Adidas and Its Marketing Strategy: Critical Analysis

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Adidas AG was founded by Adolf (adi) Dassler and his elder brother Rudolf Dassler in early 1920s in Herzogenaurach German. The name Adidas (as written on their products “adidas” by the company) is an abbreviation of the name of founder Adolf (“Adi”) Dassler. The Dassler

Adidas manufactures athletic shoes and apparel and other sporting goods. In the 21st century adidas emerged as the largest sport wear manufacturer in Europe, and the second largest (after NIKE) in the world. Adidas products are known with the three-strip trademark, which remains an element in the company’s newer “trefoil” and “mountain” logos.

The Dassler family began shoe manufacturing after world war I. Adidas first breakthrough was in 1928 Olympic Games held in Amsterdam, when they designed shoe for German athletic team. Followed by the Berlin Olympics in 1936, the American track-and-field star Jesse Owens wore shoes that were reportedly a gift from Adi Dassler. Owens’s medal-winning performances increased awareness of the Dassler brand around the world. After the world war II, Rudolf break out after unsettled interest to start his own company and named it “Puma” and later Adolf registered the company with three-strips logo in 1949, as “Adidas” (‘Adi’ from his nikename and ‘Das’ from Dassler) thereafter adidas grew extraordinarily. The Dassler family withdrew from the company in 1989. Robert Louis-Dreyfus was made the chairman of Executive board from April 1993 to March 2001. In 2001, Herbert Heiner was appointed as the CEO of the company.

Adidas took over Salomon group in 1997 and changed the company name to Adidas-Salomon AG. But in 2005 Adidas sold Salomon segment to Amer Sports Corporation. And in 2006 Adidas acquired Reebok one of the well-known brand in the world and changed the company name to “Adidas AG”. Adidas has approximately employed over 40,000 people.

Markert analysis.

Adidas AG, has over has over 2200 outlet globally and planned to acquire over 1500 new outlets in 2017. Customers can also shop from their home website and can place order online.

There was a decline in sales of Adidas European sports goods in 2009, which subsequently improved in 2010. Adidas established itself in the high growth of north America and Europe and has expanded its market in developing economies of Asia which offers a huge market opportunity compared to other developed economies.

Marketing strategy of Adidas/ Adidas target market.

Segmentation, targeting, positioning in the Marketing strategy of Adidas

with the four brands of Adidas strong portfolio- Reebok, Adidas, Rockport and Taylor made meant for different segment customer group.

Adidas makes use of differentiated targeted strategy to target younger adults, adults as well as children who have passion for fitness and athletics. Although it targets customers in the age group of 13-40 years but most of its customers are from 15-30 years of age who hail from upper middle class or the luxury class of customers.

User and benefit based positioning are strategies Adidas uses to create distinctive image in the minds of the prospective customers. They emphasize the value of quality products from a trusted brand, Adidas is able to maintain its brand essence.

The brand portfolio is divided as follows.

1. Adidas –performance in competitive sports
2. Reebok and Reebok classics in Active sports and casual sports
3. Adidas originals, Adidas fun, rock port in sports fashion.

Mission in the marketing strategies of Adidas

‘‘The Adidas Group strives to be the global leader in the sporting goods industry with brands built on a passion for sports and a sporting lifestyle. We are committed to continuously strengthening our brands and products to improve our competitive position’’

One of the most popular tagline of Adidas is ‘impossible is Nothing’ This tagline which showcases the importance of fitness and striving hard for anything you desire, is one of the biggest asset the Adidas company has and possibly summarizes the marketing strategy of Adidas.

Competitive advantage marketing strategy

One of the competitive advantage that Adidas has its distribution network, their product quality and its brand equity. Adidas globally has 2400 stores accounting 4.3-billion-dollar business according to 2014 data. Adidas has sponsored many world sport events, such as FIFA, UEFA, MBA, Cricket and Olympics in order to associate itself with the community. At the same time Adidas has been known to give the best product in the market which are comfortable, beyond normal and long-lasting.

It has strong relationship with organizations such as international labor organization, international finance corporation has given the company edge over competitors for a sustainable business

Collaboration: the knowledge of “Yeezy’s” and Adidas Pharell William sneakers’’ are the major reason for Adidas resurgence. Adidas has powerful endorsement contracts with some powerful non athletic superstars like Kanye West and Pharell Williams and use these names to promote their brand efficiently. This marketing strategy of Adidas also work for competitors like Puma as they signed-in famous personalities such as pop star Rihanna for their line of sportswear.

A New Strategy: Limiting Supply: Stan Smith and Superstar are popular Adidas shoe models, who have contributed massively to the revival of Adidas over the years which have been supported by aforementioned endorsements and innovative marketing campaigns.

While other styles such as the Ultra Boost are gaining market share at a massive rate, Adidas is actually limiting the availability of popular shoes ‘Stan Smith and Superstar’ and two models that many consider evergreens in Adidas portfolio. The prices go up when the demand is high but the supply is low – this is the economic rule we all study in school but Adidas applied in their growing years.

This strategy worked well for Adidas in the past also has the potential to help Adidas merchandise margins which has significantly expanded recently. As reported in past earning release, Adidas gross margin has increased by a few hundred basis points, and the recent moves may indicate and attempt to push margins even further if Adidas supply limitation strategy works.

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However, the decision to limit the supply of some sneakers may also be a proactive move to avoid overexposure and excessive discounting of Adidas’ products. The number of discounts on Adidas products has increased recently, and the decision to limit the supply of some key products may be a response to the growing pricing pressures generated by excessive supply.

Innovation: The Adidas company ranked No. 3 in global sales in the Apparel/Accessories category in Forbes world largest public companies list, behind only Christian Dior/LVMH and Nike, just announced that by 2024 it would use only recycled plastics in all its shoes and clothing.

This strategy is because of the company’s vision to get rid of virgin polyester overall by 2024. This strategy is not just going to have an impact on Adidas but also have profound implications in the overall fashion industries.

Social media: social media is one of the marketing tools of Adidas when it comes to interacting and connecting with customers, Adidas remains active through the traditional channels, its own websites as well as social media.

Adidas has active Facebook and YouTube channels where it uploads thousands of promotional videos for its products. Adidas also has several twitter accounts including Adidas original, Adidas US, Adidas football that it uses to stay connected to fans and followers. The main focus of all its marketing effort is to bring energy to sports and help athletes achieve.

However, now that it has revamped its strategy and focused its efforts on key areas, results have started coming in the form of financial success. While this could mean an increased challenge for both Nike and Under Armour, Adidas still has a long way to go to achieve its mission.

BCG Matrix in the Marketing strategy of Adidas

With the help of BCG Matrix, Adidas has been able to identify strategy position and future of action of SBU’s (strategic business Unit).

Adidas has four brands under the Adidas group out of which:

1. Adidas & Rebook are stars; both brands have a strong market share but at the same time the competition of this sports and fitness is very high. Other brands such as Puma, Nike also fight a large share of the market.
2. Rockport & Taylor; their market share is low but at the same time there is a good potential for these brand. But when this potential will actually benefit the company in a large way is yet to be seen.

Distribution strategy in the Marketing strategy of Adidas

As the consumer environment becomes even more dynamic with trends quickly changing, Adidas also increase its focus with expectation of these changes in responding with speed. They had aligned their sales with distribution strategy to enable and propel a heightened consumer-devotion.

After analysing the purchase process of their customers, they concluded the interactive experience and the availability, convenience and the size of the product offerings plays a major role in a successful distribution strategy. In order to expand their distribution system, the products are made available through exclusive store, co-branded stores who source it from C&N and distributors.

Brand equity in the Marketing strategy of Adidas

Sports related activities predominantly revolving around social media and community connect programs has helped Adidas to be one of the biggest player in the sportswear. Each brand and sub-brand is responsible for bring its own unique identity and positioning to life, through the creation of products, service and experience that provide platform and frameworks for long-term market share and profitability improvement. While Adidas and Reebok have individual unique identities, heritages, technologies, designs and reputations. The strategic principles and method for driving future sales growth and profitability improvement are common to both.

Competitive analysis in the Marketing strategy of Adidas

Adidas group multi-brand portfolio gives them an important competitive advantage. Through their brand portfolio they seamlessly cover the sports and consumer segments define as strategically important to support their groups ambition and to inspire and to engage people to harness the power of sports in their life.

Adidas is doing very well because they distinct themselves from Reebok, but the brand Adidas has spent so many years trying to firm up, but its situation is fluctuating.

Large firms such as Nike & Adidas have grown immensely over the last two decades. Their global reach has expanded through all continents, which is attributed to the changing lifestyle of developing economies & emergence of Internet, E-commerce firms.

Market analysis in the Marketing strategy of Adidas

Due to the presence of counterfeit product and high bargaining power of customers, it’s very hard for this player to sustain the market. Although the offering is meant for sports persons. But the majority of its buyer are normal people, professionals, and young people who don’t mind switching to other brands due to the changing competitive positioning worked upon by the players.

Industry is growing due to changing life-style, economics of the population and people migrating from rural to urban areas but at the same time demands-supply mismatch and idle inventory is resulting into shrinking margins of the player in this industry.

Customer analysis in the Marketing strategy of Adidas

Adidas customers consist of upper & Upper-middle class social groups. To be successful across consumer segments, Adidas acknowledged that a strategy of mass production or mass marketing is no longer sufficient.

Only by identifying and understanding consumer’s individual motivations and goals for doing sport, their lifestyle, their fitness level, where they are doing sport and their buying habits will help them in creating meaningful products, services and experiences that build a lasting impression and brand loyalty.

SWOT analysis

Here is the swot analysis of Adidas;

Strengths

1. Legacy and heritage; with many decades of heritage and legacy. Adidas has travelled a long way to establish itself as a youthful brand. since 1949 when the brand began till now.
2. Diversified portfolio; the Adidas company deals on multiple product portfolio with varied range of footwear and accessories under the Brand name Adidas
3. Strong financial position; The Adidas company has strong financial position with 2400 stores globally accounting $4.3billions.
4. Distribution network; By selling it from online stores to company owned stores, Adidas has an effective distribution system for their products available through diverse channels.
5. Branding by creating touch points with the community; celebrity endorsements and sponsoring major sports organizations such as FIFA and Olympics has increased the highly targeted customer base as well.
6. Collaborations and membership; Adidas has strong relationship with organizations such as international Labour organization, international finance corporation has given the company an edge over their competitors so they can have a sustainable business.

Weaknesses

1. Premium price range; High price range due to innovative technology and production methods have made the brand affordable to limited customers only, especially in developing countries.
2. Outsourced manufacturing; Adidas has 93%of production outsourced to 3rd party manufacturers mostly to Asia to avail of low labour cost and easy availability of resources. They are running the risk of over dependency on outsourcing especially in Asian markets. Also the overall quality of products perceived by the consumers is a major concern as far as brand is concerned.
3. Limited product line; Adidas and Reebok brands, has got only 2 brands under group although they have deep assortment within these brands. thus,there is more scope for product line expansion.

Opportunity

1. Changing Lifestyle; due to the saturation of developed economies, changing taste and preferences, education and changing lifestyles of developing economies, there is a steep rise in the demand of goods and services.
2. market development; Adidas should enter new markets as it will help them succeed in the future because developed economies already have high competition.
3. 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.
4. 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&D with the operational team in order to work in open system.

Threats

1. 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.
2. Supplier Dominancy: Due to majority of its production being outsourced; Suppliers have more bargaining power then the company.
3. Government Regulation; with its 35%products manufactured in China and 93% of production happening in Asia, import regulations, also duty and tariffs plays a critical role in the pricing and success of the company.

Conclusion

To sum up, in this 21st century the market place is highly competitive and to stay ahead of others you need a strong strategy. However, strategy is at the foundation of everything you need to excel in a highly competitive and fast changing business environment. During the recent years Adidas has made several changes to its business/marketing strategy for achieving faster growth worldwide.