Adidas Is One of the Largest Companies in the Sporting
ADIDAS MARKETING COMMUNICATIONS EFFECTIENESS ADIDAS MARKETING COMMUNICATIONS EFFECTIVENESS TABLE OF CONTENT 1. Executive summary………………………………………… 3 2. Introduction 2. 1 Adidas Overview……………………………………………………… 3 2. 2 Europe sports equipment market overview……………………… 4, 5, 6 3. Situtational Analysis 3. 1 PESTEL Analysis………………………………………………….. 7, 8 3. 2 Porter’s Five Forces Analysis………………………………………… 9 3. 3 SWOT Analysis…………………………………………………. 10, 11 4. Consumer Analysis……………………………………12, 13 5. Marketing Objectives…………………………………….. 14 6. Communications Mix 6. 1 Sports sponsorship………………………………………………. 15, 16 . 2 Celebrity endorsement…………………………………………… 16, 17 6. 3 Product placements…………………………………………………. 17 7. Recommendations………………………………………… 18 8. Conclusion………………………………………………… 18 9. Bibliography………………………………………………19 1. Executive summary| This report will measure the effectiveness of Adidas’s advertising campaign. To achieve this goal this report will go through the French market analyse and the target consumers. Moreover, SWOT, PESTEL and Porter’s Five Forces analysis demonstrate the different opportunities in future for Adidas and the multiple factors influencing the sports equipment industry.
Adidas is one the leading company in the sports equipment industry (with Nike, Reebok…), recognizable with its three bands, and since few years he is launching very effective campaigns. This effectiveness it’s due to the celebrity endorsement. This report will be introduced by the introduction of the overview of Adidas’s market and secondly the sport equipment market in general. 2. Introduction| 2. 1 Adidas Overview Adidas is one of the largest companies in the sporting goods industry. The group has divided its operating activities by major brand into three divisions: Adidas, Reebok and TaylorMade-Adidas Golf.
The group operates through more than 170 subsidiaries in Europe, the US and Asia, each focusing on a particular market or part of the manufacturing process. After the financial crisis of 2008 and economic difficulties of 2009, Adidas came back strongly in 2010 and can show an excellent year. The Group generated a record € 12 billion in sales, a growth of 9%, clearly outpacing his major competitors. 2. 2 Europe sports equipment market overview Adidas offers sports equipment for all sports. It provides footwear and apparel for each sport (cricket, football, running etc)
England cricket team, sponsor Adidas R. Madrid football team, sponsor Adidas As we can see in the table 1, in Europe the sports equipment market grew by 2. 1% in 2011 to reach a value of €13. 9 billion (Marketline 2012). And according to recent figures this growth will continue to increase, for more than 10% between 2011 and 2016 (Marketline, 2012). Table 1: EUROPE SPORT EQUIPMENT MARKET FIGURES| Year| € Billion| % Growth| 2007| 12. 7| | 2008| 13. 1| 3. 1| 2009| 13. 3| 1. 9| 2010| 13. 6| 2. 0| 2012| 13. 9| 2. 1| Source: Marketline
The graph above clearly demonstrates that the French market is the most important as far as the sport equipment market is concerned, with a total value of €3. 7 billion in 2011. The German and UK market, with respectively 18% (€3. 5 billion) and 18. 3% (€ 3. 5 billion) of the market share, follow it. And then comes the Italian and Spanish market (Marketline, 2012). These five markets cover more than 72% of the European sports equipment market. Source: Marketline The most valuable segment in this industry it’s clearly the ball sport equipment segment.
Adidas is well present, as they make footballs for the World Cup, UEFA Euro and the Champions League. These three competitions are the most watched all around the world (715 millions people watched the 2006 World Cup Final). FIFA World Cup 2010 UEFA Euro 2012 Champions League 12/13 According to the graph the less valuables segments are racket sport equipment (9. 5%) and golf equipment (13. 6%). By adding both figures they are still inferior comparing to the ball sport equipment (25. 5%). 3. Situtational Analysis|
As mentioned above this report will analyse the leading sports equipment market, in this case the French market. 3. 1 PESTEL Analysis Through this PESTEL analysis we will analyse which factors any company has to consider, while entering the French sports industry. POLITICAL: France is a highly centralized country; an elite group is dominating in the state and the corporation sectors. This situation persists despite attempts to decentralize power in last few years. Furthermore, according to the recent report “corruption is perceived to be widespread in French politics”. Datamonitor, 2011) ECONOMICAL: From 1999 to 2007 France’s exports share in eurozone felled by 16%, and French exports were of a value of $595 billion in 2010 (declined by 4. 6%). This will affect the prospects of the French economy in the near future. (Datamonitor, 2011) For a company like Adidas, which exports a lot to Asia with a total market of €2, 972 million in China and other Asian markets, it can effects their sales. (Marketline, 2012) SOCIAL: The French population is becoming aged. Indeed, more than 17% of the population have more than 65 years (Insee, 2012).
The Government is expecting to allow 4% of the GDP to healthcare, pensions and dependency care related to the aged people. (Datamonitor, 2011) TECHNOLOGICAL: After the industrial age France is moving towards technological age. Indeed, we can see it by the number of patents deposited at the US Patent and Trademark Office (USPTO), the figure reached 124,723 in 2010. (Datamonitor, 2011) In the other hand, the Government will withdraw the concept of Young Innovative Company, it will have is impact on the industrial growth and may reduce investments in the country. (Datamonitor, 2011) ENVIRONMENTAL:
France was very active to prepare agreements on environmental protection and sustainable development and in the strengthening of international governance. In addition, with Norway, France initiated the Global Forest Partnership in 2010. (Datamonitor, 2011) But as the technological factors, the country is not encouraging and fulfilling his agreements. Indeed, last year France was assigned to the EU Court of Justice by the European Commission for its lack of attention in the industrial emissions regulations. The European Commission was telling that France has more than 60 factories that have not got environmental authorization of the EU. Datamonitor, 2011) LEGAL: Foreign investments increased by more than 20% couple of years ago, 782 projects lead to nearly 32,000 job. Most of these projects were related to the renewable energy sector. In 2010, non-national companies based in France created two million jobs. Many of the government’s tax and labour reforms have been met with cynicism and public protests. The government may increase weekly working hours from 35 to 39 and abolish the wealth tax l’impot de solidarite sur la fortune. However, these moves will face public outrage and demonstration. 3. 2 Porter’s Five Forces Analysis
We aim to measure an industry’s attractiveness and long-term profitability through Porter’s Five Forces analysis. Adidas and his competitor, as Nike, have reach to branch out in to retail after the industry of sports equipment has seen in recent years a great development of forward integration (as sportswear manufacturers). Despite the presence of major groups, in the French market of sports equipment, the market is still fragmented. Buyer power is becoming very strong, as there is a wide range of products available, and the existence of numbers of retailers and also the fact that some large firms have integrated forwards into retail.
The expenses in sports equipment and apparel vary following the emergence of trends for particular sports. Another factor that influence purchases is the weather. It’s still possible to enter the French market by producing for example small quantities of custom-made golf and to have some economies of scales such as bulk buying. But, as seen in recent years the uninspiring revenue growth makes entry a less attractive for new entrants. The reliance on sales of sports equipment is reduced as many firms sell sports footwear and apparel in the French market. Rivalry is weakened as many large companies outsource their manufacturing. Marketline, 2012) Source: Marketline 3. 3 SWOT Analysis SWOT ANALYSIS| Strengths| Weaknesses| * Strong portfolio * Continuous research and development * Strong performance after 2010 FIFA World Cup * Worldwide presence | * Dependence on third party manufacturing * Unfunded postretirement obligations will impact cash flows adversely| Opportunities| Threats| * Reorganization to improve efficiency * Sponsoring major sports events * Global footwear market is growing| * Counterfeit products * Competition * Fluctuations of foreign currencies |
Adidas has in his portfolio three brands, as follows: Adidas, Reebok and TaylorMade-adidas Golf. Adidas is well present all around the world, Reebok is improving day by day (for instance Thierry Henry is sponsored by Reebok), and TaylorMade-adidas Golf is the less known brand of his portfolio. Because of their policy to encourage research and development allows Adidas to come out with new and better products to face competition of Nike. As mentioned above Adidas makes football for major football competition and it benefits of the success of these competitions.
After the establishment in the European and American markets, Adidas is targeting Asian market (total market of €2, 972 million in China and other Asian markets). (Marketline, 2012) As Adidas outsource 95% of his production to Asian country (32% of his suppliers are Chinese) it cannot control the quality of his product. Indeed, several products made in China have been recall by many US companies after the publication of the Consumer Product Safety Commission report. The company cannot tolerate a lack of quality in front of Nike, in order to keep market shares.
The company provides retirements benefits to most of their employees. According to a recent report, the company planned pensions of €67 million but they reached €74 million, so an unfunded status of €7 million. (Marketline, 2012) In order to enhance its efficiency Adidas undertook reorganization. Indeed, the company moved to a function-related structure from a vertically integrated brand structure. Adidas has many agreements for sports events: * Australia Olympic Committee until 2016 * Japan Football Association until 2015 * Spanish Football Federation until 2018 * Argentine Football Association until 2022 FIFA World Cup 2014 * UEFA EURO 2016 * UEFA Champions League * 11 year global agreements with the NBA (official sponsor NBA, Women’s NBA and the NBA Development League) These events will help the company to en enhance its brand image and awareness among customers and also to strength its profitability. The global footwear market, not only the European market, has shown a growth in recent years. According to Datamonitor, the global footwear market grew by 2. 6% in 2009 to reach a value of $196. 3 billion. Footwear, clothing, accessories and sportswear are the largest segments, accounting for 67. % of the market’s total value. Market’s forecast will reach the value of $230. 8 billion by 2014, representing an increase of 17. 6% from 2009. (Marketline, 2012) With the development of Asian countries, and the outsourcing of manufacturing of western companies in these countries, the counterfeit has increased and it’s a reel threat for companies. Adidas his facing competition of big companies, we identify as Adidas main competitors Nike, Puma, Callaway Golf Company and New Balance. As last threat we see the fluctuations of foreign currencies.
For instance, in India a brand like Adidas is for the high-class society otherwise they cannot afford a football shirt, which cost about 60?. (Marketline, 2012) 4. Consumer Analysis| CONSUMER SEGMENTATION BASES| Behavioural| Demographic| * User status * Usage rate * Usage occasion * Brand loyalty * Benefits sought | * Income * Age * Sex * Race * Family| Psychographic| Geographic | * Values * Opinions * Attitudes Activities * Lifestyle| * International * Regional| This table shows the consumer segmentation bases that any company can use.
They are usually the same regardless of the sector. Companies use segmentation in order to divid into groups’ consumers that have some characteristics and needs in common (Doole et al. , 2005). Hence, the company can attract easily those groups with specifics products. As his main competitor, Nike, Adidas target particularly young and middle age that practice sport. Another category of Adidas’s consumers has made by teams’ supporters (Real Madrid sold 1. 4 million shirts, Goal. com). Furthermore, there is a turnover of €1. 2 billion in goods related to football (Reuters 2012).
Because of is large portfolio the company attract different customer markets with each brand, for instance golf interested consumers with TaylorMade-adidas Golf. The following perceptual map shows the positioning of Adidas as a company offering high quality products for a High price. Foot Locker and K-Swiss try to attract people with a lower income, whereas Nike and Puma apply the same price-quality strategy than Adidas. The competitive advantage of Adidas in comparison to those two companies, however, is its positive brand image. At least, in the decision-making units (D. M.
U) we may be influence by friends, the press or by the company’s advertising. The person who buys, decides and uses is usually the same. 5. Marketing Objectives| As any company, which is not the leader in his sector, Adidas has as objective to try to extend his market shares and in long terms strategy to be the leader by a continuous research and development of innovation. Through these innovations steps Adidas can provide comprehensive solutions to his customers (Kotlet and Keller, 2009). One of the reasons of Adidas’s campaigns effectiveness is his brand awareness with his three bands logo.
And also is slogan “Impossible is nothing”, outpace our limits; make the impossible possible. In a survey reported by SportsOne (2010), 98. 8% of the respondent pool aged 13 and up that purchased athletic footwear or apparel could associate at each one of the brand elements to the company name. And another key factor is the role of celebrity endorsement. Through this marketing tool fans can associate themselves to the celebrity and to the brand. 6. Communications Mix| In order to target a wide audience and to build its brand equity, Adidas uses several marketing communications tools.
According to Duncan and Moriarty the brand delivers impressions, that can strengthen or weaken customers views of a company, on each contact it has with his customers. Kotler and Keller reinforce this as they said the shape and colour of the package, the product’s style and price, the store decor, the salesperson’s (dress and manner) communicates to buyers. 6. 1 Sports sponsorship Because they benefits of a large coverage, sports activities are more attractive to sponsors (Fill, 2011). Indeed, sport events are the most sponsored because: * They attract large audience * Simplistic measure of segmentation Events duration permits to be more visible As shown above Adidas’s main segment is football with a market share of 34% (Chazouilleres, 2010). Therefore, Adidas’s sponsorship with major football teams has been motivated because of “the attraction of large and specific target audiences with whom a degree of fit is considered to exist” (Fill, 2011). Amongst football teams we can mention clubs like Real Madrid (2nd largest fans group in world), Chelsea (6th); national teams as Argentina, Spain; and of course the sponsorships of major football competition for years (FIFA World Cup, Olympics…). |
Sponsorship is one of the important parts of the communications mix because it allows companies to communicate without the clutter of advertising. Of all types of sponsorship sport has captioned most attention and money (Fill, 2011). 6. 2 Celebrity endorsement In particular, a celebrity endorser should have a high level of visibility and a rich set of potentially useful associations, judgements and feelings (McCracken, 1989). Therefore, celebrities can play a more strategic role for their brands, not only by endorsing a product but also helping to design, position and sell merchandise and services.
In these last years Adidas has sponsored many famous football players as Zinedine Zidane, David Beckham. Nowadays the main celebrity endorsed by Adidas is definitely Lionel Messi. They aim to attract football fans, and Adidas launched couple of weeks ago special football shoes for Lionel Messi (AdiZero F50, with a computer chip inside). 6. 3 Product placements Another tool of the communications mix is the product placement. This tool consists of putting his products, usually, in movies. Adidas uses this media because it’s a “billion dollar market” (Scevak, 2001).
But since a decade product placement is not only made in movies but in all types of TV shows (Steinberg and Vranica, 2004). Since the release of “Blades of Glory”, we know that figure skating without Adidas is simply not the truth. The main characters guide you through the whole movie. In 2007 Adidas was already present in “Norbit,” “Stomp the Yard” and “The Messengers”. 7. Recommendations| For the future Adidas should be more aware about his brand image. Outsourcing 98% of his production in Asian country can affect his brand image because of the poor quality these manufacturers offer.
By outsourcing his production can damage is research and development, which cost a lot. These two things, innovation and lack of quality, don’t match. Adidas should handle it as soon as possible in order to extend his market shares and face the competition. The company should continue to sign celebrities as they currently do. The celebrity endorsement is the main key of the marketing campaigns. But Adidas should not only focus on football market (even if is reliable market). It shows that company depends a lot on it. If in the future the market goes down, Adidas can be heavily affects by this.
An ultimate recommendation can be to reinforce his presence on social networks as its use is growing amongst the youth market. 8. Conclusion| In this report we gave an overview of Adidas and the European sports equipment market. And we remarked that Adidas is the leading group in football industry, and the 2nd in sports equipment industry (after Nike). Then the report focused on the French sports equipment market. We analysed the market through two analyses, as follows: PESTEL, Porter’s five forces; and we made the SWOT analysis for Adidas. Targeted consumer are analysed nd marketing objectives are given to know how Adidas approach these consumers. We choose three different tools – sports sponsorship, celebrity endorsement and product placement – in order to explain the communication strategy used by Adidas. Finally, recommendations are done on how, in future, Adidas can maintain his leading position in the football industry and how to extend market shares and how face the competition. 9. Bibliography| Marketline (2012) Industry Profile – Europe Sports Equipment Marketline (2012) Industry Profile – France Sports Equipment Datamonitor (2011) Country Analysis Report France
Datamonitor (2011) Company Profile adidas AG Institut national de la statistique et des etudes economiques –Insee (2012) Bilan demographique SportsOne (2010) Doole, I. , Lancaster, P. and Lowe, R. (2005) Understanding and managing customers, Essex: FT Prentice Hall Kotler, P. and Keller, K. L. (2009) Marketing Management, 13th Edition, Pearson International Edition Duncan, T. and Moriarty, S. (2006) “How Integrated Marketing Communication’s ‘Touch Points’ can operationalize the service-dominant logic”, The Service-Dominant Logic of Marketing: Dialog, Debate, and Directions
Fill, C. (2011) Essentials of marketing communications, 1st Edition, Prentice Hall Steinberg, B. and Vranica, S. (2004) “Prime-Time TV’s New Guest Stars: Products”, Wall Street Journal, January 13, 2004 McCracken, G. (1989) “Who is the celebrity endorser? Cultural foundations of the endorsement process”, Journal of Consumer Research, December 1989, 16 Scevak, N. (2001) “The Evolution of Product Placement” Available URL: http://www. internetnews. com/bus-news/article. php/785431/The+Evolution+of +Product+Placement. htm