1. What is Adidas' corporate strategy? Was there a common strategic approach utilized in managing the company's lineup of sporting goods businesses prior to its 2005-2006 restructuring? Has the corporate strategy changed with restructuring?
Prior to its restructuring during 2005-2006, Adidas looked to branch out into too many areas and there was lesser focus on product specialization when compared to Nike. To have a more directed approach and focus on core competencies, Adidas has down-sized its brand categorization from 3 to 2 distinct marketing segments, namely: Sport Style and Sport Performance. Product initiatives and marketing campaigns until 2010 are directed at 5 global priorities, namely: basketball, football, originals, running, and training, which Adidas expects to add-up to over 80% of its top-line growth. With its “Impossible is Nothing” brand attitude, along with a clearly-defined, segmented approach towards distribution, and a strategy of premium-price, Adidas now looks to position itself as the world’s leading sports brand.
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2. What is your evaluation of Adidas' 1998 acquisition of Salomon SA? Did the acquisition achieve the Robert Louis-Dreyfus' objective of putting together the best portfolio of sports brands in the world? What does a 9-cell industry attractiveness/business strength matrix displaying Adidas-Salomon's business units look like?
I think the acquisition of Salomon by Adidas did notquite prove to be a reliable profit-driving move. Even though some strategic fits between the core competencies of Adidas and Salomon were good, the divisions still did not manage to uncover these synergies. Salomon’s performance and growth ever since did not live up to expectations and it has dragged Adidas-Salomon’s overall growth rate down.Though they were related businesses aiming for a competitive advantage that was based on product differentiation, the objective of Robert Louis-Dreyfusdid not quite work out as the value chains were dissimilar and unrelated for each equipment business. Adidas-Salomon businessunit displaywith a9-cell industry attractiveness/business strength matrix would show the combination not to be a good fit.
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3. Did Adidas' business line-up prior to the divestiture of Salomon and Mavic exhibit good strategic fit? What value-chain match-ups existed? What opportunities for skills transfer, cost sharing, or brand sharing were evident? What strategic fits will be possible once Reebok International is acquired?
I think the business line-up of Adidas before the divestiture of Salomon and Mavic does not exhibit a good strategic fit.Though Mavic is a business related to sport, manufacturing, marketing, and distribution aspects of performancebicyclehardware are hugely different from those of athleticfootwear. Combined marketing of Adidas’ sports performance shoes with Mavic’s high performance bicycles is a value-chain match-up. Considering that several previously-established brands continued to be untouched by the brand name of Adidas, it is clear that brand sharing was not really evident.Skill-transfer was not too evident either, considering that there were a lot of differences between what each business handled and the way they went about it. I think Reebok acquisition is a significantly better strategic fit since the two businesses are leaders in footwear and athletic apparel. While Reebok shoes would be marketed and promoted as leisure shoes, Adidas can maintain its shoe marketing and promotion as the serious athlete’s superior shoe. Adidas’acquisition of Reebok allows Adidas greater leverage to compete with Nike as the world’s No.2 athletic shoe-maker.
4. Did Adidas' business line-up exhibit good resource fit between 1998 and 2004? What were the financial characteristics of each of three major segments? Which businesses might have been considered cash hogs and cash cows? How did Adidas-Salomon's performance vary by geographic region?
No, the business line-up of Adidas did not exhibit good resource fit during 1998-2004. During this period, as high as 80% of the company sales came from Adidas alone, while Salomon and TaylorMade Golf accounted for the other 20%. In more areas than one, Salomon lagged significantly behind in comparison to the other two business units. During this period, Salomon’s operating profit average was 5.23%, TaylorMade’s was 9.83%, and Adidas’ was 8.45%. In terms of profit contribution to bottom line profits, Salomon fared 47% and 38% lesser than TaylorMade and Adidas respectively. Salomon was clearly behind in terms of converting efforts towards sales into sizable bottom line profits. Salomon’s capital expenditures were 63%, TaylorMade’s were 35%, and Adidas’ was 23% for this period. Salomon was clearly behind in terms of preventing operating profits from being eaten away by capital expenditures. Considering these financial statistics, it is clear that Adidas has been the cash cow and Salomon the cash hog during this period. In terms of Geographical regions, Adidas-Salomon’s sales in Europe, North America, Asia, and Latin America averaged 51%, 30%, 16%, and 3% respectively. While sales and operating profit in North America fell each year, those in Asia have consistently risen.
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5. Based on your analysis of Adidas-Salomon businesses, did the 2005 restructuring make sense? Does it appear the acquisition of Reebok International will produce positive results for shareholders? What strategic actions should Adidas CEO Herbert Hainer initiate to improve the company's financial and market performance now that the restructuring is nearing completion?
I think 2005 restructuring made sense as it allowed Adidas to sell those business divisions that it could not capitalize and manage. Herbert Hainer announced recently that Adidas is all set to overtake Nike in china, in terms of sales. This is a significant signal of return for a company that has traditionally struggled against Nike’s competition. Considering this along with Adidas’ acquisition of Reebok and return to focus on core competencies, it does appear that shareholders will see positive results. Herbert Hainer should not try to do too many things too quickly and end up losing focus and quality in the process. I think Herbert Hainer should avoid branching out Adidas into too many areas, but stay focused on product specialization and product differentiation.