Promoting sportswear might seem easy – as long as sport exists, there will always be high demand in the given niche. However, Adidas was one of the first companies that decided to appeal to the general audience, thus, opening more opportunities for the companies producing sports clothes.
The given step, however, also opened the door to numerous challenges, which Adidas fights very efficiently in such commercials as the advertisement of T Max 6 shoes.
Description
In their advertisement of T Max 6 shoes, Adidas provides an image of a hall with a range of lockers, two pairs of shoes, the red ones in the foreground and the white ones on the left and on the right side of the red pair. In the distance, a group of people can be seen. In the center of the advertisement, a caption saying “Together we can” runs in what is supposed to remind of a handwritten note.
Analysis
Setting
As it has been stressed above, Adidas clearly puts the stake on both athletic performers and average citizens, which the advertisement displays in a very graphic manner. On the one hand, the setting, with lockers and a long hall, can clearly be defined as a gym at the very least.
Thus, sportsmen are being addressed. However, the silhouettes of the people in the background are so vague that they could be practically anyone, from Dennis Rodman and Michael Jordan to any member of the target audience. Therefore, the viewer can easily imagine himself among sport stars and, thus, relate to the advertisement and the product in question.
Messages
No matter how vague the background might be, though, one can spot easily not one, not two, but at least three people walking in a straight line.
A seemingly minor detail at first, on a second thought, the given element of the commercial appears to be the most important part of the advertisement, not only because it affects the audience on a subliminal level, but also because it appeals to people’s necessity to be a part of society, which the catchphrase in the caption reiterates and, thus, reinforces.
For a number of reasons, people walking in line are the kind of a cliché that always renders the heartstrings of the audience in the right way. Perhaps, it is the sense of being a part of a strong team of people who mean business and knowing that there are reliable people ready to support any of their members that affects the audience.
Anyway, the blurred image of a team meaning serious business happens to be one of the strongest aspects of an advertisement, which touches upon people’s need for friends and support. In other words, the advertisement practically screams to the audience, “If you wear our shoes, you will have strong and supportive friends and be a member of a team”; and, quite honestly, very few people can resist such an offer.
Color cast
Finally, the choice of color and its arrangement in the advertisement must be mentioned. It was wise of Adidas to use only one aggressive color in the picture; with the rest of the colors toned down, blood red shoes in the foreground make a statement of their owner’s persistence an success. Another peculiar aspect of the color cast concerns the way in which the palette was arranged in the picture.
With one red shoe in the foreground and the second one in the background, the advertisement offers the audience curious visual rhymes. The impression of symmetry grows even stronger as the viewer notices two similar white shoes on the left and right from the red one.
Finally, the clever use of light also serves its purpose, making the important elements visible and leaving the places that the audience’s imagination should work with in the shadow.
Even though the idea of putting the product, i.e., the shoe, in the limelight might seem dated, in the given commercial, it appears to be quite natural, seeing how the commercial makes the audience focus on what lurks in the shadows even more than on what is in the spotlight.
Audience
One of the many important details about the way Adidas promotes its products is that it never targets a specific audience. True, sportswear is designed to be suitable mostly for the people who take up sports; however, Adidas was the first to push the envelope and ask a question why other people could not wear sporty clothes.
As a result, not only does Adidas appeal to a general audience of no particular social status, their age ranging from five to ninety, but also manages to make the idea of being sporty and trim fashionable.
Summary
Although initially, sportswear was designed for a very particular set of customers, i.e., the people who took up sports, Adidas made a breakthrough by appealing to every single member of the society, therefore, making the idea of taking up sports attractive to everyone. Such popularization of sports is especially obvious in the given advertisement, seeing how it does not show sportsmen explicitly, only dropping hints at a sports setting.
With a “Together We Can” catchphrase thrown into the foreground, the company appeals to people’s feeling of solidarity and togetherness, therefore, creating the premises for being supported by a team of enthusiasts instead of individuals, which makes the company all the more influential.
Adidas is one of the leading multinational corporations that manufactures and sells sportswear in the global market. The firm’s headquarters are in Herzogenaurach, Germany, where the products are designed and manufactured before they are distributed to the world market (Das, 2010). Although the firm has been facing stiff competition from global rivals such as Nike, Puma, and VCF, among others, it has remained strategically strong in the market, making impressive profits in the recent past. The firm has diversified its products to go beyond the sportswear as a way of gaining competitive advantage in the market. Some of the popular products recently introduced by this firm include shirts, bags, eyewear, and watches.
As the head of the strategy for Adidas, this move was taken after realising that some of the customers needed more than what this firm was offering. The brand Adidas is one of the best brands in the sportswear industry (Carney, 2009). However, the future remains uncertain as new forces in the market introduce new dynamics which are making it difficult for the players to predict the future market conditions.
VF Corporation is a large American conglomerate that designs and manufactures clothes and different types of shoes. Having been in the market for the last 24 years, this firm has gained a massive competitive advantage to become one of the leading designers and manufacturers of clothes and shoes not only in the United States but also in other regions across the world. The recent statistics show that this firm has been very profitable, with revenue of $ 9.459 billion generated in the financial year that ended in December 2012. The total asset of the firm within this period was estimated to be $ 9.734 within the same period, with an employee base of about 58,000 people (Das, 2013). This firm has been able to attract young consumers in their outdoor products. Some of their products that have gained global popularity among the youths include Timberland, Vans, North Face, Reef, and Lucy.
It is important to analyse some of the commonalities and differences between these two firms. It is clear that the two firms have some commonalities that may make the integration much easier than anticipated. Both firms design and manufactures both sportswear and casual clothing. They are both operating in the global market, and currently, the United States remains their most attractive market. The two firms have been struggling to tap into the emerging markets in China, India, and Africa. However, it is necessary to understand some of the differences that may create some complications when integrating the two firms.
Adidas is a large German corporation, while VF Corporation is an American conglomerate. The strategy used at the two firms, especially the management structure is very different (Bruner, 2004). While Adidas has a strict hierarchy of command that must be followed when communicating any information to the workers, VF Corporation has a more liberal management structure where such strict channels are not given the priority.
Strategic Options
It is clear from the above analysis that it would be necessary for Adidas to make a portfolio diversification by acquiring VF Corporation. A number of strategies have been analysed in order to come up with the best strategic approach that would not only cost less for this firm in the long run but also give this firm a complete control of the firm. A detailed analysis of this American corporation revealed some facts that must define the strategy that would be taken by the management of Adidas when making the acquisition (Kuglin & Hook, 2002). It was noted that the management unit of the firm has a hard-nodded dealer culture that is unique, and this could pose some challenges in the negotiation process. Market research done in the American and German markets revealed that some of the products of this firm such as Timberland and Vans are very popular among the youths.
This was the main reason why this firm has remained very profitable in the market. Based on these facts, we consider it necessary to buy the whole VF Corporation. This strategy will not only help this firm to benefit fully from the current profitability and strong brand name of the firm’s products but will also give the management of Adidas full control of this new portfolio (Reuer, 2004). The management of Adidas may then make a choice of the most appropriate approach in managing the acquired premises. This approach is also appropriate because Adidas will not be forced to conform to the organisational culture that was practised at VF Corporation before the acquisition.
The management may consider other alternative arrangements in case the first strategy may be considered too expensive. A cheaper option may be to buy some filet pieces that are very popular in the market. For example, Adidas can choose to buy Timberland and Vans, which are very popular, and leave the other brands. Adidas may consider a collaboration strategy with this firm, such as forming a strategic alliance with the firm. When developing the strategic alliance, it should be clear what role each firm should have in that alliance and the benefits that each of the partners will achieve from it (Cooper & Finkelstein, 2010).
The last option would be to buy shares of VFC so that Adidas can share the profitability of the firm. In case this strategy is taken, it may be necessary for this firm to take majority shares in order to achieve full control of the firm. Having the majority shares may be very helpful for the management of Adidas because it would be necessary for it to be able to define the approach taken on all the strategic plans.
Barriers to the Strategy
The discussion above clearly indicated that there are some differences between these two firms that may be a barrier to a smooth acquisition or collaboration between the two firms. Adidas is a German company with a strict organisational culture defined closely, based on the cultural beliefs and practices within this country. However, VFC is an American conglomerate with a liberal management structure that is very strange at Adidas. When these two firms enter into a strategic alliance, Adidas may find it difficult to fit the VFC’s management approach (Das, 2011). Similarly, the VFC’s managers will find the management approach of Adidas strange to them. This may strain this alliance, the fact that it may threaten the ability of both firms to achieve the desired success. When Adidas makes the choice of buying the entire firm, then it will need to align the cultural practices of employees at VFC to that of Adidas.
Recommendations
The United States remains the most attractive market for Adidas products because of its population and the purchasing power of the Americans. However, the growing markets in China, India, and Africa cannot be ignored by this firm as it struggles to come up with an appropriate way of managing the market competition (Steinhilber, 2008). China has a population of about 1.3 billion people, which means that it has a third of the world’s population. It is also the second-largest economy in the world after the United States. India has a population of about 1.2 billion people, and it has become one of the strongest economies in Asia.
The African economy is gradually improving, and with the emergent of a middle class in this region, the purchasing power of people in the region is rising consistently (Sherman & Sherman, 2011). These markets cannot be ignored by Adidas if it expects to retain its competitiveness in the market. Many firms have already gotten into these markets, but with the strong brand of Adidas, penetrating this market may not be a difficult task. The following recommendations should be considered by the top management.
In China, Adidas should form a strategic alliance with some of the local retail outlets and sell its brands through this strategic alliance. This is so because of the challenges that this firm may be subjected to if it makes a direct entry.
In Africa and India, Adidas should make a direct market entry. Although the products will be sold in the retail outlets, the firm may consider having exclusive stores for some special products.
Given the fact that the brand Adidas is popular in the above three regions, it should be used on all the products of the firm.
References
Bruner, R. F. (2004). Applied mergers and acquisitions. Hoboken, N.J: John Wiley & Sons. Web.
Carney, W. J. (2009). Mergers and acquisitions. Austin: Wolters Kluwer Law & Business. Web.
Cooper, C. L., & Finkelstein, S. (2010). Advances in mergers and acquisitions. Bingley: Emerald. Web.
Das, T. K. (2010). Researching strategic alliances: Emerging perspectives. Charlotte, NC: Information Age Publishers. Web.
Das, T. K. (2011). Strategic alliances in a globalizing world. Charlotte, N.C: Information Age Pub. Web.
Das, T. K. (2013). Management dynamics in strategic alliances. Charlotte, NC: Information Age Publishers. Web.
Kuglin, F. A., & Hook, J. (2002). Building, leading, and managing strategic alliances: How to work effectively and profitably with partner companies. New York: AMACOM. Web.
Reuer, J. J. (2004). Strategic alliances: Theory and evidence. Oxford: Oxford Univ. Press. Web.
Sherman, A. J., & Sherman, A. J. (2011). Mergers & acquisitions from A to Z. New York: American Management Association. Web.
Steinhilber, S. (2008). Strategic alliances: Three ways to make them work. Boston, Mass: Harvard Business Press. Web.
Shoe industry today is quite widespread, and the production of sports shoes is the primary development direction of such large global corporations as Reebok and Adidas. Quite an extended period of these companies’ formation allowed them to gain recognition among consumers and compete successfully with other major trade brands. Quite a complicated development process helped the companies to go a long way from small organizations to world-famous corporations and become the most recognized manufacturers of sports shoes in the world.
Text Summary
The Reebok company was created in the 20th century as a small industrial enterprise and several decades later developed into one of the world’s largest organizations specializing in the production of sports goods, in particular, footwear. Throughout its development, the corporation has experienced many difficulties. As a result, it had a negative impact on the production sector. The lack of innovations in the field of IT technology and high competition from other major producers, such as Nike forced Reebok’s specialists to work hard to gain recognition among customers and sponsors. Nevertheless, the company purposefully achieved the set goals and focused on cooperation with sports stars who advertised its products.
Adidas is another major corporation that has been known in the world for several decades. In the late 1990s, the company bought Reebok, as the latter experienced some difficulties in the market. However, both organizations continued to actively distribute their goods. Adidas focused on cooperation with many sports stars and did not try to get recognition only due to one particular celebrity. The collaboration has brought quite substantial profits and allowed competing successfully in the world market.
Importance of Business Integration for Reebok
Business integration is essential for Reebok primarily because this company may not be able to cope with market competition on its own and can lose ground against other leading brands. As practice shows, this corporation has always had some difficulties with some essential points that are necessary for successful work. For example, the lack of experience in the development of IT technologies caused some regress in the company’s activities.
Also, cooperation with Adidas allows exchanging useful experience and implementing developed innovations into created products. If Reebok works as an independent corporation, there is a risk that the management will not be able to find a way to raise the company’s rating among consumers. This factor will undoubtedly lead to losses and can cause irreparable damage to the reputation of the organization among sponsors and famous athletes. Consequently, business integration for Reebok is a rather significant aspect.
Use of Information at Reebok
The start of using Internet technologies as one of the primary sources to obtain new information allowed the specialists of Reebok to have sufficiently valuable information concerning their organization. The introduction of innovative methods to find some relevant information from customers has become a new stage in the development of the corporation. There is a diagram below of what data are collected and how they are used.
Customer reviews are collected according to the number of satisfied and dissatisfied customers. The volume of sales is estimated based on the activity of consumers in the market and the number of purchases for a particular period. Tracking public sports events allows Reebok to timely respond to changes in the interests of buyers. The participation of stars is the data that the company needs to compile a detailed work plan; all sports celebrities that advertise this or that product are considered.
Identification and Solution of Problems
If there are any problems with the network or the software, they can be solved by a competent configuration and re-equipment of the system by experienced specialists. Quite often, disruptions in programs occur because of insufficient quality and unproven type of connection and distribution of information. It is possible to find the problem by evaluating the areas where the user visit falls. Setting up the system again, taking into account the number of users and the overall dynamics of visits can help to avoid such problems in the future and keep the software intact.
Disadvantages of Reebok’s Information System
Due to the fact that Reebok’s information system occasionally failed, it was problematic for the management to trace some critical points. In particular, it is about the dynamics of customer interest since it is a rather important factor, which largely determines the direction of the company’s development. Moreover, the lack of necessary knowledge also had a negative impact on sales as competitors’ information systems worked steadily and could react timely to any changes in fashion trends. These shortcomings have led to the fact that Reebok partially lost its high positions in the world market and could not achieve sufficient interest from clients.
Report to Management
Searching for solutions to current problems related to the company’s activities and analyzing all the shortcomings is an indispensable condition for the corporation’s successful activities. In the process of distribution of goods, some difficulties arise from time to time, and the organization is forced to suffer losses because of an inadequately organized information base. The correction of some pressing problems may allow achieving higher sales figures and actively compete with such global brands as Nike.
First of all, it is possible to revise the enterprise’s policy regarding information technologies. Obsolete software and inconsistency of technology with current market standards directly affect the decrease in corporate profits. Accordingly, equipping with new high-tech resources will improve the quality of control over sales and the dynamics of client activity. The purchase of new modern equipment can be a significant step in the process of developing the company’s performance.
Also, a late reaction to changing market interests is one of the factors that negatively affect the company’s profits. Some large corporations can quickly change the course of their activities and adapt to specific conditions, for example, to the production of sports equipment with particular symbols. An attempt to adopt their experience in this sphere can be a considerably useful way to generate additional profits by increasing the level of sales and, accordingly, popularity among buyers. All these measures are efficient enough to incorporate them into the work of the company and develop them actively.
Conclusion
Thus, the development of necessary spheres allowed the companies of Reebok and Adidas become world famous brands. Some problems that arise in the course of work are often associated with an insufficiently developed information base. The solution to the problem can be the necessity to update the software and monitor the interests of customers and changing trends in the market more carefully than usual.
Having suffered several setbacks in efforts to bring a comeback to the old days of glory of the years prior to 2002 when Adidas was at the zenith in terms of its fortunes and solid reputation, a strong ray of hope was seen with the launching of its China campaign for it to recoup its lost revenues and brand acceptability among the Chinese masses. Having been endowed with becoming the official sponsor for the 2008 Beijing Olympics, Adidas saw immense potential in tapping this market to regain lost territories. The Beijing campaign was introduced by Adidas in early 2006 when it brought the US basketball star Tracy Mc Grady to China for a well publicized tour of the country and surprisingly all 800 pairs of the special edition shoes introduced at the time sold out within a single day at all stores. Adidas was very optimistic that this spirit of the Chinese as shown by the sale of those shoes would certainly have its positive effect over to the 2008 Olympics at Beijing. The company decided to inscribe the Adidas name and logo on the clothing of the athletes and on souvenir sweaters for the 2008 Olympics. It also decided to clothe the several thousand officials and volunteers during the event. Hence the Olympics and China are major factors in the strategies to revitalize Adidas that was once the pioneer of the sports industry and then became fameless.
It is understood that Adidas paid a whopping $80 million to get awarded with the sponsorship for the Beijing Olympics and that the actual figures are still said to be a mystery in view of unwillingness of Adidas to divulge the correct amount. However it is estimated that whatever the price tag, the allure of the Chinese growing market is indeed a big attraction and opportunity to make the best of the market since the sponsorship gives Adidas the right to use the Olympics logo on its products and in its advertising. This has enabled Adidas to project huge profits in the coming times. In view of rival company activities that envisage for example, Nike opening 10 stores every week, and the sponsoring of local sports celebrities to act as brand ambassadors, Adidas too has roped in Olympic gold medallist Liu Xiang to canvass on its behalf. There are several finance competitions in the offing to hook teenagers on sports related activities. Surprisingly premium sportswear sales have crossed the $300 million mark for Adidas in the current year as estimated by Rhoads who has further predicted the market for such to be valued at $3 billion and is expected to grow at 20 percent per year in China.
A noteworthy action taken by Adidas in regard to its China strategy is the appointment of Erica Kerner as Director of its Beijing Olympics Program whereby she will be responsible for marketing, business development, sponsorship and licensing activities. She will work directly with Beijing Organizing Committee for the Olympic Games (BOCOG) and the International Olympic Committee (IOC), with the responsibility to make the 2008 games a grand success for China and Adidas. Erica has had vast experience in the region in building the Adidas brand that led her to be recognized as “ Woman to Watch” in 2006 and in having her Adidas efforts to be awarded with the “Best Campaign to Launch the Olympic Partnership.” Adidas is present in about 300 Chinese cities and plans to cover all of its 660 cities in the near future. There are 3000 Adidas retail stores in the country and the target is to have 4000 stores by the time the Olympics opens. With the coming of Erica Kerner in the picture, three objectives have been outlined for the Chinese strategy. First is to have a viable financial target that is to be achieved, second is to increase the brand popularity from the consumer point of view and the third is to take care of Adidas stake holders by taking adequate care of its retailers, business partners, sports federations and government officials. The fact that this is going to be the largest and the biggest commercial games ever held in the world, the Olympics is going to be advertised everywhere including countdown clocks to the Olympics that have started to appear everywhere in all big cities. Adidas being a sports company would have been marketing aggressively even if it was not awarded the official sponsorship, so now there is a bigger reason for the company to prove its mettle to the Chinese market in regard to its brand capabilities. A fantastic advertisement campaign is on the anvil that will be ground breaking and award winning. The company has plans to work with athletes and all media options will be utilized in keeping with the Chinese adaptability to new medias such as mobile technologies, mobile phones, digital television, internet and push technologies.
Adidas sees itself as the Olympics brand since it has been involved with Olympics ever since its founder Adi Dassler developed the first spikes used by athletes. So the company can bank upon its pride in this regard in making the Chinese consumer to realize that its competitors do not have the historical expertise and heritage in the same way. Notably China is a fierce market in the sense that there are several competitors vying for the immense potential in view of the sporting event, and Adidas is banking upon its brand image as being the most inspirational and innovative brand in the Olympic games. In keeping with the proactive strategies as adopted by Adidas there is every likelihood for the company to stage a strong comeback to its previous days of accounting for a large share of the sports goods industry.
References
Adidas and the Beijing 2008 Olympics, Web.
Adidas bets on Beijing Olympics, International Herald Tribune, 2006.
The competitive advantage of Nike Inc. depends on its resources, capabilities, and competencies. The data to analyze Nike’s financial health and competitive advantage is retrieved from the 2016 half-year financial report and other annual reports. Nike’s resources involve the manufacturing facilities located in more than 12 countries and the recognizable brand name (“Nike: 2015 Annual Report” par. 1). Nike is the leading producer of sporting goods in the world, and the company’s value share was 3% in 2015 (“Nike Company Profile” par. 4). Nike’s market strategy is the company’s competency that is based on attracting the target audience with a focus on differentiation.
Nike is an entrepreneurial company because it implements risky strategies to gain more profits. While focusing on Nike’s profitability, it is important to state that the company’s net income increased by more than 20% in 2015, and this number is higher than the average type of the industry because of the crisis in the market observed in 2013-2014 (“Nike Company Profile” par. 6). Nike’s gross margin for the first half of 2016 is 45.9% that is almost equal to the company’s competitor, Under Armour (45.88%), but it is higher than the industry’s average (40%) (Nike Inc par. 2). It is possible to speak about comparably efficient operations. The inventory turnover ratio is relatively low (0.92), and it indicates the ability of Nike’s managers to plan and control the use of inventories effectively.
Still, it is possible to state that Nike’s strengths come from intangible resources rather than tangible ones. Much attention is paid to investing in research and development (R&D ratio is 14%) and making products more innovative. During the first half of 2016, 31 products were introduced by Nike (Nike par. 1). Thus, the strength of intangible assets is 2.67, and the focus is on the developed marketing strategy to attract customers. Annual advertising expenses are about $4 billion, and the marketing ratio is 1.9.
Nike can be regarded as financially strong because its Moody’s rating is A1, there is no debt, and the company demonstrates stable growth in its revenues (“Moody’s Rating: Nike” par. 2). Nike’s competitive advantage is associated with manufacturing high-quality and innovative men’s footwear and focusing on winning new markets while preserving the stable position in the US market (“Nike Company Profile” par. 8).
The reason is that the regular proposition of new attractive products and market expansion is critical for the success. To sustain the advantage, Nike has developed effective employee recruitment and retention strategy based on the talent development programs (Nike par. 5). The organizational culture can be characterized as cultivating talents and focused on creativity and growth; it corresponds with the business strategy, and these aspects also contribute to the firm’s advantage.
Adidas: Internal Analysis
The resources, capabilities, and competencies of Adidas determine the company’s competitive advantage. Much attention should be paid to analyzing the company’s profitability and efficiency of its operations to conclude about the competitive advantage with reference to the data from the 2016 half-year financial report. Focusing on profitability, it is important to note that the company’s sales in 2015 increased by 16% in comparison to the 10% average typical of the industry (“Adidas Company Profile” par. 4).
For the first half of 2016, the gross margin is 49.1%, and it is higher than the industry’s average (40%) and gross margin of Nike (45.9%). It is possible to speak about the efficiency of the firm’s operations. The inventory turnover ratio is 2.62, and it supports the idea that the company has high sales, as well as high liquidity. These data indicate that Adidas uses its resources and capabilities efficiently in order to increase sales and revenues.
The competitive advantage of Adidas is based on investing in research and development and new materials. The R&D ratio is 17%, and it is comparably high for the sporting goods industry. The number of products introduced in the first half of 2016 is the highest in the industry (119 products) (“Adidas: New Arrivals” par. 1). Therefore, it is possible to speak about the focus on innovation. Furthermore, the firm’s strengths also depend on intangible assets since the ratio is 3.07. Adidas pays much attention to supporting the company’s brand and implementing innovation strategies. The dependence on the marketing is also high because the marketing ratio for 2015 was 2.3, and it demonstrates the success in advertising and selling products (“Adidas Company Profile” par. 5).
Adidas is an entrepreneurial firm that implements many strategies to increase its profitability. These approaches result in the firm’s financial strengths. Adidas is not rated by Fitch and S&P, but its cash holdings are significant and rather secure ($641 million for the first half of 2016) (“Adidas: 2016 Half Year Report” par. 2).
The human resource management of Adidas also contributes to recruiting diverse, talented workers, and their development is supported by training programs. The organizational culture of Adidas is discussed as a balance between the market- and employee-oriented cultures. Factors that are important for succeeding in the industry are brand recognition, innovation, and resource leveraging. The strategy of Adidas addresses these factors, and the competitive advantage is based on advertising, investment in research and development, development of the multi-brand strategy, as well as expansion in developing countries.
The promotional mix used by the Adidas during their spring-summer 2008 “originals” campaign is that of sales promotions, advertising and publicity. In fact, advertising and publicity were the composing parts of the sale promotion campaign. From an academic point of view, “a promotion is a form of corporate communication that uses various methods to reach a targeted audience with a certain message in order to achieve specific organizational objectives” (Paul, 3). Companies use promotions in order to “inform” and present to the general audience, the consuming public, the products they offer. Promotional campaigns are designed also to attract consumer attention to products they did not concern themselves before (Paul 6). In a certain way, promotional campaigns are used to inform the interested ones and to “create” some interest toward the product for uninterested ones. Uninterested until the moment the campaign kicks off. As part of this promotional campaign we have advertising.
“Advertising is a non-personal form of promotion that is delivered through selected media outlets that, under most circumstances, require the marketer to pay for message placement. Advertising has long been viewed as a method of mass promotion in that a single message can reach a large number of people.” (Paul, 1).
Promotion analysis
The campaign we are speaking comprised a new set of online, print and TV related campaign elements for the 2008 collection of “ORIGINALS” clothing. It started with a fully “animated” ad, designed by “180 Amsterdam” graphic studio. The campaign shows a series of video advertisements of people from art, music and athletics (“New originals Campaign”, 1). It begins with the origins of creation of the company by its founder, Adi Dassler, and continues with the evolvement of the products category through the years and decades. All of this is in function of showing that Adidas does not offer only certain sportive goods and products but it is a way of conducting everyday life. One of the scopes of the promotional campaigns is to communicate kernel messages to the general audience (Paul 13). In this case the message would be that Adidas is not just a sporting goods company, it is a lifestyle company. It is a way of conducting your own life.
The scope of this type of communication is to influence consumer behavior. As explained in task two, this is what brand companies do.
After the first video came advertisements addressed to particular sectors of the public. Famous public sport figures were used as models. But the messages were not the same. They were slightly different for particular sectors of the public. To the youth, adolescents, young sport athletes and figures were presented and products with vivid colors and fashionable, young-style, design were introduced.
Competitive advantage
The important thing to mention here is that Adidas started the campaign just before the summer Olympics. This was not a coincidence. The Olympics is an activity that, per se, promotes sport-related lifestyle. And in fact, Adidas is promoting a type of lifestyle. It is using the general worldwide moment in his favor. During the summer Olympics the attention of the world is attracted more to sport issues due to the involvement of virtually all of the nations of the globe in it. In this case, the Olympics campaign is used as an advantage by Adidas. If the Olympic Games want to promote a sportive lifestyle, Adidas is practically offering one. And that is its advantage over the competition.
References
Adidas Group. “At a glance” the story of adidas group. 2008.
Richardson, B. Analysis: Adidas bid raises image concerns. 2005.
Kiley, D. Reebok and Adidas: A good fit. 2004.
Wasserman, A. Reebok sales slump hurts Adidas, New plan to be announced. 2006.
BusinessWeek. 2002 global brands scoreboard. 2002.
German sportswear company Adidas has seen both ups and downs in its fortunes. Having by 1990 built a solid reputation for good quality sports footwear the company suddenly found itself posting losses early in the ’90s. Following a dramatic turnaround based on large (quintuple) increases in marketing and promotional spending and a strategy which focused more tightly on specific target markets, (Lindstrom, 2003), by 2002 the company had risen to 68th. place in the global rankings of brand value, (compared with arch-rival Nike’s 35th place), (BusinessWeek, 2002). In 2005 Adidas acquired US sportswear maker Reebok, but saw its share price slump the following year, due in part to concerns about fit between the two companies, as well as a downturn in Reebok’s sales, (Wasserman, 2006).
The case
Just before the summer Olympics last year, the German based company Adidas engaged in a large scale promotion campaign of its products. It was one of the largest campaigns of sport related goods of the last decade. From an academic point of view, a promotion is “a form of corporate communication that uses various methods to reach a targeted audience with a certain message in order to achieve specific organizational objectives” (Paul, 3). Companies use promotions in order to “inform” and present to the general audience, the consuming public, the products they offer. Promotional campaigns are designed also to attract consumer attention to products they did not concern themselves before (Paul 6). In a certain way, promotional campaigns are used to inform the interested ones and to “create” some interest toward the product for uninterested ones. Uninterested until the moment the campaign kicks off. The campaign we are speaking started at the beginning of March 2008. It was labeled the “Originals” campaign. It comprised a new set of online, print and TV related campaign elements for the 2008 collection of “ORIGINALS” clothing. The whole thing kicked off with a fully “animated” ad, designed by “180 Amsterdam” graphic studio. The campaign rallies round a series of web videos of people from art, music and athletics (“New originals Campaign”, 1). The way of conducting this campaign is a sort of historical one. It begins with the origins of creation of the company by its founder, Adi Dassler, and continues with the evolvement of the products category through the years and decades. All of this is in function of showing that Adidas does not offer only certain sportive goods and products but it is a way of conducting everyday life. One of the scopes of the promotional campaigns is to communicate kernel messages to the general audience (Paul 13). In this case the message would be that Adidas is not just a sporting goods company, it is a lifestyle company. It is a way of conducting your own life.
The scope of this type of communication is to influence consumer behavior. As explained in task two, this is what brand companies do. In fact, consumer behavior (otherwise known as consumer buying behavior) is one of the key issues in marketing science (Paul 16). But how is Adidas appealing to consumers through this campaign? The first video trial mentioned above was the first of many. It was launched to show the audience that this particular company is a well established company, with steady roots and a rich history behind. The second message, from the same video advertisement, is to show the public that the founder of the company, created it starting from the same concerns of everyday life that most of us have. I do think that this first video transmitted was to open the way to more specific ones. And in fact, after came video advertisements addressed to particular sectors of the public.
In them, famous public sport figures were used as models. But the messages were slightly different for different sectors of the public. To the youth, adolescents, young sport athletes and figures were presented and products with vivid colors and fashionable, young-style, design were introduced.
For more adults, there were different styles and colors used for the products presented. Even the products themselves were slightly different. For example, the running shoes for adults that work on office all day were different from those of young adolescents. The colors were more conservative-type for the officials because they would use this type of shoes only for running and jogging after they finish work. Instead the youth have more possibilities of using these kinds of shoes. The colors were more vivid and the design of the shoes more stylish. Even during the advertising video it was shown that these shows can be used not only for jogging by the youth but even for going out with friends. The same was true for the advertisement of the first mentioned category: the adult office working men and women. The shoes were advertised only for running and jogging.
Another factor to be mentioned here is the time when Adidas started this campaign. It was just before the summer Olympics. This was not a coincidence. The Olympics is an activity that, per se, promotes sport-related lifestyle. And in fact, Adidas is promoting a type of lifestyle. It is using the general worldwide moment in his favor. During the summer Olympics the attention of the world is attracted more to sport issues due to the involvement of virtually all of the nations of the globe in it. In this case, the Olympics campaign is used as an advantage by Adidas. If the Olympic Games want to promote a sportive lifestyle, Adidas is practically offering one.
Will it work?
Well, here we come to the most difficult question of marketing. Will promotional campaigns work? There are many scholars who disagree on this issue (Paul 18). But I will advance the argument made by that part that is convinced that it works. This is because the human mind is made up of different structures of schemes. These schemes are made up of symbols with which the mind forms relations (Paul 22). In our case, the symbolism of the Olympic Games is used by Adidas to promote its own symbols. The products that the company offers are not just “some goods” that offer you a service. They are a way of life. They bear a symbolism in them.
This is why it will attract consumer’s attention. If it is true that the human mind, especially the unconscious part of it, is attracted by symbolism, then the revenues of the company will rise. And this is the ultimate goal of every business: to increase its revenue and, by doing so, its profits.
References
Adidas Group. “At a glance” the story of adidas group. 2008.
Richardson, B. Analysis: Adidas bid raises image concerns. 2005.
Kiley, D. Reebok and Adidas: A good fit. Viewed at BusinessWeek.com, 2004.
Wasserman, A. Reebok sales slump hurts Adidas, New plan to be announced. 2006.
BusinessWeek. 2002 global brands scoreboard. 2002.
Christ, Paul. Principles of Marketing. www.KnowThis.com article. 2008.
Foreign currency transactions and hedging activities
Adidas arranges and hedges their contract as well as the organized currency option and swap to reduce the risk associated with foreign exchange transactions. In the year 2010, the company had currency options of about € 7million. It recognizes hedging in the financial statement by having hedging reserved in the balance sheet and posting hedging cost in the income statement. For example, in 2010, the company recorded € 16 million for currency options and € 25 million for forward contract in the hedging reserved. In the income statement, € 4million was recorded as premium. Most purchases were made from the U.S. and recorded in dollars (Adidas-group, 2011).
From the financial statements, one can note that in 2010, there was a figure of negative € 3 million, which was in hedging reserved relating to foreign entity investments (Adidas-group, 2011). These figures can only be removed from the books if the foreign entity is disposed off. “Contracts, transactions, or balances that are, in fact, effective hedges of foreign exchange risk will be accounted for as hedges without regard to their form” (Financial Accounting Standards Board, 1981, p. 4). “The currency of the primary economic environment in which the entity operates” is the entity’s functional currency (IASCF, 2009, p. 1383). “The currency of the economic environment in which cash is generated and expended by the entity” (Financial Accounting Standards Board, 1981, p. 5). Operational forms, such as a subsidiary, division, branch, or joint venture, can make an entity. If a foreign entity’s books are not kept in the functional currency, then the book must be re-measured into the functional currency, prior to translation (Westerfield & Jordan, 2007; Gustafson, Peroni & Pugh, 2006).
Functional Currency of the Company ADIDAS AG
The functional currency of Adidas is Euro, but the group makes most purchases in dollars. For example, in 2010, the company made purchases of $ 3.7 billion. All transactions of the company and those related to subsidiaries are translated into reporting currency that is Euro (Adidas-group, 2011). All assets and liabilities denominated in other currencies apart from the functional currency of Addidas are adjusted to reflect the current exchange rate on that date. Transaction gains and losses, which result from adjusting assets and liabilities denominated in a currency other than the functional currency or from settling such items, are recognized in the income statement. All gains and losses attributable to a foreign transaction that is hedged and of investment in a foreign entity are recognized separately as a component of shareholders’ equity, in which adjustments arising from transaction foreign currency financial statements are accumulated. Meanwhile, gains and losses attributable to intercompany foreign currency transactions that are of a long-term investment nature are recognized separately as a component of shareholders’ equity. Last, the company defers and includes in the measurement of the basis of the related foreign transactions gains and losses attributable to foreign currency transactions that hedge identifiable foreign currency commitments.
The objective of the re-measurement process is to produce the same results that would have been reported if the accounting records were kept in Euros rather than the local currency. Translation of the local currency accounts into Euros takes place according to the temporal method; thus, the resulting translation gains and losses must be included in the functional currency for most of their subsidiaries. For those fluctuations that do not impact cash flows, the adjustments for currency exchange rate charges are excluded from net income (Schlosser, 2002). However, for those fluctuations that do affect cash flows, the adjustments for currency exchange rate changes are included in the net income. “Translation adjustments that arise from consolidating that foreign operation do not impact cash flows and are not included in net income” (Financial Accounting Standards Board, 1981, p. 4). However, the translation adjustments affect the cash flows directly in the case of domestic operation, and such gains or losses are included in the net income (Brealey, Myers, & Marcus, 2007).
References
Adidas-group (2011). Additional disclosures on financial instruments. Web.
Brealey, R., Myers, S. & Marcus, A. (2007). Fundamentals of corporate finance. Sydney: McGraw-hill.
Every advertisement starts with a client brief, which is the document that verifies the mutual understanding between the company and advertising and specifies the core client’s requirements (King, 2020, Advertising agency). There are three types of media advertising, such as ABL (Above the Line) and BTL (Below the Line), and new media advertising (King, 2020, Advertising in media). Also, there is traditional and digital advertising. I assume that my project refers to BTL advertising since it has the target audience and involves the distribution of promotions and banners placed at the point of sale (store) and the busy places (the metro station). In terms of current Google marketing, Adidas is focused on data and customer insights to develop its branding strategy and “inform the art of storytelling” (Google Marketing Platform, 2018). This emphasizes the importance of the real-time strategy when designing a brand and pushing the outbreak.
I also used digital advertising through social media platforms to promote the campaign’s content. Jolly (2020, para. 16) outlined core advertising tactics that can be applied to the Instagram platform. They include a focus on custom audiences and lookalike audiences in case of expanding, application of custom images of real people, irresistible offers, and the crucial role of hashtags. It is a relatively low-cost and easy-to-track way to advertise the campaign that enables reaching a highly targeted audience. To achieve the desired result, there is a variety of advertising techniques that can be applied by advertisers. The techniques that I found most applicable to my campaign include bandwagon advertising (convincing women to join the group of those who are already engaged in sports), endorsements (influential females), complementing the customers (Unique me), and the rule of thirds (key elements at the intersections of the lines) (Advertising techniques, 2019).
Brainstorming Techniques
The majority of people, including those who are not engaged in the advertising, recognize the saying “think outside the box.” These words emphasize the importance of developing different and unusual ideas. Thinking inside the box limits the thought and, thus, the scope of your ideas. Therefore, various brainstorming techniques were designed to promote this unique thinking and creativity. They involve “mind mapping, picture association, and six thinking hats” (Kachouh, 2018, Brainstorming techniques). Within a broad concept of six thinking habits designed by Edward de Bono, I found a few of the thinking methods particularly relevant for my advertising project. White, green, and yellow hats are applied to the concept of the Adidas campaign. To be more specific, the white hat represents the facts and information I learned when examining Adidas Company. The green hat is focused on the creative side of the project, which was designing the poster for the metro station and the Adidas store itself. Finally, the yellow thinking method that symbolizes the benefits and positive aspects of the project implies the significant amount of Emirati women engaged in the Adidas campaign.
The Essential Elements of Branding
The power of branding is based on providing a unique identity to the company’s products and creating emotional associations with consumers. One of the most essential parts of the brand is a logo, which is responsible for the “first impression, communicates company’s values, and defines the brand image” (Kachouh, 2018, Branding elements). When examining the colors used in Adidas advertisements, one may conclude that white is the predominant color applied by Adidas campaigns. According to Sena, Netra, and Mulyawan (2016, p. 110), white is generally associated with “perfection.” Furthermore, this color also implies that the brand’s product is designed perfectly compared to other brands.
Considering the aspect of the color, it is a crucial element of branding that influences consumers’ mood and decision-making process. In my Adidas campaign, I used predominantly warm and bright colors to attract customers’ attention and transmit positive and energetic emotional patterns. Adidas’s logo contains only one black color that “signifies importance” and elevates the company’s authority (Kachouh, 2018, Branding elements). When designing the project, I aimed at adhering to the brand personality that Adidas conveys. According to the research conducted by Chandel and Tewari (2015, p. 17), Logo is “the most influencing brand personality driver” analyzed in terms of Adidas. The general brand personality of the Adidas brand is considered to be influenced by brand personality drivers, such as logo, user imagery, and advertisement style. Concerning the competitiveness of the current market, it is particularly complex to create and manage a new brand.
Any enterprise should be focused on the brand’s influence on the consumers’ mindset and adjust its brand strategy to customer needs. Alipour and Sabzikaran (2018, p. 5) identified the “customer-based approach” of the modern marketing system as the determining factor of brand identity and authenticity that impacts the company’s results. Such a strategy should comply with the brand identity, authenticity, and determination of the company. Brand identity is shaped by the customers’ perception of the brand. Brand personality is the factor that determines the human nature of the business in the eyes of potential customers (McGrath, 2019). Thus, it is crucial to obtain skills for efficient positioning and distinction of a brand, as well as launching a unique and attractive brand personality within a market. As for my campaign, I needed to develop a clear and powerful personality to give Emirati women a reason to choose it. Brand strategy is based on the vision and is associated with business strategy. Such an approach emanates from the values and culture that a company cultivates and considers the needs and perceptions of its customers.
Brand Voice of Adidas
The visual identity of Adidas Company is based on the abstract marks, namely, it uses a purely visual form to convey the brand’s attributes. The beneficial part of such an identity is the flexibility of the visual representation of the brand. However, the vagueness of the abstract mark might be a risky approach to introduce the brand. It is important to note that when thinking of new branding, one should aim at changing behavior, value creation, and encouraging people to do things (Branding and semiotics, 2019). Kathryn Wheeler (2020, para. 45) suggests that “monitoring the brand” is vital to maintaining its brand identity. Lucipress (2018) discusses seven steps to create the brand identity, including clear purpose and positioning, in-depth market research, brand personality, polished Logo, attractive color palette, professional typography, and supporting graphics. A brand is an emotional and philosophical concept, and, hence, brand identity design is the actual process of creating visual assets.
Adidas is commonly associated with the well-recognized three stripes for a long time because it remains dedicated to its visual symbol since 1949. As described by Rogoza (2020, para. 5), the lines on the trefoil emblem represent the “focus on the variety.” The three trefoil leaves symbolize three parts of the world, namely North America, Europe, and Asia, where the company’s products are available for purchase. The Logo in the shape of the mountain embodies the “idea of overcoming challenges and pursuing your goals,” notwithstanding the circumstances (Rogoza, 2020, para. 6). Finally, the round emblem represents the globe and rapid adjustment to changes. The interesting fact about the Adidas logo is that it starts with a lowercase letter to highlight the accessibility of casual sportswear to every customer.
Adidas is commonly referred to as a brand that looks backward and depends on its past, however, it is not a retro brand that solely modifies former products. Ind and Iglesias (2016, p. 123) state that Adidas is oriented on the past, together with the “insights into consumer behavior” for the inspiration to create modern and innovative models. The half of creation implies “recognizing your accidents” (YTShowandTell, 2015). As such, it is important to analyze the pitfalls that the company might face. In the case of Adidas, the company addressed some challenges and losses in its share within the American market. The key reason was the brand’s strategy that initially targeted the “dominating football” (Kostelijk and Alsem, 2020, p. 140). The Adidas CEO expected that success in this sports activity would enhance the company’s position in other sports, however, it poorly worked in the country where football is barely a significant sport. Nevertheless, the Adidas brand is still one of the most prominent sportswear brands and is mainly linked with the hip-hop culture in the United States. Despite the vast number of competitors in the current global market, it maintains its leading position and engages inspiring figures of the modern culture to promote its brand identity, personality, and core values to the target audience.
‘Branding and semiotics’ (2019) [PowerPoint presentation].
Alipour, M. and Sabzikaran, E. (2018) ‘Investigating the effect of brand authenticity on the importance of brand and the desire to buy’, American Journal of Business, Economics and Management, 6(1), pp. 1–6.
Blessinger, P. (2014) ‘The creative process’ [PowerPoint presentation].
Bono, E. (n. d.) ‘6 thinking hats chart’ [Image].
Chandel, A. and Tewari, S. C. (2015) ‘Brand personality of Adidas and its antecedents’, Sai Om Journal of Commerce & Management, 2(9), pp. 13–19.
Mergers and acquisitions (M&A) are important events that affect a company’s viability. International M&A agreements elevate corporate growth and present new business opportunities (Rodríguez-Sánchez et al., 2018). Nevertheless, almost half of M&A cases do not meet the expected results for various reasons, including financial and legal aspects (Rodríguez-Sánchez et al., 2018). However, human resources management can contribute to a triumphant M&A (Rodríguez-Sánchez et al., 2018). Since many studies exist on previous M&A cases, one should consider other international companies’ potential to join forces. Companies like Adidas and Patagonia can create a successful merger due to similarities in goals and human resources practices.
The Adidas and Patagonia Merger
Adidas and Patagonia have the potential for a prosperous merger because of their international strategies. In 2021, Adidas presented a growth strategy to increase worldwide sales and profitability by 2025 (“About,” n.d.). One of the corporation’s objectives is sustainability, and the retailer intends to use only recycled polyester from 2024, producing nine out of ten items from sustainable materials (“About,” n.d.). On the other hand, Patagonia is a brand that aims to reduce human impact on the environment by creating recyclable and long-lasting products (“Business unusual,” n.d.). The company recognizes that its business activity is part of the problem but strives to improve (“Business unusual,” n.d.). Adidas and Patagonia could be fiscally successful if they united to produce sustainable sportswear. Adidas could access Patagonia’s recyclable materials, suppliers, and technologies, whereas Patagonia could receive financial and labor support from the major corporation. For example, while Adidas needs more experience in recycling, Patagonia wishes to have more control over the factories that make its products to secure the workers’ well-being (“About,” n.d.; “Business unusual,” n.d.). The two companies could work together towards a common goal, ensuring sustainability for the business and the environment.
If Patagonia and Adidas considered a merger, several factors would contribute. The two companies have similar cultures as they put people first, both customers and employees. To produce high-quality products for clients, Adidas has created a culture where people can thrive and feel that they belong, whereas Patagonia has built a team of employees who regard themselves as customers (“About,” n.d.; “Business unusual,” n.d.). Patagonia appreciates that its employees work outdoors, and Adidas has several sports facilities and activities at the workplace (“About,” n.d.; “Business unusual,” n.d.). Together, the companies could bring diversity into each others’ customs while working for clients’ benefit. Patagonia and Adidas can enhance their diversity based on Hofstede’s cultural dimensions. Since Patagonia originated in the USA and Adidas was established in Germany, their dimensions counter (“About,” n.d.; “Business unusual,” n.d.; Leonavičienė & Burinskienė, 2021). However, Leonavičienė and Burinskienė (2021) suggest that companies should understand cultural differences for better international business results. For instance, while Patagonia could guide Adidas to work better in a team, Adidas could advise Patagonia on how to be long-term oriented (Leonavičienė & Burinskienė, 2021). Although the two companies’ original countries have distinctions, they have similar business priorities and company cultures.
Several more factors would be important in the potential merger. Firstly, a company’s economic success is crucial in uniting businesses, and Adidas increased its operating profit by the end of last year’s third quarter compared to the previous year (“About,” n.d.). Although Patagonia does not share its monetary state as the company puts people and the planet over profit, it continuously donates millions of dollars, indicating financial stability (“Business unusual,” n.d.). Secondly, the two companies have many international locations. Adidas has headquarters and key centers in 8 countries, including Germany, UAE, and Switzerland, and owns multiple shops worldwide (“About,” n.d.). Patagonia operates offices in 7 countries, such as the USA, South Korea, and Australia, and has 70 stores globally (“Business unusual,” n.d.). Thirdly, human resources practices play a vital role in business. Adidas focuses on leadership, training, and performance, emphasizing diversity and inclusion (“About,” n.d.). Patagonia values collaboration and training and prioritizes a sport-loving personality over a degree (“Business unusual,” n.d.). A merger between Patagonia and Adidas could give them access to new markets and bring diversity to the workplace without major expenses.
Furthermore, certain human resource practices could enhance the possible merger. Concerning human talent, companies need to prepare tactical practices that would minimize any negative consequences, like a power struggle or voluntary resignations (Rodríguez-Sánchez et al., 2018). Rodríguez-Sánchez et al. (2018) propose that during the M&A process, human resource (HR) management would be involved in consolidating leadership, provision and evaluation, control, and assessment of the strategy and culture. For example, HRM can encourage talented personnel to support a positive mentality and working environment by developing their leadership skills (Rodríguez-Sánchez et al., 2018). The tactical practices should predict obstacles and determine how employees can enhance joining businesses.
Companies considering a merger or acquisition can focus on two human resources practices: ongoing training and cultural assimilation. For example, Patagonia and Adidas value the development of their employees, and education activities can improve confidence and involvement (Rodríguez-Sánchez et al., 2018). Training can contribute to the consolidation of leadership and serve as a basis for cultural change (Rodríguez-Sánchez et al., 2018). Although it may take employees several years to feel integrated into the new organization, cultural assimilation can assist in the process (Rodríguez-Sánchez et al., 2018). Rodríguez-Sánchez et al. (2018) suggest that the new culture should align with the new strategy and concentrate on cost-saving, managerial flexibility, and engagement of human resources. Therefore, companies can implement training to engage employees as a team, encouraging them to accept a culture that would lead to success.
Conclusion
To summarize, Adidas and Patagonia could create a prosperous merger because they have common objectives. The two companies seem to be economically successful, but while Adidas wants to access new markets and offer more sustainable products, Patagonia wishes for the world to use only recyclable items. Therefore, they could unite to provide customers with sustainable sportswear and assemble a unique culture that would prioritize training, diversity, and performance. Patagonia and Adidas could overcome their differences by learning more about each other and focusing on one purpose.
References
About. (n.d.). Adidas Group. Web.
Business unusual. (n.d.). Patagonia. Web.
Leonavičienė, E., & Burinskienė, A. (2021). Research on the reflection of cultural dimensions in international business. Insights into Regional Development, 3(4), 101-114. Web.
Rodríguez-Sánchez, J. L., Mora-Valentín, E. M., & Ortiz-de-Urbina-Criado, M. (2018). Successful human resources management factors in international mergers and acquisitions. Administrative Sciences, 8(45), 1-15. Web.
