1. Primary Question for Adidas Does Adidas's corporate strategy, including recent acquisitions and restructuring, stay true to its brand while positioning itself to improve shareholder value and challenge Nike as the leader of the global sporting goods industry?

2. Secondary Questions What enabled Adidas to be the market leader in the past? How did Adidas lose the lead to Nike? What has the Adidas brand represented in the past and what does it represent today? How has Adidas' corporate strategy changed over time, specifically before and after the 2005-2006 restructuring? Have Adidas' acquisitions helped improve their position against the competition? What role do developing countries have in Adidas's future success and how is Adidas positioned in those countries? Should Adidas be concerned about losing North American market share to Nike? Is there another corporate strategy Adidas should be pursuing?

3. What enabled Adidas to be the Market Leader in the past?

4. Product Innovation Track and Field 1925:studs and spikes Arch support 1949 – molded rubber cleats 1952 - screw in spikes Soccer 1954 – screw in spikes 1963- Began producing soccer balls 1967 – athletic apparel Results Over 700 patents Strong reputation among top athletes 1970 – leading brand in consumer jogging shoes Analysis – Adidas was an early entrant into athletic shoe industry. They developed many of the features still present in shoes today. Strong presence in Olympics and soccer. Created a strong brand based on high quality, innovative products that top athletes choose to use in training and competition.

5. Marketing Innovation Gave shoes to German athletes in 1928 Olympics 2 stripe (and later 3 stripe) brand 75% of track and field athletes wearing adidas in 1960 Olympics 78% of athletes wearing adidas at 1972 Olympics Developed strong following with top track and field athletes. Applied this same model years later with soccer shoes and apparel. Successful because adidas was creating innovative, high quality products. Product innovation enabled marketing innovation. Different than Nike – marketing is what set them apart from the start.

6. How did Adidas lose the lead to Nike?

7. What has the Adidas brand represented in the past and what does it represent today?

8. How has Adidas's corporate strategy changed over time, specifically before and after the 2005-2006 restructuring?

9. Adi’s leadership… Loss of focus… Focused on athletic footwear/apparel. Success factors are marketing and product innovation. Focused on Puma, while Nike underestimated. Tries to catch up via acquisitions which yields product breadth instead of specialization. Return to form via restructuring… Design and Innovation, differentiated image for brands, improved retail and supply chain Adidas Evolving Strategy

10. Adidas’ Current Strategy

11. Have Adidas' acquisitions helped improve their position against the competition?

12. Salomon Acquisition: Was it Successful? Product Line BeforeProduct Line After Athletic Shoes Athletic Apparel Ski Equipment Golf Clubs Bicycle equipment Winter Sports Apparel Analysis:Paid 1.5bn to diversify product line. Surpassed Reebok world’s 2 nd largest sporting goods company, however…

13. Adidas’s Stock Price Stock price fell soon after acquisition in 1998, Salomon divested except for Taylor-Made Golf line. Adidas overpaid for acquisition.

14. Adidas after Salomon was divested Product Line Before Product Line After Product Line After Divestiture Athletic Shoes Athletic Apparel Ski EquipmentGolf Clubs* Golf Clubs Bicycle equipment Winter Sports Apparel Net addition was TaylorMade golf

15. SWOT Analysis for Adidas Strengths Brand reputation / recognition Diverse product portfolio Culture driven by innovation / R&D Sponsorships in basketball, soccer, and golf Supply chain management Strong international presence Weaknesses Wasting resources trying to overtake Nike in the US Lack of success with Salomon acquisition Lag behind Nike in marketing Corporate strategy to overtake Nike has caused Adidas to make poor decisions Opportunities Growth rates for footwear and apparel Central Asia (13%), Eastern Europe (20%) China (15%) Threats Nike’s reputation and presence; a leader in marketing and advertising Sponsorships and endorsements may go wrong (Kobe Bryant) Controlling subcontractor quality – negative effects can be devastating

16. SWOT Analysis for Reebok Strengths Strong in hockey, football and baseball Loyal female customer base Past success in marketing Strong stable of professional athlete endorsements Weaknesses Poor reputation for quality and innovation Greg Norman golf apparel brand Limited distribution channels Opportunities Encouraging sales growth in Latin America and Asia Economies of scale with Adidas supply chain and distribution Threats Possibility of cannibalization if sold in same place as Adidas products Still third in market share in its strongest market, North America

17. Reebok Acquistion AdidasReebok FootballBaseballHockeySoccerRunningBasketball On paper it looks like Reebok’s product portfolio, endorsements and relationships round out Adidas and together they can join forces to overtake Nike. Issue is can management overcome Reebok’s reputation for poor quality and lack of innovation? Can two companies come together with such different cultures and focus? Adidas – product innovation and commitment to quality Reebok – marketing focus

18. What role do developing countries have in Adidas's future success and how is Adidas positioned in those countries?

19. Adidas is a global player 43% of sales from Europe, which is slowest growth market Encouraging that #1 in developing eastern European market, Russia expected to be most profitable market in Europe by 2010 2006 acquisition of Reebok not enough to overcome Nike in North America Growing number of sales in Asia market, fueled by adidas success in China. Strong demand and large population

20. Net Sales in Emerging Markets Analysis – strong growth trend in sales in two very attractive emerging markets. Growth may be result of Adidas brand strength in soccer, world’s most popular sport.

21. Regional Footwear/Apparel Markets RegionSizeMarket Growth Rate Adidas SalesAdidas Sales Growth Adidas Position North America $42.5 billion3%$2.9 billion5%#2 behind Nike EuropeN/A2% (20% Eastern Europe) $4.3 billion8%, mainly in Russia #1 Asia3.2 billion people 13% (South and Central) 15% (China) $2.2 billion17%#1 Latin America N/A $657 million39%#2 behind Nike Analysis – Adidas is strong in several developing markets (Eastern Europe, China) but its focus and acquisitions have been geared towards overtaking Nike in the large, but slow growth North America market.

22. Should Adidas be concerned about losing North American market share to Nike?

23. Retail Store Strategy 20062007 Adidas Retail Locations 8751003 Reebok Retail Locations 283430

24. Adidas AG Geographic Revenue Performance Key Growth Potential: Europe – continue focus on soccer (including endorsements) and build brand loyalty Asia/Latin America – increase distribution network and brand awareness - All three regions averaging double-digit growth rates

25. TaylorMade Advantages Shift to International Markets Strength in Metalwoods Strong Apparel Presence Revenues from Asia: 1999 – 13% of total 2007 – 35% of total Decreasing reliance on U.S. Market: 1999 – 69% of total 2007 – 52% of total Revenues from Asia: 1999 – 13% of total 2007 – 35% of total Decreasing reliance on U.S. Market: 1999 – 69% of total 2007 – 52% of total Metalwoods currently hold number one ranking. Irons hold less than half market share of industry leader Golf balls have seen limited success Metalwoods currently hold number one ranking. Irons hold less than half market share of industry leader Golf balls have seen limited success Over 70 touring pros lift apparel presence. Conclusion – TaylorMade should hold U.S. market share in U.S. given the brand’s strenghts, however, TM is only 8% of Adidas AG global revenues. TM cannot help Adidas overtake Nike in U.S. market

26. Adidas Global Revenue Sources (2007) Conclusion – The majority of Adidas’s revenue streams are outside U.S. market and are growing significantly – let Nike lead U.S. market but dominate Europe and emerging markets.

27. Reebok Global Revenue Sources (2004) Conclusion – Use Adidas’s control and production efficiencies to enhance Reebok’s distribution network in U.S. to increase U.S. revenues.

28. Is there another corporate strategy Adidas should be pursuing?

29. Alt Strategy Options Use Adidas as revenue driver outside of U.S. market – restructure Reebok strategy to capitalize on historic revenue performance in U.S. – Decrease number of Adidas retail outlets in U.S. - convert to Reebok retail – Increase Reebok U.S. endorsements Use Adidas global distribution to further increase TaylorMade international revenues

30. Slides that follow still need to be placed or cut.

31. External Environment: PEST CategoryIssueThreats/Opportunities Ranking (1-5) Political Operating multi-nationally – awareness of cultures, laws, image, environment, regulations Threat- mistakes can be costly 2 Economic Current state of economy – customers may be less willing to pay for higher priced items Threat – high quality means higher prices 2 Extreme forces in competitor pricing. Opportunity – supply chain efficiencies and multiple distribution channels 4 Social Keeping up with the wants of the younger generation Opportunity – Reebok’s strength in this area 4 TechnologicalProduct innovation is a key driver in the industry Opportunity – core competency for adidas 4

32. Porter’s 5 Forces Threat of Substitutes Low Bargaining Power of Suppliers Low Bargaining Power of Buyers High Threat of New Entrants Low Intensity of Competition High

33. Porter’s Five Forces FactorDescriptionImpact Threat of Substitute Products adidas’s strength is product innovation and meeting customer expectationsLow Threat of New Entrants Strong presence of established brands and distribution channels Customers already loyal to their brand Huge resources required of new entrants Low Bargaining Power of Buyers Huge number of buyers means adidas must market products effectively Must be able to differentiate from the competition Buyers more conscious of their spending Buyers have access to more information High Bargaining Power of Suppliers Multiple sources of materials for shoes and apparel – commodity status Suppliers are very dependent on adidas and others Ease in switching suppliers if necessary and can do so globally Low Competitive Rivalry Recent acquisitions in industry All competition has global reach – internet and e-commerce Remaining a leader is expensive – aggressive sales and marketing Always struggling to get a competitive edge High

34. How has Adidas evolved since it was founded?

35. Timeline of Adidas Fouded 1920 by Adi Dassler – wanted to design shoes for athletes in soccer, T&F, & tennis. The Dassler brothers (Rudi & Adi) made their first major innovation in athletic shoes, integrating studs & spikes in track & field shoes. Innovators in Marketing – gave away shoes to German athletes competing in Olympic games. By 1936 most athletes would compete only in Dassler shoes. Bitter family feud, company dissolved. Rudi established Puma. With his departure Adi renamed company Adidas & registered the trademark 3 rd strip to Adidas shoes. Adi expanded spikes concept in track shoes to soccer shoes. Partial credit was given to the soccer shoes for Germany’s World Cup Championship that year. 1920-1925 1928-1936 1948-1949 1954

36. Timeline of Adidas Adidas is the clear favorite among athletes – 75% of T&F athletes wear them in Olympics. ’63 started producing soccer balls, ’67 athletic apparel Adidas became leader in consumer jogging shoes in the US. T- shirts and apparel bearing the 3 stripes became popular among teens. Adi Dassler dies, Adidas remains worldwide leader in athletic footwear but they are losing market share fast to Nike in US. Market share loss continues through the 80’s and mid 90’s. Through cost cutting, new model launches, and endorsement contracts with popular athletes Adidas increased sales by 75% over prior year in US. Becoming 3 rd largest athletic footware company in US – trailing only Nike and Reebok. 1960-1967 1970’s 1978 1994

37. Timeline of Adidas Acquisition of Salomon SA – diversified beyond shoes & apperal to ski, golf, bicycle, & winter sports. Stock price takes a hit possibly due to Salomon acquisition. Adidas mgt divested all of Salomon’s winter sports & bicycle equipment. Acquistion of Reebok, included Rockport footware, Greg Norman apparel, & CCM hockey equipment. 1998 1998-2005 2006