Financial Position (FP)

Ratin
gs

Adidas AGs has Return on Equity of 11.2% on 2015, compared to the

Sports Goods Industry Return on Equity of 11.5%.

4.0

4 Adidas AGs Net Income from continuing operations is

720 million which results to an increase of 12.15% from
the prior years 642 million Net Income from continuing
operations.

5.0

Adidas AGs working capital turnover in 2015 is 7.9; which is an

increase of 3 pts. from 4.9 of 2014.

3.0

Adidas P/E ratio at the end of 2015 is 27.10, compared

to the Sports Goods Industry P/E year-end ratio of 24.50.

6.0

Adidas AGs Return on Investment for 2015 is 5.40%; which

increased by .23 point percentage compared to 2014s 5.17% ROI.

4.0
22.0

Industry Position (IP)

Adidas AGs profit forecast for 2016
Companys growth for the next 5 years
Supply chain and resource dispatch of Adidas AG focus more on the
velocity and ease of access.
Companys financial analyses show its stability that may create
opportunities.
Joint forces of Adidas, Rebook, and TaylorMade continue to improve
and create more advantages with regards to niche markets.

5.0
5.0
3.0
4.0
6.0
23.0

Stability Position (SP)

Technological development is fast-paced and affects the needs of

consumers.
Adidas sports footwear operates in an oligopolistic market so there is
high barriers to entry; threat of new entrants is minimal.
Product prices and shipping cost of the major competitor, Nike, is
moderately higher.
Sporting goods industry is at risk of incompliance litigation due to
increasing community concern towards environmental sustainability.
(Adidas manage environmental issues as an integral part of their
daily operations)
Less-developed countries are experiencing inflation which influences
the spending behavior of consumers.

-1.0
-3.0
-3.0
-1.0

-4.0
-12.0

Competitive Position (CP)

Sale of athletic footwear in US constitutes at least 40% of the market

share.
Adidas promotes its products through endorsements in every sport
by global sports stars and teams.
Maintain market dominance in China over its toughest competitor,
Nike.
Invest strategically in marketing in growing urban cities across the
globe.
Open up to consumers, athletes, and partners to co-create the future
global products for global cities.

-6.0
-5.0
-1.0
-3.0
-3.0
-18.0

A Space Matrix for Adidas AG

Conclusion
SP Average is: -12.0 5 = -2.4
CP Average is: -18.0 5 = -3.6

IP Average is: 23.0 5 = 4.6

FP Average is: 22.0 5 = 4.4

Directional Vector Coordinates: x-axis: -3.6 + 4.6 = 1

y-axis: -2.4 + 4.4 = 2

Therefore, Adidas should pursue aggressive strategies.

The SPACE Matrix for Adidas

It can be inferred, based on the matrix, that Adidas should pursue actions
that will utilize its internal strengths to take advantage of external opportunities,
overcome their weaknesses, and avoid threats. It is already evident that Adidas is
taking integration strategies by acquiring smaller competitors, such as TaylorMade
and Reebok. Adidas, however, does not pursue much of backward integration since
they found outsourcing as an effective action. As for forward integration, Adidas
does not also exercise such strategy currently. Furthermore, Adidas needs to act
towards market penetration especially in the US where its market share is relatively
smaller as compared to Nike, and extend their market beyond the current ones.
Lastly, it can be also clearly seen that Adidas is already continuously developing
*Bases and explanations for the ratings are provided in pages 3-

and diversifying their products by taking advantage and coping up with the changes
and advancement in technology.

FINANCIAL POSITION
Adidas AGs Return on Equity
4.0
Adidas AGs ROE is less than the average ROE of sports industry thus
indicating Adidas is below the average industry level but this is the next highest
ROE for five years (2010-2015) following the 2013 highest ROE.
Adidas AGs Net Income from continuing operations
5.0
Adidas AGs net income from continuing operations is 720 million which
results to an increase of 12.15% from the prior years 642 million net income from
continuing operations. Though the NI increased by 12.15%, the 2015 NI does not
still completely regained the large decrease of NI from 2012 and 2013 (though it
increased in 2014) and lowest NI generated during 2010-2015 operations. But this
also shows the continuing recovery of Adidas AG.
Adidas AGs Working Capital Turnover
3.0
Adidas AGs working capital turnover in 2015 is 7.9 which is an increase of
three (3) points from 4.9 of 2014.Though Adidas AG achieved the highest working
capital turnover, which measures how well a company is utilizing its working capital
to support a given level of sales, during the five-year operation, looking over cause
other financial elements, the increase of three points in working capital ratio is
caused by the noticeable increase of total current liabilities. Thus, the increase is
not merely due to managements efficiency is using its total current asset but also
accompanied by the evident increase in total current liabilities.
Adidas P/E ratio
6.0
Adidas P/E ratio at the end of 2015 is 27.10, compared to the sports goods
industry P/E year-end ratio of 24.50. Adidas AGs P/E 2015 year-end ratio is higher
than the industrys P/E 2015 year-end ratio and in 2015 Adidas AG has the highest
P/E year-end ratio so far. This indicates that Adidas AG has been very attractive in
the equity market. This benefits the Adidas AG to easily accumulate capital from
investors through its equity.
Adidas AGs Return in Investment
4.0
Adidas AGs Return on Investment for 2015 is 5.40 percent which increased
by .23 point percentage compared to 2014s 5.17 percent ROI. The increase of ROI
2

indicates that its investment in business assets higher than 2014s but, such
increase does not compensate the fact that 2015 ROI is one of the smallest ROI
during the five-year operations of Adidas AG following the 2014s ROI being the
smallest.
Note: The five-year operations (2010-2015) is financial result of the 2010 Strategy
(with a span of five years) of Adidas AG.

INDUSTRY POSITION
Adidas AGs profit forecast for 2016
5.0
Adidas said it now expected currency-neutral sales and operating profit to
both grow by at least 10 percent in 2016 after predicting in November that they
should rise at a high single-digit rate - the same forecast it had given for 2015.
Companys growth for the next 5 years
5.0
German sport-shoe maker Adidas AG expects the fastest sales growth in five
years to be tempered by shrinking profitability as it pays more to purchase goods in
Asia.
Supply chain and resource dispatch of Adidas AG focus more on the
velocity and ease of access.
3.0
They focus on faster product creation and production by continuously
improving the infrastructure, processes and systems. Additionally they also
emphasize on significantly reduced complexity on a group level by streamlining the
global product range, consolidating the warehouse base as well as harmonizing
above market-service. The ambition to deliver the best branded shopping
experiences at all consumer touch points. Innovative speed models in supply chain
to respond quickly to consumer needs.
Companys financial analyses show its stability that may create
opportunities.
4.0
Based on the analyses in the financial dimension, companys potential for
growth and development can be achieved in many ways at any time. The
companys profile in terms of currency does not hinder the company to take actions
in pursuing its goals.
Joint forces of Adidas, Rebook, and TaylorMade continue to improve and
create more

advantages with regards to niche markets.

6.0
Each company has specialty segments that enable the group to achieve high
performance in each market segment. This helps the group to compete with others
despite of the differences in brand names. TaylorMade is intended to compete with
Nike Golf. And Rebook if more focused on fitness that the whole world is mostly
concerned of.

STABILITY POSITION
Technological development is fast-paced and affects the needs of
consumers.
- 1.0
Advances in technology present Adidas with new opportunities due to their
products being more readily available to customers. Purchasing Adidas products is
now much easier for customers and this is something Adidas will have to capitalize
on.
Adidas shocked their way into the technological side by making the worlds
first smart shoe, adding a microchip inside the shoe connecting to smartphones and
wireless mp3 players. The packaging the company uses is suitable for
transportation over long distances, humid conditions and extreme temperature
changes, they use recycled paper and other environmentally-friendly packaging
materials.
Adidas sports footwear operates in an oligopolistic market so there is high
barriers
to entry; threat of new entrants is minimal.
-3.0
Adidas and Nike are currently the market leaders and other companies such
as Puma are also highly competitive. About 60 percent of market is held by Adidas
and Nike.

Product prices and shipping cost of the major competitor, Nike, is

moderately higher.
-3.0
Adidas shoes start at under $50 while their apparel starts under $25. Adidas
has fair prices for high quality sport and fashion clothing, accessories, and footwear.
Men's sneakers are most expensive and of course, children's shoes are the lowest
price when it comes to Adidas footwear.
On the other hand, Nike Air Pegasus+ 29 running shoes cost $100.00; Nike
Vapor Talon Elite Low TD mens football cleat shoes cost $140.00; Nike Eclipse II
Women's Shoe cost $68.00; NFL team men's jerseys cost $100. Women's cost $95
and for boys the cost is $70; Nike Windrunner mens jacket cost $85; and, Nike+
Sportband cost $59.00.
Sporting goods industry is at risk of incompliance litigation due to
increasing community
concern
towards
environmental
sustainability.
(Adidas
manage
environmental
issues as an integral part of their daily operations)
-1.0
Building on several environmental initiatives over the past years, in 2010,
they developed a coherent environmental strategy for the whole Adidas group,
which aims to reduce their relative environmental footprint by 15 percent by 2015.
Their approach is to manage environmental issues as an integral part of their daily
operations, positively contributing to the Adidas groups overall business
performance. Adidas has an environmental strategy team led by group social and
environmental affairs (SEA) and consisting of representatives of all brands and core
functions, reports to the Adidas group executive board.
Less-developed countries are experiencing inflation which influences the
spending
behavior of consumers.
-4.0
Inflation is inevitable and its effects are on price increases and changes in
consumption.

COMPETITIVE POSITION
Sale of athletic footwear in US constitutes at least 40% of the market
share.
-6.0
In reality the brand is dwarfed by Nike which owns a whopping 48% of the
USAs footwear market, while Adidass 9% share has declined every year since
2011.The statistics shows a very small market share of Adidas in the footwear
market. But achieving 40% is not impossible.
Adidas promotes its products through endorsements in every sport
5

by global sports stars and teams.

-5.0
We give it a -5 because of the fact that Nike is quicker in acquiring and have
more endorsements from popular athletes, teams, and organizations which caused
it to have more TV appearances than Adidas.
Maintain market dominance in China over its toughest competitor, Nike.
-1.0
China, composing the largest population, is an important market for sporting
goods in which Adidas must have to compete with Nike for the extent of their
market share.
Invest strategically in marketing in growing urban cities across the globe.
-3.0
Adidas expects to grow its top-line revenue by 15% annually through 2020. It
plans to create this growth through investments to increase its speed of new
products to market, which will allow the company to adapt more quickly. It also
intends to invest strategically in marketing in growing urban cities across the globe,
as the company recognizes the movement of population, particularly younger and
more athletic segments of the population, to urban areas.
Adidas is currently working on this and the result is yet to be seen for
evaluation.
Open up to consumers, athletes, and partners to co-create the future
global products for global cities.
-3.0
By its own admission, Adidas has been closed off to consumers, athletes and
partners when it comes to shaping the future of the brand. This is changing with its
marketers ceding some of the control in the hope of elevating creativity and
innovation when it comes product design and advertising. It is already happening
within the Adidas Originals part of the business, which has pared back the number
of celebrities it works with but given those it does such as musician Pharrell greater
creative control of the brand.
Hainer added: We will open up [to consumers, athletes and partners] so that
they can co-create the future together. We will take this spirit and give many more
the opportunity to move closer to us and become part of us and our brand.

References

https://adidas.knoji.com/compare-vs/nike
https://adidsaudit.wordpress.com/
https://books.google.com.ph/books?isbn=1137411996

http://finance.yahoo.com/q?s=^YHOh724
http://www.global.adidas.com
http://www.adidas-group.com/en/
http://csimarket.com/Industry/industry_Financial_Strength_Ratios.php?ind=401
http://www.highsnobiety.com/2015/11/09/nike-adidas-market-shares/
http://qz.com/590781/adidas-is-catching-up-to-nike-in-china/
http://www.investopedia.com/articles/markets/012616/adidas-vs-nike-vs-underarmour-which-2016-nkeua.asp
http://m.thedrum.com/news/2015/03/28/how-adidas-creating-new-recapture-itswinning-streak