sports field, etc.Adidas has also providedbaseball equipment and sponsors numerous players of Major League Baseball andNippon Professional Baseball in Japan.
From 1997 to 2008, Adidassponsored New York Yankees. In the 1990s, Adidas signed thesuperstar Indian batsman Sachin Tendulkar and made shoes for him. From 2008till his retirement, Adidas had sponsored the cricket bat used by Tendulkar. Itcreated a new bat, ‘Adidas Master Blaster Elite’, personalized for him. In2008, Adidas made a concerted move into English cricket market by sponsoringEnglish batting star Kevin Petersen after the cancellation of his lifetime dealwith Woodworm, when they ran into financial difficulties.The following year theysigned up fellow England player Ian Bell, Pakistan opening batsman Salman Buttand Indian Player Ravindra Jadeja. In the Indian PremierLeague (IPL), Adidas sponsored the team Mumbai Indians from 2008 to 2014 andDelhi Daredevils from 2008 to 2013. They were the official sponsors of PuneWarriors India in 2011 and 2012, however the team was banned from IPL due topayment issues.
In 2015 Season, Adidas sponsored Royal Challengers Bangalore.USA Olympic team membersMcKayla Maroney, Jordyn Wieber, Jake Dalton and Danell Leyva are all sponsoredby Adidas gymnastics. ORGANIZATIONSTRUCTUREFigure1.1The company consists ofseveral senior levels, mid-level and entry level executives which handle itsfunctioning and operations.
A strict organization or hierarchical structure isfollowed within the company to ensure that everything remains in order and thatthe responsibilities and roles are properly divided and distributed.CEOAt the topmost positioncomes with Chief executive officer or CEO which is the highest level in thecorporate company who is the senior most employee of the company and the onewho is responsible for all the successes and losses of the company. Directly within the CEO, there are manypositions which are occupied by those who report directly to him. They are: CFOChief corporatecommunications officerGeneral counselGlobal head of brandsHead of public relationsMember of managementboard, global operationsMember of managementboard, global salesChairman of BoardThis is the secondhighest position in the company and is also a senior level position in thecompany. The chairman has a supervisory or decision-making role in the company.
One needs not just experience but also skills and knowledge to get to thisposition. ViceChairman of BoardAfter the chairman comesthe position of the vice chairman of board. The vice chairman of board directlyoverseas the various departments and ensures that they are working smoothly.Vice chairman of board looks after board related activities and takes part inthe major decision making of the company. Vice chairwoman of thesupervisory board, employee representativeVice chairman of thesupervisory boardMember of the supervisoryboard, employee representative The director of employeerepresentative or member of the supervisory board is the next position in thehierarchical order of Adidas corporate hierarchy.
This individual looks afteremployee relations, employee management and employee welfare at Adidas. Memberof the Supervisory BoardThe member of thesupervisory board is also known as the director and is the person who isresponsible for supervision of different departments. There is a director eachfor each of the Adidas head office and this too is a senior level position.
PRESENTMARKET SHAREAdidas AG is the largestsportswear manufacturer in Europe and the second largest in the world. Thecompany employed approximately 60,617 people worldwide in 2016. The adidasGroup’s global net sales amounted to about 19.29 billion euros in 2016. In thatyear as well, the North American region of the adidas Group generated 21percent of the company’s retail net sales. Footwear and apparel aretwo of the adidas Group’s biggest segments.
In 2016, the company produced 360million pairs of shoes worldwide and 382 million units of sports apparel. As aresult, Adidas has become one of the most popular brands amongst men and womenwhen it comes to sportswear worldwide.FUTURESTRATEGIESAnything and everythingthat can be digitalized will be digitalized. Adidas promise it customers that thecompany will seize every new technology as an opportunity to communicate evenbetter with customers and satisfy their wishes even more quickly. Withthe company new e-commerce business, the company is already closer to thecustomer.
Adidas know that their customers are buying behaviour, their budgets,and their purchasing rhythms and it’s completely clear that the company will besecuring their short-term requirements and production planning with this data. However, according to thecompany it is crucial that they should use this digital connection to swiftlydetect even the smallest changes in the moods of young consumers and react tothem accordingly and the core target group of 14- to 19-year-olds renews itselfevery five years. In these five years, the company is trying their best tomaster every trend, and at the same time understand the regrowing core targetgroup. Regardless of where andhow the customers shop, any company will want to inspire them always andeverywhere and so Adidas have more retail stores than any other competitor, andare the market leader in e-commerce, they are even implementing franchisingmodels in challenging markets like China and Latin America. With more than 2,700retail stores (12 concept stores, including the Running Store and the new OCSin Berlin, as well as 12 outlet stores in Germany), over 11,000 mono-brandfranchise stores (13 in Germany), over 116,000 stores by the company’s wholesalepartners, and around 50 of our own e-commerce platforms, we have anunparalleled network of contact points for our customers in our industry.
These customers thusexperience adidas across all sales channels, and with a uniform appearance atthat. adidas isn’t divided or quartered, it maintains one face for ourcustomers.Adidas is aiming to increasetheir consolidate profit annually up to the year 2020 and to achieve thesegoals, the company is concentrating in their strategic business plan “Creatingthe New” on the factors “Cities,” “Swiftness,” and “Open Source.”FINANCIALINFORMATIONTable1.1 Table1.2ACHEIVEMENTSDOWJONES SUSTAINABILITY INDICESIn September 2017, forthe 18th consecutive time, adidas AG has been selected to join the Dow JonesSustainability Indices (DJSI), the world’s first global sustainability indexfamily tracking the performance of the leading sustainability-driven companiesworldwide. In the “Textiles, Apparel& Luxury Goods Industry”, the company was rated industry best in thecriteria Brand ManagementCustomer RelationshipManagementImpact Measurement andValuationMaterialityRisk and CrisisManagementSupply Chain ManagementEnvironmental Policy andManagement SystemsCorporate Citizenship andPhilanthropyHuman Rights.
The indices serve asbenchmarks for investors who integrate sustainability considerations into theirportfolios, and provide an effective engagement platform for companies who wantto adopt sustainable best practices. The annual review of the DJSI family isbased on a thorough analysis of corporate economic, environmental and socialperformance, assessing issues such as corporate governance, risk management,branding, climate change mitigation, supply chain standards and labourpractices. FTSE4GOODINDEX SERIESIn December 2016, adidaswas again included in the FTSE4Good Index.
FTSE Russell (the tradingname of FTSE International Limited and Frank Russell Company) confirms thatadidas has been independently assessed according to the FTSE4Good criteria, andhas satisfied the requirements to become a constituent of the FTSE4Good IndexSeries. Created by the global index provider FTSE Russell, the FTSE4Good IndexSeries is designed to measure the performance of companies demonstrating strongEnvironmental, Social and Governance (ESG) practices. The FTSE4Good indices areused by a wide variety of market participants to create and assess responsibleinvestment funds and other products VIGEOEIRIS EURONEXT INDICESAs of May 2017, adidas AGis maintained in the Vigeo Eiris Euronext indicesEurope 120 (the 120 mostadvanced companies in Europe) andEurozone120 (the 120 mostadvanced companies in the Eurozone region).Vigeo Eiris’ indices arecomposed of the highest-ranking listed companies as evaluated by the agency interms of their performance in corporate responsibility. Selected companies haveachieved the highest ratings in their reference universe. Ratings are weightedand reflect the company’s performance with regards to the set of risks VigeoEiris defines and evaluates to assess and measure corporate responsibility. ECPIINDICESIn December 2016, adidasAG has again been included in the ECPI Indices.
ECPI is dedicated toenvironmental, social and governance (ESG) research and index development,calculation and publication. ECPI offers a wide range of ESG indices builtusing its proprietary ESG Rating Methodology (positive screening) andcontroversial sector exclusion (negative screening). CARBONDISCLOSURE PROJECT (CDP)Adidas annually reportour CO2 emissions and water consumption reduction targets and strategies toachieve these targets via CDP, which is an independent not-for-profitorganisation that holds the largest collection globally of self-reportedclimate change data. On a voluntary basis, CDP requests information on CO2emissions, reduction targets, risks and opportunities of climate change fromthe world’s largest companies on behalf of 722 institutional investorsignatories. The information provided is evaluated and published by CDP toincrease transparency around climate-related investment risk and commercialopportunity, and to drive investments towards a low-carbon economy. In 2017, adidas againresponded to the CDP Climate Change questionnaire and was awarded with a ‘Bscore’ in the category “Consumer Discretionary”. This good resultsignals that the company is taking further steps to effectively reduce itsemissions, indicating more advanced environmental stewardship by measuring andmanaging its impact. In addition, adidas responded to the CDP Water programme.
For the second year in a row, the company reported about its water reductiontargets and strategies to achieve these targets and was awarded with a ‘A-Leadership’ rating. The excellent result shows that the company has implementeda range of best practice actions to manage water and mitigate water risk, bothin its own operations and beyond them. CHAPTER IV-COMPARATIVEANALYSISStrengthsin the SWOT analysis of Adidas· Legacy & heritage: With decades ofheritage & legacy, Adidas has travelled a long way to establish itself as ayouthful brand. The brand was started in 1949 and has travelled a long waysince then.· Diversified portfolio: Company hasmultiple product portfolio’s with varied range of footwear & accessoriesunder brand name Adidas (premium segment) & Reebok (mid range).· Strong financial position: With its 2400store globally accounting $4.3billions, the company is in strong financialposition· Distribution network: By selling it fromonline stores to company owned stores to supermarket stores, Adidas has aneffective distribution system for their products available through differentchannels.
· Branding by creating touch points with thecommunity: Celebrity endorsements & sponsoring major sports organizationssuch as FIFA, UEFA, NBA & Olympics has increased the awareness of Adidas inthe market & hence it has increased the highly targeted customer base aswell.· Collaborations & memberships: Strongrelationship within the sustainability area with organizations such asInternational Labour organization, International Finance Corporation has giventhe company an edge over competitors so that they can have a sustainablebusiness…
Weaknessin the SWOT analysis of Adidas· Premium price range: High price range dueto innovative technology & Production methods have made the brandaffordable to limited customers only, especially in developing countries.· Outsourced manufacturing: Adidas has 93%of production outsourced to 3rd party manufacturers (largely to Asia) to availof low labour cost & easy availability of resources. They are running arisk of over dependency on outsourcing especially in Asian markets. Also, theoverall quality of products perceived by the consumers of developed economiesis a major concern as far as brand is concerned· Limited product line: Adidas along withthe recently acquired Reebok brands, has got only 2 brands under their groupalthough they have got deep assortments within these brands. Thus, there ismore scope for product line expansion.
. Opportunitiesin the SWOT analysis of Adidas · Changing Lifestyle: With the saturation ofdeveloped economies, changing taste & preferences, education & changinglifestyle of developing economies, there is a steep rise in the demand ofpremium goods & services.· Market development: Entering into newmarkets will be the only way to succeed in the future because developedeconomies are already having high competition.· Expansion in product line: Expanding itsproduct line will open a new set of opportunities while at the same time it candifferentiate itself from the competitors by following this strategy.· Increasing demand of premium products: Ifwe only consider the Indian market then there is a growth rate of 33% in demandof premium products. This tells us the future business opportunity market size of developing economies.· Backward integration: This will be smartstrategy if followed by Adidas as it will help Adidas to secure their patentrights & also integrate their R with the operational team in order towork in open system.
.Threatsin the SWOT analysis of Adidas · Competition: Although Adidas is a globalbrand but it is facing fierce competition from other brands like Nike which isNo.1 brand and Adidas being in 2nd Position in this premium segment. Besidesthis, there is regular competition from local players, substitutes and marketpenetrators.· Supplier Dominancy: Due to majority of itsproduction being outsourced; Suppliers have more bargaining power then thecompany.· Government Regulations: With its 35%products manufactured in China & 93% of production happening in Asia,Import regulations, duty & tariffs plays a critical role in the pricing andsuccess of the company. McKinsey’s7S ModelThe model is based on thetheory that, for an organization to perform well, the seven elements (strategy,structure, systems, shared values, style, staff, and skills) of the model to bearrange and should be mutually strong.
So, the model can be used to helpidentify the needs of the organization to improve the company’s performance,can relate the probable future changes within the company, arrange departments systematically,and also how to implement the strategy or plan. Whatever the type ofchange it may be whether relating to change in strategy or it implementation,the structural change, change in day to day activities of the organization, theway of leadership should be adopted in the organization on the basis ofexamination, change in the assigning of the work or task on the basis of staffcapabilities or organization requirement will help in the improvement ofoverall performance of the organization.The McKinsey’s 7S Modelfollowed in and by Adidas is as follows:StrategyAdidas general markettarget customers are between of age group of 13-40 years but its maximum numberof customers are between the age of 15-30 years mostly belonging to the uppermiddle class or the high social class.In a recent ininteraction with the current CEO ofAdidas in which he stated the company’s move towards to digitisation and saidthat anything that are possible to digitised, should be digitised and alsostated the company ease of reaching to its customers and vice-versa with thehelp of e-commerce.
Structure The organizationstructure of Adidas is arranged in a strict corporate hierarchical structurefor the smooth functioning of the organization ranging from the CEO which isthe highest or the topmost position in the company to the staff of thesupervisory board of the organization. At the topmost, the CEO of the companyis responsible for the success and failure of the company or the overalloperation of the company which is followed by the other top-level managementlike the CFO, general counsel, head of public relations, etc. Then there comesthe middle level of management which includes the immediate subordinates andfunctional heads that helps in the implementation of the broad strategies andlastly but not the least there are the first line managers responsible for theproduction of goods like the supervisors, section heads, who are the initialmanagers or involved in the initial management of the organisation.
SystemsThe system of workfollowed in the organization is as such that the company business acts doesn’tharm any of their workers, employees, stakeholders. The company make sure thatall the member of the organization is given a platform to express their viewsand everyone opinion is respected. Moreover, the company gives opportunity toit workers to ask question, make suggestion or express their concerns by text.Shared ValueOne of the most importantmodel of the McKinsey’s 7S Model is the shared value which can also be relatedto the superordinate goals or the goals that cannot be achieved until and unlessthe two or more-conflict group coming together, putting aside their personaldifference to achieve something and cannot be achieved by any individual alone.
Since the management in the organisation of Adidas gives the benefit of sendinga text message to the management or sharing one view regarding safety measuresor any other suggestion in the company which removes the notion of conflictbetween two class of people in the management as all the members of theorganization are given a platform to express their views.StyleThe style in theMcKinsey’s 7S model refer to the leadership value adopted in the organisationlike how one lead the part of the responsibility, showing passion for what onedoes, how one behaves with its subordinates and should cheer with its colleagueduring success and lead from front during failure.So, did the HerbertHainer when he became the CEO of the company in 2001 and improve the companyoverall performance as in 2016 the company’s sales has increased from 5.8billion euros to around 20 billion euros when as compared with the 2001 datawhemj he came into position.
StaffStaff is also animportant element of the model as after examining the organisation, Adidasknows through this element the need and the vacancies in the organisationthat’s required to be filled, and also the type of people need to be recruitedand how they should be trained. Proper use of theseelements has led to the increase of the total number of employees whichaccounts to around 57000 (approx.) as per the data of 2016 statistics ofAdidas.
SkillsThrough this element ofthe model, Adidas frames out the skill gap, if any. The monitoring of the employee’sskills so that it can be utilised in the most judicious way and also if anytraining required by the employees so that the organisation can improve on thatskill. Also, the company gets to know about their strongest skills.This model is also one ofthe reasons that help Adidas to improve its performance, manage the huge numberof employee, plan strategy and similarly carry out the other activitiesrequired in the organisation.