ITESM CAMPUS HIDALGO

MARKETING AND SALES

BEYORI URIBE FRANSCISCO ABARCA

CESAR CORONADO

ERICKA JASSO

September 7, 2015

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

ADIDAS GROUP

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

Reebok, TaylorMade-Adidas Golf, Rockport and CCM-Hockey. The Group's headquarters are in Herzogenaurach, Germany. In the third quarter of 2014 the Group’s revenue was €4.118 billion. The main competitors of the Brand include: Nike, Puma, Fila and Under Armour. Since the barriers for new entrants are high in the industry, few companies have been able to position in the market in the last two decades. However, there are new companies that can be considered as a threat because of the substitutes, such Crocs shoes.

Since Adidas have private contractors in countries where the wages are really low, the company has a great power over the factories and can easily switch from one to another, on the other hand in the power of customers is also high because they can get products from other firms when factors such better price, quality and style are notorious but in order to create loyalty in customers, the firm strives to offer innovative designs with a wide variety of products, which makes it hard to the client to choose another brand.As for the strategies followed by Adidas, the broad differentiation allows the company to focus on innovation to produce new products, services and processes. Besides the firm relies also on the multi brand strategy that has allowed them to cater all segments in the market in order to embrace diverse niches. The investment in distribution channels and close attention to their supply chain have helped the company to customize their products and to be updated in trends happening in the market with the purpose to deliver innovative products with a very good quality. To become a sustainable company they find the right balance between shareholder interests and the needs and concerns of their employees, the workers in their suppliers’ factories as well as the environment.

Adidas Business model is highly focused on innovation that satisfies client’s needs, instead of investing its resources on sponsoring; the firm is oriented in enhancing its value by creating a high performance product line that meets the specific needs of athletes and customers. Adidas Group strives to tackle global trends in the market such personalization, online market and shopping experiences to position itself against other emerging brands, making a unique brand to the customers and highly attractive to investors.In the expansion of the brand there were created three different lines of products to increase their 35% in the global market share: Performance, Originals and Style. Every one of them are created to satisfy different customer needs, in other words, three market segments separated. Performance is for the client who buys Adidas by truly wants to achieve and develop a better performance in the sport he practices.Originals have a version more into retro and vintage and it’s focused on those clients who do not only practice sports but wear these clothes on a daily basis.Style tackles the specific nice of fashion conscious people who also enjoy the brand of Adidas.

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

SWOT

Marketing strategy

Adidas objectives Group are To be the global leader in the sporting goods industry Maximize the operational and financial performance

Strategies Creating shareholder value Diverse brand portfolio

S-Diverse brand portfolio

-Focused on performance and innovation-Long heritage and brand value

-Competitve-Workforce

-Major market in footbal and tennis

W-Limited presence in USA

-Limited sponsorship and advertisement-Sitff competition and similar big brands-Prices below its main competitor (Nike)

-Ability to use mixed media ads-Sales dependent on the footwear

market

O-Dominates the world football market

-Largest market share in europe-Second largest seller

-Highly positioned -Expansion to new markets (e-

commerce)-Adidas can venture into making more

stylish designs-Alliance with emerging sports

T-Newly born brands in the market

-Global economy crisis-Negative image of celebrities as

embassors of the brand-Concentration

-Other brands offer more styles and varietes

-Competitive brands who produce sports equipment and accesories to lesser costs

Investments focused on highest-potential markets and channels Creating a flexible supply chain Leading through innovation Develop a team grounded in their heritage in sport Focusing on sustainability Understanding needs/wants of the people

The company puts entire dedication and brainpower into the mission of making the Adidas Group the global leader in the sporting goods industry, because they create as much value for all their stakeholders as possible. No matter whether the clients are athletes, fashionistas, (potential) employees or any other stakeholder, Adidas strive to create value for each on of them.

Adidas has implemented key strategies to keep a unique identity in the market. First they’re focused on broad differentiation, betting for the innovation in products, services, and processes. Besides of this, the firm designated a centralized team in 2014, Sales Strategy & Excellency that is in charge of supporting all markets in the world, managed by the Global Sales function, this last was divided into two areas, wholesales and retail in order to sustain the various needs of both business models, and define their corporate level strategy, giving them in return a competitive advantage in the market.

Adidas also implemented a multi-brand strategy by offering a diverse brand portfolio, which has enabled the company to test the different segments of the market. In the same way, Adidas has strived and bet for the best marketing, distribution channels and adoption of the e-commerce to become more efficient and accessible to more customers. The culture of constant communication with supply channels enables the firm to offer customization, innovation through responding changing market needs and high quality products to the user. In terms of innovation Adidas has created the system ClimaCool to ventilate and A3, an energy management technology that guides and drives an athlete’s foot through each stride offering solutions to basic needs of customer in this segment of market.

FINANCIAL PROYECTIONS

• ADIDAS Income Statement 2014

Assumptions 2012 2013 2014

Sales growth for the coming years are:

7% 5% 3%

Cost of sales is constant and consistent with last year

Selling expenses are variable depending on sales

Administrative expenses increase annually with inflation at:

3% 3% 3%

The weighted average interest rate for debt per year is:

10% 10% 10%

The tax rate is fixed annually:

30% 30% 30%

The amount of shares issued annually are:

15 PER 15 PER 15 PER

The company has a policy of annual dividend payments:

40% 50% 60%

In the event of the company Adidas and according to the column March 2014, the company will present low growth and poor performance getting painful impacts due to the weakening of several currencies of emerging countries despite that in 2013 had predicted an increase in sales of 3.3%.

The second largest sportswear firm in the world, which has been losing ground against the market leader Nike reported that its fourth-quarter sales rose 3.3% to 3,480 million euros (4,780 million), at the upper end of the forecast average analyst of 3,400 million euros.

(PUNTO DE EQUILIBRIO) BREAKEVEN

FIXED COSTS Gross Profit% REQUIRED AMOUNT OF INCOME IN SALES TO REACH THE BREAK-EVEN POINT

EUR1,600,000 73.8% EUR2,168,021.68

ADIDAS global financial forecasts

Annual sales of billions of dollars in the region

Forecast annual sales between 2013-2017

North América 91 3,70%

Europe occidental 53 4,00%

Europe wester 16 13,60%

Asia Pacífico 56 8,90%

Latinoamérica 28 16,60%

Oriente Medio y África 15 10,10%

Oceanía 4 3,10%

Adidas fixed costs are EUR 1,600,000 approx., And expected profit margin is 73.8%. Therefore, breakeven is EUR2,168,021.68 you should get for the monthly sales.

As breakeven Adidas is EUR2,168,021.68 and the company estimated to earn between 3.25 and EUR 3.43 million per month. Adidas understands that your business will get stable earnings despite fluctuations sports losses and Russia's participation in its currency, also of considerable change in 2015 by the devaluation of the Chinese currency and the impact it can have in manufacturing of their products.

ADIDAS BALANCE SHEET 2014

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