Case Study - Adidas
TAKING A LOOK AT
The company officially became Adidas AG in 1949 and was formed by Adolph Dassler in Germany.
In its latest quarterly financial report, the company grew its revenues by 10% in currency-neutral terms. In Euros, that amounts to a 4% increase. The net income grew by 20% to 418 million euros. The World Cup had a significant impact on its bottom line.
In 1924, Adolph and Rudolf Dassler formed a company called Dassler Brothers Shoe Company. They ran it successfully, until a fallout between the brothers in 1947, caused Rudolf to form a company that later became Puma. Adolph decided to start his own company called Adidas AG in response. The Adidas company name is derived from Adi which is a nickname for Adolph, and Das which is the first part of the last name.
The rivalry between the two brothers became so heated, it divided the entire town they operated in. People either rooted for the Adidas camp or the Puma camp. People would find themselves looking at the shoes of people walking by to see what they were wearing. They became known as the “town of bent necks.”
Note: the company officially uses lowercase letters for its logo. For the purposes of this report, the company name will be capitalized as it is a proper noun.
How the Company Started
When the Dassler brothers were working together at the Dassler Brothers Shoe Company, they created a spiked shoe for athletes. However, they were not fond of the heavy metal-like shoes that were in the market at the time, so they redesigned them to be lighter and made of rubber. They convinced Jesse Owens to use this new shoe or the 1936 Summer Olympics. Owens was a gold medal winner who helped propel the company name.
Adidas was formed with the cash generated from Dassler Brothers Shoe Company. There is no indication of further infusions of cash. The company is a public company which means it can use that avenue to raise cash.
An early challenge was the rift between the Dassler brothers. It is something they never reconciled. The feud occurred because Rudolph was charged by American troops as being part of the Gestapo. Ari testified that he was in the Gestapo and Rudolph could never forgive his brother for that betrayal.
Recently, the company has decided to maintain its partnership with Kanye West. In an interview with West, he suggested that slavery was a choice. People became outraged by this comment and put pressure on Adidas to part ways with the celebrity. However, the company feels that they don’t agree with the statement but believes West has the right to speak his mind. The CEO tried to distance the company from the comment but not the celebrity.
In 2000, the company was in the spotlight for its practices on child labor and poor conditions in its Indonesian operations. The company stated that quotas were too high when pressed on the issue. They also agreed to increase the wages of many of the workers based on the complaints. This could be the initiative that caused the company to alter its strategies and take a stance on these unruly practices.
Why it Works
The biggest reason why Adidas works is branding. People have come to trust the name and equate it with quality. Customers don’t mind spending more when they know that a product will last.
The company focuses on technology to make a better product. They are constantly looking for ways to give athletes an edge and help them perform better. This will lead these athletes to endorse the company which results in higher sales.
The company takes a strong stance against human rights violations and human trafficking. This is a challenging initiative for the company as its supply chain is global. However, it screens its suppliers and vows to work with only those who support this initiative.
The company uses a mix of low-end and high-end products. The low-end products serve to keep income flowing at a steady rate. The high-end products are used to supercharge sales. When they use sports celebrities to endorse high-end products, sales increase.
Adidas continues its initiatives of sponsoring sports events and players. This keeps its brand associated with whatever sport it sponsored. The company is involved with most of the major sports as well as the less-known ones.
The company uses an international marketing approach which means that it is sensitive to the needs of cultural and social differences in the countries it operates. While many companies try to focus on this, not every company is successful. Adidas has been doing this since its formation in 1949.
The company has an ongoing partnership with Stella McCartney for a line of women’s sportswear. McCartney felt that this was an underserved market that she could use to help women.
Adidas has an affiliate program, which is a low-cost method of driving sales. Affiliate programs allow business owners of any size (usually ones having a website) to participate in the sales of the company’s products. The vendor supplies the affiliate with links embedded with an identifier (affiliate id). The affiliate places these links on his or her website. When customers click on those links, the affiliate is paid a commission for any sales as a result of this interaction. The affiliate is responsible for driving traffic to the vendor’s website.
The company has a gift card program that can help boost sales. During the holiday season, this is likely to add significant revenues for the company.
David Beckham has been a big supporter of the company’s products and is shown to wear them during matches. This relationship has been strong since early in his career. The evolution of his cleats is shown in the following story:
When searching for Adidas products on Amazon, you will find many of them to be rated at 4+ stars. For instance, the classic Adidas sneaker, 71% of the ratings were 5-stars. With 841 customers rating the product, that is significant.
For this example, one reviewer stated the sneakers were not legitimate. However, he or she gave the product a 4-star rating. This shows how ratings should not be taken at face value and that people need to analyze them a bit to ensure they make sense.
On ConsumerAffairs.com (not associated with a government agency), reviewers left low ratings for the company (mostly 1-star). The general complaints are with the quality and fit of the shoes these customers purchased. Several of these reviewers stated that their experience with customer service when trying to resolve the issues were substandard. These are all reviews within the past year of this writing.
One reviewer, who gave a 5-star review, couldn’t understand all the bad reviews on ConsumerAffairs.com. He felt that the products he ordered from the company were great.
Lessons Learned By The Business
The company learned the hard way that it must commit to fair treatment of its workers. The 2000 complaint against the company is the possible motivation towards creating the anti-human trafficking initiatives.
How Other Businesses Can Learn From This
Strive to be the best in your industry. Learn how to help your customers do more with your products, and you will have fans for a long time. When you focus on the customer and not the products, you will learn what they need and want and give it to them.
Case studies like these allow us to learn from the bigger companies as we determine how to best differentiate from competitors.
~ The Game Changer Team