Term Paper on Marketing Management of Adidas

Submitted by

Boom-Al-Habibi

MBA Program

BUS-620

Sec: 04

North South University

Submitted to

Professor Dr.M.Mahmodul Hasan

Date of Submission: April 02, 2016

Letter of transmittal

April 2, 2016

Dr.M.Mahmodul Hasan

Professor

School of Business

North South University

Subject: Term paper on Marketing Management of ADIDAS.

Dear Sir,

It is indeed a great pleasure for us as the student of MBA program to be able to hand

over the result of our hardship of the Term Paper on Marketing Management of

ADIDAS . This Term Paper is the result of the knowledge which has been acquired from

the respective course BUS-620 and the kind hearted supervision of our honorable

instructor Dr.M.Mahmodul Hasan. We tried our level best for preparing this Term

Paper. Hope you will appreciate our hard work and excuse the minor errors.

Thanking you for your sincere observation and humbly provide our respect to you to

consider our hard work because all of us gave our hundred percent for making this

report come together.

We, fervently hope your cooperation.

Sincerely Yours,

Nazmin Sultana Nima 152 1771 660

Sazzad Hossain 142 1184 060

Md. Abu Bakar 142 1183 060

Ummehaney Shila 153 0899 660

Khudeza Shahrin Toma 153 0843 660

Acknowledgement

With the completion of our project entitled “Marketing Management of

Adidas”, We would like to extend our sincere gratitude and a word of thanks to the

Almighty Allah and our great inspiration Professor Dr.M.Mahmodul Hasan who

inspired us to think beyond and to always look for better stimulation.

We would also like to take this opportunity to express our profound gratitude and deep

regard to our Honorable faculty Professor Dr.M.Mahmodul Hasan, for his exemplary

guidance, precious feedback and constant encouragement throughout the duration of

the Term Paper on Marketing Management. His valuable suggestions were of immense

help throughout our project work. His perceptive and continuous criticism kept us

working to make this project in a much better way. Working under him was an

extremely knowledgeable experience for us.

We would also like to give our sincere gratitude to all the friends and group members

who passed sleepless night and worked hard to make this thesis a success, without

which this research would be incomplete.

And last but not the least who acted the best way to support us to flourish this term

paper in an wonderful manner is our family members. Supporting us in all means

during preparing our valuable term paper. Thanking all for their devoted positive

support toward us during this journey.

Executive Summary

To know about the Marketing Management, this research will help a lot in greater

understanding and utilizing this in future work. Here working on different marketing

management parts of ADIDAS will help a lot for better understanding of marketing

management and its possible analysis as well as how can we use the knowledge in

practical life.

For this research we have collected information from secondary source and of course

our honorable faculty’s lectures.

The Adidas group, headquartered in Herzogenaurach (Germany) was built on 18th

August 1920 by Adolf Dassler. 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. To stay competitive to Nike on the US-market, the company had taken over

Reebok in 2006 and later Rockport and TaylorMAde. Based on the Group’s strong

brands, premium products, extensive global presence and its commitment to innovation

and the consumer, the Adidas Group aspires to outperform total market growth.

Adidas has three sub brands under it namely Sports performance, Style and Originals.

Under these brand Adidas introducing all the products of it. Adidas is organizing its

marketing plan around these brands. Adidas is sports based company but they are also

focusing beyond this by introducing Rockport brand.

In this report we have also discussed about how can Adidas focus on fashionable

products and as well existing product for all aged people. Overall this report is reflection

of SWOT, PESTEL, Porter’s Five forces, Marketing strategy, Brand and Branding, Five

M’s of Advertising, Marketing budget, pricing strategy etc.

Adidas has competitive advantage. So it needs to take Short run and as well as long run

marketing plan to promote its brand far beyond its sports image.

Table of Content

Content Page No.

Definition 1

Mission 2

Vision 2

Business plan 2

Corporate strategy 3

SWOT Analysis of ADIDAS 4

PESTEL Analysis of Adidas 5

Porter’s Five Forces 7

Marketing Strategy & Core marketing concept And Market Segmentation of ADIDAS 9

Market segmentation of ADIDAS 13

Marketing mix 15

Alternate Marketing mix – 4 C’s of marketing of Adidas 19

Value Chain Analysis 21

Value Chain Model of ADIDAS 24

Total Quality Management of ADIDAS 25

Brand 28

Brand under Adidas Group 29

Branding 30

Different Branding Strategy of ADIDAS 32

Brand Elements 33

Brand Dynamic Pyramid 35

FIVE M’s OF ADVERTISING 38

Mass Communication 39

Marketing Budget and Expenditures ( $ in millions) 42

Pricing Strategies 43

Steps in Setting Price 44

Break Even Analysis of ADIDAS 47

Recommendation 49

Conclusion 50

References 51

1

Definition of Marketing Management (Theory 2000 – 2011)

Marketing management is the art and science of choosing target markets and

getting, keeping, and growing customers through creating, delivering, and

communicating superior customer value.

Definition of Marketing Management (Theory 2012 – 2016 ±)

Marketing management depends on the size of the business and the industry in

which the business operates. Effective marketing management will use a company's

resources to increase its customer base, improve customer opinions of the company's

products and services, and increase the company's perceived value.

{ Sazzad Hossain; ID: 142 1184 060}

2

Mission

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

We are innovation and design leaders who seek to help athletes of all skill level achieve

peak performance with every product we bring to market.

We are consumer focused and therefore, we continuously improve the quality, look, feel,

and image of our products and our organizations structures to match and exceeds

consumer expectations and to provide them with the highest value.

Vision

To be the most respected and successful enterprise, delighting customers with a wide

range of products and solutions in the automobile industry with the best people and the

best technology.

Business plan

Based on the Group’s strong brands, premium products, extensive global presence and

its commitment to innovation and the consumer, the Adidas Group aspires to

outperform total market growth (both GDP and sporting goods market) and to continue

growing its bottom line faster than its top line.

In addition, the Group plans to lay the foundation for leadership in the sporting goods

industry by outgrowing its major competitor in the next five years. The Group targets a

compounded annual earnings growth rate of 15% and wants to reach an operating

margin of 11% sustainably by 2015 at the latest.

3

Corporate strategy

Adidas' mission statement testifies that "Adidas-Salomon strives to be the global leader

in the sporting goods industry with sports brands built on a passion for sports and a

sporting lifestyle" (Adidas-Salomon).

According to numerous studies have shown that the main reason for the failure of a

merger between the companies lack of cultural integration. In previous mergers,

companies often ignore, rather than executing them, which often lead to the failure of

their combination of cultural differences.

Acquisition of a large company like Reebok, Adidas disadvantage is that although

changes in management and infrastructure, or a combination of the new learning

culture difficulties in the new merged company, its competitors are running at full

speed.

Just seven years ago, Adidas acquired Salomon and became the second largest sporting

goods manufacturer in the world, behind Nike and ahead of Reebok. This recent

experience of acquiring a company will ease the difficulty of acquiring Reebok.

4

SWOT Analysis of ADIDAS

strengths

Legacy & heritage: The brand was started in 1949 .

Diversified portfolio: Company has multiple product portfolio’s

with varied range of footwear & accessories .

Strong financial position: With its 2400 store globally accounting

$4.3billions.

Distribution network: Adidas has an effective distribution system

for their products available through different channels.

Collaborations & memberships: Strong relationship within the

sustainability area with organizations.

Weakness

Premium price range: High price range due to innovative

technology & Production methods have made the brand affordable

to limited customers only, especially in developing countries.

Limited product line: Adidas along with the recently acquired

Reebok brands

opportunities

Changing Lifestyle: With the saturation of developed economies,

changing taste & preferences, education & changing lifestyle of

developing economies

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.

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

Competition: Although Adidas is a global brand but it is facing

fierce competition from other brands.

Supplier Dominancy: Due to majority of its production being

outsourced; Suppliers have more bargaining power then the

company

5

PESTEL Analysis of Adidas

Political Factors

Adidas makes policies and monitor risky substance to protect human health and

environment . and also it protects the rights of its employees by following labor laws on

country special way. Adidas a multinational company need to consider the global

political state as well as domestic political issue. It is important to monitor the

government’s laws which affect the business of Adidas. Since the political arena has a

many influence upon the regulation of government and private sector businesses, and

the spending power of consumers and other businesses it has come necessary for Adidas

react drastically and efficiency for these issues. The government enters in to any trade

agreements Adidas needs to keep it on track since it may affect the business.

Government taxation policy plays a major role in company’s profit.

Economical Factors

Adidas as a multinational company sustaintain it’s strong economical growth year by

year. In 2008, the Adidas Group again released a strong financial execution. The

product sales and the profitability gowned up in line with management’s primary

expectations. Currency-unbiased sales grown by 9%. And the double digits sales

increase in Adidas segment had the maximum impact on this development. Adidas

driven to decrease its production cost with improving the product quality by locating the

factory plants in Asia.

Social Factors

There is no obstacle for Adidas products like raise, age, religion, and lifestyle, it is always

in fashion with different design in any product. Adidas focus in people who like sports

and athletes, close everybody beyond the boundaries.

6

Technology

Adidas introduces new approaches to doing new and old things, Adidas join into

technology by make up the world’s first “smart shoe”, adding a microchip inside the

shoe and wireless mp3 player. Adidas uses hot decompose system of production which

is environment friendly. And the packaging system, storage system and transportation

of products are numerously advanced comparing to other companies.

Environmental

Building on different environmental implantation over the past years, in 2010, they

developed a compatible environmental strategy for the Adidas group. The strategy carry

the clear vision and mission and sets annual milestones which will qualify the

achievement of the 2015 targets. These targets cover their entire value chain from

product formation to sourcing and manufacturing and from their own activities to their

stores and all other sale points. Their direction is to manage environmental issues as an

undivided part of their daily operations, positively contributing to the Adidas groups in

total business performance. An environmental strategy team driven by group social and

environmental affairs (SEA) and consisting of delegates of all brands and interior

operations, announcement to the Adidas group executive board.

Legal

The Adidas group patronize the United Nations proclamation of Human Rights, their

company policies and procedures keep at to all applicable domestic laws and are

compatible with core labor principles of the International Labor Organization (ILO).

7

Porter’s Five Forces

Degree of Rivalry of ADIDAS

Adidas is contending in the market with many rival firms including the world leaders

Nike, PUMA, FILA etc. The rivalry among existing competitors is pretty high in the

sports and footwear industry as compared to other similar industries. ADIDAS has

adopted several strategic measures for their market growth such as acquisition of an

subsisting competitor, building partnership etc. ADIDAS has onward into a world leader

through several acquisitions; namely Sports Inc., Salomon AG, Reebok etc. In 2005, the

ADIDAS acquired world’s third sports brand. The Company ADIDAS has also do good

from the strategy of on-line sales. As ADIDAS deals with products of low product

differentiation, the degree of rivalry is so high. Since the switching costs are low, the

rivalry among competitors is very high. When trading with products of competitive

nature, the firm have to be highly innovative and the technology used should be of very

leading and sophisticated. This introduced the fixed cost high and in turn increases the

degree of rivalry among the competitors. The diversity of rivals, that is; the rival firms

like NIKE, PUMA are of different cultural, historical and philosophical backgrounds and

so the rival inflection are very difficult to predict.

Threat of Substitutes

The substitutes of Adidas products such as NIKE, PUMA etc. is also affects the market

growth of Adidas. The price of its substitute products often intuition the products of

ADIDAS, either in a positive or a negative way. When the price of the substitutes is low,

the demand for the Adidas product will be low, and vice versa. That is when switching

cost is low there is a higher tendency to lose its customers. However in particular

circumstances buyer’s choice exclusively influences the buying decision and its demand.

The degree of threat of substitutes is low in the case of Adidas.

8

Bargaining Power of Buyers

Bargaining power of Buyers of Adidas products oversee to be high these days. One of the

reasons for this is that the buyers’ intentness is high, that means they buy large volumes.

The ease of convenience of its substitutes is one of the major reasons of the high

bargaining power. The low switching costs to its substitutes also makes high bargaining

power of customers. Price impressibility and Product Differentiation also affects the

bargaining power of buyers.

Bargaining Power of Suppliers

The suppliers for the Adidas products are available in enough and so the bargaining

powers of suppliers are low. Suppliers are weak because of high supplier intentness, that

is; suppliers are far more than what is required. The other reasons are the easy

availability of close substitutes of inputs, low switching cost from on supplier to another,

backward integration of suppliers, weak customers etc. Moreover, the Adidas apply a

high power over the suppliers and is very demanding.

Barriers to Entry

The competition will become cut-throat when there is free market entrance. But such an

established brand like ADIDAS will not be influenced much. The entry barriers to the

sportswear market are relatively high. Any firm can freely enter into the market but

survival in the market and to reach market leadership is quite difficult. When a new

firm’s products are competing with such a huge brand name, it needed to be more

careful and have to adopt high quality strategies to gain the market. There are some

barriers like High initial investments and fixed costs, Controlled access to the raw

materials by Adidas, reusable distribution channels by Adidas, Economies of scale,

Government Policies and Protected Intellectual Property Rights like technical know-

how.

{ Khudeza Shahrin Toma; ID: 153 0843 660}

9

Marketing Strategy & Core marketing concept And Market

Segmentation of ADIDAS

Adidas is the biggest sportswear manufacturer of Europe & one of the biggest in the

world. The Adidas group has four brands in its strong portfolio –

Reebok,

Adidas,

Rockport &

Taylor

By emphasizing the value of quality products from a trusted brand Adidas is able to

maintain its brand essence. The portfolio is divided as follows.

Adidas-performance in Competitive sports,

Reebok & Reebok classics in Active sports & casual sports, &

Adidas originals, Adidas Fun, Rockport in Sports fashion.

Core marketing concept of Adidas

Needs

Adidas believe that consumers want choice. Therefore, the group implemented a multi-

brand strategy, which allows them to capitalize on opportunities from several

10

perspectives, as both a mass and a niche player. Existence of unmet needs is

precondition to undertake marketing activities in Adidas own marketing strategy.

Marketing tries to satisfy needs of consumers. Needs are physiological in nature and

create physiological tension that can be released by consuming/using products which

particularly met by Adidas.

Wants

In Adidas according to the branding and marketing policy, the brand is able to keep a

unique identity and focus on its core competencies, whilst simultaneously providing the

group with a broad spectrum of products. International marketing is crucial for the

group in its quest to generate substantial profits; as survival depends on their

established presence on the global world market. Wants in the ways are the options to

satisfy a specific need of the consumer to satisfy trough Adidas products.

Maximum satisfaction of consumer need depends upon availability of better options

which Adidas have that quality to present in front of the consumers.

Demand

Adidas tries to influence demand by making the product attractive, affordable, and

easily available. Marketing management concerns with managing quantum and timing

of demand. Demand is the want for specific products that are backed by the ability and

willingness to buy them. It is always expressed in relation to time. All wants are not

transmitted in demand. Such wants which are supported by ability and willingness to

buy can turn as demand.

Product

Product can also be referred as a bundle of satisfaction, physical and psychological both.

Product includes core product (basic contents or utility), product-related features (color,

branding, packaging, labeling, varieties, etc.), and product-related services (after-sales

services, guarantee and warrantee, free home delivery, free repairing, and so on). So,

11

tangible product is a package of services or benefits. Adidas should consider product

benefits and services, instead of product itself and they does that to satisfy over their

product assessment.

Utility (value), Cost, and Satisfaction

Utility means overall capacity of product to satisfy need and want. It is a guiding concept

to choose the product. Every product has varying degree of utility. As per level of utility,

products can be ranked from the most need-satisfying to the least need-satisfying. As a

market-orientated organization Adidas continuously identifies and reviews consumers’

needs to ensure its products meet these needs. It aims to exceed customer expectations

by adapting its product portfolio to meet the changing needs of consumers. It is this

focus on its customers, teamed with product and marketing innovation, that plays a key

role in Adidas’ success.

Satisfaction means fulfillment of needs and this is possible when buyer perceives that

product has more value compared to the cost paid for. Satisfaction closely concerns with

fulfillment of all the expectations of buyer of Adidas.

Exchange, Transaction, and Transfer

Marketing management of Adidas tries to arrive at the desired exchange of its

consumers. The brand Adidas want its marketing emerges only when people want to

satisfy their needs and wants through exchange of satisfactory sports products of this

sports brand Adidas. Exchange is possible when following five conditions are satisfied:

i. There should be at least two parties

ii. Each party has something that might be of value to the other party

iii. Each party is capable of communication and delivery

iv. Each party is free to accept or reject the exchange offer

v. Each party believes it is desirable to deal with the other party

12

Relationships and Network

Today’s marketing practice of Adidas gives more importance to relation building with

the successful players. Marketing practice of Adidas based on relation building can be

said as relationship marketing. Relationship marketing is the practice of building long-

term profitable or satisfying relations with key parties like customers, suppliers,

distributors, and others in order to retain their long-term preference in business.

Adidas tries to build up long-term, trusting, and ‘win-win’ relations with valued

customers, distributors, and suppliers. Relationship marketing needs trust,

commitment, cooperation, and high degree of understanding.

Network is the ultimate outcome of relationship marketing where Adidas always there

to create new for its consumers and be successful leader of the global market.

Market, Marketing, Marketer, and Prospect of Adidas

Marketing is social and managerial process by which individuals and groups obtain

what they need and want through creating and exchanging product and value with

others. Prospect is someone to whom the marketer identifies as potentially willing and

able to engage in the exchange. Generally, consumer of Adidas who buys product from a

company for satisfying his needs or wants can be said as the prospect.

13

Market segmentation of ADIDAS

Adidas uses differentiated targeting strategy to target young adults, adults as well as

children who have passion for fitness & sports. Although it targets customers in the age

group of 13-40 years but majority of its customers are of 15-30 years of age who hail

from upper middle class or the luxury class of customers. All successful organizations

have outstanding marketing strategies which they segment strategically. The market you

sell to is very important to you organization. Companies such as Adidas market to

athletes of all ages over the world. Adidas markets to professionals and amateur

athletes. The market segmentation plays a key role in the marketing strategy. Each

market is unique so the organization has to be careful upon choosing the right one(s).

The purpose of market segmentation is to enable the marketer to adjust marketing

mixes to meet the needs of one or more specific segments. Basically marketers use the

market segmentation process to divide big markets into smaller segments according to

characteristics of individuals, different groups and locations. Adidas the largest

sportswear manufacturer in Europe and the second biggest sportswear manufacturer in

the world markets by looking at buying attitudes and buying practices of different

people. The sellers design a separate market program for each buyer. Adidas mainly

focuses on demographic and psychographic segmentation's. So Adidas develops their

brand in 3 different styles of segmentation.

Demographic segmentation

Refers to dividing the market into groups based on demographic variables, such as sex

and age. This method has long been used in clothing market. Adidas brands products

into range of male, female and kids, according to age and life cycle segmentation and

gender segmentation. Adidas has a branded range of male and female clothing, shoes or

body-care and eye wear. Performance, originals and style are all three brands of Adidas.

14

Psychographic segmentation

It is the segment which used to divide the market into groups based on social class, life

style or personality characteristics. Adidas focuses on social class because people within

a given social class tend to have similar buying traits. Companies also use income,

gender, ethnic, and family life cycle segmentation's to distinguish their market but

Adidas keeps it a little less complicated and more wide ranged so the brand is marketing

to many different people all over the world.

15

Marketing mix

One of the top brands in the sports and footwear market, Adidas has seen its share of

ups and downs. The company started in 1936 and is one of the oldest footwear brands of

the world. However, even though the company has old origins, its heart is young. Adidas

faced stiff competition in the 1980s from Nike but soon overcame the competition by

targeting youngsters as well as sports oriented people.

16

Products in the marketing mix of Adidas

Adidas is well known for its ideal and exclusive product category for the sports persons.

The Adidas group has 4 main subsidiary’s. The first is its own brand name Adidas,

which is present in clothes as well as footwear. The second is Reebok which has

overtaken Adidas and is one of the leading subsidiary’s in the Adidas group. The 3rd is

Rockpot which specializes in outdoor footwear, apparel’s and accessories and 4th is

Taylor made which is focused on golfing clothes, equipment etc. Out of all the above

subsidiary’s, Reebok is the strongest followed by Adidas.

Adidas has various products. The major product of Adidas is off course their footwear.

Coming in various design and style, Adidas footwear is robust and athletic. The

secondary product of Adidas is apparel’s and accessories. Apparel’s like T-Shirts,

jackets, sweatshirts, shorts etc are in great demand. Where Reebok is stronger in

footwear, Adidas is stronger in apparel’s.

The aim of Adidas is to give the best footwear to their customers which has the

combination of technology and design. These products are not need based. In fact, the

shoes are bought by customers to satisfy their wants and desires. Similarly, the apparel’s

are targeted towards comfort during heavy activity. However, although the main target

is sports, the apparel’s are frequently used as a style statement by youngsters.

Pricing in the marketing mix of Adidas

Adidas, because of its style, design and promotions uses skimming prices as well as

competitive pricing. For run of the mill products, Adidas uses competitive pricing

keeping in mind competitors like Nike, Reebok and Puma. But for products which are

newly introduced in the market and are uniquely designed, Adidas uses skimming price.

Apparel’s of Adidas constantly use skimming price and are higher priced due to brand

equity of Adidas in the apparel’s market. The target customer for Adidas is the upper

middle class as well as high end customers. Adidas never uses penetrative pricing

because that will affect the brand equity of Adidas. In fact, the higher price point helps

in the price quality approach and psychologically, customers think that a higher price

will mean better quality as well. Thus, Adidas rarely drops its prices.

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Place in the marketing mix of Adidas

The company has adopted an ambitious global plan to distribute its products to the

consumer with a strong focus on controlled space, including: Own-retail business, e-

commerce, Shop-in-Shop, Joint ventures with retail partners, mono-branded franchise

stores, co-branded stores with sports organizations and other brands.

The major areas in which Adidas is sold is through retail outlets. Adidas has its own

exclusive stores in which the material is provided directly from the company. On the

other hand, many multi brand showrooms will also have Adidas apparel’s and footwear

on display. These multi brand showrooms get the products from a distributor. The third

and last mode of distribution is online. The products are sold through online medium

via fashion stores lie myntra.com as well as the online website of Adidas. Thus the

distribution channel of Adidas is as follows

Due to the excellent brand equity of Adidas, the operating margins are fairly high

thereby keeping the distribution channel motivated. A happy distribution channel

means better promotion for the company.

Manufacturing Adidas outlets End customer

Manufacturing Distributor Multi brand showrooms

Manufacturing Online fashion

websites / Adidas website

End customer

18

Promotions in the marketing mix of Adidas

Adidas markets through various marketing vehicles but the majority of marketing is

concentrated on television and product placements. The creative team of Adidas is

known to pump adrenaline in their customers through ads which are well made, very

creative and filled with energy. These ads attract the customers towards the brand by

sending the right marketing message to the customer. The tagline of Adidas “Impossible

is nothing” is in itself a very powerful statement for the brand.

After television, product placement is the second line of promotion for Adidas. The

popularity of the brand is because it ties up with the top players across the world such as

Lionel messi, Ronaldinho, Sachin tendulkar and various others. At the same time,

Adidas also sponsors teams and some of the top teams include Real Madrid, France,

Great Britain (in football), England and South Africa (in cricket) and several others.

People

This is a vitally important element of the extended service marketing mix. When a

service is being delivered, the person delivering it is not unique from the service itself.

Adidas is the brand to follow the rule of people in significantly.

Process

Since service provision needs to strike a balance between customization and

standardization, the processes involved in the activity require special mention and

attention which is an important process to follow on done perfectly by Adidas

Physical Evidence

The location of the service delivery also takes on significance. The level of comfort and

attractiveness of a service location may make a lot of difference to the user experience.

Adidas has its important presence according to its products is remarkable

19

Alternate Marketing mix – 4 C’s of marketing of Adidas

The traditional and new edition of marketing mix is a 4 P’s model and is business

oriented. The 4 C’s model of marketing on the other hand is more consumer oriented.

Because of its focus on consumers, the 4 C’s model is mainly used for Niche Marketing.

In terms of Adidas focused consumer market they are as follows:

1. Consumer

2. Cost

3. Convenience

4. Communication

Consumer

The principle of four C’s of Adidas marketing strategy states that the customer should be

the prime focus. Because Adidas follow this model to believe in making products which

satisfy their customers and exclusive sports persons. They are generally ready to offer

customizable products and they have a general set of target customers.

20

Cost

Cost is equivalent to Pricing in the traditional marketing mix. Cost is a very important

consideration during consumer decision making and hence in the 4 C’s principle, in

Adidas the cost variable is given special attention regardless of each factors in the

company. Adidas always go for premium pricing for exclusive product category.

Communication

The concept of communication remains same for both, the traditional marketing mix as

well as for the 4 C’s of marketing. the marketing communications for the company

following the 4 C’s of marketing is completely different as it needs a completely different

Segmentation, targeting and positioning. The media vehicles used for marketing

communications for a Adidas they go for brand person presence by creating ample

attention to the consumers.

Convenience

Convenience is equivalent of distribution or placement of the traditional marketing mix.

Adidas is customer based, so the convenience of the customer in acquiring the product

plays a critical role according to their choices.

21

Value Chain Analysis

Adidas maintains its primary activities so well since its start. The inbound logistics and

outbound logistics are so good in regard to Adidas. They have a specified inbound

logistic chain for moving raw materials and un assembled goods inside the company.

Moreover the outbound logistics system for the transport of finished goods is very fast

and timely. The core operations, marketing and sales have been outstanding which

helped Adidas to be one of the major players in the sector. The research teams for the

development of new innovative development of new products for the changing markets

has been sustainable and helps the company well in maintaining its market position.

Adidas has introduced sales for the first time in the sector and still manage to be the

strategic market leader in this regard. Adidas monitors the quality of service, staff

training and customer satisfaction throughout the franchisees as a part of their value

chain.

22

R&D

This value-adding function includes companies that engage in R&D and Adidas is a

company to always need continuous research on consumer satisfaction and demand, as

well as activities related to improving the physical product or process and market and

consumer research.

Design

This stage includes Adidas that offer aesthetic design services for products and

components throughout the value chain. Design and style activities are used to attract

attention, improve product performance, cut production costs, and give the product a

strong competitive advantage in the target market.

Sourcing (Inbound)

This stage refers to the inbound processes involved in purchasing and transporting end

products. It includes physically transporting products, as well as managing or providing

technology and equipment for supply chain coordination. Logistics can involve domestic

or overseas coordination.

Production

Apparel manufacturers or shoe manufacturer like Adidas can manufacture custom

inventories or raw materials for individual clients. Adidas can purchase raw materials

from another establishment or make the components in-house.

Distribution or Outbound

After apparel is manufactured, it is distributed and sold via a network of wholesalers,

agents, logistics firms, and other companies responsible for value-adding activities

outside of production in Adidas.

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Marketing and Sales

This function includes in Adidas all activities and companies associated with pricing,

selling, and distributing a product, including activities such as branding or advertising.

These companies frequently do not make any physical alternations to the product but

tend to follow trend and go by that influence.

Services

This includes any type of activity a firm or industry provides to its suppliers, Buyers, or

employees, typically as a way to distinguish itself from competitors in the market.

All the supporting activities in the case of Adidas like procurement, research and

development, human resource management and infrastructure development are well

carried out keeping in mind the company's reputation, brand value and market status.

The company always emphasis on procurement of materials and all related activities in

the cheapest possible mode, making maximum use of the global sourcing and off

shoring strategies. The company has moved a part of its manufacturing activity to china

and Vietnam, taking account of the labor cost. Moreover the employees are well treated

and kept with maximum satisfaction. The company believes that, its employees are very

vital form of resource for them. The company spends a large amount on technology

development, and maintaining its infrastructure, accounting, control and planning and

management information system.

24

Value Chain Model of ADIDAS

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Total Quality Management of ADIDAS

Total Quality management is the process of managing quality and continuous

improvement and consistency to reduce in constant activities.TQM is about

conformance quality and Quality in everything company wants to meet customer’s

requirement.

The Adidas has strongly positioned in the market due to high quality and exclusive

target market. They maintain the quality in every step in the processing. The Adidas

Company maintains the total quality management as per the diagram below:

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Adidas always focus to the execution of international standards developed to provide a

framework around which a quality management system can effectively be implemented:

• Customer focus – in order to continue customer relationships, organizations should

fully understand current and future customer needs, meet customer requirements and

strive to exceed customer expectations at all times.

• Leadership – leadership plays a crucial role in organizations, ensuring unity of purpose

and direction of the company that allows leaders to create and foster an effective

internal environment.

• Involvement of people – as the most valuable resource within any organization,

involvement of employees at all levels is the essence of the company.

• Process approach – another critical component of any quality management strategy,

the anticipated result is achieved more competently when related resources and tasks

are managed as a process within the company.

• System approach to management – in order to implement a system approach, it is

essential to identify, understand and manage interrelated processes for a specific

objective to increase the organization’s efficiency and abilities.

• Continual improvement – striving for continual improvement should be a primary

objective of any organization, to consistently perform tasks and duties at the highest

level of efficiency at all times.

• Factual approach to decision making – to ensure that all decisions are made fairly and

effectively, decisions need to be based on the analysis of data and information rather

than an emotional level or unproven hypothesis.

• Mutually beneficial supplier relationships – a company and its suppliers are mutually

dependent, which means that a favorable relationship augments the capacity of both

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supplier and company in order to create value and foster quality management within the

workplace.

But Adidas already concentrated on their strategy of providing best quality through best

assessment of these factors, they are:

Conformance to specifications

Adidas measures how well the product or service meets the targets and tolerances

determined by its designers.

Fitness for use

The company focuses on how well the product performs its intended function or use.

Value for price paid

Is a definition of quality that consumers often use for product or service usefulness?

This is the only definition that combines economics with consumer criteria of Adidas; it

assumes that the definition of quality is price sensitive.

Support services

Quality does not apply only to the product or service itself; it also applies to the people,

processes, and organizational environment associated with it which is strictly followed

by Adidas.

Psychological criteria

It is a subjective definition that focuses on the judgmental evaluation of what constitutes

product or service quality of Adidas.

{ Nazmin Sultana Nima; ID: 152 1771 660}

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Brand

A brand is a product, service, or concept that has Unique design, sign, symbol, words, or

a combination of these, that is publicly distinguished from other products, services, or

concepts so that it can be easily communicated and usually marketed.

Adidas has unique brand identity and logo than others from which we can easily identify

the brand. Reebok and TaylorMAde in combined enhance the brand range of Adidas.

Over time, this image becomes associated with a level of credibility, quality, and

satisfaction in the consumer's mind. Thus brands help harried consumers in crowded

and complex marketplace, by standing for certain benefits and value. In all the products

of Adidas everyone can find the logo to make the product unique and different than

other competitors. Adidas is mainly targeting competitive sports based on innovation

and technology with Adidas Sport Performance. By watching the logo and hearing the

name the first thing that will come up in mind is “Sports”. It has created the brand

image over the decades as Sports oriented company and that is the main strength of the

company. Though Adidas is also focusing of different segments as well by introducing

Rockport as a brand, which is different than sport concept of Adidas.

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Brand under Adidas Group

Under Adidas group now five brands are equally working to enhance its brand rage

towards the customer needs.

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Branding

The process is involving in creating a unique name and image for a product in the

consumers' mind, mainly through advertising campaigns with a consistent theme.

Branding aims to establish a significant and differentiated presence in the market that

attracts and retains loyal customers. The company counted the branding campaign a

success when their product became a household name and surveys indicated they had a

loyal base of customers.

Adidas is mainly targeting competitive sports based on innovation and technology with

Adidas Sport Performance. This sub-brand is the multisport specialist.

The sub-brands Adidas Originals and Adidas Sport Style strive to take the brand’s

unique heritage and design leadership to capture potential in the sports lifestyle and

fashion market.

As part of market segmentation strategy and to increase addressable market to the

lifestyle and fashion consumer, several sub-labels under the banner of Adidas Sport

Style were established to increase appeal to a younger, more price-conscious generation

of lifestyle consumers, the Adidas NEO label was established to cater specifically to their

needs.

Adidas has three sub brands under it namely Sports performance, Style and Originals.

The guiding principle of the Adidas Sport Performance Division is to equip all athletes to

achieve their “impossible”.

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The Sport Style Division

is the home of Originals, defined as authentic sportswear, the Fashion Group, which is

the future of sportswear, and Style Essentials, the fresh sport-inspired label made

accessible for style-adopting youth. Together they offer consumers products from street

fashion to high fashion, all uniquely inspired and linked to sport inspired by its roots in

sport and women’s fitness. They are:

Reebok

TaylorMade Adidas Golf

CCM and Rockport

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Different Branding Strategy of ADIDAS

There are three sub-brands and each have their own stores. Stores which use

the Adidas Performance sub-brand logo as their storefront signage and also

sell Adidas Originals products inside the store which actually has another logo.

There are stores which sell all of the product lines.

Performance, originals, style etc. Separate stores of the sub-brand stores like

SLVR and NEO which work under the Adidas STYLE sub-brand is also working

on branding the product.

Three Adidas logos are using in Germany HQ building as the building signage.

There are some stores which use the three horizontal stripes as their stores

signage next to the Adidas word mark —which is the main logo.

There are also stores which use the Adidas Performance logo as the main logo of

their stores although they sell different products of Adidas sub-brands like

Originals, Style etc.

There are also stores which use only the Adidas word mark as their signage.

Adidas is branding their sports product by Tracy McGrady, Messi, Derrick Rose,

Dwight Howard who are the super hero in sports world.

Sponsoring of sports events and professional teams as well.

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Brand Elements

Brand elements

are devices, which can be trademarked, that identify and differentiate the brand. Most

strong brands employ multiple brand elements. Adidas has the distinctive “three

horizontal stripes” logo, the empowering “Nothing is impossible” and “All in All” slogan,

and the “Adidas” name from the founder.

There are six criteria for choosing brand elements. The first three—memorable,

meaningful, and likable—are “brand building.” The latter three—transferable, adaptable,

and protectable—are “defensive” and help leverage and preserve brand equity against

challenges.

The elements used to build a brand memorable, meaningful, and likable.

Memorable

Meaningful

Likable

Transfarable

Adaptable

Protectable

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Memorable

How easily do consumers recall and recognize the brand element, and when—at both

purchase and consumption? Logo of the brand is memorable and its image of sports is

also memorable

Meaningful

Adidas is branding their sports product by Tracy McGrady, Messi, Derrick Rose, Dwight

Howard who are the super hero in sports world so that is totally meaningful aligning

with the brand image.

Likable

How aesthetically appealing is the brand element? The design of the shoes and

sportswear is so unique and attractive that the design is fulfilling all the criteria of

likable.

Transferable

The brand Adidas has introduced CCM, Rockport that is by going beyond their category

and acquiring Reebok and TaylorMAde makes the Adidas transferable more to

consumers. Different stores under different sub brand, original brand and in different

region makes Adidas more transferable than others.

Adaptable

Adidas is adaptable in a sense of introducing more innovative sports shoes and

sportswear in the market.

Protectable

The name and logo of Adidas is protectable from any other competitors. By three

horizontal stripes people understand that this is the Adidas’s products.

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Brand Dynamic Pyramid

It illustrates the five key stages that customers go through as they build loyalty to a

brand, product, or organization. The five stages are:

1. Presence.

2. Relevance.

3. Performance.

4. Advantage.

5. Bonding.

The Brand Pyramid can be used as a part of the process of developing an effective

marketing strategy. Company’s aim is to get as many customers as possible to the higher

levels of the pyramid.

also likely to be vocal advocates of the brand, which helps build further awareness

within their family, social, and professional circles.

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Strong Performance

Weak Performance

Brand Dynamics Pyramid

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Presence

At this level, customers are aware of your brand, but little else. They may have tried your

products and services before, but they have little or no emotional attachment to them.

Relevance

At this level, customers start to think about whether the brand meets their wants and

needs. Customers begin asking questions like:

"Does this brand fit my needs?"

"Is it in the right price bracket for me?"

"Is it worth it?"

Performance

Here, customers begin comparing the brand with others, to see whether it delivers on its

potential. They're also starting to associate the brand with a specific identity, and they're

beginning to recognize it and associate with it. By now, the brand is on the customer's

"short list" of brands to choose from.

Advantage

At this level, customers have determined that there is a distinct advantage to using the

brand, compared with others. They're also beginning to associate the brand with their

emotions and with their sense of self.

Bonding

Here, customers have established a bond with the brand. They've also formed a strong

emotional attachment to the brand; the brand has become an integral part of their self-

image, and helps represent who they are. Customers at this level are Customer is loyal to

Adidas now, they can’t think over it. Adidas passion to innovate, continuous process of

strengthening brands and products to improve competitive position and financial

performance leads towards bonding stage successfully.

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FIVE M’s OF ADVERTISING

Advertising is an important promotional tool for any marketing campaign. So much so

that whenever we think of marketing we think of advertising although it is just one of

the marketing tools. The purpose here is not to increase the sales figure but to increase

the awareness of people regarding the relevant topics. Today the marketing manager has

a range of advertising options to choose from- from interpersonal communication to

Internet. Communication can be classified as the five M’s of advertising.

Mission

First of the entire marketing manager must be clear on the company’s purpose for

advertising. Any advertisement must be persuasive in nature, attracting consumers

towards the brand and Reminder: This objective is relevant for well-established

companies. These types of advertisements only try to remind the consumers of the

brand existence.

Money

After the objective has been decided upon; the next step is to decide upon the budget.

There are several methods for deciding on the advertising budget. The most common

among them is the percentage of sales method. Another method suggests that a

company should spend as much as its competitors are spending.

Message

As a common experience, we love some advertisements, while the others just irritate us.

Adidas's appealing advertising always win consumers and consequently induce them to

purchase the product. The message that company wants to convey should be put in a

manner that will arouse interest.

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Measurement

It is necessary that effectiveness of any advertising be judged. Only on the basis of this

measurement, can further decisions regarding continuation or termination of the

particular advertising campaign be taken. An ad can be judged on the basis of its reach

and impact on sales. Good advertising is one that generates brand awareness and

consequently brand preference.

{ Ummehaney Shila; ID: 153 0899 660}

Mass Communication

Mass communication technically refers to the process of transferring or transmitting a

message to a large group of people — typically, this requires the use of some form of

media such as newspapers, television, or the Internet. Another definition of the term,

and perhaps the most common one, refers to an academic study of how messages are

relayed to large groups of people instantaneously.

Advertising Budget & Campaign Cost

Advertising Budget is the amount of money which can be or has to be spent on

advertising of the product to promote it, reach the target consumers and make the sales

chart go on the upper side and give reasonable profits to the company. The following

factors affect the budget decisions:

Stage in the product life cycle

Market Share and consumer base

Advertisement frequency

Competition and Clutter

Product substitutability

Adidas is planning its biggest-ever advertising campaign next year as it fights back

against rival Nike. The world's second-largest sportswear maker has admitted that it

needs to invest more in its brands to catch up with market leader Nike, after losing

40

ground in developed markets. The brand always promised the "most ambitious" brand

campaign in the company's history for 2015.

Adidas showed its marketing budget from 13% to 14% of sales in 2015, raising it by up to

€200m (£159m).

Sales Promotion Budget

Sales Promotion is a key ingredient in marketing campaigns ,consists of a collection of

incentive tools , mostly short term, designed to stimulate quicker or greater or greater

purchase of particular products or services by consumer or the trade. This is

promotional strategy of the firm.

Events & Experiences

Sponsoring events enables companies to obtain wider exposure for their brands and

influence consumer’s attitude towards brands. Cricket sponsorship is big business in the

South Asia. Adidas sponsored in FIFA World Cup in 2010 which was called "largest

marketing campaign in history," packed with enough pro athletes, pop stars and

adrenaline overload to finally put it on par with heavy-spending competitors. They have

sponsored number of tournaments like golf, baseball, tennis, etc.

Public Relation/Government Lobbying

The Adidas Group endeavors to improve business value and contribute to society

through sustained corporate activities in harmony with the local community and the

global environment, under the business philosophy of "contributing to and striving to be

respected by the Adidass of the world." It is with this goal permanently in mind that we

strive to reinforce corporate governance, in recognition of the importance of ensuring

management transparency and effectively supervising management from various

different angles. The Public relation department perform the following five functions:

Press Relations

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Product Publicity

Corporate Communication

Lobbying

Counseling

Corporate Social Responsibility

Recent high-profile controversies surrounding industry working conditions have put

labor concerns back in the spotlight. Throughout the supply chain, poor labor conditions

threaten basic human rights and present reputational risks to consumer-sensitive

companies.

ADIDAS one of 33 global brands to send a “climate declaration” to the U.S. Congress,

urging immediate action on climate change. As part of its 2012 London Olympic Games

sponsorship, volunteers wore Adidas jackets and shirts made from 100 per cent recycled

materials, and athletic shoes containing more than 50 per cent recycled content, for a

total of 1.5 million Adidas products containing sustainable materials.

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Marketing Budget and Expenditures ( $ in millions)

The company has increased a significant amount on its marketing expansion. Due to

aggressive marketing it has allocated huge amount in their marketing expenditure. The

following table shows the comparative marketing expenditure between 2014 and 2015:

Name of expenses (Exp) As on 31.12.15 As on 31.12.14

Exp on marketing investment 1886 1548

Marketing overhead 554 427

Sales force 2040 1915

Research and development 139 126

Total 4,619 4,016

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Pricing Strategies

Traditionally, price has operated as the major determinant of buyer choice. Price

remains one of the most important elements determining market share and

profitability.

In industries where pricing is a key factor, companies will often establish a pricing

department to set or assist others in determining appropriate prices. Many companies

do not handle pricing well. Others use price as a key strategic tool. There are customized

prices and offerings based on segment value and costs. Effectively designing and

implementing pricing strategies requires a thorough understanding of consumer pricing

psychology and a systematic approach to setting, adapting, and changing prices. The

company like Adidas must consider six steps in the process of setting pricing policies.

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Fig: Price Setting Steps

Steps in Setting Price

Select the price objective

Determine demand

Estimate costs

Analyze competitor price mix

Select pricing method

Select final price

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Selecting the Pricing Objective

While selecting pricing objectives, the company focuses on commoditization of its

products due to the change in needs from focusing on functionality toward brand value.

In this way, Adidas aims to be a product-quality leader in the market. Aiming to be a

“Solid Global Company”, the company focuses on the business area using the strengths

developed and accumulated on years of experience to establish an industry leading

business group with global competitiveness and strong brand loyalty.

Determining Demand

Competition in the footwear market is intensifying not only within the country rather

expanded globally. Customers demand created by competitive price, lucrative design,

and greater promotional offers.

Estimating Costs

In Year ended on March 31, 2014 Adidas’s Fixed Cost was $6,203 million and Variable

Cost was $ 8,748 million. With a goal of strengthening the domestic and overseas

production capability, Adidas aims to restructure its domestic primary production

systems by concentrating and combining the skills and craftsmanship held among

individual Adidas group companies to reduce the variable costs of the company. It also

aims to reduce the costs of its overseas production systems.

Analyzing Competitors’ Costs, Prices, and Offers

Adidas has strong competitors such as brands like Nike, Puma, etc. Adidas continuous

endeavor toward customer choice and value proposition, product innovation, stylish

design, strong distribution channels and research& development work makes it one of

the world’s top brand footwear.

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Selecting a Pricing Method

There are several pricing strategies that company follows in setting price for its products

Markup pricing,

Target-Return Pricing

Perceived Value Pricing

Value Pricing

Going Rate Pricing

Auction-Type Pricing,

Adidas adopts Value Pricing strategies in setting prices for its products. They are

focusing on building up a loyal customer base by charging a fairly low price for a high

quality offering. Adidas pricing strategy is –

Ensure reasonable profit margins by price controlling over international markets

Improve the brand image, and growth by increasing added-value products

Realizing the growing price competition with competitive manufacturers and increase in

growth through investment in advertising/ expanding sales channels, Adidas has taken

appropriate measures in reengineering its domestic and overseas manufacturing

operations to become a low cost producer without sacrificing quality to attract large

number of value-conscious customer. The company believes that –“Impossible is

nothing”.

Selecting the Final Price

Considering the emerging companies as its strategic marketplace, Adidas aims to

accelerate growth in profit through boosting sales concurrently with promotion of

streamlining. The company believes in building brand equity and good quality to deliver

value to the customers. It strongly focuses on strengthening corporate brand marketing

and building up strong brand image and loyalty to ensure business growth and

profitability.

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Break Even Analysis of ADIDAS

Break even analysis is an analysis to determine the point at which revenue received

equals the costs associated with receiving the revenue. Break-even analysis calculates

what is known as a margin of safety, the amount that revenues exceed the break-even

point. This is the amount that revenues can fall while still staying above the break-even

point.

Fig: Break Even Chart

A company needs to at least break even in order to make the expense of producing a

product worth the effort. As a result, breakeven analysis is an important feature in

evaluating the risk of an activity. Breakeven analysis calculates the relationship between

the fixed costs, variable costs, and profit of the product. For a financial break-even point

calculation, the formula is given below.

Break Even Sales = Fixed Cost / Contribution Margin

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Contribution Margin = (Sales – Variable Cost) / Sales

Break Even Point (in Sales in millions of dollars)

2015 2014

Net Sales (millions of dollar) 16,915 14,534

Variable Cost (millions of dollar) 8,602 7,478

Fixed Cost (millions of dollar) 7,289 6,203

Contribution Margin 49.14% 48.55%

Break Even Sales (millions of dollar) 14,833 12,778

From above break-even analysis for the year ended on December 31, 2014, we find that

the company requires net sales of $ 12,778 dollars to reach into the break-even point.

In the year of 2015, the break-even point is $14,833.

{ Md. Abu Bakar; ID: 142 1183 060}

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Recommendation

The world is moving towards a successful business platform, apart from traditional

marketing in television and prints Adidas been always focused more on digital

marketing like social media marketing, online advertisements etc. In addition, although

Adidas has its name as a performance sportswear, yet it should focus more on its design

for the aged and general people as a shoe is also a fashionable item.

To increase its visibility, Adidas can sponsor events similar to social responsibility in

which all the normal issues may articulate the life style should be in style and designs

launched are displayed. This would have multiplier effect as the latest designs of usable

shoes and sportswear launched by the company get noticed by different segments of the

customers in varied ways. The Adidas should tie –up with FM radio channels for

reminder advertisements and informing customers about various sales promotion offers

from time-to-time. The Adidas should Invest more in R&D as customer expectations are

changing rapidly. Though Adidas has got more product collections, it should focus on

introducing more varieties for normal use also. The company should Introduce exclusive

collection for youth segment which is more contemporary and complements both

traditional and western wear. Majority of the population belongs to middle class

segment. so more innovative design should be made for them in a reasonable price and

more of the exclusive show room should be set up. After sales service has to be improved

and superior. That is, the process of servicing and repairing of watches should be made

faster. This can be done by ensuring the spare parts availability and training all sales

personnel in Adidas Service centre to undertake these tasks or teaching the new

customers. Considering the growing competition in Global apparel industry, Adidas

should put emphasis on several areas. Adidas should strengthen and optimize its

domestic and overseas production operations and capability to control overall cost.

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Conclusion

For over 80 years Adidas has been part of the world of sports on every level and also

serving the generation with their stylish and comfortable innovation to carry out fashion

in the shoe industry, delivering state-of-the-art sports footwear, apparel and accessories.

Today, with total net sales of 6.1 billion and net income of 208 million, Adidas - is a

global leader in the sporting goods industry and offers the broadest portfolio of

products. Adidas products are available in virtually every country of the world. Our

strategy is simple: continuously strengthen our brands and products to improve our

competitive position and financial performance.

Turbulent is the word that aptly describes the scenario in sports industry in last two last

financial years. By frequent price cuts in market and larger than live Marketing game

plans, competition reached its new highs and lows. It is no longer sufficient to just be

competitive. A Company, which has to survive, has got to have competitive advantage.

One needs to take strategic initiative in the short run to achieve the desired positioning

in future. One has to foresee tomorrow and trough its strong brand presence and

marketing strategy Adidas is ruling proudly to be the best.

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References

1. Book: Marketing Management (Philip Cotler, Kevin Lane Keller, Abraham Koshy,

Mithileshwar Jha, 14th Edition).

2. www.adidas.com

3. Forbes Journal

4. http://daxueconsulting.com/market-research-on-adidas-in-china/

5. http://www.researchandmarkets.com/reports/552123/analysis_of_adidas_ag

6. http://businesscasestudies.co.uk/adidas/planning-effective-marketing-

strategies-for-a-target-audience/marketing-strategies.html#axzz44Sj2FEsu

{ Sazzad Hossain; ID: 142 1184 060}

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APPENDIX