Developing a Comprehensive Marketing Plan for Adidas - Essay Example

? “Marketing Plan” Matric Number: Word count: Table of Contents Topic Page Number Executive Summary 2 A brief history of Adidas 2 Adidas the company: 3 Macro environmental Issues with regard to UK 3 Micro environmental Issues 4 Competitive advantage 9 Strategy development 10 Marketing Segmentation 10 Product Planning 10 Channel Management 11 Marketing Communications 12 Pricing Policy 13 SWOT Analysis of Adidas 13 Recommendations and conclusion 14 References 15 Executive Summary: Adolf (Adi) Dassler, founded the company in 1948 with his brother Rudolf Dassler in Herzogenaurach, Germany and registered it as Adidas AG on 18 August 1949. In later years, due to some differences the two brothers split up their business. Rudolf went on to start Puma, while Adolf focused his attention on the expansion of Adidas. It is a German based company which specializes in sports apparel manufacturing. It is the second largest sportswear manufacturer in the world after Nike and is a significant part of the Adidas group which is primarily comprised of Reebok Sportswear Company, Taylormade Golf Company, Maxfli golf balls, and Adidas Golf. The company acquired Reebok in January 2006 and became more dominant in the market. Adidas primarily focuses on the European markets but in order to cut costs the company has started outsourcing its production to Asian countries. The Company values its employees and makes sure they are well paid and are happy in their work environment. But they are not able to exert as much control in the countries where they have outsourced. The company uses print media, advertisements, the internet and also celebrity endorsement for its promotion. Both Nike and Adidas cash their brand names. Since both are very popular throughout the world, so the customers have a strong belief that these companies will always provide competitive, technologically advanced and quality products; and yes they are right in their belief. But still, Nike has the largest market share and customers often prefer it over Adidas. It is focusing on the right target market and with the increasing spending power of its target market its sales can be boosted. More and more people are incorporating sports into their lifestyle. With outsourcing, their production cost will be reduced and they will have more money to spend on promotional activities. Adidas states “impossible is nothing”, so if they continue to believe in it then it can do wonders for their success. A brief history of Adidas: Adolf (Adi) Dassler, founded the company in 1948 and has been in the shoe production business since the early 1920s. He and his brother Rudolf Dassler founded the company together in Herzogenaurach, Germany and registered it as Adidas AG (with lower-case lettering) on 18 August 1949. In later years, some differences aroused between the two brothers that led to the split up of their business, and Rudolf went on to start Puma while Adolf focused his attention on the expansion of Adidas. (Suzy Kassem n.d) Adidas the company: Adidas is a German based company, which specializes in sports apparel manufacturing. It is the second largest sportswear manufacturer in the world after Nike and is a significant part of the Adidas group which is primarily comprised of Reebok Sportswear Company, Taylormade Golf Company, Maxfli golf balls, and Adidas Golf. The company acquired Reebok in January 2006 and became more dominant in the market and is continuing on the road to success. Today, Adidas plays a dominant role in global street culture and many of its sub-cultures (Suzy Kassem n.d). Macro environmental Issues with regard to UK: Political: Adidas primarily focuses on the European markets but in order to cut costs, the company has started outsourcing its production to Asian countries. Like other European countries, UK also has rules, regulations as well as laws, which aid and ensure its economic development, but luckily it does not have policies that hamper or confine the communication strategies or promotional activities of foreign companies. Therefore, Adidas is doing the right thing by focusing its attention on the European market as it poses an encouraging environment for the company to prosper in. Economic: UK has a strong and stable economy, which is very essential for the healthy growth and prosperity of any company. The rate of inflation is relatively low in comparison to other countries, also there is low economical risk and since it comes in the category of developed as well as technologically advanced countries, it presents a very good market for Adidas. Social: Adidas is quite justified in targeting the European market, since people of these countries have a higher purchasing power that is similar to that of the USA. Also, people here believe that professional sports goods are a bare necessity when they take holidays or vacations and sports are also incorporated in their lifestyle. Technological: The design as well as product development for the Adidas products are done in Germany. Although, the company has outsourced its production to Asian countries but the basic designing and its development is still done in the German headquarters. With the help of its well developed internet site, Adidas is able to gain and keep potential customers without additional costs. Environmental: Adidas makes sure its products are environment friendly and also that the production process is not harmful for the surrounding environment. Hence, the company takes pollution prevention measures and tries to utilize the natural resources in the best possible manner. Micro environmental Issues: Customers: Adidas has perfected its website for the ease of its customers so that they can search through the product line online and find the perfect product that fits their demand. Also, as Adidas believes in quality products so customer satisfaction is guaranteed. Employees: The company values its employees and makes sure they are well paid and are happy in their work environment. But they are not able to exert as much control in the countries where they have outsourced. They do try and make sure that they still follow their company code of conduct there, but for that the governments of those respective countries also needs to play an important role. In a research conducted by Adidas, the company found the following issues requiring their attention in countries where they have outsourced their production. Adidas has devised rules and regulations to emit these issues. Forced labour: This issue has come up in some Asian countries where the employees are in debt of their employers and in such cases their passports can be confiscated and then, they are forced to work under temporary contracts, in which even the minimum wage level is not met. The business partners must not force the workers in anyway, be it prison labour, indentured labour, bonded labour or otherwise. Only employees willing to work shall be engaged (Adidas-Salomon 2000). Child labour: In countries like Turkey where workers are not able to prove their age, they are deprived of rights to medical checks, maximum working hours and annual leave. No individual under the age of 15 can be employed by the business partners. (Adidas-Salomon 2000) Discrimination: The migrant workers are underpaid as compared to the local. Particularly in Mexico, women are paid less than men and are also required to take pregnancy tests. Adidas officials believe that a person should be hired on the basis of his abilities and there should be no form of discrimination on the basis of a personal characteristic or belief and the company will only do business with partners that share the same belief. (Adidas-Salomon 2000) Wages and benefits: Some factories pay below the minimum wage limit and also are relaxed in their payments, which in turn, results in delayed payments. Also, at times the wages are calculated in such a way that the workers do not understand. And hence, they are not able to calculate if they have been paid in accordance to their working hours. All business partners will make sure that the employees are not paid below the minimum wage line and also that they are fairly compensated for putting in overtime. (Adidas-Salomon 2000) Hours of work: The maximum working hours limit is being ignored by some factories and also if the workers put in over time they are not fairly paid for them. Except under extraordinary circumstances, the employees will not work for more than sixty hours per week and that is including any overtime. Besides this, they will be allowed to take paid annual leave and will be given at least 24 consecutive hours off in a seven day period. (Adidas-Salomon 2000) Rights of association: Where Independent unions are illegal in some countries, they are considered notorious in various others. The partners must ensure good communication with their employees and also give them the right to join and organise associations of their choice and be able to bargain collectively as they please. (Adidas-Salomon 2000) Disciplinary practices: There are no published rules and regulations pamphlet and workers are fined for things like late arrival or failure to meet production targets. The dignity of each employee will be respected and no employee will be stressed in any way either physical or mental. (Adidas-Salomon 2000) Suppliers: The suppliers must comply to the rules and regulations defined by the company and also the suppliers located in various countries, where Adidas has outsourced their production, must also comply with the laws of the country they are operating in. They are also expected to participate actively in the social and environmental activities in that country and be responsible for all their actions. Shareholders: Adidas believes in a relation of high esteem and faith where its shareholders are concerned, and it provides them with the appropriate information on a standard basis. By having good communication with our shareholders, we are able to be up to date with their needs and expectations. Also, Adidas works closely with all its business stakeholders including customers, suppliers, shareholders and staff so that a strong and trust worthy business relationship can be developed. (Adidas-Salomon 2000) Media: Media plays an important role in developing the brand image of a company and Adidas heavily relies on it. The company uses print media, advertisements, the internet and also celebrity endorsement for its promotion. Adidas used music to create an attractive and intoxicating advertisement for the launch of its technologically advanced shoe the Adidas 1 which is the "world's first intelligent shoe." The company teamed with TBWA/Chiat/Day, San Francisco and Spike Jonze to create a special effects-filled ad oozing with dreams and fantasies. It recognized the importance and attraction of music to launch its state of the art $250 shoe. Uli Becker, the global communications chief for Adidas states that the company needed to come up with music that was "as unique and disruptive" for the iPod generation as the bionic shoe. (McCarthy 2005) In 2001, the Adidas engineers dreamed of a shoe that would adapt itself to its wearer and this dream came true in 2004 with the launch of Adidas 1. The shoe has a magnetic sensor in it that measures the amount of compression as it hits the ground and then the microprocessor decides if the shoe is excessively supple or too concrete. The shoe is going to be available very soon but it comes with a heavy price tag of $250. (Theme 2004) Competitors: The main competitors of Adidas are Nike and Puma, but since Nike is its number one competitor so we shall be focusing it in our competitor analysis. Both brands are very popular throughout the world, so the customers have a strong belief that these companies will always provide competitive, technologically advanced and quality products. But still, Nike has the largest market share and customers often prefer it over Adidas. Discussed below are some factors that influence the purchase decision of the consumer. Sponsorships: Nike always takes the lead in terms of celebrity sponsorship and endorsement but Adidas is trying its best to catch up. (Recomparison contributor n.d) Market Focus: The Nike assemble consists of basketball shoes, running shoes and cross-training products. Adidas currently offers products for sports, like soccer, tennis and general athletics. (Recomparison contributor n.d) Market Strategies: Nike mainly targets the domestic market but recently it has also entered the world of soccer. The hype of athletic sponsorship was created by Nike and it relies heavily on celebrity endorsement and due to this, it has a very dominant advertising strategy. In comparison to Nike, Adidas pays more attention to the European markets. In other parts of the world, it is mainly know due to soccer but now the company has decided to increase its advertising budget and is entering new markets namely sports equipment and sportswear. (Recomparison contributor n.d) Outsourcing Policies: Nike has outsourced all its production to Asian countries where the production cost is lower, but it had only outsourced its production and its product design and its development is still done in its headquarters in Beaverton. Adidas has also started copying the outsourcing policy of Nike and has outsourced its production to Asian countries while its R&D department still operates in its head office in Germany. This has helped Adidas in competing well with Nike. (Recomparison contributor n.d) Comparison: Nike Adidas Focuses on local market Focuses on European market Excellent advertising and marketing Decision to increase advertising and marketing budget Restructured the appearance of its product line Expanded its product line to include sports equipment and clothing Specializes in basketball shoes, running shoes and cross-training products and also offers custom product lines Specializes in soccer, tennis, and athletics Excellent website support for custom options Recently updated its production for increased efficiency and cost effectiveness All production is outsourced Production is outsourced to Asian countries (Recomparison contributor n.d) Competitive advantage:  Adidas keeps on improving its designs and incorporating technology in it. It developed the first technologically advanced shoe Adidas 1. Also, it doesn’t compromise on quality and after Nike it is the strongest sports products company. It tries to price its products a little lesser as compared to Nike in order to increase market share. Strategy development: Adidas is working in accordance with incorporating the passion for sports among the people and is striving to furnish the athletes with the best possible sports equipment, which aids them to outshine in their respective sport. The company is following two types of marketing strategies namely market development and market penetration. Market penetration is the one in which the company penetrates the market with its products in order to gain a higher market share. Adidas is doing just that because it is focusing its attention on improving its products and entering the world market in order to gain a higher market share. It is gaining share in the sports apparel and equipment industry. Secondly, it is also following market development strategy by entering into new markets of the sports industry. It has now shifted its focus from footwear to sports equipment and sports apparel, which it is producing for both men as well as women. Also, it is incorporating technology in its designs e.g. Adidas 1. Now, it has produced further varieties of Adidas 1 and the consumers have much more to choose from than before. Also it has opened stores in various countries. Marketing Segmentation:  Market segmentation can be done in two ways. One way is to look at the descriptive statistics which include the geographic, demographic and psychographic characteristics of the consumers. While another way to do market segmentation, is to look at the behavioural characteristics of the consumers. (Kotler & Keller 2006) Adidas has done geographical segmentation and is focusing on the European markets. Also, its target market is the young generation (aged between 14-25 years, specially the sports fans) and athletes. Product Planning: Adidas has recently expanded its product line to include sports equipment and clothing. It is focusing on expanding its product line and tapping into new markets. It is also combining design with technology and innovation and coming up with products that not only offer a style statement but are also technologically advanced in their field. (Adidas-Salomon 2000) Channel Management: The supply chain of Adidas is large and complex. They depend on approximately 570 factories including sewing subcontractors around the world. The Adidas group itself, only owns only 11 factories in Germany, France, Italy, and the USA and in China. The rest of the factories are owned by the suppliers which produce Adidas-branded goods of footwear and apparel. Outsourcing has helped the company in tremendously reducing the cost of production. But with outsourcing comes moral and ethical responsibilities, which is why the company seeks to ensure that working conditions for its workers improve and not deteriorate. The company expects its business partners i.e. their suppliers to comply with the following standards. General principle The business partners with fulfil all legal requirements of the country they are operating in and keep the best interests of the company in mind. Employment standards All employees must be treated equally and fairly. Their wages should match the minimum wage line limit and the working conditions should be appropriate and also they should be provided with annual leaves and health benefits which is their right. Health and safety The health and safety of the employees will not be overlooked under any circumstances and they will be provided with a clean and hygienic working environment. Environmental requirements Measures will be taken to prevent environmental pollution and also the natural resources will be utilized responsibly. Community involvement Business partners will be favoured if they make an effort to improve the conditions of their country of operation. (Adidas-Salomon 2000) Marketing Communications: The Marketing Communications Mix comprises of the marketing and promotional activities of any company and it includes advertising, personal selling, sales promotion, public relations, and direct marketing. (Dolak 2010) The “Beat Rugby” campaign by Adidas shines light on how important it is to integrate the e-viral activities with the rest of the online communications network. Based on the concept of partnerships, Adidas partnered with the rugby and the All blacks New Zealand Team and came up with an online campaign, with the aid of which they were able to reconnect with the heart of the worldwide sports fans and spectators between the ages of twelve to twenty. The core of the campaign was an interactive game that could be accessed via the Internet and supporting it was an additional media campaign that encouraged fans to visit the Beat Rugby website. This massively successful campaign resulted in a vast amount of rugby fans of over 20 countries becoming members of the global rugby community and having an interactive experience with the Adidas brand in turn increasing its popularity. (Masterman & Wood 2006) Pricing Policy: Its pricing should be in accordance to its brand name and quality and with outsourcing, the product prices can certainly be lowered. Its price is generally lower than that of Nike, which is good as it may attract more consumers who think that, why not get the same quality product as Nike with a lower price at Adidas. Adidas sales hit record high. The sales of Adidas were boosted due to the world cup and it has recorded ground breaking sales for the past year and hence, its forecast for the year 2011 looks rather positive which specially contributes to the success in emerging markets like China. “2011 is shaping up to be another great year for the Adidas group and we are off to a fast start,” chief executive Herbert Hainer said after the group reported sales for 2010 of €11.99bn (?10.2bn). (The Independent 2011) SWOT Analysis of Adidas: Strengths: Adidas has increased its advertising budget. Also, it is paying more attention to celebrity endorsement and is now working with celebrities like Beckham &Kobe. The brand name is quite Strong brand name, which is well recognised worldwide. It made the first technologically advanced shoe Adidas 1 and it continues to improve its products. Weaknesses: Adidas is not in first place in its industry and Nike continues to be the market leader. Also, since Nike has also entered the world of soccer hence its domination in the European market has seen a downfall. It is still not able to compete with Nike in terms of promotion and advertising. Opportunities: It is focusing on the right target market and with the increasing spending power of its target market; its sales can be immensely boosted. More and more people are incorporating sports into their lifestyle. With outsourcing, their production cost will be reduced and they will have more money to spend on promotional activities. Threats: The prime threats are its competitors but since Nike is the strongest, so whichever product Adidas develops Nike can come up with a better version. Recommendations and conclusion: Adidas continues to be the second best in its industry after Nike. It should follow in the footsteps of its chief competitor and try to gain a higher market share. It’s good that it has done outsourcing because this will reduce its production cost and spare more money for marketing and promotion. It should focus on building a strong brand name as it is not as well known worldwide as Nike is and it can be done if Adidas pays more attention to the sports teams because if the team endorses the brand, then the fans will also try to buy them as they look up to their favourite players and hence, it will start a chain of brand popularity. Adidas can gain a sizeable share in the Asian market. Also, if it starts developing products according to the taste of local people then it may be able to gain a competitive advantage over Nike. Celebrity endorsement can prove to be very beneficial and as Adidas states “impossible is nothing” so if they believe in it then it can do wonders for their success. References Adidas-Salomon, 2000, Our world Social and Environmental report 2000 [online], Available from: http://www.Adidasgroup.com/en/sustainability/assets/social_environmental_report_2000_e.pdf, [Accessed on 11 Mar 2011] Dolak, D 1999-2010, The Marketing Communications or Promotional Mix [online], Available from: http://www.davedolak.com/promix.htm, [Accessed on 11 Mar 2010] Kassem, S n.d, Adidas [online]. Available at: [Accessed 11th Mar 2011] Kotler, P & Keller K 2006, Marketing Management, 12th edn, Prentice-Hall. Masterman,G & Wood E 2006, Innovative Marketing Communications strategies for the events industry, Elsevier Butterworth-Heinemann, Burlington, MA. p.122, Available from: http://books.google.com.pk/books?id=9VUOnHKJ2igC&pg=PA122&dq=marketing+communication+Adidas&hl=en&ei=ny56TZGnGiN4gaTwsyjBg&sa=X&oi=book_result&ct=result&resnum=2&ved=0CDEQ6AEwAQ#v=onepage&q=marketing%20communication%20Adidas&f=false, [Accessed on 11 Mar 2011 ] McCarthy, M 2005, ‘Ad Track: Adidas ad takes a different path — and it works’ [online], USA Today, 6 June 2005. Available from: http://www.usatoday.com/money/advertising/adtrack/2005-06-05-track-Adidas_x.htm , [Accessed on 11 Mar 2011] The Business Matrix, 3rd March 2011, The Independent [online], Available from: http://www.independent.co.uk/i/matrix/the-business-matrix-thursday-3-march-2011-2230511.html , [Accessed o 11 Mar 2011] Theme, T 2004, ‘Grand Award Adidas 1 ’ [online], Popular Science, December 2004, p.96. Available from:http://books.google.com.pk/books?id=fwAAAAAAMBAJ&pg=PA96&dq=Adidas&hl=en&ei=htx5Tb2iJMO04gbt_839BQ&sa=X&oi=book_result&ct=result&resnum=4&ved=0CDUQ6AEwAw#v=onepage&q=Adidas&f=false, [Accessed on 11 Mar 2011] Read More