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The process of business restructuring is one of the most essential processes carried out by businesses to improve their efficiency. Business restructuring is an integrated process aimed at reducing cost of production while increasing profits earned through the incorporation of best practices.
It normally entails modification of business strategies in a bid to maximize profits among other benefits. Therefore, just like any other changes done in businesses, restructuring features on areas such as value creation, supply chain managements, and business operation modifications just to mention a few.
Adidas is one of the companies that have undergone corporate restructuring in the recent past. In 2009, Adidas announced that it was in the process of restructuring its corporate structure in order to increase shareholder value. This paper is an in-depth analysis of the restructuring processes of Adidas and the effects the restructuring process.
Adidas is a Germany–based company whose headquarters are situated in Portland. It normally deals with the production and distribution of sportswear products with the brand Adidas. The decision by Adidas to have its organization restructured was after a fall in its profits in 2009. That year, Adidas had reported a 6 per cent decline in sales falling from $3.49 billion to $3.43 billion.
The company also noted significant decline in its sales in all regions apart from the Latin America. Actually, North America reported the highest fall with a 17 per cent decline of its currency neutral sales. In addition to this, Adidas experienced a fall in its market share price by 3 cents per share.
This in turn significantly affected its income hence making huge losses forcing it to have its corporate structure restructured. Thus, in order to speed up the process of revenue growth while cutting costs, Adidas indicated that it would implement a number of changes within its organizational structure. First, the restructuring was geared towards cost reduction techniques.
In this, the management of Adidas made sure that the cost of producing and distributing their products was as minimal as possible. For instance, Adidas could achieve this by restructuring their production and distribution channels to sizes that are cost effective yet achieving the set objectives. Secondly, the restructuring of Adidas was aimed at making it a high performing company within its region and all over the globe. This objective was achieved as Adidas products have been widely used globally from 2009.
Adidas made use of advertising and communication strategies to make their products known globally thus attracting a large group of customers. Reorganization of resources as well as the identification of outsourcing opportunities was yet another activity carried out in Adidas restructuring. Adidas improved its processes to serve a larger group of customers thus realizing efficiencies.
In 2009, the Attorney General of Adidas created a Global Retail segment, which was to manage an increasing number of stores that dealt with Adidas products. The retail segment was to be headed by a chief retail officer who was to be responsible for all the new locations, putting more emphasis on the underperforming retail locations. According to the AG, a chief sales officer would be recruited to head the wholesale business section, which is responsible for the distribution of products to retail partners.
In the discussed restructuring process of Adidas, its operations were not affected since no major changes took place. If anything, the company anticipated a cost saving of about 100 million euro or $ 133 million within the 2009/2010 financial year. According to the company’s CEO, the restructuring process would make the company achieve a higher level of success in addition to other long-term benefits. The company’s CEO made it clear that focusing on market developments was one of the objectives of restructuring.
From the above discussion, it can be clearly concluded that the idea of having Adidas restructure its corporate structure was inevitable given the huge losses it had incurred in the first quarter of the 2009/2010 financial year. Having the wholesale business placed under the management of a new chief sales officer would significantly improve the sales of the company, which had previously declined by 6 per cent.
This is because the distribution and marketing responsibilities would be bestowed to one individual thus ensuring proper audit in case of failure. Given the fact that Adidas deals with sportswear, which in most cases are seasonal because of the seasonality of sporting events, proper marketing was essential. This would ensure that the company makes high sales during the sporting events to cater for the costs incurred during low season.
Segmentation of the retail group was also significant in the restructuring process as it enabled Adidas deal with its close competitors like Reebok. Finally yet most importantly, synergy was achieved after the process of restructuring since the management of the company was structured in a way that efficiency was achieved. However, it should be noted that restructuring comes with certain costs that feature in the financial statements of the restructured company.
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