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In 1925, in a small German village, the world got it's first taste of adidas. It was there, in a village 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 still the 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 in 1928, 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 his work. Jesse Owens wore adidas track shoes, during his spectacular Olympic performance in 1936, where he earned four gold medals. And Armin Hary was the first athlete to run the 100-m sprint in 10 seconds, also wearing adidas shoes. In 1949, Dassler created the first soccer shoe with molded rubber studs, adopting the trademark three stripes. The German National team truimphed in the 1954 World Cup wearing Adi's soccer boots with screw-in studs, which enabled the game to be played under vastly different conditions without slipping. Hundreds of world records, Olympic medals and World Cup victories stand as a testament to Adi Dassler's life work.

One of Dassler's goals in producing athletic shoes was to design them according to each sport's specific demands. Dassler's drive to fulfill this goal resulted in more than 700 patents. His long list of sport shoe innovations includes nylon soles and running spikes. He considered 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 his shoes.

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

Yet it was not Adi's creativity and mastery of shoe technology alone that catapulted adidas to the top of the athletic shoe industry. Dassler's wife, Kathe, and their five children all had a hand in the business. Horst, the Dasslers' first-born, perhaps made the most signigicant contribution to his father's company. While Adi's were creative talents, Horst had a head for 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.

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. And the 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.”

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 Europe. Adidas ranks second worldwide, with their products selling in almost 200 countries. In 1994 alone, adidas sales totaled 3 billion dollars. In late 1995, adidas went public 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 site continues 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 the logo 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 most adidas 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 in 1991 with a trio of soccer shoes. The trio consisted of the following.

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

Newly acquired brands:

· Salomon: skis, snowboards, bindings, ski boots, cross country ski equipment, in-line skates
· Taylor Made, golfclubs and accessories
· Mavic, bike wheels and rims

S h o e s / S o c k s

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

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

H a t s

B a g s

O t h e r

· Adidas footwear, net sales according to categories
Running: 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 region
Europe: 64.4 %
Americas: 29.5 %
Asia: 6.1 %

An immense amount of work goes into the creation of an adidas product. First, Marketing consults with the internal adidas sports and technical divisions and external sources, such as 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, Marketing presents the concepts to our design department, which creates products to fill these needs with innovative technologies and functional design. Development makes the actual prototypes. Marketing presents these prototypes to the retail market.

Clearly, an adidas product is the result of the intense thought and creative energy of many different 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 follows function. 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 needs should 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 selection to those they anticipate will most successfully meet athletes' needs.

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 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 to retailers.

In 1997, Adidas became Adidas-Salomon with its US$1.4 billion purchase of Salomon, a French manufacturer of skis and other sporting goods. The deal put Adidas one step closer 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 sport marketeer in the world, and number one in Europe. Salomon is currently very strong in North America and Japan, and Adidas has the largest market share in Europe.

Founded in 1947 by Georges Salomon, the Salomon Worldwide Group was established as a ski-edges workshop in the French Alps. Nowadays, the company is among the leaders in sports equipment with strong brands: Salomon (winter sports, hiking boots and rollerblade), 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 true partnership with sport-oriented men and women. This strategy is supported by strong investments in R&D and marketing (respectively 5% and 20% of sales).

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

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. Until then, Adidas had stated that it did not wish to develop a code of its own but favoured an industry-wide code similar to that drawn up by the World Federation of Sporting Goods Industry (WFSGI).

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

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

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

Adidas sources most of its products from suppliers all over the globe. About 95% of its sports 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 international sourcing costs. The Adidas Annual Report of 1996 already states that sourcing is at the heart of the business and a crucial factor in reducing production costs.

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

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

In 1999, Adidas became a member of the Fair Labor Association in the USA and applied for membership of the Ethical Trading Initiative in Great Britain. Although progress is slow and confined to selected cases of labour violations such as Formosa/Evergreen, Adidas 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, gross violations of labour legislation. This report was communicated to the Clean Clothes Campaign by adidas, as well as a correctional action plan dated October 1999. Over a year after publication of the Formosa/Evergreen report, there is little progress, but at least first 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.

Reebok, in terms of their products, is not entirely different from Nike. Reebok is involved in the design and marketing of both athletic and non-athletic footwear and apparel, as well as other 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 is evident 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 net sales 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 leaves Reebok’s current financial position, as a whole, looking bleak.

In 1998, Americans spent approximately $38 billion to purchase more than 1.1 billion pairs of shoes. The wholesale value of athletic shoes for the US market totaled $8.7 billion in 1998 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" casual footwear with a comfortable and rugged design. This switch is due to the increasing number of workplaces adopting casual dress codes.

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 offering more styles at lower price points. Companies are looking for new ways to boost sales by capitalizing 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 forward to 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.

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

In fiscal year 1999, the economy was relatively favorable for footwear manufacturers. The 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 is cyclically sensitive to the Olympics. Historically, years of the Olympic Games have demonstrated surges in growth followed by difficult sales periods. The outlook for increased sales trends is optimistic due to the upcoming Olympic Games slated for this year. Nike can also look forward to a boost in demand from the World Cup events.

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

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

Another key barrier to entry is the access of traditional distribution channels. When combing the shelves at stores like Sports Authority and FootLocker, it is evident that the leaders dominate the shelves. Lesser-known brands are viewed by retailers as being too risky 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 overhead that come along with traditional brick and mortar retail distributors are being significantly diminished. New entrants are now able to slide into markets without these high startup costs, making it more profitable to begin production.

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

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 female consumers market. While Reebok’s spending on advertising has fluctuated, individual product designs have come and gone, female consumers have, as a group, remained loyal to Reebok and their products.

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

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

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. While other athletic shoe companies bombard the airwaves with commercials pushing their product lines, Reebok remains out of sight and out of mind.

Yes, Reebok’s chances of growing their market share are slim as long as their advertising endeavors remain to be so unsuccessful. For Reebok to rebound from their current economic woes, they will have to improve the quality of their overall marketing operations.

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

Adidas once loyal market is currently aging. This means that its customers are not as athletic 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.

The phenomenon of the aging of our most loyal market segment questions whether there is a threat that the new generation will not be exclusively loyal to adidas. In the current market 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 clothing and shoes are competing with adidas. In addition, Nike is not keeping up with the latest trends and styles like some of its competitors have been. For that reason, the newer generation is attracted by Nike and Tommy Hilfiger.

An opportunity produced by pressure groups is the ability to react in a positive manner to concerns of the public as well as customers. Consumer watch groups are paying especially 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 are indeed taking steps to reduce and eventually eliminate sweatshops and child labor through new 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 while we are trying to be efficient and economical.

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. By disregarding the voice of concerned citizens, means disregarding their customers, one of our most important stakeholders.

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. Adidas has capitalized on the recent economic boom with higher sales and income. However, they are not using their resources to the fullest degree. There are currently many areas in which adidas 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 account the changing demographics in this country. There is a much higher proportion of Hispanics, Asians, and African Americans than there was before. These groups have somewhat different tastes that adidas should be able to satisfy.

To exploit this opportunity, adidas needs to focus on who the next generation of loyal customers will be and cater to their needs. In addition, the world economy is recovering currently, which allows adidas to make an impression in foreign markets as well. adidas is strong 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 they want to increase their market share, they must look at trends while maintaining their high standards of quality.

The key threat for adidas. is market saturation. The problem is that the athletic shoe market 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 second position 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 sell clothing or other types of shoes. If all of these other companies merely gain a small percentage 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 share and making sure that competitors like Nike, Rebook and Old Nay do not steal away the market share. They could do this by focusing their efforts on a broader market. This would include the younger generation that is interested in sports as well as extreme sports.

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.

During the time of Adi Dassler the corporate strategy was to deliver the right kind of foot wear 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.

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.

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

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 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.

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.

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.

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.

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 bought Bauer, a Canadian maker of hockey skates and accessories. When Nike introduced a new hockey stick with an ergonomic, finger fitting handle, the product did not hit well with the players.

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.

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.

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.

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

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.

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

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

Considering the business level strategies of Adidas, Adidas follows product development and Market development strategies to enlarge its domain. Adidas while following market development strategy freshened up the footwear line and sponsored tournaments in “streetball”, a street version of basket ball. It continuously follows product development strategy 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 segments rather than product areas and each division will follow a different strategy.

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.

The Original Division will target consumers who want to buy products exclusively for leisure usage, but still are inspired by sports.

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.

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 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.

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 largest market share in the Europe. Adidas’s Achilles heel is still the American market where it 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.

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 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.

Adidas primarily conducts marketing research on a continual basis to assist in increasing the market share in the athletic footwear and apparel industry.

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.

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.

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 set up 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.

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 a tradition of requiring its suppliers to conform to social and environmental standards. In 1998 further steps were taken to ensure that there are acceptable working conditions in the factories which supply Adidas-Salomon products. All suppliers are obliged to adhere to the corporate Standards of Engagement (SOE) confirming the policy on minimum requirements for labor, health, safety and environmental issues. The SOE is based on the World 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 been translated for display in factories into the languages of the countries where products are sourced.

Nike is also strongly committed to social responsibility. In response to accusations by consumer groups over unfair labor practices, Nike has developed a Corporate Responsibility Policy that discusses how it will improve working conditions for its international 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 the environment, improving safety and health conditions, and developing programs to provide educational programs. The policy shows Nike’s commitment to responding to the concerns of consumers, as well as a commitment to its employees around the world.

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 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 the area of consumer brand awareness and brand power. While the reasons that Nike is successful in marketing our products are numerous, this key distinctive competency towers 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.

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.

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 has got 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 products outside 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 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 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 market responsiveness 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 different segments 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:

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 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.

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.

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 employees extra 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 and market its shoes and clothing for sports enthusiasts. The company chooses to call its headquarters a "campus" instead of an office. Employees are called "players," supervisors are "coaches" and meetings are "huddles."

Nike has been striving towards an inner culture that reflects this mantra. Employees are given 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 view a video of sports highlights accompanied by a soundtrack that discusses the soul of the athlete and the competitive spirit. In addition, management sends weekly emails to update employees on the recent successes of Nike-sponsored athletes, and often hosts spokespeople 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 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.

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.