ITESM CAMPUS HIDALGO

MARKETING AND SALES

BEYORI URIBE
FRANSCISCO ABARCA
CESAR CORONADO
ERICKA JASSO

September 7, 2015

EXECUTIVE REVIEW
In this case we will be analyzing the structure of the case presented for the
global leader in sportswear, Adidas. Adidas is a German company focused on
the production of sport clothed segmented in three different business models,
Performance, Originals and style, and as resultant of their business model,
Adidas owns a supply chain focused on the customer perception of value.
Adidas works very attached to their mission and this is what allows them to
satisfy all of their clients in terms of value.
Adidas has been always competing with few companies in the same business
market but also strong and with determined market segments; Adidas has built
an image and competitive advantages within introducing always the innovation
on their business model and applying innovative strategies for the penetration of
new markets, keeping the ones conquered and working in low-cost strategies
for their financial sustain.
The last years, Adidas suffered a big financial issue because of the introduction
to new countries and because of that, the usage of different exchanges, so the
ultimate European crisis caused Adidas to lose 3.3% of utilities expected for
2013, and their competitors reach 3% above their equilibrium point, but this didn
t really affected the image Adidas has built and didnt make them to lose
credibility.
Adidas has always focused on how clients perceive them, and being present in
the big national team of almost every country, using famous players as a brand
image, helped Adidas to appear always on the consumers mind as a product
with status and high quality, which allows them to have low costs in the
manufacturing area and competitive but not low prices in the sales and
marketing area.

ADIDAS GROUP
Adidas Group was founded in Bavaria, Germany in 1924. Adidas is a global
public company and is one of the largest sports brands in the world. It is a
household brand name with its three stripes logo recognized in markets across
the world. The companys product portfolio is vast, ranging from state-of-the-art
sports footwear and clothing to accessories such as bags, watches, eyewear
and other sports-related goods and equipment. Employing over 46,000 people
worldwide, the Adidas Group consists of around 170 subsidiaries including

Reebok, TaylorMade-Adidas Golf, Rockport and CCM-Hockey. The Group's

headquarters are in Herzogenaurach, Germany. In the third quarter of 2014 the
Groups revenue was 4.118 billion. The main competitors of the Brand include:
Nike, Puma, Fila and Under Armour. Since the barriers for new entrants are
high in the industry, few companies have been able to position in the market in
the last two decades. However, there are new companies that can be
considered as a threat because of the substitutes, such Crocs shoes.
Since Adidas have private contractors in countries where the wages are really
low, the company has a great power over the factories and can easily switch
from one to another, on the other hand in the power of customers is also high
because they can get products from other firms when factors such better price,
quality and style are notorious but in order to create loyalty in customers, the
firm strives to offer innovative designs with a wide variety of products, which
makes it hard to the client to choose another brand.
As for the strategies followed by Adidas, the broad differentiation allows the
company to focus on innovation to produce new products, services and
processes. Besides the firm relies also on the multi brand strategy that has
allowed them to cater all segments in the market in order to embrace diverse
niches. The investment in distribution channels and close attention to their
supply chain have helped the company to customize their products and to be
updated in trends happening in the market with the purpose to deliver
innovative products with a very good quality. To become a sustainable company
they find the right balance between shareholder interests and the needs and
concerns of their employees, the workers in their suppliers factories as well as
the environment.
Adidas Business model is highly focused on innovation that satisfies clients
needs, instead of investing its resources on sponsoring; the firm is oriented in
enhancing its value by creating a high performance product line that meets the
specific needs of athletes and customers. Adidas Group strives to tackle global
trends in the market such personalization, online market and shopping
experiences to position itself against other emerging brands, making a unique
brand to the customers and highly attractive to investors.
In the expansion of the brand there were created three different lines of
products to increase their 35% in the global market share: Performance,
Originals and Style. Every one of them are created to satisfy different customer
needs, in other words, three market segments separated. Performance is for
the client who buys Adidas by truly wants to achieve and develop a better
performance in the sport he practices.
Originals have a version more into retro and vintage and its focused on those
clients who do not only practice sports but wear these clothes on a daily basis.
Style tackles the specific nice of fashion conscious people who also enjoy the
brand of Adidas.

Regarding the sales of Adidas, these have had proportional increases since
2010 but in comparison to its main competitor Nike, theres still a gap to
overcome since Nike uses price strategy strategies to remain relevant in the
market and to position the brand as exclusive, while Adidas as mentioned
before is more focused on performance and innovation development to meet
customer basic needs.
SWOT

S
S
-Diverse
brand
portfolio
-Diverse brand portfolio
-Focused on
on performance
performance and
and
-Focused
innovation
innovation
-Long
heritage and
and brand
brand value
value
-Long heritage
-Competitve
-Competitve
-Workforce
-Workforce
-Major
market
-Major market in
in footbal
footbal and
and
tennis
tennis

O
O
-Dominates
the world
world football
football
-Dominates the
market
market
-Largest market
share in
europe
-Largest
market share
in europe
-Second
largest
seller
-Second largest seller
-Highly
positioned
-Highly positioned
-Expansion to
new markets
(e-Expansion
to new
markets (ecommerce)
commerce)
-Adidas
can venture
venture into
making
-Adidas can
into making
more
more stylish
stylish designs
designs
-Alliance
-Alliance with
with emerging
emerging sports
sports

W
W
-Limited
presence
USA
-Limited presence in
in USA
-Limited
and
-Limited sponsorship
sponsorship and
advertisement
advertisement
-Sitff
competition and
-Sitff competition
and similar
similar big
big
brands
brands
-Prices below
its main
-Prices
below its
main competitor
competitor
(Nike)
(Nike)
-Ability
to use
media ads
ads
-Ability to
use mixed
mixed media
-Sales
-Sales dependent
dependent on
on the
the footwear
footwear
market
market

T
T
-Newly
born
brands
-Newly born brands in
in the
the market
market
-Global economy
economy crisis
-Global
crisis
-Negative image
celebrities as
-Negative
image of
of celebrities
as
embassors
of the
the brand
embassors of
brand
-Concentration
-Concentration
-Other
brands offer
-Other brands
offer more
more styles
styles
and
varietes
and varietes
-Competitive
brands who
-Competitive brands
who produce
produce
sports
equipment and
sports equipment
and accesories
accesories
to
lesser costs
to lesser
costs

Marketing strategy
Adidas objectives Group are
To be the global leader in the sporting goods industry
Maximize the operational and financial performance
Strategies
Creating shareholder value
Diverse brand portfolio

Investments focused on highest-potential markets and channels

Creating a flexible supply chain
Leading through innovation
Develop a team grounded in their heritage in sport
Focusing on sustainability
Understanding needs/wants of the people

The company puts entire dedication and brainpower into the mission of making
the Adidas Group the global leader in the sporting goods industry, because they
create as much value for all their stakeholders as possible. No matter whether
the clients are athletes, fashionistas, (potential) employees or any other
stakeholder, Adidas strive to create value for each on of them.
Adidas has implemented key strategies to keep a unique identity in the market.
First theyre focused on broad differentiation, betting for the innovation in
products, services, and processes. Besides of this, the firm designated a
centralized team in 2014, Sales Strategy & Excellency that is in charge of
supporting all markets in the world, managed by the Global Sales function, this
last was divided into two areas, wholesales and retail in order to sustain the
various needs of both business models, and define their corporate level
strategy, giving them in return a competitive advantage in the market.
Adidas also implemented a multi-brand strategy by offering a diverse brand
portfolio, which has enabled the company to test the different segments of the
market. In the same way, Adidas has strived and bet for the best marketing,
distribution channels and adoption of the e-commerce to become more efficient
and accessible to more customers. The culture of constant communication with
supply channels enables the firm to offer customization, innovation through
responding changing market needs and high quality products to the user. In
terms of innovation Adidas has created the system ClimaCool to ventilate and
A3, an energy management technology that guides and drives an athletes foot
through each stride offering solutions to basic needs of customer in this
segment of market.

FINANCIAL PROYECTIONS

 ADIDAS Income Statement 2014

2012

2013

2014

7%

5%

3%

Administrative expenses
increase annually with
inflation at:

3%

3%

3%

The weighted average

interest rate for debt per
year is:

10%

10%

10%

The tax rate is fixed

annually:

30%

30%

30%

Assumptions
Sales growth for the
coming years are:
Cost of sales is constant
and consistent with last
year
Selling expenses are
variable depending on
sales

The amount of shares

issued annually are:

15 PER

The company has a policy

of annual dividend
payments:

15 PER

40%

15 PER

50%

In the event of the company Adidas and according to the column March 2014,
the company will present low growth and poor performance getting painful
impacts due to the weakening of several currencies of emerging countries
despite that in 2013 had predicted an increase in sales of 3.3%.
The second largest sportswear firm in the world, which has been losing ground
against the market leader Nike reported that its fourth-quarter sales rose 3.3%
to 3,480 million euros (4,780 million), at the upper end of the forecast average
analyst of 3,400 million euros.

60%

(PUNTO DE EQUILIBRIO) BREAKEVEN

FIXED COSTS

Gross Profit%

EUR1,600,000

REQUIRED AMOUNT OF
INCOME IN SALES TO REACH
THE BREAK-EVEN POINT

73.8%

EUR2,168,021.68

ADIDAS global financial forecasts

Annual sales of billions of dollars in

the region

Forecast annual sales between 20132017

North Amrica

91 3,70%

Europe occidental

53 4,00%

Europe wester

16 13,60%

Asia Pacfico

56 8,90%

Latinoamrica

28 16,60%

Oriente Medio y frica

15 10,10%

Oceana

4 3,10%

Adidas fixed costs are EUR 1,600,000 approx., And expected profit margin is
73.8%. Therefore, breakeven is EUR2,168,021.68 you should get for the
monthly sales.
As breakeven Adidas is EUR2,168,021.68 and the company estimated to earn
between 3.25 and EUR 3.43 million per month. Adidas understands that your
business will get stable earnings despite fluctuations sports losses and Russia's
participation in its currency, also of considerable change in 2015 by the
devaluation of the Chinese currency and the impact it can have in
manufacturing of their products.

ADIDAS BALANCE SHEET 2014

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