Adidas Market in the UAE for the Adidas Footwear Brand - Case Study Example

Introduction

The Adidas Group of companies is a German MNC that deals in the manufacture of sports apparel, accessories, and footwear. The Adidas group is a global leader in the industry that deals in the manufacture of sports products as it offers the market state-of-the-arts goods (Smart, 2007). The company has many brands such as the Reebok, Adidas, Rockport, Taylormade, and CCM. This report will focus on the Adidas brand which is the flagship line of apparel, footwear and accessories. The market research was conducted in Dubai.

Current Market Situation

Adidas was introduced in the UAE in 2001, with the first store opened at Deira City Centre. The then marketing manager of the Middle East region, Walter Bruppacher, presided over the launch of the brand. The market for sports footwear and apparels in the UAE is not fully developed as compared to that of other markets such as the Europe because of the weather that limits outdoor sports (Abougomaah, 2005). The existing product lines in the UAE include Nike’s footwear and Reebok.

The organization that markets the Adidas brand is the Adidas AG. The company was founded in 1920, but established in UAE. It is a large MNC, with revenues hitting the 14.88 billion US Dollars in revenues in 2012 alone (Kapoor, 2014). The company in the UAE holds a top-down strategy in the high ranks of the structure. There is the board of the executives that govern the company from the headquarters. In UAE, the company adopts a structure that is functional and the matrix structure. The company is an ambidextrous organization that focuses on new markets.

The strengths of Adidas include legacy and heritage. The brand has been popular since 1949. The financial strength of the company also acts as an advantage, evidenced by the revenues. In UAE, the company has an efficient distribution network, utilizing its stores and also the supermarkets in the cities (Borowski, 2011). Additionally, the branding of the company has created a community touch with associations such as FIFA.

Its extensive collaborations with the international organs such as the international labor organization create a competitive advantage. Despite the strength, Adidas has weaknesses that restrict its prosperity. First, the company in UAE and the Asian markets mainly outsources its manufacturing function. Third manufacturers are preferred because of the cheap manpower there hence the quality of the products produced in the UAE is questionable by the consumers (Kapoor, 2014).

Market Environment

The marketing environment in the UAE is dynamic. The two most influential micro-environmental factors that impact on Adidas are competitors and customers. There are many competitors that sell sporting apparels and footwear in the UAE region. For instance, Nike is the fiercest competitor, with others such as Puma, K-Swiss Inc., LaCrosse Footwear, Inc., and New Balance Athletic Shoe also posing as the major competitors. Customers largely affect the business and the marketing of a product as they are the ones that the business tries to satisfy. Adidas has to study the demographics of the customers, know their needs, tastes and preferences. Customers vary from young to old, rich to poor, and hence, it is important to know these demographics before presenting the product to them. If customers love t=what has been offered, they will continue buying the product leading to customer loyalty.

Borowski(2011) added that the macro-environmental factors that largely affect the Adidas brand in the region are the social and technological factors. The company uses high-tech methodologies in manufacturing its products. According to Berger (2008), production technologies involving the manufacture of sports footwear is rapidly changing. This makes the existing production techniques of the company become obsolete quickly thereby they require constant upgrading. Consequently, the company will incur additional production cost which will ultimately reflect on the high or premium prices of the shoes. The social aspects also affect the brand, with calls for the control of weight and diseases caused by lack of fitness now a contemporary issue. The UAE countries that include Dubai have programs that promote fitness and hence the local people there purchase the sportswear apparels due to the social influence (Abougomaah, 2005).

The emergence of sports in the UAE such as the prestigious golf courses in the city of Dubai is a current trend that will affect the marketing decision of Adidas. For example, golf is associated with wealth, with a majority of Dubai residents coming from the wealthy background (Lee, 2009). The residents need the prestigious sport and sports accessories. Adidas, therefore, need to satisfy these needs by manufacturing and offering high state-of-the-art sports apparel and shoes (Adidas). The concept of weight loss or keeping fit also affects the marketing decision in that the company will need to target those with overweight and the elderly population in its market targeting strategy.

Consumer Product

A core product is that which offers the perceived or real benefit to the consumer (Armstrong, Kotler, & He, 2000). Adidas presents over 600 types of shoes and also more than 1500 different models of apparels and sportswear. Offering sport shoes remain the focus of the company. The actual product involves the durability, quality, and design of the product. Additionally, the packaging strategy and style of the product is also an aspect of the actual product. The shoes made by Adidas are universally recognized. The firm focuses on making sure that their product is of high quality and durable. Athletes, thus, prefer the Adidas shoe to the other shoes from Puma and Nike due to the perceived quality.

Armstrong, Kotler& He (2000) stated that the augmented product us what accompanies the product in terms of after sale services, customer service and warranty. The services that Adidas offers include employees dedicated to offering customer services in its main shops. The strengths of the shoes include their quality and durability. The Adidas products are in the growth stage with sales still growing. The image of the shoes has a global recognition. The weaknesses of the Adidas footwear are that the prices are high, therefore scaring the price-sensitive customers.

Market Description and Segmentation

The market for sports shoes in the UAE is not yet fully exploited. The market is limited due to the many competitors who have set up branches in the region, whereas serving a limited number of customers (Mahajan, 2012). One of the contributing factors that has led to the congested market is that the region does not have many sports. For instance, the football teams available are less than those in Europe, while the golf courses are also few due to the climate of the region. The target market is composed of the few athletes and the privileged that can access the few golf courses. Professional footballers need the shoes for playing soccer.

The existing market segments include budget conscious segment, running shoe segment, football shoe segment, golf-cloth segment, elite segment, basketball shoe segment and general sportswear segment (Jain-NFASL&Sudhendranath-NSFSPL, 2013). There are potential new segments of those people who need special apparels to be used by the elderly. Moreover, the company can explore the motor industry and design products to be used by the racers. The segmentation strategy use the demographics age, sex and social class or income, and also geographical in terms of the countries in the UAE. Adidas can target the high-income earners in countries such as Dubai and also the geographic by selecting to explore and exploit the Qatari sportswear industry.

Figure; Pie Chart showing the existing market segments

Note;

The elite and sporty segment is the dominating segment in the UAE market. Hence, this is the market segment that Adidas should target, basing on the fact that it manufactures quality shoes that are priced at a premium, thereby eliminating the budget conscious market segment. It is assumed that the everyday wearers are served by other brands such as Nike and Puma.

Marketing Opportunities

The marketing opportunities are determined using the MOA (Market Opportunities Analysis) to determine the most appropriate segments. The segment here will be the elite segment for the shoes. One growth opportunity for the product is the changing lifestyle where people love sports. The market for shoes is still developing hence it is another growth opportunity for Adidas. Besides, there is an increasing demand for premium product in the UAE (Sharma,Harneja, & Kaushik, 2010). Additionally, the firm has an opportunity to expand the product line and offer more accessories to accompany the Adidas footwear. Using the product market expansion grid, the strategy to be used to expand is the market development strategy as the market has competitors and hence, the firm will increase its territorial reach by exploiting the UAE.

Application of the Marketing Mix

Proposed Product

The product to be offered to UAE is the Adidas sports shoes. The image of the corporation lies on the product so it is important to offer a high quality product. The company will need to provide after sale services and a warranty that if the product wears in two months, the consumer will be given another product.

Proposed price

There are many competitors in the region, and the costs of manufacturing are high due to technologies involved (Borowski, 2011). Hence, the company should concentrate on the quality so as to use the skimming pricing strategy and will thus be demonstrating that the product is a luxury good.

Proposed place

The product should be distributed in luxury malls across the UAE nations in a selective type of distribution targeting the high-income earners. This is because it is a luxurious commodity and hence the production will be done at low volumes, utilizing the pull distribution system (Borowski, 2011). The inventory will be kept at the minimum but availed to clients upon specific orders.

Proposed promotion

The promotion of the Adidas should be carried out mainly through advertising via TV ads and sporting magazines because sports are aired through televisions (Berger, 2008). Pull strategy will be used, where customers will be expected to come to the place of selling for the Adidas product.

Conclusion

Analysis from the market research and Recommendations

From the marketing research, Adidas is a luxurious good. Therefore, the company should charge a price that will target the elite segment that has customers who are price insensitive. As such the firm will use the skimming pricing strategy, and hence, it will have to use product differentiation. Product differentiation can be achieved by redesigning the product and improving in its quality. Similarly, the firm may offer more after sale services. Regarding the distribution, the company will use the pull distribution channel, where it will display its Adidas footwear in the luxury shops located in the malls. The elite segment has access to the media and so TV advertising is the most effective promotional tool for this brand.

Aspect

Strategy

Reasons

Type of product

Luxurious

Premium price. High quality

Promotional tools

TV ads, sports magazine

To reach target clientele (selective strategy)

Pricing strategy

Skimming

High costs of production for a premium product

Distribution strategy (place)

Pull distribution strategy

Targeting the high income earners and minimize additional costs

Table; Recommendations for the Adidas marketing strategy

Questionnaire Aspect on Adidas

Existing state

Expected state after application of market research finding

Current Brand; Adidas

Product still in the Growth stage

Level of satisfaction

Low satisfaction, due to low sales

High levels of customer satisfaction

Customers needs

Customers need a high quality footwear

Redesigning the product to improve quality

Market segments

Targeted segment is the elite market segment

Customer Buying behavior

Not price-sensitive, hence skimming price strategy

Marketing mix

High quality product, media promotion, skimming price, pull distribution strategy

Premium price for a premium product

Market opportunity

Changing lifestyle

Expansion of market share

Table showing the questionnaire variables

Q. What is your level of satisfaction with the sports shoe offered in the market by the various brands? We sampled 100 respondents in each of the 3 main segments (located in Dubai) we identified and asked them on their level of satisfaction of what is being offered in the market. We found out that the elite and sporty segment had the lowest satisfaction of what was offered

Q. What do you want most in a sports shoe product (customer needs). We sampled 10 respondents in each of the 3 main segments we identified.

Q. what is your consumption rate of a sports shoe? How often do you purchase the shoe?

We used a total sample of 20 participants from the three of the main segments identified.

Q. Where do you buy the sports shoes? We gave out the option of prestigious shopping malls, supermarkets, open air markets and regular shops. Out of 100 respondents, 55% said they would buy in the shopping malls, 25% in the supermarkets, 10% buy in the open air markets and regular shops each.