Running head: STRATEGIC MARKETING PLAN GROUP PROJECT PART 1 & 2

Strategic Marketing Plan Group Project Part 1: Adidas Athletic Shoes

Shareen Cleary, Adeline Delorme, Shanese Francis, and Alexander Grzyb

University of Maryland University College

Professor: Cynthia Mable

Saturday, December 8, 2018

Running head: STRATEGIC MARKETING PLAN GROUP PROJECT PART 1 & 2 2

Executive Summary

Adidas must look forward, not backward. The future holds an opportunity to make their

presence known even more than in recent years. Nike may be the industry leader, but Adidas has

room for improvement and an opportunity for growth. The athletic footwear industry is a

competitive market with voluminous branders. The market leader Nike should not become

complacent because in recent years Adidas is gaining market shares in the athletic footwear

industry.

Adidas has a balanced portfolio and is reaping the benefits of growth in Adidas Originals,

training apparel, and most importantly, core footwear. Adidas needs to embrace what’s recently

been a major source of strength for them. They have already relegated Under Armour to a distant

competitor. Now they encapsulate the status of being a market follower. There’s still more work

that needs to be done. That’s why Adidas is audacious enough to take on the endeavor of giving

of challenging Nike. This explains why Adidas aspires to increase their market share in North

America from 10 to 15 percent in the next 3 years, according to their North American brand

president Mark King (Low, 2018).

This could all be huge for Adidas and considering how opportunistic a company they are

and have been throughout their history. This is a huge opportunity and could behoove the

company. The main reason why is results. Adidas changed their vision and structure for the

company, starting in 2015, and now there are tangible results that speak for themselves. When

the numbers materialized, retail researcher NPD Group divulged that in May of 2017, Nike’s

share of the American footwear market dwindled from 35.9 percent to 34.7 percent. To

exacerbate matters for Nike, their subsidiary the Jordan brand, who mainly specializes in

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basketball shoes, saw their market share drop from 14.8 percent to 11.8 percent over that same

timespan. This is especially impressive for Adidas when you juxtapose it how they fared during

the time period in the late 2000s through early 2010s. In fact, they saw their market share nearly

double from 6.3 percent to 11.3 percent (Roberts, 2017). These are the kinds of results that

Adidas had by undergoing a metamorphosis with their business and marketing model. They need

to perpetuate this ideal to continue to have results like this for the rest of the decade and beyond.

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Table of Contents

Section 1: Company mission/vision/values or other indicators of a market-driven organization……………………………………………………………………………………………………………………1

Section 2: Current marketing situation……………………………………………………………………………2

Section 3: Target Market……………………………………………………………………………………………….13

Section 4: Strategic Marketing Plan Objectives……………………………………………………………..15

Section 5: Product Strategy…………………………………………………………………………………………..18

Section 6: Pricing Strategy…………………………………………………………………………………………….23

Section 7: Distribution Strategy…………………………………………………………………………………….25

Section 8: Marketing Communication Strategy……………………………………………………………..26

Section 9: Marketing Program………………………………………………………………………………………30

Section 10: Financial Plan……………………………………………………………………………………………..31

Section 11: Marketing Metrics………………………………………………………………………………………33

Exhibits………………………………………………………………………………………………………………………..36

References…………………………………………………………………………………………………………………….39

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Running head: STRATEGIC MARKETING PLAN GROUP PROJECT PART 1 1

Section 1: Company mission/vision/values or other indicators of a market-driven organization

Adidas was founded in 1924 as Dasslers Brothers Shoe Factory. Later they branched out

to Adidas in 1949. Adidas is well-known footwear worldwide. Adidas mission is to be the best

sports company in the world. In a sustainable way, they build and sell one of the best sports

products worldwide, and the best service and experience. Three strategic choices are made:

speed, cities, and open source.

 Speed: how they deliver their products to consumers fast and desirable. Adidas aims to be

the true fastest company.  Cities: where they deliver their products, shapes consumer perception, trends, and buying

decisions. Six cities where Adidas wants to share their trends, mind, and market are

London, Los Angeles, New York, Paris, Shanghai, and Tokyo.  Open Source: how they create and collaborate and innovate. They aim to invite athletes,

consumers, and partners to co-create the future of sports (Adidas Group, 2018)

Adidas is very competitive in the footwear manufacturing industry. It is known for its

footwear, but also sell clothing and accessories. Adidas is the single biggest growth opportunity

in North America because its total share is 40%, which is the biggest market in the sporting

goods industry (Adidas Group, 2018). This is why Adidas will continue to focus and invest in the

U.S. market. It has annual revenue of $25.42 billion, having their biggest competitor as Nike.

Nike is the largest footwear manufacturer, and Adidas is right behind them as a strong competitor

based on company offerings, financial results, and business relationships.

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Section 2: Current marketing situation

Internal factors

Analysis of the company's current offerings

Adidas is known in the sporting goods industry for having a portfolio of products

containing apparel, sports accessories, and footwear. In the global market, apparel and footwear

make up Adidas Group biggest segment with a shoe production in 2017 of 403 million globally

(Statista, 2017.) Adidas' footwear has a wide range of shoes from athletic, running, casual shoes

and sandals. Athletic and running shoes cater both to the professional athlete, amateur athlete and

fitness enthusiasts. In addition to athletic footwear, Adidas is tapping into the casual athletic

footwear market which offers sporty shoes to consumers to be worn for regular everyday use and

fashion. Additionally, Adidas vies for consumers that are runners by developing technology in its

shoes that improve performance and comfort. The company has introduced a new line of shoes

known as AM4 which stands for "Adidas made for" and are running shoes that designed for the

specific needs of runners in different major cities (Amidst the Retail Apocalypse, 2018.) Whether

it is athletic or casual athletic footwear, the company understands the need for innovation,

performance, and attention to the consumer's needs in all its products.

Analysis of financial results

Adidas footwear sales for 2017 reached $14.09 billion which was up from sales in 2016

of $11.49 billion (Adidas Annual Report, 2017.) See Exhibit 1 of past three years of footwear

sales from Adidas Annual Reports. Note profit financial information has not been able to be

located for the athletic footwear segment. Exhibit 1 contains sales only from past three years.

This growth is in part due to the expansion of sales in the market of North America and China. In

North America’s market, Adidas reported that sales were up 31% following other quarters which

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were in the high-twenties and low-thirties (Green, 2017.) Green contributes positive financial

results in recent quarters to the company's ability to deliver what the consumer wants,

particularly in the running category of athletic shoes (2017.) Additionally, another footwear

category that is driving sales is Adidas casual athletic footwear which makes up 23% of market

shares of casual footwear (Roberts, 2017.) In the US athletic footwear market share, Adidas grew

from 6.3% in 2016 to 11.3% in 2017 (Roberts, 2017.) 2017’s strong financial and operational

performance has kept the company on track to increase profitability in local and global markets

in upcoming quarters.

Analysis of key business relationships

Adidas has achieved strong relationships through its partnership approach. These

partnerships include stakeholder engagement through representation and ongoing engagement;

collaborations with organizations that promote sustainable innovation, environmental conditions

of materials used and proper representation in sporting goods industry; government outreach in

regards to human rights and working conditions; civil society such as engagement with the

Greenpeace Detox Campaign to reduce hazardous chemicals in the supply chain and other

campaigns that impact human rights; and sporting events through a presence in major sports

(Adidas Partnership Approach, n.d.)

Adidas has a large presence in sports through sponsorships deals in the Football World

Cup, Olympic Games, sports teams, leagues, and colleges, and with such sports figures as James

Harden, Paul Pogba, and Aaron Rodgers. The 8-year partnership with USF Athletics and Adidas

formed in December 2017 is just one of the many sports partnerships that provide official athletic

footwear to men and women’s sports teams (Athletics Announces Partnership, 2017.) These

partnerships and sponsorships elevate the brand through reaching a core audience of sports

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enthused consumers by building brand passion, brand awareness, and engagement for Adidas as

it competes in a highly competitive market of the athletic footwear industry.

Adidas’ relationships with third-party retail partners is key to company sales. While

Adidas uses different distribution channels to sell its products, 70% of Adidas' of its products

sold in 2017 were through third-party retail partners (Trentmann, 2018.) These retail partners

include Dick's Sporting Goods Inc., Foot Locker Inc., and Amazon. These business relationships

are an important part of sales growth for the company.

Lastly, another business relationship for the company comes through its supply chain and

sourcing with manufactures. Because Adidas outsources product production globally, the

company seeks long-term partnerships as part of its sourcing model. Managing outsourcing

relationships is critical to the development of the product, overall success, and growth of the

company.

Analysis of core competencies

Adidas has such core competencies as technology, consumer focus, and brand

recognition. Adidas provides products that bring the best footwear technology to its consumers.

The company introduced Boost foam in 2013 in its running shoe that provided runners with

support, durability, and energy return (Charboneau, 2018.) The Boost has been refined over the

years and Adidas continues with developing new designed techniques such as tailored fiber

placement with Solar Boost, an EVA foam Bounce, and an adaptive torsion system to bring about

the best performance for consumers in its products (Charboneau, 2018.) Such technology as

Adidas’ Boost foam started out in its running shoes but can now be found in other sports styles

including basketball and training as the ideal cushioning choice in athletic shoes. The

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development of these technologies is one way that Adidas improves the experience of its

consumers and leads into another core competency upheld which is customer focus.

A large part of Adidas' mission is to be consumer-focused by offering products that meet

needs and expectations of its consumer. The innovation of products not only comes from the best

footwear technology but also through style, comfort, the quality that enables the company to

offer products with the highest value that meet consumer needs.

The last identified core competency of Adidas is brand recognition. Sport sponsorship

deals and championship support have contributed to building brand recognition. Other channels

including social media presence have built strong brand awareness. The company's three-stripe

logo is ranked the number one most social media shared logo with an average of 6,664,170

unique images per month across such social media channels as Twitter and Instagram

(Brandwatch, 2018.) This heightens the company's brand engagement while building brand

recognition.

Analysis of current customers

Adidas strives to make and offer sportswear that is accessible to all consumers. Current

customers include professional sports figures and sports teams, the amateur athlete, and the

consumer with a fitness lifestyle. Adidas athletic footwear customers include children, young

adults, and adults. While Adidas footwear has customers in all age groups, the company targets

an age range of males and females 13-40 years. However, customers in the 15-30 years of age

range have been identified to make up much of the company’s current customers. These

customers consist of upper & upper-middle class social groups. Current customers are influenced

by social acceptance, luxury, fashion and celebrity endorsements, product quality, product

innovation, and the latest trends in athletic footwear.

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Current customers purchase Adidas footwear through a variety of channels including e-

commerce and retail. With more consumers choosing online shopping, Adidas has closed

thousands of retail stores and turned to more online channels (Trentman, 2018.) Additionally,

communication and online interaction through social media channels are becoming a necessity as

this is becoming the customer’s preferred channel of communication.

Competitive Analysis

The athletic shoe industry is highly competitive with Nike leading the competition. Nike

exhibits higher annual footwear sales of $21.1 billion in 2017 (Ritcher, 2018) compared to

Adidas annual footwear sales in the same year of $14.09 billion (Adidas Annual Report, 2017.)

Nike also leads with more employees than Adidas and has a larger US athletic footwear market

share of 34.7% compared to Adidas market share of 11.3%. Even though Adidas has had a solid

performance in the industry it hasn't reached being the leader in the market. But if there is a

company that is going to be a market challenger to Nike, Adidas has the greatest opportunity

when compared to Under Armour. Adidas has a strong lead in annual footwear sales over Under

Armour's $1.0 billion annual sales (Richter, 2018) and its low US athletic footwear market share

of 2.4% (Roberts, 2017.) Adidas has a strong global presence and consistent association with

sports sponsorships which are competitive advantages to the brand in the athletic shoe industry.

See exhibit 2 for competitive analysis worksheet.

External factors

Demographic trends

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One of the demographic trends that affect Adidas the most is the rise of millennials. As of

2016, Millennials in the United States were nearing population numbers of Baby Boomers

(Cilluffo & Cohh, 2018.) This shift in the age demographic population can increase the number

of consumers that the company can reach. Companies need to adapt communication to reach its

consumers effectively and efficiently. Studies have shown that millennials are more engaged and

addicted users of apps than any other age bracket by spending an average of 3.2 hrs. per day on

apps (Soper, 2017.) The latest Adidas app was introduced in 2017 and brings personalization to

the customer through a personalized news feed, customer inquiries, and online shopping (Green,

2017.) The Adidas app is reaching an audience of users through a popular platform for

millennials with engagement features and integration of products and services.

Economic trends

Economic factors are important for growth and success of Adidas. Economic fluctuations

have an impact on a business because low economy results in loss of employment, which in turn

results in lower consumer buying, and effects the sales and growth of companies who sell

premium priced products. Adidas experienced a 97% drop in profits during the economic

downturn in 2009 (Adidas sees profits drop by 97%, 2009.) Economic growth works the

opposite resulting in an increase in employment, consumers spending, and more sales. Global

economic growth has seen its highest since 2011 reaching 3% and prospects of steady growth in

upcoming year (World Economic Situation and Prospects, 2018.) This economic growth has had

a part in Adidas’ sales growth as it markets goods to consumers in a stronger economy.

Environmental trends

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In the American market, 55% of Americans rank environmental protection as a top

priority (Anderson, 2017.) Because Adidas is a global company it has many sites and operational

impacts on the environment. The company is showing responsibility to the environment in

operations by dedication to such environmental issues as water efficiency, sustainable materials,

and reducing absolute energy consumption and CO2 emissions (Adidas Environmental Approach,

n.d.) A commitment to bettering the environment also can come in materials used in products.

An example of this would be the Parley Shoes which is made with Parley Ocean Plastic. The

knitted uppers of these shoes’ features upcycled waste of fishing nets and coastal area debris

converted into yarn fibers (Adidas Product Description, n.d.) Environmental factors and trends

need to be a focus for many global businesses as sustainability and environmental protection is

important to many consumers in this era.

Technological Trends

Technology trends affect many aspects of the business including marketing, operations,

customer service, and products. Technavio identifies three trends that will impact the athletic

footwear market the most. These include the demand for eco-friendly products, sole technology,

and customized products (Business Wire, 2016.) These factors are directed at products and

highly related to Adidas. In efforts to deliver what the consumer needs in products, Adidas must

be on top of the latest trends in technology. Examples include built-in sensors that track, and

sync gathered data to Adidas’ mobile app (Amidst the Retail Apocalypse, 2018.) Additionally,

broadening the channels of communications to stay connected with the consumer requires a

digital focus. Being digitally focused helps Adidas gain consumer attention, gather useful data,

and build consumer connections (Harvard Business Review, 2018.) Technology enables better

performance by Adidas which in turn results in growth for the company.

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Political-Legal/Regulatory Trends Technology doesn’t come without regulations. Being a European based company, Adidas

is impacted by the General Data Protection Regulation (GDPR) enforced in Europe in May 2018.

According to the European Commission, this regulation will regulate a company’s processing of

personal data of individuals in the EU (What Does the GDPR Govern? n.d.) This would include

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