CHAPTER on the company’s clothing and shoe designs

CHAPTER II-COMPANY
PROFILE

HISTORY

Adidas is a multinational
company and it was founded, and its head office is located Herzogenaurach which
is in Germany, the company designs and manufactures various commodities like shoes,
clothing and accessories and said to be the largest sportswear manufacturer in
Europe and the second largest in the world after Nike, which is its rival
company.

Adolf Dassler in his
mother’s house started the company and was joined by his elder brother Rudolf later
in 1924 under the name Dassler Brothers Shoe Factory. In 1949, due to the
breakdown in the relationship between the brothers, Dassler created Adidas, and
Rudolf established Puma, which became Adidas’ business rival.

The three stripes logo by
Adidas, which is used on the company’s clothing and shoe designs as a promotion
logo – The branding of Adidas was bought from Finnish sports company Karhu
Sports which Dassler described Adidas as “The three stripes company”
as the branding become very successful.

After the split up in
relations between the two brothers in 1947 which led to the formation of new
firm by Rudolf which he named Ruda and was derived from Rudolf Dassler which
was 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 I
Dream About Sports” is said to be the acronym for Adidas, though it is a myth
but 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 had
become bitter business rivalry after the split of Dassler Brothers Shoe Factory
in 1947, and due to this even the town of Herzogenaurach was divided on the
issue which lead to the nickname “the town of bent necks” and at that
time people looked down to see which shoes strangers were wearing. Even two
football clubs of the towns were divided as Adidas supported the ASV
Herzogenaurach club, while Puma supported 1 FC Herzogenaurach. When an
odd-jobber were called to Rudolf’s home, the used to wear Adidas shoe deliberately
so that Rudolf Dassler would tell them to go to the basement and pick out a
pair of Pumas shoe for free.

 

PRODUCT
PROFILE

APPAREL

A wide range of clothing
items is sold by Adidas ranging from tracks, t-shirts, leggings, socks,
jackets, hoodies, etc.

Franz Beckenbauer
tracksuit was the first Adidas item of apparel created in
1967. The largest manufacturer of sports bras in Europe is Adidas, and is also the
second largest manufacturer in the world.

 

SPORTSWEAR
AND SPORTS EQUIPMENTS

A wide range of sportwear
required in different sports like cricket, basketball, football, tennis,
skateboarding, khabaddi is also manufactured by Adidas. Moreover, adidas also
manufactures sports equipment like cricket bat, football and has been official
supplier of the match ball in FIFA world cup.

Since different sports
games require different outfits and so a wide range of different shoes are also
manufactured by Adidas like boots worn by football players, running shoes for
athlete, shoe worn by cricket players, tennis players, etc.

Sports equipment of golf are
also manufacture by Adidas under the sub-head ‘Adidas Golf’.

ACCESORIES

Adidas manufactures
accessories for both men and women ranging from watches, eyewear, bags, baseball
caps, and socks. As well, Adidas also has a branded range of male and female
deodorants, perfumes, aftershave and lotions. Mobile accessories also
manufacture by Adidas.

 

CLIENT
PROFILE

Client of Adidas includes
athletes, sports personalities from different sports and also Adidas is the
official sponsorship of various teams in different sports, players from
different sports field, etc.

Adidas has also provided
baseball equipment and sponsors numerous players of Major League Baseball and
Nippon Professional Baseball in Japan.

From 1997 to 2008, Adidas
sponsored New York Yankees. In the 1990s, Adidas signed the
superstar Indian batsman Sachin Tendulkar and made shoes for him. From 2008
till his retirement, Adidas had sponsored the cricket bat used by Tendulkar. It
created a new bat, ‘Adidas Master Blaster Elite’, personalized for him. In
2008, Adidas made a concerted move into English cricket market by sponsoring
English batting star Kevin Petersen after the cancellation of his lifetime deal
with Woodworm, when they ran into financial difficulties.

The following year they
signed up fellow England player Ian Bell, Pakistan opening batsman Salman Butt
and Indian Player Ravindra Jadeja.

 

In the Indian Premier
League (IPL), Adidas sponsored the team Mumbai Indians from 2008 to 2014 and
Delhi Daredevils from 2008 to 2013. They were the official sponsors of Pune
Warriors India in 2011 and 2012, however the team was banned from IPL due to
payment issues. In 2015 Season, Adidas sponsored Royal Challengers Bangalore.

USA Olympic team members
McKayla Maroney, Jordyn Wieber, Jake Dalton and Danell Leyva are all sponsored
by Adidas gymnastics.

 

ORGANIZATION
STRUCTURE

Figure
1.1

The company consists of
several senior levels, mid-level and entry level executives which handle its
functioning and operations. A strict organization or hierarchical structure is
followed within the company to ensure that everything remains in order and that
the responsibilities and roles are properly divided and distributed.

CEO

At the topmost position
comes with Chief executive officer or CEO which is the highest level in the
corporate company who is the senior most employee of the company and the one
who is responsible for all the successes and losses of the company.  Directly within the CEO, there are many
positions which are occupied by those who report directly to him. They are:

 

CFO

Chief corporate
communications officer

General counsel

Global head of brands

Head of public relations

Member of management
board, global operations

Member of management
board, global sales

Chairman of Board

This is the second
highest position in the company and is also a senior level position in the
company. 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 this
position.

 

Vice
Chairman of Board

After the chairman comes
the position of the vice chairman of board. The vice chairman of board directly
overseas the various departments and ensures that they are working smoothly.
Vice chairman of board looks after board related activities and takes part in
the major decision making of the company.

 

Vice chairwoman of the
supervisory board, employee representative

Vice chairman of the
supervisory board

Member of the supervisory
board, employee representative

 

The director of employee
representative or member of the supervisory board is the next position in the
hierarchical order of Adidas corporate hierarchy. This individual looks after
employee relations, employee management and employee welfare at Adidas.

 

Member
of the Supervisory Board

The member of the
supervisory board is also known as the director and is the person who is
responsible for supervision of different departments. There is a director each
for each of the Adidas head office and this too is a senior level position.

 

PRESENT
MARKET SHARE

Adidas AG is the largest
sportswear manufacturer in Europe and the second largest in the world. The
company employed approximately 60,617 people worldwide in 2016. The adidas
Group’s global net sales amounted to about 19.29 billion euros in 2016. In that
year as well, the North American region of the adidas Group generated 21
percent of the company’s retail net sales.

 

 

Footwear and apparel are
two of the adidas Group’s biggest segments. In 2016, the company produced 360
million pairs of shoes worldwide and 382 million units of sports apparel. As a
result, Adidas has become one of the most popular brands amongst men and women
when it comes to sportswear worldwide.

FUTURE
STRATEGIES

Anything and everything
that can be digitalized will be digitalized. Adidas promise it customers that the
company will seize every new technology as an opportunity to communicate even
better with customers and satisfy their wishes even more quickly. With
the company new e-commerce business, the company is already closer to the
customer. Adidas know that their customers are buying behaviour, their budgets,
and their purchasing rhythms and it’s completely clear that the company will be
securing their short-term requirements and production planning with this data.

 

However, according to the
company it is crucial that they should use this digital connection to swiftly
detect even the smallest changes in the moods of young consumers and react to
them accordingly and the core target group of 14- to 19-year-olds renews itself
every five years. In these five years, the company is trying their best to
master every trend, and at the same time understand the regrowing core target
group.

 

Regardless of where and
how the customers shop, any company will want to inspire them always and
everywhere and so Adidas have more retail stores than any other competitor, and
are the market leader in e-commerce, they are even implementing franchising
models in challenging markets like China and Latin America.

 

With more than 2,700
retail stores (12 concept stores, including the Running Store and the new OCS
in Berlin, as well as 12 outlet stores in Germany), over 11,000 mono-brand
franchise stores (13 in Germany), over 116,000 stores by the company’s wholesale
partners, and around 50 of our own e-commerce platforms, we have an
unparalleled network of contact points for our customers in our industry.

 

These customers thus
experience adidas across all sales channels, and with a uniform appearance at
that. adidas isn’t divided or quartered, it maintains one face for our
customers.

Adidas is aiming to increase
their consolidate profit annually up to the year 2020 and to achieve these
goals, the company is concentrating in their strategic business plan “Creating
the New” on the factors “Cities,” “Swiftness,” and “Open Source.”

FINANCIAL
INFORMATION

Table
1.1

 

Table
1.2

ACHEIVEMENTS

DOW
JONES SUSTAINABILITY INDICES

In September 2017, for
the 18th consecutive time, adidas AG has been selected to join the Dow Jones
Sustainability Indices (DJSI), the world’s first global sustainability index
family tracking the performance of the leading sustainability-driven companies
worldwide.

 

In the “Textiles, Apparel
& Luxury Goods Industry”, the company was rated industry best in the
criteria

 

Brand Management

Customer Relationship
Management

Impact Measurement and
Valuation

Materiality

Risk and Crisis
Management

Supply Chain Management

Environmental Policy and
Management Systems

Corporate Citizenship and
Philanthropy

Human Rights.

The indices serve as
benchmarks for investors who integrate sustainability considerations into their
portfolios, and provide an effective engagement platform for companies who want
to adopt sustainable best practices. The annual review of the DJSI family is
based on a thorough analysis of corporate economic, environmental and social
performance, assessing issues such as corporate governance, risk management,
branding, climate change mitigation, supply chain standards and labour
practices.

 

FTSE4GOOD
INDEX SERIES

In December 2016, adidas
was again included in the FTSE4Good Index.

FTSE Russell (the trading
name of FTSE International Limited and Frank Russell Company) confirms that
adidas has been independently assessed according to the FTSE4Good criteria, and
has satisfied the requirements to become a constituent of the FTSE4Good Index
Series. Created by the global index provider FTSE Russell, the FTSE4Good Index
Series is designed to measure the performance of companies demonstrating strong
Environmental, Social and Governance (ESG) practices. The FTSE4Good indices are
used by a wide variety of market participants to create and assess responsible
investment funds and other products

 

VIGEO
EIRIS EURONEXT INDICES

As of May 2017, adidas AG
is maintained in the Vigeo Eiris Euronext indices

Europe 120 (the 120 most
advanced companies in Europe) and

Eurozone120 (the 120 most
advanced companies in the Eurozone region).

Vigeo Eiris’ indices are
composed of the highest-ranking listed companies as evaluated by the agency in
terms of their performance in corporate responsibility. Selected companies have
achieved the highest ratings in their reference universe. Ratings are weighted
and reflect the company’s performance with regards to the set of risks Vigeo
Eiris defines and evaluates to assess and measure corporate responsibility.

 

ECPI
INDICES

In December 2016, adidas
AG has again been included in the ECPI Indices. ECPI is dedicated to
environmental, social and governance (ESG) research and index development,
calculation and publication. ECPI offers a wide range of ESG indices built
using its proprietary ESG Rating Methodology (positive screening) and
controversial sector exclusion (negative screening).

 

CARBON
DISCLOSURE PROJECT (CDP)

Adidas annually report
our CO2 emissions and water consumption reduction targets and strategies to
achieve these targets via CDP, which is an independent not-for-profit
organisation that holds the largest collection globally of self-reported
climate change data. On a voluntary basis, CDP requests information on CO2
emissions, reduction targets, risks and opportunities of climate change from
the world’s largest companies on behalf of 722 institutional investor
signatories. The information provided is evaluated and published by CDP to
increase transparency around climate-related investment risk and commercial
opportunity, and to drive investments towards a low-carbon economy.

 

In 2017, adidas again
responded to the CDP Climate Change questionnaire and was awarded with a ‘B
score’ in the category “Consumer Discretionary”. This good result
signals that the company is taking further steps to effectively reduce its
emissions, indicating more advanced environmental stewardship by measuring and
managing its impact. In addition, adidas responded to the CDP Water programme.
For the second year in a row, the company reported about its water reduction
targets and strategies to achieve these targets and was awarded with a ‘A-
Leadership’ rating. The excellent result shows that the company has implemented
a range of best practice actions to manage water and mitigate water risk, both
in its own operations and beyond them.

 

 

 

CHAPTER IV-COMPARATIVE
ANALYSIS

Strengths
in the SWOT analysis of Adidas

·        
Legacy & heritage: With decades of
heritage & legacy, Adidas has travelled a long way to establish itself as a
youthful brand. The brand was started in 1949 and has travelled a long way
since then.

·        
Diversified portfolio: Company has
multiple product portfolio’s with varied range of footwear & accessories
under brand name Adidas (premium segment) & Reebok (mid range).

·        
Strong financial position: With its 2400
store globally accounting $4.3billions, the company is in strong financial
position

·        
Distribution network: By selling it from
online stores to company owned stores to supermarket stores, Adidas has an
effective distribution system for their products available through different
channels.

·        
Branding by creating touch points with the
community: Celebrity endorsements & sponsoring major sports organizations
such as FIFA, UEFA, NBA & Olympics has increased the awareness of Adidas in
the market & hence it has increased the highly targeted customer base as
well.

·        
Collaborations & memberships: Strong
relationship within the sustainability area with organizations such as
International Labour organization, International Finance Corporation has given
the company an edge over competitors so that they can have a sustainable
business.

..

Weakness
in the SWOT analysis of Adidas

·        
Premium price range: High price range due
to innovative technology & Production methods have made the brand
affordable to limited customers only, especially in developing countries.

·        
Outsourced manufacturing: Adidas has 93%
of production outsourced to 3rd party manufacturers (largely to Asia) to avail
of low labour cost & easy availability of resources. They are running a
risk of over dependency on outsourcing especially in Asian markets. Also, the
overall quality of products perceived by the consumers of developed economies
is a major concern as far as brand is concerned

·        
Limited product line: Adidas along with
the recently acquired Reebok brands, has got only 2 brands under their group
although they have got deep assortments within these brands. Thus, there is
more scope for product line expansion..

 

Opportunities
in the SWOT analysis of Adidas

·        
Changing Lifestyle: With the saturation of
developed economies, changing taste & preferences, education & changing
lifestyle of developing economies, there is a steep rise in the demand of
premium goods & services.

·        
Market development: Entering into new
markets will be the only way to succeed in the future because developed
economies are already having high competition.

·        
Expansion in product line: Expanding its
product line will open a new set of opportunities while at the same time it can
differentiate itself from the competitors by following this strategy.

·        
Increasing demand of premium products: If
we only consider the Indian market then there is a growth rate of 33% in demand
of premium products. This tells us the future business opportunity &
expanding market size of developing economies.

·        
Backward integration: This will be smart
strategy if followed by Adidas as it will help Adidas to secure their patent
rights & also integrate their R with the operational team in order to
work in open system.

.

Threats
in the SWOT analysis of Adidas

·        
Competition: Although Adidas is a global
brand but it is facing fierce competition from other brands like Nike which is
No.1 brand and Adidas being in 2nd Position in this premium segment. Besides
this, there is regular competition from local players, substitutes and market
penetrators.

·        
Supplier Dominancy: Due to majority of its
production being outsourced; Suppliers have more bargaining power then the
company.

·        
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 and
success of the company.

 

McKinsey’s
7S Model

The model is based on the
theory that, for an organization to perform well, the seven elements (strategy,
structure, systems, shared values, style, staff, and skills) of the model to be
arrange and should be mutually strong. So, the model can be used to help
identify 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 of
change it may be whether relating to change in strategy or it implementation,
the structural change, change in day to day activities of the organization, the
way of leadership should be adopted in the organization on the basis of
examination, change in the assigning of the work or task on the basis of staff
capabilities or organization requirement will help in the improvement of
overall performance of the organization.

The McKinsey’s 7S Model
followed in and by Adidas is as follows:

Strategy

Adidas general market
target customers are between of age group of 13-40 years but its maximum number
of customers are between the age of 15-30 years mostly belonging to the upper
middle class or the high social class.

In a recent in
interaction with the  current CEO of
Adidas in which he stated the company’s move towards to digitisation and said
that anything that are possible to digitised, should be digitised and also
stated the company ease of reaching to its customers and vice-versa with the
help of e-commerce.

Structure

The organization
structure of Adidas is arranged in a strict corporate hierarchical structure
for the smooth functioning of the organization ranging from the CEO which is
the highest or the topmost position in the company to the staff of the
supervisory board of the organization. At the topmost, the CEO of the company
is responsible for the success and failure of the company or the overall
operation of the company which is followed by the other top-level management
like the CFO, general counsel, head of public relations, etc. Then there comes
the middle level of management which includes the immediate subordinates and
functional heads that helps in the implementation of the broad strategies and
lastly but not the least there are the first line managers responsible for the
production of goods like the supervisors, section heads, who are the initial
managers or involved in the initial management of the organisation.

Systems

The system of work
followed in the organization is as such that the company business acts doesn’t
harm any of their workers, employees, stakeholders. The company make sure that
all the member of the organization is given a platform to express their views
and everyone opinion is respected. Moreover, the company gives opportunity to
it workers to ask question, make suggestion or express their concerns by text.

Shared Value

One of the most important
model of the McKinsey’s 7S Model is the shared value which can also be related
to the superordinate goals or the goals that cannot be achieved until and unless
the two or more-conflict group coming together, putting aside their personal
difference to achieve something and cannot be achieved by any individual alone.
Since the management in the organisation of Adidas gives the benefit of sending
a text message to the management or sharing one view regarding safety measures
or any other suggestion in the company which removes the notion of conflict
between two class of people in the management as all the members of the
organization are given a platform to express their views.

Style

The style in the
McKinsey’s 7S model refer to the leadership value adopted in the organisation
like how one lead the part of the responsibility, showing passion for what one
does, how one behaves with its subordinates and should cheer with its colleague
during success and lead from front during failure.

So, did the Herbert
Hainer when he became the CEO of the company in 2001 and improve the company
overall performance as in 2016 the company’s sales has increased from 5.8
billion euros to around 20 billion euros when as compared with the 2001 data
whemj he came into position.

Staff

Staff is also an
important element of the model as after examining the organisation, Adidas
knows through this element the need and the vacancies in the organisation
that’s required to be filled, and also the type of people need to be recruited
and how they should be trained.

Proper use of these
elements has led to the increase of the total number of employees which
accounts to around 57000 (approx.) as per the data of 2016 statistics of
Adidas.

 

Skills

Through this element of
the model, Adidas frames out the skill gap, if any. The monitoring of the employee’s
skills so that it can be utilised in the most judicious way and also if any
training required by the employees so that the organisation can improve on that
skill. Also, the company gets to know about their strongest skills.

This model is also one of
the reasons that help Adidas to improve its performance, manage the huge number
of employee, plan strategy and similarly carry out the other activities
required in the organisation.

 

 

REFERENCES

(Trading Economics, n.d.; The Statistics Portal, n.d.; Mind Tools, n.d.;
Adidas, n.d.; GAMEPLAN A, n.d.; Marketing 91, n.d.) (Marketing 91, n.d.) (The Wall Street Journal, 2018) (Adidas, n.d.) (Wikipedia, n.d.) (Wikipedia, n.d.) (Essay UK, n.d.) (The Wall Street Journal, 2018) (Adidas, n.d.)