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Analysis of the Adidas Group (AG)

Paper Type: Free Assignment Study Level: University / Undergraduate
Wordcount: 6874 words Published: 26th Oct 2021

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We decided to base our Assignment on the Adidas Group which is a German multinational corporation founded in 1949 by Adolf Dassler in Herzogenaurach, Bavaria. The Adidas Group consists of Reebok, TaylorMade, Five Ten and Runtastic; and it manufactures and designs sports shoes, clothing and accessories (Wikipedia 2015). Therefore, the Adidas Group makes use of a multi-brand strategy, as the company believes its customers deserve choice. Different groups of customers are targeted: athletes as well as fashion-conscious people; Adidas defines itself as both a mass and niche player and insists on keeping each of its brands identity (Adidas Group 2015).

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Since 1949, Adidas has grown to become Europe’s largest sportswear manufacturer and the second biggest one in the world. It is its market position (the company owns 35% of global market share) (Adidas Group 2015) and high presence in young people’s everyday life that made us choose to work with it for this assignment. Today, Adidas sells its products in 150 countries worldwide.

Question 1

a) Geert Hofstede developed five dimensions of culture which describe countries’ work-oriented cultures and how these relate to behaviour. The analysis of Power Distance, Individualism, Masculinity, Uncertainty Avoidance and Long Term Orientation describe the influence in the workplace in different countries. (The Hofstede Centre 2014)

Power Distance

Highly dispersed and reinforced by a strong middle class, Germany is among  the countries with the lower power distance (Score of 35). In Germany it is normal to communicate in a direct and participate way, control is not appreciated and ‘know-how’ is favoured. (The Hofstede Centre 2014)


Individualist societies put emphasis on themselves and their closest relatives. From its relatively high score on Hofstede’s test (67), it can be concluded that Germany is an individualist country. The German society favours its own rights, its personal achievements and needs. Large and extended families are not a common characteristic of the German society; and this society’s sense of communication is very direct, honest and straightforward. In the workplace, this also means that employees will often get a second chance, and will be pushed to learn from their mistakes. (The Hofstede Centre 2014)


In a masculine society, it is important that leaders are confident, critical and aggressive.

With a score of 66 Germany is considered a masculine society. Good performance is highly cherished as in school, children are separated into different types of school systems at the age of ten in order to perform well. (The Hofstede Centre 2014)

Uncertainty Avoidance

Uncertainty means that the future is unpredictable. This arises the question whether the future should be controlled or not.

Germany is among those uncertainty avoiding countries, meaning that Germany tends to slightly be avoidant.  For instance, this uncertainty avoidance can be found in the law system. Germans have a system where details are well structured and equal in order to create certainty. As well as in the relativeness to low Power Distance, Germans try to compensate the uncertainty on expertising. (The Hofstede Centre 2014)

Long-term orientation

Germany scores very high (83) on long-term orientation. This makes Germans very pragmatic, meaning that they strongly believe that context, situation and time play a part in the truth. It also is a society in which persistence, thriftiness and perseverance in achieving results dominate. This also reflects in Germans saving and investing a big part of their income. Long-term orientation therefore reflects how societies manage to maintain some links with their own past while dealing with the challenges of the present and future (The Hofstede Centre 2014)

b) The Triad was first composed of the three old global powers: Japan, the United States and Western Europe. Today, it has a broader definition which also includes Asia Pacific. A quantitative approach will determine Adidas AG’s international orientation using the same technique as Rugman & Verbeke. For the necessary calculations, the whole population is divided into three subsets: North America, Europe and Asia Pacific. Total sales in 2015 amounted €16,915million (Adidas AG 2015).

According to Adidas Group’s fiscal annual report of 2015, their best market share performance was in its home-based triad region: Western Europe, with 4,539millions net sales. This amount consists of 26.83% of total sales (4539/16195). Sales in North America amounted 2753€ millions (Adidas AG 2015), giving 16.28% of total sales. Finally, the Asia Pacific region amounted of 3245€ millions, which leads to 19.2% of total sales. The results show that the company follows a bi-regional path, since 20% of its total sales are home-region based, and another 20% are based in Asia Pacific. This is first explained by the fact that the firm targets the western culture by promoting European values through its marketing techniques. Moreover, Western Europe is its domestic market, which allows the company to use mass promotion and launch innovation. Its high presence in Asia Pacific can be explained through its recent access to this market Therefore, the high sales are explained through the market size of Asia Pacific, allowing the firm to sell a high amount of products.

Question 2

a) In the following, two ownership advantages of the OLI paradigm of Adidas Group will be discussed.

First of all, Adidas AG’s clear value-added possession is its continuous technological innovation. An ownership advantage is reflected as a resource that can be transferred through cross-border barriers and help the firm attain a competitive advantage in foreign countries. This definition perfectly suits a technological property since it is an intangible good that can be used in foreign countries with ease. An example of this resource is the Adidas Boost; an innovation that hit the industry hard because it enabled the company to create healthier shoes and increase their performance. The Boost platform has instead of the normal foam-based cushioning, individual capsules. These capsules are able to absorb energy and release the energy at a consistent rate (So 2015).

Adidas also works with knowledgeable and valued partners in order to create more innovative ,they for example work with Parley for the Oceans to make a sustainable shoe created entirely from recycled ocean plastic. This shoe aims to demonstrate how the industry can influence and stop the ocean plastic pollution (Liedtke 2015). The company has a monopoly on this innovation, increasing customer’s’ satisfaction and competitiveness within the textile industry.

Secondly, this advantage is followed and sustained by the firm’s top branding strategy. This is clearly a resource that can be showed by how Adidas Group intensively promotes its products throughout the 169 countries it serves; (Adidas Group 2015) which is concentrated mainly on television and product placement. The marketing team of the firm is famous for their creativity, and known advertising (Bhasin 2014). Adidas AG also concentrates on sending a strong marketing message to the customer with for example their tagline “Impossible is nothing”. All promotion strategies are not only adapted to the country but also projects the idea that Adidas shoes are a must-have. In addition, the company promotes a “cool brand” with the link of its shoes to celebrities such as Messi and Ronaldinho (Adidas Group 2015). Moreover Adidas Group also sponsors football teams like Real Madrid, France and Great Britain (Bold 2016)

b) When analyzing the theories of International Business in Lecture 2, clear differences can be depicted between born globals and the Uppsala model. The Uppsala model focuses on learning processes by following a step-by-step expansion. Born Globals seek to derive significant competitive advantages from the use of resources and the sale of output it multiple countries from the very beginning. Adolf Adi Dassler, founder of the Adidas Group, started producing shoes in 1924 in his mother’s kitchen in Herzogenaurach. By the Summer Olympics in 1936, Adi Dassler convinced U.S. sprinter Jesse Owens to use his shoes. Owen won that year four gold medals, this event laid the foundation for the good reputation of Dassler shoes among the world’s most famous sportsmen. When Adolf Dassler died, his son, Horst Dassler, sold the company in 1987 to a French industrialist Bernard Tapie. Tapie decided to move production offshore to Asia. In 2004 adidas launched a joint-venture with Stella McCartney launching a line of sports performance collection for women called “Adidas by Stella McCartney”. In 2005, Adidas declared that it was thinking of buying the British company Reebok to have closer business sales to those in Nike in North America, this allowed Adidas to compete with Nike as the number two athletic shoemaker.  (Barrett 2008). Based on this facts it becomes clear that Adidas succeeded internationally by experiential knowledge, so by using the Uppsala Model. It can be seen that Adidas slowly grew by starting off in the Olympic games with international athletes and later by joint ventures and finally by buying other companies to increase its competitiveness. The Adidas Group internationalized by a dynamic process of learning in which it decided its next step based on what they knew at the time.

Question 3

a) After conducting research, Qatar seemed to be most appealing for Adidas AG because Qatar aims to become the leader of FDI in the Middle East and the FDI flow into Qatar reached more than USD 30 billion in 2012 (Santander 2016). First of all, Qatar has easy and cheap access to important resources such as oil and gas (Annual Statistical Bulletin 2015) which can be profitable for Adidas AG’s production processes. Secondly, during the last few years, the country has increasingly opened itself to the world. This is first supported by its active and full membership in World Trade Organization and United Nations (United Nations 2015), and emphasized by its status of host country for FIFA 2022. The world cup starting in 2022, could be a major opportunity for Adidas AG. Thirdly, Qatar is hardly trying to attract foreign countries to sustain economic development and socialization. That is why the government restrictions, such as tax regimes and law regulations, are low in Qatar. As you can see on figure 1, Qatar has one of the lowest corporate taxes in the world, 10 %. (Santander 2016) and has the loosest law regulations in general. In terms of its economical achievements, Qatar is the richest nation of the Middle East, with a GDP of US $ 227 billion (2015) (Global Finance 2016), which you can see on figure 2. Qatar also has main alliances with its neighbors, such as Saudi Arabia, giving it easy access to potential markets. Furthermore, Qatar has a strong labour force in the primary and secondary sector. (Just Here 2013). According to Bhaita (2014) 10% of the labour force has a hard time finding a well-paid job. This is a main advantage for Adidas AG, since there is a significant amount of labour force available.

Since the past years, MNE’s shape the market in Qatar, meaning that costs and benefits varying for the employees. Despite n an increase of 4.1% in salary in 2015, (Hay Group 2014) Adidas would be able to keep up with the wages and pay the workers more than the regional companies, which would give them an internalisation and competitive advantage. Qatar’s capital market attracts a significant number of financial institutions, hence monetary investments are welcome. Adidas expects an increase of 2 billion € due to the world cup in Qatar (Adidas Group 2014).

b) Adidas AG is already exporting its products inform of retail stores to Qatar, but by producing its goods in the country, Adidas AG would be more present in Qatar and therefore can even increase its sales. Adidas AG has to adapt its current strategies goals in order to be successful in Qatar. Adidas AG’s current strategy is made out of three components; speed, cities and open source (Adidas Group 2015). Speed in terms of customer satisfaction and internal decision making, cities meaning the increase of presence in big cities, and open source meaning that consumers and partners are becoming part of the brand. Adidas is able to adapt speed, cities and open source in Qatar, independent of the threats and opportunities, without any negative outcomes.

However, in order to be successful, Adidas AG should take advantage of Qatar’s resources in order to produce its products. Oil and Petroleum is important for the energy use of the production process. By striking a deal with for example the big Qatari company ‘Qatar Petroleum’, Adidas would be certain to have reliable and consistent supply. Due to the low taxes, Adidas AG could increase its profit by lowering its expenses on taxes, which is only doable in Qatar. Adidas would have to set up a contract with the Qatari government in order to be able to benefit from the 10% corporate tax, which would otherwise be 35%, if Adidas does not set up a contract. (Simons 2015)

However, Adidas AG needs to overcome some barriers when opening a production facility in Qatar. First of all, Adidas should hire qualified English speaking management in order to overcome the national language barriers and to follow the current strategy. Furthermore, Adidas has significant competition from the Qatari sportswear producer ‘Burrda’ (Burrda 2014). Adidas should overcome this competition problem by increasing its advertising expenses in order to  make the Qatari population aware of Adidas. In addition, due to the high percentage of muslims in Qatar, Adidas should provide prayer free time for the workers, in order to overcome the cultural differences (Wikipedia 2016). Another problem in Qatar is the mistreatment of workers in the primary sector of MNEs (Human Rights Watch 2015). Adidas needs to take into account the basic human labour rights, such as Article 23 and Article 24 in the human rights when hiring workers for the factory.

Question 4

a) Adidas has a history of failing to protect its workers abroad, especially in Indonesia, where the company manufactures a lot. There, Adidas has faced allegations of abusing labour rights, violating workers’ safety and more generally transgressing worker freedom (Lukianchikov 2015). Several recent incidents have proved that Adidas’ workers aren’t able to use their due rights to a living wage, to acceptable working conditions, to negotiating and to compensation or severance. In 2010, a factory in Indonesia supplying Adidas was closed because of labour rights violations. Following that, almost 3000 workers found themselves without receiving any severance pay as Adidas refused to contribute to this payment, which they said they were not supposed to pay. In 2012, several more labor rights abuses, including some in Indonesia were made public; right before the London Olympic Games, it emerged that the Great Britain team uniforms supplied by Adidas were in fact produced in sweatshops throughout Asia. In 2012, workers of another Indonesian factory were dismissed because they went on strike to denounce their working conditions. The sweatshop situation in Indonesia has alarmed the European Parliament (Burke 2000), as it was revealed that in fact two factories in Jakarta supplying Adidas were making use of child labour, as well as sexual harassment and unpaid and forced overtime. 15-year old children were being forced to work more than 75 hours a week while being paid at a rate below what is legal.

This issue is an ethical dilemma for Adidas, as it reveals the company  exploits its employees from developing countries solely for the sake of profit. Sweatshops are socially unacceptable and considered almost as slavery, which in the 21st century is not something that is possible. Also, the fact that Adidas is a multi million dollar company makes it hard to believe that it needs to use sweatshops to cut costs.

The three most important stakeholders for the ethical dilemma (in order of importance) are the employees of the concerned local factories in Jakarta; followed by the Indonesian government and by the top managers at Adidas. This is because, most importantly, workers from the Jakarta sweatshops are those who are directly affected by Adidas’ production. The Indonesian government is also an important stakeholder for the dilemma, as the country’s image suffers from these human rights violations made public. Also, as a secondary stakeholder, the government should regulate its labour market in order to avoid the possibility of child labour and more generally, of  sweatshops. The last affected stakeholder is Adidas’ top management, as it is being accused of Third World exploitation just for the sake of higher profit. Adidas suffers from this derogatory image and top managers are the ones accused of ordering abusive labour.

b) Adidas deals with its ethical dilemma by denying its responsibility in the use of sweatshops. A spokesman for the company stated that Adidas is devoted to “ensuring fair labour practices, fair wages and safe working conditions throughout our global supply chain” (Marks 2012). Adidas does not deny the existence of these labour abusive factories in Indonesia, but argues that it has nothing to do with it as they are not Adidas-owned or managed factories. Indeed, orders are very often sub-contracted at a local level, meaning that Adidas managers do not necessarily know where production actually happens (Bunting 2011). However, Adidas intervened in the two troublesome factories by sending its experts to analyse the situation. This ended in Adidas increasing pay, in reduction of the quotas, in the factories having to keep track of their workers’ age to ensure no children were working there. Eventually, Adidas more or less admitted its implication in the dilemma when the company took on action (Marks 2012).

Top management was affected by the dilemma when media attention rose and made the company look unfair and unethical. Local workers are affected everyday by the dilemma as their working conditions are horrible. Lastly, the Indonesian government is affected by the dilemma as well as it was also hit by the scandal: it finally came to light that the labour situation had to be regulated, so that workers could have bearable lives.

This ethical dilemma and its stakeholders have a global relevance, as Adidas is not the only company in the clothing industry concerned with such an accusation: companies such as Nike, Gap, Mango, Benetton, Victoria’s Secret and J Crew have also been said to make use of sweatshops (Ciaramidaro 2015). Furthermore, many countries other than Indonesia have also been accused of using sweatshops in their production: Bangladesh, Vietnam and China are repeatedly cited in the media. The associated stakeholders also have a global relevance, as they are the same as for the other concerned companies.

Adidas has a globally standardized strategy to cope with its sweatshop dilemma as other clothing companies have had the same response of first denying its responsibility and then eventually trying to get the situation under control by satisfying activists and trying to better employees’ working conditions.

Question 5

a) Market Seeking

The main goal of Adidas AG is to become the biggest footwear company in the world and in order to achieve this they are constantly expanding and finding new markets. As a matter of fact, Adidas AG is almost represented in every country of the world. By entering in China, Adidas AG was able to largely expand its market . Adidas is still seeking market in China and that’s why it is planning to open 3000 more stores by 2020 (Zillman 2016).Adidas already has 9000 stores in China but wants to expand this even more(Zillman 2016). Adidas decided to increase it’s in expansion in China because it saw an 18% sale increase in China, Hong Kong and Taiwan last year (Zillman 2016). China has always been an very important market for Adidas group and last year it recorded the highest sales ever in the area being  $2,75 billion. China is the second largest market for Adidas. Another factor of expanding in China, is that the government has introduced new regulations that aims to reform the football industry. (Zillman 2016)

Efficiency Seeking

Adidas started expanding in Vietnam in 1993, but only in 2009 it officially started functioning properly. In just two years Adidas opened 50 shops and employed more than 80,000 people.  One of the reasons why Adidas chose to expand to Vietnam is to seek Efficiency. Vietnam is known for it’s cheap labour and sweatshops. Most people in Vietnam like to see more sweatshop rather than less of them because those shops provide work for people who otherwise wouldn’t have one. For people living in Vietnam three dollars a day is a lot of money, this makes it easy to understand why Adidas seeks efficiency in Vietnam. At the beginning Adidas produced all shoes and apparel by it’s own in Germany, but when the company started growing, Adidas outsourced in 1993 to Asia because of its cheap labor and low raw materials cost. (Hays 2008)

b) In the last 6 to 8 years, Adidas has used different foreign entry modes. For instance, Adidas AG formed a Joint Venture with the Brazilian shoe company Vulcabras in 2008. Vulcabras distributed Reebok goods in Brazil, Paraguay and Argentina. Adidas could not have expanded in Latin America in a better way as the best way to do business there is if you have a guide with experience in the area (Crespo 2009). Adidas Group also decided to take this decision in order to give their Reebok division a boost and improve its distribution network in the emerging markets of South America. The joint venture is also a way for Adidas group to promote sales growth by having their own distribution networks instead of having to pay royalties by working with and apart distributor. (RAM 2008).

In addition, Adidas Group was in 2015 the first multinational sportswear company to convince the Indian government to open 100% foreign-owned shops in India. The fact that Adidas will have its own retail gives them the opportunity to increase their leadership position even more. In addition India could become one of the top 5 markets for Adidas by 2020 due to this foreign direct investment. (Sarkar 2015)

Question 6

a) Adidas Group benefits from a comparative advantage which is part of global sourcing. This is achieved when firms procure the inputs they need all over the world. Closely followed by Nike, Adidas AG achieves this advantage by acquiring nearly 100% of the inputs used in their athletic shoes from foreign suppliers. Hence, in 2014, 64% of the firm’s suppliers where Asia based (China, Korea, Vietnam, Indonesia, Japan), 23% consisted of the Americas (United States, Brazil, Canada, Argentina, Mexico) and the last 13% were Europe based (Adidas AG annual report 2015). The firm argues that the best strategy to maximize the benefits from this advantage is to build long-term relationships with their suppliers. Through this relationship building, the firm creates strong trust-based alliances which allows it to acquire the best quality at fair prices. This represents the main advantage that the firm has benefit from going global. It allows a flexible production which provides high-quality products at a fair price. The statistics shows that nearly 87% of suppliers are not based in the firm’s home triad region. This shows that the company heavily relies on continuous foreign supply, increasing dependence among foreign countries and policies. Therefore, the firm would be disadvantaged by acquiring all supplies from their home region, since those seem to be more expensive.

Its entry to the world of globalization has led the company to increase its sales revenues abroad. Adidas AG annual report (2015) showed that the company’s net sales are higher in their home region, Western Europe (4539€ millions), but this is closely followed by the net sales in North America (2573€ millions), China (2469€ millions), MEAA (2388) and Latin America (1783€ millions). This shows that their revenue is almost equally spread over the world. This leads the company to benefit from diversification of risk, which is due to an intense repartition of sales over the world. Therefore, if a region is subject to recession or disaster, the company can rely on its sales from the regions that are not affected. This diversifies risks, which tend to increase when firms go global since they rely on foreign suppliers and customers, thus are more interdependent across countries. If the company was to operate regionally, the risk would be greater. This is because if the European economy is hardly hit, the revenue of the company would follow the disaster.

b) The company follows its corporate social strategy by setting achievable 10-year-goals which are then achieved through the implementation of proper objectives and strategies that gradually lead to attain the goals. The goals flow from waste reductions to water savings and other reductions in what is negatively correlated with the environment (Adidas AG Sustainability report 2015). Since 1998, the company has adopted a code of conduct for its suppliers (Workplace Standards) that ensures a continuous respect of human rights in the foreign relationships that the company uses to create its products. (Adidas Sustainability report 2015) This was followed by the adoption of a Restricted Substances policy which promoted the use of non-toxic inputs. The last ten years enable higher sustainability standards for the company, which tried to rise the bar higher each year by adopting a new policy or increasing sustainable transparency. The firm’s corporate social strategy is directly correlated with Coolfinity’s because the guest firm’s has connected his firm’s objectives with social objectives. Coolfinity creates fridges that can be use without power in developing countries, to which they added the  sustainable side. In fact, the fridge can be use for medicine which helps developing countries and promotes a concerned company. Adidas followed a similar path by making sure to use non-toxic inputs in their products, which aligned its strategic objectives with its corporate strategy plan. Finally, corporate social responsibility is more important for a company such as Coolfinity, since it is part of its strategic objectives.

Question 7

a) In August 2015, Adidas group bought the Australian application Runtastic GmbH (Adidas Group 2015 ). Adidas group strategic business plan was to ‘Create the New’ and by buying this application Adidas accentuated once again the commitment of Adidas group to motivate and help athletes of all levels to include sports in their daily lives (Adidas Group 2015).

Runtastic was founded in 2009 and has experiences a rapid growth. Today, Runtastic has more than 140 million downloads and 70 million active users. The app can function in 18 different languages and is already one most diverse global players in the health and fitness app market (Hainer 2015). It also offers 20 fitness and endurance apps and recently also branched into software. Adidas did not only buy Runtastic to be able to access the 70 million active users but also to further compete with Nike. Nike has dominated for a long-time the running footwear and has had big success with its tech offerings. In 2012, Nike came out with Apple and the Ipod and was one of the first fitness trackers. Adidas buying Runtastic means that they will try to break into a market that Nike has been leading (Roberts 2015).

b) Adidas AG follows the global standardization strategy (global product division) with high benefits of aggregation and low benefits of adaptation. Adidas AG is ”treating the world as a single market  and selling, marketing and distributing the standard products and services worldwide” (Mishra 2011). Therefore, Adidas AG sells its standardized footwear and sports equipment in 169 countries (Adidas Group 2015) in order to achieve the maximum benefit for its global sales. This makes Adidas a global company. Adidas AG replicates its products in the countries where the firm is operating in and therefore can focus on the improvement of quality rather than to local responsiveness. (Mishra 2011). However, good quality promotes the brand presence worldwide and results in customer preference, which is a significant advantage for Adidas AG. The global strategy also brings new knowledge to the company since Adidas is present in 169 countries. (Mishra 2011). Moreover, the demand for sportswear and equipment is present in every country and therefore Adidas AG has an advantage of a consistent demand and attractiveness in most markets worldwide (Mishra 2011). Furthermore, Adidas AG’s global strategy helps to gain competitive advantage, by playing out local smaller firms (Mishra 2011). An example of this is the Chinese sports shoe manufacturer Li Ning, who was market leader in Asia before Adidas has operated the Asian market. Li Ning had major decreases in sales in Asia, after Adidas entered the market (Bloomberg 2008).



  Qatar Middle East & North Africa United States Germany
Number of Payments of Taxes per Year 4.0 19.0 10.6 9.0
Time Taken For Administrative Formalities (Hours) 41.0 221.0 175.0 218.0
Total Share of Taxes (% of Profit) 11.3 32.1 43.9 48.8


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