Adidas

Brand Management Assignment

1 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment carried out through literature review and by studying the official web site of Adidas- www.adidas.com. Adidas was started in 1920 by Adi Dassler because of his passion for sports and shoemaking and with three guiding principles in mind - to produce the best shoe to serve the needs of sport, to protect the athlete from injury and to make the product durable. With profits and with more family members joining in, the company expanded in the next decade. Adidas has streamed into three divisions- Performance, Style and Originals. With these divisions, Adidas diversified into fashion and style for the general public. Adidas, as a brand, is quite popular especially among sports persons/ athletes. It boasts of an attractive consumer value proposition. The tangible and intangible resources of the company are integrated with the brand in terms of brand image and reputation. Adidas has a strong brand image in the terms that it is recognised as a company that provides durable and sporty products. The three stripes logo of Adidas is well recognised and the consistency in the use of this logo has created a strong association of three stripes with Adidas. The clothing and accessories of Adidas are not so popular in the general public as its footwear. This is because the brand image is mainly related to footwear, especially sports footwear. Therefore, it is recommended that the company explore new vistas and expand into the wider market that is available to it right now. The present profits of Adidas have increased in the past one year by around 8%. With further development of the company’s marketing strategy and business plans Adidas can grow to be the largest brand in the market, not only the sports market but also the general market of footwear, clothing and accessories.

Introduction 2 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment A brand is usually linked to the identity of a product and its differentiation from competitors. Because of the growing importance of brand, ‘brand management’ has emerged as an important area of research. Brand management is a relatively new phenomenon. Since the 1980s, researchers and practitioners have been exploring the domain, nature and potential of brand. Heding, Knudtzen & Bjerre (2009) list seven approaches to brandingi.

The economic approach

ii.

The identity approach

iii.

The consumer-based approach

iv.

The personality approach

v.

The relational approach

vi.

The community approach

vii.

The cultural approach

These brand approaches are neither mutually discreet nor mutually comprehensive; but brands usually involve more than one of these approaches. Adidas is the brand for which this report has been prepared. Adidas has been taken up because it is a globally established brand and therefore, has

several

areas

of

brand

management

that

can

be

explored.

Investigating brand management and making suggestions requires a study of various factors/ elements like brand identity, endorsements, target market, brand value, product range etc. Adidas has a long history of evolution and hence, its brand and brand image can be seen growing and adapting with times. From a small unit of production, Adidas is today a name known by one and all. Everybody can identify the three stripes as the official logo of Adidas. The research on the brand has been carried out through literature review and by studying the official web site of Adidas- www.adidas.com. The report has thus been formulated based on both primary and secondary 3 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment research. Recommendations have been made in the last part of the Report.

Brief History (Source: http://www.adidas.com/in/shared/aboutadidas.asp)

Adidas is a very well known brand name worldwide. It was an initiative by Adi Dassler (from whom the company gets its name) in the 1920s. Adi Dassler started Adidas because of his passion for sports and shoemaking and with three guiding principles in mind - to produce the best shoe to serve the needs of sport, to protect the athlete from injury and to make the product durable. He started with no machinery and no electricity and manufactured a few handmade leather shoes with the help of two hired shoemakers. Gradually with profits and with more family members joining in, the company expanded in the next decade. It was Adi Dassler’s innovative and thoughtful designs that persuaded people to join his team and customers to buy Adidas shoes. In 1928, Adidas spikes shoes made their Olympic debut. Olympic success in 1930 fuelled the company further. By 1935, majority of German athletes were donning Adidas shoes. With more success at Olympics, Adi collaborated with the Olympics Committee for designing shoes in 1937. It was actually in 1943 that the company name Adidas came into being, after Adi’s brither split with him and developed Puma (before that, they were together known as Dassler shoes). In 1949, the three stripes were officially registered as the Adidas logo. In 1954, a total of 450,000 pairs of shoes were produced. From mid 1960s, Adidas diversified into sports clothing and balls. Sports items further developed with the manufacture of tennis rackets and other sports equipments in the 1970s. In 1980, Adidas became a corporation but retained its family ownership. In 1995, Adidas went public by starting to manufacture for the general market. 1998 FIFA World Cup was sponsored by Adidas. The year 2001 4 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment saw the record breaking sales of 6.1 billion pounds for Adidas. In 2006, Adidas expanded by acquiring Reebok International. Adidas is still making innovations and growing with each passing year.

ADIDAS as a Brand Brand has three basic components (McDonald, 2007)i.

Brand Strategy- It stems from the position of the brand in the portfolio of the organization.

ii.

Brand Positioning- It is concerned with what the brand actually does and with what it competes.

iii.

Brand Personality- It is a useful descriptor of the perception that consumers have about the brand.

Adidas is known as the largest and the most popular company for sportswear and accessories. Adidas started as a sports footwear company and went on to make associations even with the Olympics Committee. With time, it has also expanded for the general public, but the principle remains the same- providing comfortable and durable products. The designs of Adidas are always innovative; they are still reflective of Adi Dassler’s thoughtful designing. From footwear, Adidas has diversified into sports equipment, clothing and other accessories. Adidas has managed some high profile endorsements and associations. David Beckham, Andre Agassi and Michael Ballack are some of the many celebrity sportspersons who are promoting Adidas. Adidas has tried to balance street credibility with sports performance by developing three streams (Haig, 2004)i.

Sport Performance- Focuses on functionality and innovation

ii.

Sport Heritage- Range of Adidas originals 5 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment iii.

Sport

Style-

For

the

fashion

conscious

consumers,

produced with fashion designer Yohji Yamamoto Sport Performance division still accounts for 70% of overall sales while Sports Heritage and Sport Style account for 25% and 5% respectively. So, Adidas is a brand that is looking both forward and backward.

Brand Value A brand is also a value creating resource for a firm. Creating value for a brand requires four factors (Marr, 2005)i.

An attractive consumer value proposition

ii.

Integration of the brand with the firm’s other tangible and intangible resources

iii.

Market economics permitting returns over the capital

iv.

Brand strategies related to value creation

For luxury goods, brand accounts for 70% importance according to sales/ resource creation in firms. Adidas can also come under luxury products; therefore, the importance or value of brand for Adidas is quite high. Adidas, as a brand, is quite popular especially among sports persons/ athletes. It boasts of an attractive consumer value proposition. The tangible and intangible resources of the company are integrated with the brand in terms of brand image and reputation. Total assets of Adidas in 2008 were worth € 9533 million. The net sales for Adidas at the end of 2008 were € 10799 million and gross profit was worth €

5256

million

(Source:

http://adidas-group.corporate-

publications.com/2008/gb/en/konzernabschluss/consolidated-incomesheet.html). As has already been discussed the three divisions of AdidasSport Performance, Sport Heritage and Sport Style- account for 70%, 25% and 5% of the total sales respectively. Adidas has witnessed a continuous rise in its profits throughout the years and is still in its growing phase. 6 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment These figures are demonstrators of the market economy’s capacity to produce returns on investment or assets. Further, the value of brand is also determined. As pointed out, brand is very important for Adidas and therefore, its value is quite high. The logo, image, reputation and perception all add to the brand value. There are certain qualities associated with the brand Adidas and they accentuate the brand value.

Target Market Target market refers to that section of the market which the company has in mind while developing the product and the market strategy and which the company believes will form the majority of its customers. Marketing plans are formulated according to the target market, taking into account their demographics, demands and specific needs. The brand also integrates the target market and the market strategies. Managers understand brand equity in terms of the target market (Elliott & Percy, 2007). Brand claims are established strongly in the customers’ minds for each specific product, but the perceptions may vary according to variation in different segments of the market. Adidas, as has already been described, started as a company manufacturing footwear for athletes/ sportspersons. Then it expanded to sports equipment and sports clothing. With time and increasing popularity of Adidas, it has also opened up to the general public. The three divisions of Adidas have therefore, developed as- Performance, Originals and Style. The Performance division catering to sportspersons still accounts for the largest portion of sales- 70%. So, the main target market of Adidas is sportspersons/ athletes/ sports teams. But with its diversification, Adidas is also targeting the young ‘sporty’ or ‘adventurous’ market.

7 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment

Product Range Adidas was started as a shoe making unit in 1920 but grew to marketing a large number of products like sports equipment, clothing, accessories etc. At first, all the manufacture was meant for sportspersons/ athletes. However, with growing popular demand, Adidas went public and began marketing products for the general market, especially the young segment. For smooth functionality and convenience, Adidas has divided itself intoPerformance, Originals and Style (these divisions have already been discussed). The official website of Adidas, segments its products into Men and Women. These are then further diversified as footwear, clothing and accessories. The products meant for sports are divided as football, tennis, swimming, basketball, running equipments. Accessories include eyewear, watches, bands etc.

8 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment

Brand Image Brand Image refers to the cumulative impact of all the associations with a particular brand (Mullin, Hardy & Sutton, 2007). For success, the key is to make these associations strong and profitable. Some examples of sources of brand associations are owners, logo, specific products, endorsements, publicity etc. The companies that are well known with established brands are the companies that have managed to build up a strong brand image that forms associations specific only to them. Thus, companies should try to develop brand image based on their unique features. Adidas has a strong brand image in the terms that it is recognised as a company that provides durable and sporty products. The three stripes logo of Adidas is well recognised and the consistency in the use of this 9 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment logo has created a strong association of three stripes with Adidas. The clothing and accessories of Adidas are not so popular in the general public as its footwear. This is because the brand image is mainly related to footwear, especially sports footwear. The wallpapers given below present the brand image as ‘strong’, ‘durable’ and ‘sporty’.

Identity ElementsColour and Logos Brand Image consists of the following components (refer to figure)-

Source: http://www.modernmind.com/brand.htm

Adidas is basically in black and white colours and has a simple logo which has a deeper meaning. The logo of Adidas came into being after three stripes were used on the designs of many shoes manufactured by the company. It was in 1948 that the three stripes were officially registered as 10 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment the Adidas logo. The basic Adidas logo, to this day, comprises of just three slanting stripes and the brand name. However, as Adidas expanded into three divisions- Performance, Originals and Style, it developed new logos and experimented with different colours. The original logo was reserved for the performance division as performance and functionality were the original goals of Adidas products. A light blue flower logo was designed for original Adidas products and a grey ball for Adidas Style. However, care was taken to incorporate the original three stripes in all of these logos. It is this consistent use of three stripes that has maintained a strong brand identity for Adidas.

Adidas Performance Adidas Originals

Adidas Style

ADIDAS’ Style As has already been discussed, Adidas started manufacturing shoes for sports persons/ athletes, but diversified for the general public on popular demand and also started marketing clothing and accessories apart from footwear. Adidas enjoys a ‘cool image’ among the general public and is viewed as a brand that guarantees comfort and durability. Adidas keeps ahead because of its determination and innovation. The products of Adidas are uniquely styled and earn winning points for the brand. Adi Dassler was the first to come up with ideas like fitting shoe soles with 11 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment studs, spikes etc to deliver better performance, his tradition is still being followed in the company. Adidas has been sponsoring major sports events like the FIFA World Cup. Apart from that, the company has also signed up agreements with sports teams for providing footwear, clothing and accessories. Many games use Adidas equipments. Also, popular and famous celebrity sports people like David Beckham, Andre Agassi have also signed contracts with Adidas.

Big Five by Jennifer Aaker Brand personality and values can be defined with the help of Big Five by Jennifer Aaker (1997). These big five are- sincerity, excitement, competence, sophistication, ruggedness. Adidas can be evaluated in these terms. Adidas has been sincere in its approach of providing comfortable, useful and durable products. With innovation and diversification, the company has added to the excitement quotient. It has a competitive edge over other brands in the market because it is unique in its designs and its products are high in terms of quality. Sophistication is expressed through the careful and classy designs of Adidas. Ruggedness is inevitable associated with Adidas because of its sporty and durable image. Brand Personality Sincerity Excitement Competence Sophistication Ruggedness

ADIDAS Comfortable, useful and durable products Innovation and diversification Uniqueness and quality Careful and classy designs Sporty and durable image

Brand Endorsements Since Adidas has penetrated into the general market, publicity and endorsements have become quite significant. Fortunately, Adidas does not need to struggle for endorsements. Having already sponsored major sports events, big sports teams and famous athletes; spots celebrities are 12 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment easily ready to form associations with the company. Adidas has endorsers from all main sports. Football has always been its biggest marketing space. Football players like David Beckham, Zinedine Zadan, Michael Ballack etc have signed agreements with Adidas. Andre Agassi is another big name. An advertisement with David Beckham is given below.

Apart from sports personalities, Adidas has also developed alliances with fashion designers like Stella McCartney and Yohji Yamamoto.

Brand Effectiveness Brand seeks to create an emotional band with the customers and to create strong and positive associations. Branding strategy is very significant because it targets the market segment that the products are created for and promotes sales. The figure given below demonstrates the 13 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment intentions of an organization and their application. The brand can be called the voice of the organization.

Source: http://www.modernmind.com/brand.htm

A simple method to measure the brand effectives is what is called the 4 Ds method. The four Ds stand fori.

Distinctiveness- The brand and brand communication should be very distinct as compared to other visual and audio communications.

ii.

Differentiation- The offer made should be more attractive than all other competitors.

iii.

Defendable- The brand should have proprietary strength to avoid approximations.

iv.

Digitable- Electronic communications have become very important and should be implemented properly.

Brand Effectiveness Distinctiveness Differentiation Defendable Digitable

ADIDAS Use of specific logo and promotions through celebrities Comfort and durability of all products, especially meant for sports Particular quality Well developed web site offering eshopping and comprehensive catalogues

Brand Personality Brand personality is developed to enhance the appeal of a brand to consumers (Gelder, 2003). The brand personality is constructed by the 14 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment brand’s underlying character or the transmission of imagery to the consumer. Brand personality is actually the impression that customers have about the brand. Thus, brand personality may vary from region to region, person to person and time to time. However, it is largely controlled by companies in order to promote positive personality to market the products. Adidas has a strong brand personality which is described in the figure below-

Sports is the first association that customers usually make with Adidas. Adidas products are known to be very durable (having been manufactured for athletes). Also, they have innovative designs for comfortable use which other competitors do not offer strongly. These factors together comprise the brand personality of Adidas. However, there may be other aspects that may develop with time and with the differentiation and different publicity/ promotion of Adidas products.

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Brand Management Assignment

Strengths and Weaknesses Adidas is a strong brand in the market. However, it is not without its flaws. Though the development of Adidas is indeed inspirational, there have been hiccups on the way. The new diversification and expansion that Adidas has undertaken may also pose as speed breakers on the way. Therefore, an analysis of the strengths and weaknesses of the brand is necessary. Strengths  Adidas is a globally known brand name.  Adidas is popular for sports footwear, clothing and accessories.  Adidas is the biggest brand in the sport market, especially so because it enjoys long term relations with the Olympics, FIFA World Cup etc.  Adidas is known for its innovative and functional designs.

 The electronic communication of Adidas is well developed. Its website is also user friendly and promotes business. Weaknesses  Adidas is usually known as a sports brand. It has not yet made its way to the general public in a massive way.  Product differentiation causes narrowing down of the market.  Fashion segment of the brand is largely missing or obscure. The designs are all mainly meant for functionality.  The publicity/ promotion also stresses on the sports aspect of the

company, thus neglecting all other areas. Its competitors are, on the other hand, diversifying into many other segments.

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Brand Management Assignment

Building a Brand Professor David Jobber identifies seven main factors in building successful brands, as illustrated in the diagram below:

(Source: http://tutor2u.net/business/marketing/brands_building_brands.asp)

There may be several stages associated with brand building (Elliot & Percy, 2007). They are illustrated in the diagram below-

As pointed out, trust is the underlying factor for all stages of brand development. A customer should feel cared for and it is the customer’s need that should be taken into consideration to build up this trust. Brand awareness

mainly

depends

upon

the

promotion

and

through

17 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment differentiation and quality, a brand manages to create an emotional bond with the customers which makes the demand for the product rise and be maintained.

Company’s Situation Adidas has been surging forward with diversification and expansion. However, it still has a lot of potential to succeed in the given environment. The gross profits of Adidas in 2008 marked a change of 7.7% over its gross profits in 2007 (sales increased by 4.9% from 2007 to 2008) (Source: Consolidated Balance Sheet, www.adidas.com). Adidas is still trying to grab hold of the market segments where it has not reached till now, like the fashion industry. Therefore, it needs to implement newer policies and promotion strategies.

Recommendations Adidas is a reputed brand in the sports world and broadly speaking, does not have any competitors to match its strength. The company began as a small shoe making unit for sports persons and athletes. But with growth of demand in the market, Adidas opened up to general public. Obviously, the public is not just concerned with sports equipments and accessories. Hence, Adidas has tried to penetrate the market of fashion and style as well. However, the brand is still not known as a fashion brand and people largely associate it with sports and durability, not fashion and style. Therefore, Adidas must try to incorporate its new business strategies with its brand as well. This would imply a change in promotion strategies, advertisements, nature of products, distribution channels etc. The advertisements of Adidas feature sports celebrities and various sporting events.

There

should

be

a

shift

towards

more

fashion

oriented

advertisements. Also, Adidas can try to widen its market by designing products for older age segments and those not interested in sports. This 18 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment will

result

in

further

development

of

the

clothing

and

accessories departments of Adidas. Adidas has always been an innovative and strong; a little push in different areas will help it expand further and beat all other competitors.

List of References 1) About Us, Consolidated Balance Sheet, Consolidated Income Sheet.

Retrieved on 26th May 2009 from www.adidas.com. 2) Brand Image. Retrieved on 26th May 2009 from

www.modernmind.com.

19 presented by: - krishna kumar jaiswal ([email protected])

Brand Management Assignment 3) Building a Brand. Retrieved on 26th May 2009 from

www.tutor2u.net. 4) Elliott, R. & Percy, L. 2007. Strategic brand management. Oxford

University Press, Oxford. 5) Gelder, S.V. 2003. Global Brand Strategy: Unlocking Brand Potential

Across Countries, Cultures & Markets. Kogan Page Publishers, New York. 6) Haig, M. 2004. Brand royalty: how the world's top 100 brands thrive

and survive. Kogan Page Publishers, New York. 7) Heding, T., Knudtzen, C.F. & Bjerre, M. 2009. Brand Management:

Theory and Practice. Taylor & Francis, London. 8) Marr, B. 2005. Perspectives on intellectual capital. Butterworth-

Heinemann, London. 9) McDonald, M. 2007. Marketing plans: how to prepare them, how to

use them. Butterworth-Heinemann, London. 10)

Mullin, B.J., Hardy, S. & Sutton, W.A. 2007. Sport marketing.

Human Kinetics, New York.

20 presented by: - krishna kumar jaiswal ([email protected])