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Table of Contents

Executive Summary 1

Chapter 1:

Introduction

1.1History 2

1.2 Logo History 4

1.3 Product Line 5

1.4 Creation of a Product at Adidas 8

Chapter 2:Company Profile and Industry Analysis 3

2.1 Company Profile Aiddas-Soloman 3

2.2 Profile of the Industry

2.3 Industry Entry and Exit Barriers

2.3 Opportunities and Threats of the Industry

Chapter 3

3.1 Environmental Analysis 12

3.2 SWOT Analysis 14

 

Chapter 4:

Strategies 19

Chapter 5:

Organizational Design of Adidas

5.1 A review of the Organizational Design of Adidas

5.2 Organizational Culture of AdidasChapter 6

Conclusion

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Company History:

In 1925, in a small German village, the world got it's first taste of adidas. It was there, in avillage by the name of Herzogenaurach, located 12 miles to the north and the west of Nuremberg, that those simple three stripes were brought to life by adidas' founder, Adolf "Adi" Dassler. Adi created adidas after realizing the need for performance athletic shoes.

 Adidas began small, producing soccer and running shoes, which ironically enough are stillthe main products that adidas is known for.

 As Dassler’s experience grew, so did his reputation. Dassler became widely known as the"equipment manager of the world." His shoes were first worn in Olympic competition in1928, and from then on he worked with everyone from Olympic athletes to national soccer teams. Some of history's greatest athletic performances are in debt to Dassler and hiswork. Jesse Owens wore adidas track shoes, during his spectacular Olympic performancein 1936, where he earned four gold medals. And Armin Hary was the first athlete to run the100-m sprint in 10 seconds, also wearing adidas shoes. In 1949, Dassler created the firstsoccer shoe with molded rubber studs, adopting the trademark three stripes. The GermanNational team truimphed in the 1954 World Cup wearing Adi's soccer boots with screw-instuds, which enabled the game to be played under vastly different conditions withoutslipping. Hundreds of world records, Olympic medals and World Cup victories stand as atestament to Adi Dassler's life work.

One of Dassler's goals in producing athletic shoes was to design them according to eachsport's specific demands. Dassler's drive to fulfill this goal resulted in more than 700patents. His long list of sport shoe innovations includes nylon soles and running spikes. Heconsidered any material that might enhance the performance of his shoes. Dassler experimented with sharkskin as a sole material and kangaroo skin for the sides of hisshoes.

Whatever the athlete's needs, Dassler took them into consideration when designing ashoe. Gold medals, world records and personal athletic accomplishments are the truetestaments to Dassler's shoes and the effectiveness of Adi's innovations. Recognizing thegenius of Dassler's work, the American Sporting Goods Industry Hall of Fame inductedDassler in 1978 as its first non-American member. Today the world refers to Dassler as thefounder of the modern sporting goods industry.

Yet it was not Adi's creativity and mastery of shoe technology alone that catapulted adidasto the top of the athletic shoe industry. Dassler's wife, Kathe, and their five children all hada hand in the business. Horst, the Dasslers' first-born, perhaps made the most signigicantcontribution to his father's company. While Adi's were creative talents, Horst had a headfor marketing. With the combination of Dassler shoe quality and Horst's ability to market

that quality, adidas was bound for success in the athletic shoe market.

Dassler’s Legacy.

Today, the legacy of the Dassler family lives on in the design and manufacture of contemporary adidas products. The same meticulous attention is paid to athletes' evolvingneeds. adidas keeps abreast of sport technology, incorporating the most advancedmaterials into its shoes and apparel to ensure performance and safety. And the company'saggressive marketing strategy is aimed at communicating adidas quality to as large andathletic an audience as possible. Though times and technologies have changed, the goalof adidas today is the same as Adi Dassler's nearly 80 years ago: “to be the best sportsbrand in the world.” 

 Adidas has continued to gain momentum through the years. Many attribute this to adidas'quality, styling and reputation. Adidas is currently the largest supplier of athletic shoes in

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Europe. Adidas ranks second worldwide, with their products selling in almost 200countries. In 1994 alone, adidas sales totaled 3 billion dollars. In late 1995, adidas wentpublic with its stock. It was a tremendous success and continues to trade internationally.

 Adidas posted an amazing 40% increase in net sales in the first half of 1997.

 Adidas, always on the cutting edge, launched their own website in 1996. The sitecontinues to evolve, yet maintains its simplistic and dazzling form, just like the brand with

the three stripes that is known the world over.

Logo History

For years the only symbol associated with adidas was the trefoil (flower) logo. This is thelogo on top of the three you see on the right. In 1991 a new adidas logo was introduced.This logo evolved to become the performance logo (on the bottom) featured on mostadidas products today. The performance logo was actually a part of the logo used for adidas' higher line of product's called adidas equipment. The equipment line began in1991 with a trio of soccer shoes. The trio consisted of the following.

equipment turf for turf surfaces (List $109.95) 

equipment hard ground for grassy surfaces (List $161.95) 

equipment soft ground for wet conditions (List $167.95) 

These 3 shoes featured the adidas equipment logo (middle logo) and were the first of a

long line of adidas equipment products. Products in the adidas equipment line were quite

expensive (although not as expensive as today's Predator (List $181.95) ). At first the

equipment logo was only green, but soon a black version surfaced. The equipment line

continued on for a few years and then all of a sudden adidas started using the

performance logo on products that weren't part of the equipment line. The logo showed up

mostly on running and workout shoes at first. The only difference was that the word

"equipment" had vanished. Adidas continued to release shoes with the trefoil symbol as

well. In fact, it wasn't until 1997 that adidas soccer shoes started getting the performance

logo on them. This is ironic considering the performance logo started with the equipment

soccer shoes. Adidas still releases products under the equipment line but they aren't as

high quality (and cost) as they used to be.

Product Line

 Adidas-Salomon produces under the following brand names:

· Adidas: footwear, apparel and hardware· Erima: Apparel· Bonfire: Apparel

Newly acquired brands:

· Salomon: skis, snowboards, bindings, ski boots, cross country ski equipment, in-line

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skates· Taylor Made, golfclubs and accessories· Mavic, bike wheels and rims

Adventure Shoes Basketball shoesCycling

shoes

Eye

protectionTennis shoes

Backlash Lo Downtown Campiolo Chili Central

Backlash Mid EQT Elevation Lo DirtSurfer Cookie EQT precision

EQT Arooga Lo EQT Elevation Mid Garda Cop Response FYW

EQT Arooga Mid Squire Ghissalo Lizard Spitfire Lo

EQT Badlander Turnaround Off Ramp Robin The Open

  Violation Vuelta Sprocket The Wells

  Twini Top rank Mid

 

Track and Field

ShoesSoccer shoes Running Shoes

Training

shoes

The World Cup

Soccer Ball

 Adistar Accelarator Copa Mundial Alfrescon Trail 4 by 1The World Cup

Soccer Ball

 Adistar 

Hammer/DiscussEQT Real Liga

Equipment

SalvationBradenton Lo  

 Adistar High jump EQT Velez LigaEquipment

Trident

Dorsey  

 Adistar JavelinPredator Traxion

CupLexicon Extra Equipment  

 Adistar LDRapier Traxion

 junior Ozweego Extreme Fast  

 Adistar Long jump World cup Response Malice  

 Adistar MD   Response Trail Roll Out

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 Adistar Race Walk   Supernova Speed Trainer    

 Adistar Shot Put  

 Adistar Sprint  

 Adistar Steeple  

 Adistar Triple jump  

Titan LD  

S h o e s / S o c k s

Samba Nubuc

Beckenbauer Cup

Etrusco Primo Studs

Khaki Canvas Leisure Shoes

Street Ball Basketball Shoes

Samba Classics

Torsion Cross II

Equipment Turfs

Removable Liner Turf Trainers

Torsion Cross

Adi Lite II Sandals

Equipment Adventure Boot

Malice training shoes

Response IV running shoes

Beach Slide Sandals

Crew Socks

Copa socks

3 stripe socks

Logo Socks

Response Trail running shoes

Loko

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S h i r t s / C o a t s

Equipment T-shirt

Label T-shirt

"Good morning, Good bye" adidas running T-Shirt

"Now that's a Red Card" T-shirt

Basketball mesh tank top

World Cup Hooded Sweatshirt

Classic Long Sleeve T-Shirt

Tread T-Shirt

T-shirt with embroidered adidas lettering and stripes in a circle

Burdette Jacket, Green

Signature Hooded Sweatshirt

Equipment Field Shirt

Penarol Jerseys, one Red and one Black one

Equipment Polo

Slash T-Shirt

Bayern Munich Jersey

C4 T-Shirt

Striper T-Shirt

DC United Training Jersey

Trefoil Logo Shirt-Original Classic, White/Sky

Performance Logo T-shirt, white

Performance Logo T-shirt, gray

P a n t s / S h o r t s

Retro Shorts, Black

White Boxer Briefs

M One Training Pants, black

Field Short, green

Mesh Shorts, Navy

Mesh Basketball Shorts, NavyAzteca Shorts, black

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3-Stripe Fleece Pants, gray

Ventura Short, New Navy

H a t s

Gasoline cap, Navy

Visor , black

Equipment Hat with suede bill, the original one (Back when equipment was the

elite stuff) 

Navy Hat with a white trefoil

White Hat with a puffed out black and silver trefoil

 All black hat with suede bill and raised rubber trefoil

Gray fleece hat with blue logo

Lil' Buddy Hat

B a g s

Equipment medium bag, red

Canvas backpack, navy

Napali Backpack

O t h e r 

Equipment Stripe Classic Watch and box 

Sandstone watch

Scorpion Soccer Ball

Breezline Sunglasses

Field Player Gloves (well not anymore, stolen at a game)

Shoe Bag

Baranne Shoe Polish

adidas equipment keychain - Included with equipment turf soccer shoes

3-Bar Headband, white

3-Bar Wristbands, navy

Soccer Bandana

Lanyard, navy

Footbag, green

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Can of adidas tennis balls 

Sale of adidas footwear and apparel according to category and region:

• Adidas footwear, net sales according to categoriesRunning: 46.4%Training: 11.6%Basketball: 11.0%Soccer: 10.8%Tennis: 7.8 %Others: 12.4%

• Adidas footwear, net sales according to regions Americas: 46.2 %Europe: 47.6 %

 Asia: 6.2 %

• Adidas Apparel, net sales according to categories

 All purpose: 62.5 %Soccer: 16.2 %Lifestyle: 7.9 %Workout: 5.2 %Others: 8.2 %

• Adidas Apparel, net sales according to regionEurope: 64.4 %

 Americas: 29.5 % Asia: 6.1 %

Creation Of a product at adidas.

 An immense amount of work goes into the creation of an adidas product. First, Marketingconsults with the internal adidas sports and technical divisions and external sources, suchas athletes and coaches, to find out where a product is needed, or where other productsare falling short. After the consumers' needs and opportunities for product improvementsare identified, Marketing presents the concepts to our design department, which createsproducts to fill these needs with innovative technologies and functional design.Development makes the actual prototypes. Marketing presents these prototypes to theretail market.

Clearly, an adidas product is the result of the intense thought and creative energy of manydifferent people at adidas. Our goal is to crate a product that is honest. In other words,

adidas designs products that are intended to perform. The rule is simple, form followsfunction. The following is a gerneral outline of how an adidas product is created:

1. Marketing evaluates athletes' needs, develops a basic concept of how those needsshould be met, and presents the concept to Design.

2 . Design sketches possible prototypes to meet the needs expressed by Marketing.

3. Design and Marketing consider the prototype sketches together, narrowing the selectionto those they anticipate will most successfully meet athletes' needs.

4. Design works with Development to create a prototype.

5. Marketing, Design and Development meet to review and improve the prototype.

6. Samples are wear-tested to ensure the product meets adidas standards for  performance and durability and stands up to the demands of the sport for which it was

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designed.

7. Preview samples are presented to key accounts and consumer focus groups for feedback. Final changes are made.

8. Salesman samples are distributed to adidas sales representatives for presentation toretailers.

9. Product is delivered to retailers.

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COMPANY PROFILE—adidas Solomon.

In 1997, Adidas became Adidas-Salomon with its US$1.4 billion purchase of Salomon, aFrench manufacturer of skis and other sporting goods. The deal put Adidas one stepcloser to competitor and world market leader Nike, and one step ahead of Reebok.

Salomon, aside from its winter sport equipment, also owns golf club brand Taylor Made

and cycle brand Mavic. The merger makes Adidas/Salomon the second largest sportmarketeer in the world, and number one in Europe. Salomon is currently very strong inNorth America and Japan, and Adidas has the largest market share in Europe.

Position and perspectives--Solomon

Founded in 1947 by Georges Salomon, the Salomon Worldwide Group was established asa ski-edges workshop in the French Alps. Nowadays, the company is among the leaders insports equipment with strong brands: Salomon (winter sports, hiking boots androllerblade), Taylor Made (golf clubs and accessories), and Mavic (cycle components).

Salomon Worldwide‘s strength and philosophy lies in its reputation of designing true

innovative products, with both technical advantages and esthetics, resulting in a truepartnership with sport-oriented men and women. This strategy is supported by stronginvestments in R&D and marketing (respectively 5% and 20% of sales).

The company has proven its ability to quickly attain strong market positions andprofitability. Its strategy is to become a leader in the "freedom actions sports": 

Facing the decline of its traditional markets (winter ski and fixations), Salomon —

still world leader in winter sports — has diversified its activities in the fast growing

snowboard and in-line skates markets.

Taylor Made is number two in metalwoods worldwide — driven by the success of Burner Bubble irons, it is the golf brand with the strongest growth on the American

market — and expects to confirm its position as an innovative brand.

Mavic is the world leader of top-level rims, and new products — such as ultra-

aerodynamic wheels — are currently being studied by the company.

Corporate Responsibility

Compared to US companies Nike and Reebok, Adidas has been slow to respond to issuesof corporate responsibility. It was only in June 1998 that Adidas adopted a code of conduct("Standards of Engagement") and an internal monitoring system. Until then, Adidas hadstated that it did not wish to develop a code of its own but favoured an industry-wide codesimilar to that drawn up by the World Federation of Sporting Goods Industry (WFSGI).

To monitor these standards, Adidas has initiated an internal monitoring program, withsubsequent audits of suppliers conducted all over the world by regionally located Adidas-Salomon personnel. The majority of Adidas suppliers have been evaluated for compliancewith the SOE and other action plans developed with individual suppliers to improveworking conditions. Adidas-Salomon has teamed up with Business for SocialResponsibility, a non-profit organization which promotes corporate citizenship, to trainmonitors and suppliers' representatives. With the assistance of experienced environmentalconsultants, a manual on health and safety and environmental issues has been developedwhich will help to make the SOE effective in practice. Manuals on labour issues are also

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being developed.

Next to that, Adidas-Salomon supports, through the WFSGI, projects which provideeducational opportunities for working children in Pakistan and thus alternatives to stitchingfootballs. A similar project is being developed in India. Both involve local sports goodsmanufacturers, the ILO, Save the Children, UNICEF and local NGOs.

In January 1999, Adidas appointed David Husselbee as global director of Social andEnvironmental Affairs. Husselbee used to work for Save the Children Fund and worked onWFSGI child labour projects in Pakistan.

 Adidas sources most of its products from suppliers all over the globe. About 95% of itssports shoes and 60% of its garments are sourced from Southeast Asia. The increase in

 Adidas sales of sports shoes and garments is due to a "strict control" of internationalsourcing costs. The Adidas Annual Report of 1996 already states that sourcing is at theheart of the business and a crucial factor in reducing production costs.

The consequences of this policy on working conditions in the supplier factories of Adidashas been described in detail which are as follow:

1.  At the Formosa/Evergreen factory in El Salvador, there are about 1000 women who

work 60-70 hours per week for a monthly wage of US$133. Women becoming

pregnant are dismissed. Unions are being suppressed. (German TV broadcast 

"Monitor" 13 August 1998)

2. The monthly wage in the Chinese shoe factory Han Tin is between US$47 and

US$72. Workers have to work seven days a week with forced overtime of up to

seven hours a day - paid at the normal rate of pay. (Asia Monitor Resource Center 

and Hong Kong Christian Industrial Committee, October 1997) 3. The women workers at the Bulgarian knitting supplier Orfei earn 67 US $ per month.

(Documentation of the International Forum on Clean Clothes 30 April - 5 May 

1998 Brussels)

4.   At the Tainan factory in Indonesia, neither the minimum wage nor the legally

prescribed overtime pay are being paid. Overtime is forced and exceeds the legally

prescribed maximum number of hours. Union activities are being hampered.

Sanctions for mistakes are excessive in proportion to the wages paid. Health andsafety are neglected. Female workers are sexually harassed. ("Cheap production

in Indonesia for Germany's fashion TNCs: Steps towards alternatives",

SÜDWIND-Materialien Nr. 7, Siegburg/Germany, November 1999)

International pressure on Adidas has increased over the last couple of years, with the aimto press the company to go beyond internal monitoring. Subsequently, Adidas has startedto respond to letters from international Clean Clothes Campaigns sympathizers and to talkto the German Clean Clothes Campaign.

In 1999, Adidas became a member of the Fair Labor Association in the USA and appliedfor membership of the Ethical Trading Initiative in Great Britain. Although progress is slowand confined to selected cases of labour violations such as Formosa/Evergreen, Adidas

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opted for corrective measures from the end of 1998. In June 1999 the US audit company"Verité", hired by Adidas, monitored Formosa/Evergreen and reported continued, grossviolations of labour legislation. This report was communicated to the Clean ClothesCampaign by adidas, as well as a correctional action plan dated October 1999. Over ayear after publication of the Formosa/Evergreen report, there is little progress, but at leastfirst improvements are beginning to be felt by the workers: workers applying for a job are

no longer asked if they are members of a union.PROFILE OF THE COMPETITOR 

Reebok, in terms of their products, is not entirely different from Nike. Reebok is involved inthe design and marketing of both athletic and non-athletic footwear and apparel, as well asother various fitness projects. Reebok’s market share is a distant third in the footwear industry at 11.2% (compared to 30.4% and 15.5% for Nike and Adidas respectively).Reebok’s financial position has been gradually slipping for a number of years. This isevident in their declining stock price, which has fallen by over 80 percent in the last four years. Reebok’s financial woes are illustrated in their declining net sales. Reebok’s netsales declined 9% during the first three-quarters of fiscal year 1999. During that same

period, net income declined 17%. Taking these and other factors into account leavesReebok’s current financial position, as a whole, looking bleak.

PROFILE OF THE INDUSTRY

Industry Size

In 1998, Americans spent approximately $38 billion to purchase more than 1.1 billion pairsof shoes. The wholesale value of athletic shoes for the US market totaled $8.7 billion in1998 down 8.5% from the year before. According to the Sporting Goods Manufacturers

 Association, athletic footwear accounts for almost 35% of all footwear purchases.

In general, consumers are spending less worldwide for athletic footwear. The current

domestic industry focus is on casual and comfortable shoes. Although athletic footwear sales appear to be recovering, demand is still leaning toward the "brown shoe" casualfootwear with a comfortable and rugged design. This switch is due to the increasingnumber of workplaces adopting casual dress codes.

Industry Profitability

The athletic footwear industry is a challenging and saturated market. Intense competition,fashion trends, and price conscious consumers have slowed growth in this industry.Manufacturers are combating sluggish sales with radical new styles, along with offeringmore styles at lower price points. Companies are looking for new ways to boost sales bycapitalizing on direct Internet sales to consumers. Many companies are also increasing

profitability by transferring production to cheaper offshore facilities.

This segment has reached a point of maturity in the domestic market and can look forwardto only modest sales growth for the long term. However, sales are improving slightly,especially in the areas of running shoes, cross-trainers and basketball shoes. Therefore,companies with strong brands will increasingly turn to international markets for growth.

Industry Seasonality

Overall, sales in the athletic footwear industry remain stable throughout the year. Theglobal variance in our market balances the seasonal fluctuations. Typical trends inseasonality appear for spring apparel, the back-to-school season, and the Christmas

holiday season.Industry Cyclicality

In fiscal year 1999, the economy was relatively favorable for footwear manufacturers. The

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footwear industry and its profitability are closely tied to economic cycles. Modest inflation,low unemployment, and a booming stock market will all contribute to healthy consumer spending.

The theory behind the slowdown in sales is that growth in athletic footwear and apparel iscyclically sensitive to the Olympics. Historically, years of the Olympic Games havedemonstrated surges in growth followed by difficult sales periods. The outlook for 

increased sales trends is optimistic due to the upcoming Olympic Games slated for thisyear. Nike can also look forward to a boost in demand from the World Cup events.

Industry Entry and Exit Barriers:

Entry Barriers

The athletic footwear industry is a very competitive and mature market. The leaders of thisindustry are very well established. Leaders like Nike and adidas have made the industrywhat it is today. Consequently, long-time competitors like Saucony and K-Swiss have beenstruggling for years just to keep their brands alive. This cutthroat environment hashindered the entry of new competitors.

Economies of scale also contribute to the lack of newcomers into this market. In order tohave an edge over the leaders, companies must be able to compete at all levels such asreasonable pricing, efficient production, and high product quality. These things are difficultto achieve without the resources of an established manufacturer.

 Another key barrier to entry is the access of traditional distribution channels. Whencombing the shelves at stores like Sports Authority and FootLocker, it is evident that theleaders dominate the shelves. Lesser-known brands are viewed by retailers as being toorisky to replace an established brand name like Nike or adidas on the shelf.

These walls seem to be breaking down with the help of the Internet. The costs of overheadthat come along with traditional brick and mortar retail distributors are being significantlydiminished. New entrants are now able to slide into markets without these high startupcosts, making it more profitable to begin production.

Exit Barriers

When a company decides to exit from this industry it must be aware of things such asindebtedness and its ability to meet those obligations. A company must also be cognizantof lawsuits filed by its stakeholders and claims made on any residual assets.

INDUSTRY ANALYSIS:

Opportunities

The athletic footwear and apparel industries will benefit from the currently strongeconomic backdrop in the United States. Spending is high and is expected to result

in sales growth industry-wide.

 Athletic shoes and apparel have become a staple in wardrobes worldwide. This is

due to both the increasing numbers of people exercising and the trend towards

casual apparel.

Competition is fierce at all levels in within the industry, especially among the

leaders. This creates a sense of security for the companies that have been able tocreate a niche. 

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Cost cutting due to restructuring of operations will give many companies the chance

to price products more competitively.

One area in the industry that is ever changing is research and development. The

strong departments will surely capitalize on the trends of tomorrow if their efforts are

successful.

Increasing financial recovery in overseas markets proves to be an area of 

expansion for the athletic footwear and apparel industry. 

E-tailing, or customer-designed internet merchandise, is threatening the traditional

distribution channels, thus eliminating the "middle-man" distributors and allowing for 

increasing profitability. 

Threats

The industry has reached a level of maturity. While style and technology in athletic

apparel and footwear has reached a leveling-off point, the important aspect now is

for companies to differentiate their lines.

Inflation is looming over the U.S. economy, which may spark a cutback in consumer 

spending.

Consumers are becoming savvier and may lean towards discounted items. 

In terms of market saturation, many of the key manufacturers in this industry havebeen around for many years. Consumers may be scanning the market for new and

different footwear and apparel products. 

ENVIRONMENTAL ANALYSIS:

Top Competitor Analysis

Distinctive Competency - Marketing (Consumer Loyalty)

Despite the tough times Reebok has recently come upon, reasons for optimism remain.Reebok has managed to hold the loyalty of a large portion of the industry’s femaleconsumers market. While Reebok’s spending on advertising has fluctuated, individualproduct designs have come and gone, female consumers have, as a group, remainedloyal to Reebok and their products.

Can Reebok use this distinctive competency to inflict damage on adidas? 

Yes, Reebok can use their distinctive competency to wound adidas. If Reebok can expandtheir appeal to incorporate female consumers who are not currently Reebok customers,Reebok could expand their market share and take customers away from adidas products.

Can adidas protect itself against this threat? 

Yes, adidas can protect its market share among female consumers within the industry bytargeting some of our promotions to female consumers.

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Competitor’s Key Weakness – Marketing – (Advertising/Promotion)

The leading cause of Reebok’s recent tumbles stemmed from problems relating to poor marketing. Reebok’s shortcoming in the area of marketing is their key weakness. Whileother athletic shoe companies bombard the airwaves with commercials pushing their product lines, Reebok remains out of sight and out of mind.

Can Reebok’s key weakness damage their competitive position? Yes, Reebok’s chances of growing their market share are slim as long as their advertisingendeavors remain to be so unsuccessful. For Reebok to rebound from their currenteconomic woes, they will have to improve the quality of their overall marketing operations.

Can adidas take advantage of their competitor’s key weakness? 

Yes, adidas can take advantage of Reebok’s marketing woes by doing extensive andaggressive marketing. Continuing it’s successful marketing programs should allow adidasto court the customers Reebok fails to draw in with their weak marketing initiatives.

Other External Forces

Demographics

Opportunity 

 Adidas once loyal market is currently aging. This means that its customers are not asathletic as they may have been in the past. However, this poses as an opportunity for adidas because they have the ability to influence the next generation of adidas customers.The older generation of adidas brand purchasers have the power to influence their children- part of the next generation of adidas loyalists. In addition, by marketing different types of shoes to this market, these existing customers will continue to be loyal to adidas.

Threat 

The phenomenon of the aging of our most loyal market segment questions whether thereis a threat that the new generation will not be exclusively loyal to adidas. In the currentmarket there are a number of other competitors that are not mainly athletically oriented.Examples include such manufacturer-retailers as The Gap and Old Navy. Their clothingand shoes are competing with adidas. In addition, Nike is not keeping up with the latesttrends and styles like some of its competitors have been. For that reason, the newer generation is attracted by Nike and Tommy Hilfiger.

Pressure groups

Opportunity 

 An opportunity produced by pressure groups is the ability to react in a positive manner toconcerns of the public as well as customers. Consumer watch groups are payingespecially close attention to adidas use of sweatshops and child labor to produce our products. Adidas opportunity lies in being able to show the consumer force that they areindeed taking steps to reduce and eventually eliminate sweatshops and child labor throughnew policies and strict implementation procedures. Also, by responding to such consumer activism, they are portraying a positive image in that we are promoting ethics even whilewe are trying to be efficient and economical.

Threat 

In the same manner, not responding to these consumer activist groups poses a threat to

adidas. The negative publicity the potential to ruin a company permanently. Bydisregarding the voice of concerned citizens, means disregarding their customers, one of our most important stakeholders.

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KEY OPPORTUNITY

The key opportunity for adidas currently is the booming economy of the United States.Currently the company has the ability and the resources to exploit this opportunity. Adidashas capitalized on the recent economic boom with higher sales and income. However, theyare not using their resources to the fullest degree. There are currently many areas in whichadidas is not paying attention. They have not catered to a large portion of the new

generation that demand the latest trends and styles. Also, adidas must take into accountthe changing demographics in this country. There is a much higher proportion of Hispanics, Asians, and African Americans than there was before. These groups havesomewhat different tastes that adidas should be able to satisfy.

To exploit this opportunity, adidas needs to focus on who the next generation of loyalcustomers will be and cater to their needs. In addition, the world economy is recoveringcurrently, which allows adidas to make an impression in foreign markets as well. adidas isstrong in many foreign countries, but we need to focus on the younger market of consumers. Adidas has been doing a great deal of research and development, but if theywant to increase their market share, they must look at trends while maintaining their high

standards of quality.KEY THREAT

The key threat for adidas. is market saturation. The problem is that the athletic shoemarket is already full of different brands and companies. Now, there is very little room for new companies. There is also very little room for new product innovation and growth of market share for companies like adidas. Since adidas is currently holding the secondposition in the market as far as market share, there is little room for them to expand.

 Adidas. is now competing with other athletic companies as well as companies that just sellclothing or other types of shoes. If all of these other companies merely gain a smallpercentage of the market, adidas will be one of the main companies to start losing market

share.

In response to this threat, they have to focus on keeping and increasing their market shareand making sure that competitors like Nike, Rebook and Old Nay do not steal away themarket share. They could do this by focusing their efforts on a broader market. This wouldinclude the younger generation that is interested in sports as well as extreme sports.

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MISSION OF ADIDAS

Our mission is to be the best sports brand in the world. We will never equate quantity with

quality. Adidas founder, Adi Dassler was passionate about sports and committed to

meeting the demands and needs of athletes. He gave them the unexpected, the little

differences that made them more comfortable and improved performance.

This is our legacy.

This is what the brand stands for.

This will never change.

STRATEGIES

CORPORATE LEVEL STRATEGIES

During the time of Adi Dassler the corporate strategy was to deliver the right kind of footwear to the athletes: the foot wear that suits their needs. The focus was on manufacturing.

Even after the death of Adi Dassler, in lieu of aggressive competition from Nike and

Reebok there was no change in the strategy and the management kept its focus on

manufacturing. In a business driven by cutting edge marketing Adidas’s senior 

management ignored market changes, taking a conservative course while letting Nike

steal its market leadership with innovative, aggressive marketing and products. Adidas

executives lost touch with their markets, which resulted in dwindling of Adidas market

share from an all time high of 70% to mere 2%.

In February 1993 Adidas acquired Sports Inc a US based sports marketing company

founded by former Nike executives Rob Strasser and Peter Moore. Sports Inc was later 

merged with US operations of Adidas.

Turnaround of Adidas

In April 1993 Robert Louis Dreyfus, who had earned himself the reputation of doctor to

sick companies took over Adidas. Within weeks he changed the strategy of the company.

Adidas went from a Manufacturing to a Marketing company

“ All I did was borrow what Nike and Reebok were doing. It was there for everybody to

see.” 

  (Robert Louis Dreyfus)

Louis Dreyfus wanted to cut costs and move Adidas out of production. He closed down all

the company’s high cost factories in Germany and Austria except one. Now almost 80% of 

the footwear is outsourced while rest is manufactured by Adidas itself. Adidas has shifted

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its focus to outsourcing throughout Asia, North Africa and Southern Europe. What Adidas

gained from changing the manufacturing strategy was reduced capital requirement, lower 

wages and ability to focus on its core competencies.

To build loyalty into its promotions, Robert Dreyfus devised another strategy of making

partial payment in Adidas stock.

Divestment of Fashion Brands

To streamline the operations of Adidas and shift back its focus to Athletic Performance

brand, fashion brands like Le Coq Sportif and Pony that were not very successful were

shed.

Adidas goes public

In year 1994 Adidas showed profits after quite some years and in Year 1995 Adidas went

public. In the year 1996 the net income for the first three quarters surged to a record $214

million. After restoring the robust profits to Europe’s largest athletic gear maker, Robert

Dreyfus wanted to turn up the heat on Nike and Reebok on their home turf. The strategy

was a cornerstone of the goal to regain the strength Adidas enjoyed during 1970’s.

Related Diversification

In September 1997 Adidas purchased the French sports equipment group Salomon S.A.

and became Adidas Salomon. This deal put Adidas one step closer to competitor and

world market leader Nike and a step ahead of Reebok. This acquisition broadened

 Adidas’s product base as well as balanced its geographic reach. Adidas outmaneuvered

Nike in the rush to diversify from footwear and apparel.

The product base was broadened to include

  Ski gear 

  Golf products

  Bike components

Nike being an industry leader and the company to beat will outspend the bulked up Adidas

Salomon 2-to-1 on marketing and promotions.

 Adidas has started signing up sports stars and now has a contract with Kobe Bryant to

appeal to kids.

Nike’s Limited Success with Diversification

Nike bought Bauer, a Canadian maker of hockey skates and accessories. When Nike

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introduced a new hockey stick with an ergonomic, finger fitting handle, the product did not

hit well with the players.

Adoption of Code of Conduct

Compared to US companies Nike and Reebok, Adidas has been slow to respond to

issues of corporate responsibility. It was only in June 1998 that Adidas adopted a code of 

conduct ("Standards of Engagement") and an internal monitoring system. Adidas has

teamed up with Business for Social Responsibility ("BSR"), a non-profit organization

geared towards helping corporations develop more environmentally and socially

responsible practices. Adidas is also in the process of getting ISO 14000 certification for 

the entire Adidas organization.

Revolutionary New Global Business Strategy

In year 2000 Adidas Salomon AG announced its revolutionary New Global Business

Strategy. The strategy aimed at shifting brand positioning through a revolutionary three

divisional structure.

 A part of this strategy was to integrate US organization into Adidas global marketing

structure which would result in savings over the next years.

This new strategy will revolutionize the way Adidas does business in the years to come. It

will provide the framework that is needed to aggressively expand the business.

Vertical Integration

In April 2001 Adidas Salomon AG took over its long time Danish Distributor Sportgoods

A/S.

Following the acquisition of Sportgoods A/S, the company will be able to offer its

customers a wider product range and a united marketing presence. This is intended to

improve the brand‘s position in Denmark.

Controlling the Environment by Establishing Interorganizational Linkages

Strategic Alliances

  Minority Ownership

 

 Adidas bought 10% of Bayern Munich, German soccer club in a move to intensify its long

standing co-operation with the club. The decision to have a stake in the club will allow

 Adidas to intensify relations with the club over and above brand marketing like having

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more say in marketing the club and more visibility I the soccer world.

Making the Supply Chain a Competitive Advantage

In year 2001, Adidas embarked on an ambitious supplier consolidation plan which

improved its “end to end” supply chain solutions, optimizing partnerships with raw material

suppliers, manufacturers and retailers. The consolidation of supplier base will increase its

influence and power with suppliers. This focus will in turn allow Adidas Salomon to create

customized solutions; further improve social and environmental performance and lower 

purchasing cost. This emphasis will allow Adidas to use supply chain as a competitive

advantage.

Joint Venture

 Adidas has entered into a joint venture with Rugged Shark to license, produce and marketa men's, women's and children's collection of National Geographic casual footwear.

Licensing

 Adidas acquired the rights and business of Australian designer and manufacturer, RoyalElastics (elasticized footwear).

BUSINESS LEVEL STRATEGIES

Considering the business level strategies of Adidas, Adidas follows product developmentand Market development strategies to enlarge its domain. Adidas while following marketdevelopment strategy freshened up the footwear line and sponsored tournaments in“streetball”, a street version of basket ball. It continuously follows product developmentstrategy with three new types of shoes hitting the market this year.

Under the new structure of Adidas each of the three divisions will produce its own footwear and apparel lines. Each division has been structured around different Market segmentsrather than product areas and each division will follow a different strategy.

FOREVER SPORT DIVISION: Engineered to Perform

The "Forever Sport" division will feature products that are aimed at the serious sports

participant. The main strategy followed by this division will be Focus Strategy because

this division will target athletes who want the highest level of functionality for their specific

sport. The products under this division are performance driven rather than image driven.

Forever Sport Division will use the Adidas Performance Logo.

The Forever Sport Division is where Adidas will compete with companies such as Nike,

Reebok, Puma, and Fila.

ORIGINAL DIVISION: “Once Innovative, Now Classic, Always Authentic”

The Original Division will target consumers who want to buy products exclusively for 

leisure usage, but still are inspired by sports.

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 Adidas Originals will primarily follow “Differentiation Strategy” in which it will have three

different product segmentations: The Original Division will have three different product

segmentations: Re-introduced, Re-interpreted, and Re-designed products.

Re-introduced products will be limited volume re-makes of classic products. Re-interpreted

products will be based on the original authentic sport version, with updated colors,

materials and details. Re-designed products will be inspired by the old Adidas originals in

style and craftsmanship, but put in today’s fashion context. All products will use the classic

 Adidas Trefoil logo.

The Original Division is where Adidas will compete beyond its traditional competitors with

companies such as Polo, Abercrombie & Fitch, and the GAP. Increasing competition from

the fashion houses will require rapid product turnover and quick delivery times.

EQUIPMENT DIVISION: “Simply Unexpected”

The EQUIPMENT Division will focus on creating multi-functional sports products, with

cutting-edge designs, for the prestigious consumer. It will serve as the house of innovation

for cross-performance apparel and footwear. The contemporary, meaningful, aggressive,

and exciting design elements of the EQUIPMENT products will create a brand that is a

status symbol on and off the court or playing field. All products will use the new Adidas

EQUIPMENT logo.

 According to the analysis conducted by the group the Equipment division will follow

“Focused Differentiation Strategy” as the distribution will be selective in chosen markets

like Germany, France and USA. The initial product launch in this division is scheduled for 

fall/winter 2002.

FUNCTIONAL LEVEL STRATEGIES

Functional level strategy is a plan of action to strengthen organization’s functional and

organizational resources, as well as its coordination abilities in order to create core

competences. For this purpose the group has evaluated the strengths and weaknesses of 

the functional level.

Marketing

Market Share

 Adidas holds about 16% of the global market share whereas Nike holds an impressive

30.4% of the global market share. Reebok has a share of 11.2%. Adidas has the largestmarket share in the Europe. Adidas’s Achilles heel is still the American market where it

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lags behind Nike but has a share equal to that of Reebok i.e. 11% whereas Nike holds

43% of US market share. Adidas expects its share to increase as a result of sponsoring

ten teams in the competition and providing the ball. By year 2004, Adidas plans to increase

its US market share to 20% of the entire US sporting goods market.

Advertising and Promotion

Company's aggressive marketing strategy is aimed at communicating Adidas quality to as

large and athletic an audience as possible. Though times and technologies have changed,

the goal of Adidas today is the same as Adi Dassler's nearly 80 years ago: to be the best

sports brand in the world. Before 1993 Adidas used to make one spot a year, now it makes

more than 40 a year. Strong advertising and promotion has resulted in brand loyalty and

strong brand power. The three stripes bring to mind the name Adidas but lack of catchy

slogans has been a problem for Adidas. Now with restructuring Adidas has introduced

slogans with each of its divisions but it will take time to register in the mind of consumers.

Nike’s swoosh and slogan Just do it represent the most recognizable brand.

 Adidas is, like Nike, very active in securing sponsoring and advertising deals with

celebrities. Some of the most famous are Martina Hingis (tennis), Kobe Bryant

(basketball), Peyton Manning, Paul Palmer (swimmer), Jan Ullrich (racing cyclist) and the

New York Yankees. David Beckham, Patrick Kluivert and Zidane all wear Adidas boots, the

Predator Accelerator.

 Adidas’s marketing budget is 12% of the sales.

Products

 Adidas’s goal is to create products that are honest and the product must perform. To

produce high quality performance products a lot of work goes into creation of a product.

First need is determined. Marketing department talks to athletes and coaches to find out

where a product is needed or where other products are falling short. After the consumers'

needs and opportunities for product improvements are identified, the marketing

department presents the concepts to design department. The innovators in this part of the

company then create products to fill the athletes' needs as they use the latest in

technology and functional design. A development team makes the actual prototypes.

These prototypes are then presented to the retail market by the marketing department.

Nike is also very strong in creating cutting edge products but its focus is more towards

creating a life style rather than delivering performance oriented products.

  Marketing Research

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 Adidas primarily conducts marketing research on a continual basis to assist in increasing

the market share in the athletic footwear and apparel industry.

Production

 Adidas’s facilities are located throughout Asia, North Africa and Southern Europe.

European countries such as Greece, Turkey and Portugal, supplemented by North African

locations such as Tunisia, are favored for logistical reasons. The faster delivery and stock

turnover that these sites are able to provide for European customers outweighs their 

higher labor costs (compared with Asia). The shift to China and other low-cost havens has

often come through the contract manufacturers. 80 % of the production of Adidas is

outsourced.

Nike’s facilities are located throughout Asia and South America. The locations are

geographically dispersed which works well with its mission to be a truly global company.

The production facilities are located close to raw materials and cheap labor sources. In

general, the facilities are located further from most customers, resulting in higher 

distribution costs. However, the cost savings due to the placement of production facilities

allows for cheaper production of products despite the higher costs of transporting

products.

  Working Conditions of Facilities

The move to cheaper locations like China has seen companies like Adidas criticized for 

allowing poor working conditions in the factories of some of their contract manufacturers.

The criticism has put pressure on the likes of Adidas, Nike and Reebok to monitor 

manufacturing more closely. In June 1998 that Adidas adopted a code of conduct

("Standards of Engagement") and an internal monitoring system.

Nike and Reebok also have taken steps to improve the working conditions of the factories.

 As part of Nike’s new labor initiative:

  Expanding our current independent monitoring programs to include non-governmental

organizations, foundations and educational institutions.

 Adopting U.S. Occupational Safety and Health Administration (OSHA) indoor air quality

standards for all footwear factories.

Reebok has its Human Rights Production Standards.

Research and Development

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 Adidas has one of its R&D site in Germany where its head quarters are located. The

categories most influenced by the European market are designed, developed, and

marketed globally from the international headquarters in Herzogenaurach, Germany. By

I994 Dreyfus decided the Lucerne R&D centre in Switzerland was not only too expensive

but also too far removed from North Americans' sporting tastes. The result was that he setup a biomechanics research centre and a regional marketing centre in Portland, Oregon in

the US, while materials research was consolidated in Scheinfeld in Germany.

 Adidas is doing very well in R&D but Nike is way ahead of Adidas in R&D. Although Nike

conducts continuous, basic research that benefits numerous facets of the sports and

fitness industry, our primary focus is directed towards applied research. Applied research

focuses on short-term initiatives such as successfully developing new product lines.

Human Resource

Social Responsibility

 Adidas feels a strong social responsibility and has a strong commitment towards it.

Social responsibility is an integral part of [their] brand values, and Adidas-Salomon has atradition of requiring its suppliers to conform to social and environmental standards. In1998 further steps were taken to ensure that there are acceptable working conditions inthe factories which supply Adidas-Salomon products. All suppliers are obliged to adhere tothe corporate Standards of Engagement (SOE) confirming the policy on minimumrequirements for labor, health, safety and environmental issues. The SOE is based on theWorld Federation of the Sporting Goods Industry model Code of Conduct and states that  Adidas-Salomon will not conduct business with suppliers which use forced labor or child labor and do not comply with the employment laws of the country concerned. It has beentranslated for display in factories into the languages of the countries where products aresourced.

Nike is also strongly committed to social responsibility. In response to accusations byconsumer groups over unfair labor practices, Nike has developed a CorporateResponsibility Policy that discusses how it will improve working conditions for itsinternational employees. The Policy has the following mission, "To lead in corporate

citizenship through operations that reflect caring for the world family of Nike, our teammates, our consumers, and those who provide services to Nike." The policy includes,but is not limited to, the following initiatives: raising age limits in factories to 18 years,securing independent monitoring for our factories, extending a commitment to theenvironment, improving safety and health conditions, and developing programs to provideeducational programs. The policy shows Nike’s commitment to responding to the concernsof consumers, as well as a commitment to its employees around the world.

Distinctive Competency

The distinctive competency of Adidas lies in churning out products that fit the exact needs

of athletes. Adidas by creating an exclusive line focused on fulfilling the functional needs of 

the athlete and by utilizing the best materials and athlete input in the tradition of Adi

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Dassler. This helped in rejuvenating the Adidas brand in USA. It offered moisture

management, thermal insulation, weather protection, ease of movement, and safety,

helping the athlete to perform more efficiently.

 An Adidas product is the result of the intense thought and creative energy of many

different people. Even today, the legacy of the Dassler family lives on in the design and

manufacture of contemporary Adidas products. The same meticulous attention is paid to

athletes' evolving needs. Adidas keeps abreast of sport technology, incorporating the most

advanced materials into its shoes and apparel to ensure performance and safety.

Whereas Nike’s distinctive competency lies in the area of marketing, particularity in thearea of consumer brand awareness and brand power. While the reasons that Nike issuccessful in marketing our products are numerous, this key distinctive competencytowers over our competitors. As a result, Nike’s market share is number-one in the athletic

footwear industry. Catch phrases like, "Just Do It," and symbols like the Nike "Swoosh,"couple with sports icons to serve as instant reminders of the Nike empire.

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Organizational Design of Adidas

In this chapter, we have reviewed the Organizational Structure and Culture of Adidas.

Though Adidas-Salomon is a company, which is in the business of manufacturing and

marketing a wide range of products, the emphasis of our study is on the footwear business

(core business) of Adidas.

A Review on the Organizational Structure of Adidas

The Head Quarter of Adidas-Salomon is situated in a small town named Herzogenaurach

in Germany. This head office only manages the support function of Adidas such R&D,

marketing sales etc. and that too of the European, African and Asian regions only.

The American region is monitored by Adidas America, which is an autonomous division

and has been made to increase the market share of Adidas in USA. Adidas America hasgot its own support functions, which help it respond to the market needs as quickly as

possible.

In 1997, Adidas acquired “Salomon”, one of the world's leaders in sporting goods. The

acquisition broadened its product range through the addition of three leading sports

brands. “Salomon” for winter sports equipment, “Taylor Made” for golf equipment and

“Mavic” for cycle components.

The core brand of Adidas-Salomon is Adidas which is in the business of making athletic

equipment, footwear and apparel. Adidas has gone through a lot of structural changes

since 1924 i:e when two brothers Rudolf and Adi Dassler founded this shoe making

company.

In 1948, the two brothers split from each other and Rudolf founded a rival sporting

company named “Puma”.

 Adidas started growing and to cut its prices short, it started manufacturing its productsoutside Germany. It moved to countries such as the Czech Republic, Hungry, Poland and

Russia.

 As the company grew big, it was rent by family quarrels. As Adi’s son, Horst, split with his

parent and opened a rival branch in France, complete with its own designers and factories.

Horst eventually took over the parents company in 1985. By then, Adidas’ share of the key

 American Market was crumbling. It had dwindled to just 2% from 70%. Adidas’ share was

taken by Nike and Reebok.

Horst died in 1985, leaving Adidas leaderless. His sister finally sold the company in 1989

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to Bernard Tapie, a roguish French financer for $ 320 million. Tapie was soon declared

bankrupt and Adidas fell into the hand of the creditors.

Louis-Dreyfus, scion of a prominent French trading dynasty with an M.B.A. from Harvard,

earned a reputation as a doctor to sick companies after turning around London-based

market research firm IMS. With no other company or entrepreneur willing to gamble on

 Adidas, Louis-Dreyfus got an incredible bargain from the banks: he and a group of friends

from his days at IMS contributed just $10,000 each in cash and signed up for $100 million

in loans for 15% of the company, with an option to buy the remainder at a fixed price 18

months later.

One of Louis-Dreyfus’ first move was to replace nearly all of the senior managers, bringing

in young people from all over the worked. He flattened the organizational hierarchy and

moved his own office into middle of the marketing group, working directly with the product

managers. Then he doubled the marketing budget – which had been reduced year after 

year to control costs.

Louis-Dreyfus moved production to low-wage factories in China, Indonesia and Thailand

and sold Adidas' eastern European factories for a token one Deutsche mark apiece. This

shift of manufacturing was due to the reason that prices in eastern Europe had been rising

for the some time. This hit the competitiveness of Adidas and sent it towards locations in

 Asia, North Africa and Southern Europe. At this time, 90% of the shoes and apparel of 

 Adidas in made Asia, Africa and southern Europe.

 Adidas is also having its products manufactured by sub-contractors in countries like Korea.

This sort of contract manufacturing is handled by regional offices (in this case Hong Kong).

These regional offices have a high degree of autonomy. There is no or little involvement

from the head office in Germany. In the past, all of the manufacturing was monitored by the

head office.

 Adidas also has offices all over the world which work as sales centers of its product in their 

respective countries.

 Adidas soon wants to finish manufacturing all sorts of products. It wants its products to be

manufactured by subcontractors. It only wants to take care of the marketing of its brand

and products.

In the past, Adidas had been following the traditional “footwear and apparel” structure

which was being followed by most of the sports equipment companies. To cope with

uncertain and competitive environment, most of the footwear and apparel companies

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shifted to flexible structures to deal with the environmental uncertainties. For example,

Nike and Reebok shifted to a “Network Structure”. A network organization is a collection of 

independent, mostly single-function firms. The dynamic network structure describes not

one organization but the web of interrelationship between many firms. The network as

whole can display the technical specialization of the functional structure, the marketresponsiveness of the product structure and the balance and flexibility of a matrix.

In 2000, Adidas announced revolutionary new three divisional structure. This structure had

never been followed by any other organization before. In this structure, Adidas divided its

products into three divisions. The divisions were named as “The Forever Sports Division”,

“The Original Division” and “The Equipment Division”. The divisions are dealt as separate

organizations as all the three divisions produce different product to cater the differentsegments of the society. The competitors of these divisions are also different. Furthermore,

these divisions have a network structure within them. This new structure of Adidas is a

very powerful tool to handle all sorts of uncertainties of the different markets.

Given below is a sketch of the new and revolutionary Three Divisional Structure of Adidas.

 

In the figure, FSD stands for Forever Sports Division, OD stands for Original Division and

ED stands for Equipment Division.

 A brief listing of the products and competitors of the three divisions is given below:

Forever Sports Division

The forever sports division spotlights “sports performance” products that Adidas aims at

fashion oriented customers. Forever Sports offers products that compete with Nike,

Reebok, Fila and Puma.

Original Division

Original Division focuses mainly on leisure products. The division offers three product

segments: Re-introduced, or limited volume remakes of the classical goods; Re-

interpreted, or updated products based on Adidas’ “sport” version; and Re-designed,

based on older Adidas styles, but as the company explains, “put in today’s fashion

context.” Adidas wants this division to compete with retailers such as Polo, Abercrombie &

Fitch and GAP.

Equipment Division

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The equipment division will be launched in winter 2002. This division will create

multifunctional sports products. The distribution of these products will be in chosen

markets like Germany, France and the US.

 Adidas has undergone this structural change but one of its divisions has still not hit the

markets. This new structure of Adidas will provide Adidas with the dynamic framework that

it needs to aggressively expand its businesses and will enable it to deliver significant

growth rates in the coming years.

Organizational Culture of Adidas

Before 1993, that is when Louis-Dreyfus joined as the CEO of Adidas, Adidas was a very

formal and centralized company. All the top management was German and as Louis-

Dreyfus recalls, “it was a very self centered German company which was absolutely sure

that it was right.” There was a lot of bureaucracy in the company which had built up over 

several generations. Louis-Dreyfus realized this fact on the very first day when he joined

as the President of Adidas, when he was asked to approve a salesman expense account

for $ 300. He soon realized that this was the company’s biggest enemy.

 Adidas more or less tried to follow the lines of its rival Nike. Nike has a strong sports-oriented culture and is promoted through company practices such as paying employeesextra for biking to work instead of driving. Nike is recognized worldwide as an athlete’s

company which, hire former college, professional and Olympic athletes to design andmarket its shoes and clothing for sports enthusiasts. The company chooses to call itsheadquarters a "campus" instead of an office. Employees are called "players," supervisorsare "coaches" and meetings are "huddles."

Nike has been striving towards an inner culture that reflects this mantra. Employees aregiven an hour and a half for lunch to play sports or simply workout. The new Nike is not

 just about shoes and slam-dunks, but about promoting a lifestyle. All new employees viewa video of sports highlights accompanied by a soundtrack that discusses the soul of theathlete and the competitive spirit. In addition, management sends weekly emails to updateemployees on the recent successes of Nike-sponsored athletes, and often hostsspokespeople to motivate and thank its staff for contributions to the sports world.

 Adopting a new culture is not an easy job. The primary steps taken by Louis-Dreyfus were,

that as soon as he joined Adidas as its CEO, he replaced nearly all of the senior managers

and brought in young managers. He slashed the company's bureaucracy, adopted

 American accounting rules and brought in international management talent. In a matter of 

weeks, the entire German senior management had been fired. The company's chief 

financial officer was Australian and the international marketing manager was a Swede.

English became the official language of the head office and no Germans remained on the

managing board of the company other than himself and some other trusted aides.

In another break with the traditional German workplace, corporate life was made almost

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gratingly informal. Unlike other German managers, the managers of Adidas show up for 

work wearing sweatshirts and sneakers. A lot of freedom is now given to the employees

working there. None of the decisions are interfered with and no complaints are made about

any decision.

The culture of Adidas does not only care for the internal environment but also the external

environment. Its culture now emphasizes on socially responsible, safe and environmentally

sustainable practices in the company and its supply chain to enhance the value of its

brands. Adidas emphasizes on the fact that athletes need a healthy planet, just as they

need the best products, as it is hard to run when the air is poisoned.

Globally, Adidas has made, or is in the process of making the following commitments

towards reducing its impact on the environment:

1. Preparation of a Germany-based global technology centre dedicated to developing

environmental friendly footwear manufacturing technologies.

2. ISO 14000 (a set of international standards which help make the world a better place

to live) Certification.

3. Cutting wastes and conserving resources.

4. Promoting a culture of responsible outdoor athleticism and an athletic, healthy lifestyle

5. Teaming up with other organizations and companies to help Adidas develop

sustainable socially responsible business practices.

The brand values of the company are authenticity, inspiration, honesty and commitment

that are derived from sports. They form the basis of its Standards of Engagement, the

company’s code of conduct that aims to ensure that its suppliers´ factories are safe, fair 

places in which to work.

 Adidas vows to adhere to social and environmental laws, directives and guidelines while

continually improving upon its own contribution to a sustainable society.

 Adidas aims to communicate with all stakeholders in an atmosphere of mutual trust and

respect. It provides them with appropriate information related to the social and

environmental performance of the group on a regular basis.

Competitors of Adidas

The main competitors of Adidas in footwear are

  Nike

  Reebok

8/3/2019 OB Project on Adidas

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  Fila

  Puma

  New Balance

  L.A Gear