Economical:
Nike and Adidas
The inflation is rising. The latest growth is 5% in the UK. This has an impact on the interest rates and on the exchange rate as well.
Because of the enormous competition on the high street there is a big pressure among the companies which led to a price fall.
Footwear sales are driven strongly by economic conditions, demographics and pricing.
Footwear has began a gradual recovery since 2003
The slow economy has led athletic footwear manufacturers to lay off workers, freeze hiring, find less expensive sourcing, and cut non-fixed costs like technology, travel and entertainment
Adidas and Nike are producing footwear in China and other third world countries.
Social:
The average life age of person has increased. Sports and health plays a great role in a day to day life.
Increased interest in sports and leisure
Increased popularity of visiting gyms and health clubs (especially among women): In modern World everyone want to look good but to feel good. Gyms are available for everyone: for people from different social groups, ages, and income. Even younger population- children are brought to the healthy clubs by their parents on the week days.
It is fashionable to be a member of a sport club.
Older group who seeks comfort and style as well
There is a new macro trend were health and health lifestyle is involved. Changes in lifestyle, increased popularity and interest in sports and leisure means the sector perform well. People are willing to spend their free time visiting gyms and exercising.
Fashion plays a big role in footwear nowadays. There is a fashion led group of young people who want style and comfort as well. Shoes are wormed in a non-sporting environment as a part of the everyday usage.
Nike
Nike definition is: selling a lifestyle not only sport shoes. And even if people cannot live this lifestyle, they can wear the shoes.
Take Michael Jordan or Magic Johnson, these celebrities national triumphs and sport stars have the credit and can inspire and promote participation in basketball among young people. Nike signed NBA player LeBron James recently.
Adidas
High consumer confidence: Adidas brand exists for more than 82 years. It is recognised as part of the World sports of different levels. Today Adidas is a global leader of sporting goods industry.
New healthy lifestyle:
Impact of celebrities and media are enormous. There are huge numbers of celebrities who are doing various advertising campaigns for Adidas. NBA, football players as Adidas is well known in Europe for producing football sports wear and specially football sport shoes.
Adidas have a new approach for their basketball products. As their biggest competitor is Nike in the states, they definitely want a bigger market share in this industry so they organize summer camps for teenagers from all over Europe and world and invite NBA stars to train children and do advertising.
Stella McCartney designs clothes for Adidas.
Technological:
Nike
Nike drives the demand through innovation, with new technologies, design, fibers and style enhancement. Nike is the world number one organic fibre user. Nike recently launched a new shoe in corporation with I Pod. AirMax 360 features a new method of creating air-sole unit called thermoforming
With the new way of shopping on the internet (E-Commerce) shopping is far easier because consumers can browse and compare the products from home.
(source: www.nikebiz.com)
Adidas
Adidas has introduced a sophisticated technology to the modern consumer needs, newwest developments and stylish designs.
Internet has become so popular and sometimes consumer finds it hard to waste time on shopping all day. Adidas introduces online shopping. It is possible to order any kind of product online, any pair of shoes and it will be delivered. Shoppers can browse the latest trends online.
The innovation centre helps customers simply to point at images and laser and infrared technologies interpret their gestures, converting them to command. Radio frequency identification ( RFID)-activated monitors give detailed information on Adidas product.
( source………………)
It is planned to introduce the new high-tech concept stores in major cities, including China for the 2008 Beijing Olympics.
The strategy is based for the younger generation as they grew up watching TV, playing video and computer games as well as spending most of their time browsing internet.
Environmental:
Nike
Environmental concerns are getting everyday more important and more people are worried about climate changes, pollution, etc. For such a big global company as Nike has to be very concerned about pollution.
Their innovation drives toward two long-term aspirations: and .
Nike launched the (alongside with their waste management programme) takes old running shoes and recycles them into new sport surfaces
Adidas
Adidas is takes responsibility for natural environment for people at present and future. Company takes an approach in managing the environmental impacts in their production facilities and in their supply chain. They are improving materials that are going into products and tackling pollution in factories.
Legal:
Nike
Nike has been criticized for contracting with factories that use sweatshop labour in countries like China, Indonesia, Vietnam, and Mexico.
Also supports the career of women with establishing its Global Women’s Leadership Council.
Nike was a number 13 from 31 on the Business Ethics Magazine list of 100 Best Corporate Citizens which was based on its community and environmental programs
.Nike was recognized as the in 2004, 2005 and 2006 reducing traffic and air pollution. (source: www.nikebiz.com)
Adidas
Company has achieved a number of legal factors. 1998 ILO Declaration says that the company has to observe, promote and realise the core labour standards. It includes:
- the abolition of exploitative child labour,
- the abolition of forced labour,
- the freedom of association and the right to collective bargaining,
- the elimination of discrimination in employment and occupation on the basis of nationality, skin colour, religion, ethic origin, political beliefs or sex,
- the right of employees to good health
- reasonable working hours
- a living wage
The company states that their aim is to act responsibly and communicate honestly. Each year in their annual report they inform about their social and environmental programme, it is very important for the stakeholders. The website adidas.com covers online reporting and is updated during the year.
The company do take into consideration labour standards. They include staff , independent auditors, investing in capacity building and outreach, improving the performance in supply chain.
(source: www.adidas.com)
Trade Act 2002
SWOT analysis
SWOT ANALYSIS FOR ADIDAS AND NIKE
Each company will have its strengths, weaknesses, opportunities and threats. Here is a breakdown of each factor for both companies
ADIDAS S.W.O.T ANALYSIS
STRENGTHS
-Adidas has strong management team and good corporate strategy in both North- American and overseas markets.
-Advantage as first company to introduce e-commerce
-Has brand recognition and reputation
-Strong control over its own distribution channel
-Strong customer base
-Strong financial position with minimal long-term debts
-Innovative designs in footwear enabling consumers to design their own shoes online
-Diversity and variety in products offered on the web (footwear, apparel, sporting equipment, etc.) Adidas even offers items not available in its retail stores
-Pricing strategy is competitive to Nike's
-Merger with Salomon will allow Adidas to gain a strong foothold in the Skiing Industry
-Secondary web sites (i.e. soccerevolution.com to simply promote soccer, Adidas leads the market in this sport)
- Adidas was an official partner of FIFA 2006 World Cup
WEAKNESSES
-Negative image portrayed by poor working conditions in its overseas factories.
-The direct sale to consumers is creating conflicts with its own resellers
-Currently available supply chain, manufacturing, and fulfillment technologies aren't easily integrated with online build-to-order Not known for its research and development leading to innovative designs¬systems
-The e-commerce is limited to USA, however, has planned to expand to Canada and international in the near future
-Online customer service not "helpful" or easy to find
OPPORTUNITIES
-Increasing demand in the industry for products available online
-Increase female participation in athletics
-E-commerce will reduce the cost of goods sold thus improving the "bottom line"
-New technology and innovation to stay on top of market needs
-Expand e-commerce to global markets
-Possibility of outsourcing the web development and e-commerce to a third party developer
-Growing interest in the sport of Basketball. Partnering up with other retailers to sell basketball footwear and apparel
-Growing reputation in non-basketball sports will boost e-business
-Collaborate with other online retailers to offer Adidas products
THREATS
-Negative image due to "sweatshops"
-Economic downturn in North America and Asian Countries
-Increase in the price of providing technological solutions (e-commerce)
-Strong competition from some of its major challengers in all branches of the business e.g. USA
-Continuing challenges in import/export duties
-Negative image created by the sponsored athletes (i.e. Kobe Bryant and his sexual assault case)
-Increase in the Price of Raw materials
-Threats to free trade and foreign currency fluctuations
-Possibility of distress from growing beyond its capabilities e.g. legal factors in different countries
-Losing serious ground to Nike in the Soccer industry, which Adidas has a stronghold on
REF www.mintel.com
www.echeat.com/eassy.php?t=27600
NIKE S.W.O.T ANALYSIS
STRENGHT
- Brand name recognition, because Nike has been around so long, the brand is recognized and respected both internationally and domestically.
- Brand loyalty, Nike has consistently produced quality products that appeal to its consumers both internationally and domestically.
-Nike carries a wide arrangement of products with a large amount of options for personal preference.
-Strong international presence, in the event that U.S. sales continue to slack off or the economy continues to worsen, they have their international investments that consistently turns a profit. They are the number one footwear manufacturer in nine international countries; with distribution centers both internationally and domestically. The ad agency that they contract out to has opened three offices in three different countries in order to reach their target audience on a local level. NEED TO REVIEW ON COUNTRIES
-Nike is constantly trying to increase their international presence.
-Good financial standing, in the year ending May 31, 2002 their Net Income was $663,300,000. 2006 report
-Nike has an on-line store where custom shoes may be purchased; they believe it is essential to run an on-line operation.
-In such a competitive environment Nike steps it up by investing a large portion of their income into R&D, with the formation of the Nike Sport Research Laboratory in 1980, and the introduction of the Advance Product Engineering department; Nike is making sure that they stay in control of their market share. These two departments ensure that Nike has new shoe styles and are constantly developing new products.
-Nike despite popular belief is a very aware of its social responsibility, and has donated over $34 million in cash and products to different charitable organizations. In addition to their contributions they have also developed a labor practices department, which pays close attention to the labor practice of third –world countries in which it produces.
-Even though they are a charitable organization they have not forgotten to be environmentally aware, with the introduction of the Nike Environmental Action Team
(NEAT) in 1993 they are showing consumers that they really have a heart.
WEAKNESS
-Competition is stiff making it difficult to get a larger piece of the market share.
-Decline in U.S. profits, a steady decrease of 2 to 3 percent every year.
-Contract manufacturing of shoes to low-wage factories in the Far East makes Nike susceptible to laws, natural disasters, and economic problems abroad
OPPORTUNITIES
-Product Diversification, with new technology and increased earnings they should be able to invest even more into R & D.
-Increase their global presence by expanding their services to countries such as, Chile, Peru, Bolivia, India, Mexico, and South Africa in an attempt to serve those with the largest populations.
-The key is more advertising, encourage young people to purchase Nike’s even if they are not sport’ players.
- Increase marketing to the female consumer.
- Increase manufacturing of products that the new generation is interested, specifically boots and sandals.
THREATS
- Stiff competition both domestically and internationally.
-Nike increased European competition and US competition.
-Change in the young consumer to sandals and boots.
- High inflation and unemployment in Asia and Pacific Rim, Latin America, and Russia may cause a decline in shoe sales.
-Some countries due to the high return on investment in technological ventures are straying away from shoe manufacturing and into more profitable ventures.
-The fluctuation of foreign currency and interest rate may pose a threat to earnings.
-Import and export regulations turns to make things difficult to the company
REF.
Companies’ strategy
Adidas strategy is “to be the market leader in the sports industry and continuously strengthen its brands and products to improve its position and financial performance.”(1)
Adidas top five priorities are football, running, basketball, tennis and training.
One of the most important thing is to strengthening the brand’s success is to expand a strong global brand positioning. Therefore Adidas launched the “Impossible is nothing” campaign in 2004 with a huge success. In the other hand strategic partnership also plays an important role with Stella McCartney or Porsche Design. Sponsorship of major global sporting events like FIFA World Cup had a huge impact positive impact on a company.
Due to the tremendous competition in the sector – Nike is the No.1. in the basketball era – Adidas reinvented its marketing strategy and product line as well. Adidas now generates close to 60 new foot designs each year to keep up with competition.
As basketball plays a fundamental part of it, products has been repositioned as young and creative, particularly in North America. Adidas has developed deals with world class athletes. Three of the best and most inspirational NBA players are going to represent Adidas basketball: Tracy McGrady, Kevin Garnett and Tim Duncan. These sports figures not only score high marks in their game – but they also know as celebrities. Young man who idolize them want to play basketball like he does and wear the same shoes as well.
Adidas heart is in football. The company has a big heritage in the game and the connection was always strong among football and Adidas. Adidas is a World leading football shoe brand and the strongest in Europe. To maintain its position is essential. Among the other famous sport people, David Beckham-UK’s top football celebrity is representing the brand.
Adidas is a global player – and represents its markets all over the world. But Nike – the main competitor – has NIKETOWN in the US, Europe and Australia, Adidas opened its first Adidas-Solomon flagship mega store in Paris. It was important to maintain the brand awareness and increase its visibility through the point of purchase as well.
Adidas is a global company and one of its main responsibility is to be socially and environmentally response. That means reducing the environmental impact and caring for welfare and for the employees as well.
Recommendations Conclusion
As adverts in magazines and television make people more aware of their bodies and how to change them, the sports manufacturing business will continue to grow. The sports industry “is a dynamic and growing industry in the U.S., grows. “This is a truly global industry, and sports stir up deep passion within spectators and players alike in countries around the world. To one person, sports are a venue for gambling; to another, they are a mode of personal recreation and fitness, be it skiing, cycling, running or playing tennis. To business people, sports provide a lucrative and continually growing marketplace worthy of immense investments. To athletes, sports may lead to high levels of personal achievement, and to professionals sports can bring fame and fortune.”
http://www.adbrands.net/de/adidas
1
The Mintel International Group – footwear retailing
