Founded in Herzogenaurach, Germany in 1924, Adidas is a
multinational corporation that started off as a sports footwear brand but has
ventured deeper into the fashion industry. With its reputation as Forbe’s 3rd
most valuable brands in sports, Adidas continues to delve in various sports and
maintaining its reputation as one of top sports brands. Adidas has constantly
building itself on a passion for sports and a sporting lifestyle. It has over
60, 617 employees in 2016 worldwide and has over 1,700 concept stores
worldwide. In 2016, Adidas Group’s net sales amounted to about 19.29 billion
In this report the mode of entry that Adidas has taken to
make its brand known is discussed as well as the political, legal, economics
and social structure of America that affects the organisation. It is important to
understand mentioned factors to properly place the business internationally and
successfully. By learning about the market and the host country, businesses can
market their product effectively to the right audience.
Mode of entry
It is important that an organisation chooses the right mode
of entry to make its mark in the country and in turn building up the reputation
of the organisation. There is a total of 5 modes of entry and Adidas touches 4
out of 5 of it; exporting, franchising, licensing and wholly owned
Adidas goods are mostly manufactured in China but have a few
other manufacturers around the globe such as in Vietnam, Cambodia, United
States of America and many more. The products are then exported to a lot of the
different countries such as Singapore, Malaysia, Japan and Brazil. The act of
exporting overseas, helps Adidas to avoid the cost of manufacturing operations
in Germany. However, Adidas has recently opened Speedfactory in Germany in
hopes to open a new industry and provide better technology in facilitating
manufacturing of sports goods.
The three-striped brand has more than 13,000 franchise stores
open worldwide. The stores around the world uses their sub-brands such as
Adidas NEO and Adidas Originals to target different audience in the country.
This allows them to have a wider range of audience with different needs. Adidas
is anal on franchising that upholds a premium standard. The organisation aspire
to have a global standard instead of focusing on each different market and
would like all the franchises to follow such standards. This means that they
have a lot more control on how the franchise will operate.
Licensing is common with the organisation as they believe
that Adidas must continuously grow. One way is to enter an agreement with other
specific businesses to make, sell or distribute their products. Adidas Group
has their own licensing division, Sports Licensed Division (SLD). An example would
be Mitchell & Ness Nostalgia Company which is a wholesaler, marketer and
distributor of authentic vintage athletic product, is licensed to Adidas. SLD
uses its manufacturing and design expertise to grow and strengthen the aforementioned
company’s position in the United States’ market as well as key markets around
Adidas is known to have wholly owned subsidiaries as well
though not many is known. Adidas has control over the operations in such
countries over operational matters. Having control also helps Adidas to get
data and analytics faster to remain competitive in the market. An example of a
wholly owned subsidiary Adidas has is in Korea. Adidas acquired the subsidiary with
wanting to strengthen Adidas Korea’s leading position in Asia.
Adidas is known to have a decentralised structure where each
brand runs its own researches, designs and development activities. This is in
line with the unique positioning that each brand has as well as environmental
management. Adidas also has separated operating units choosing software that
suited internal preferences and geography. However, the fundamental and
biomechanical researches are still shared across the Group as well as sharing Research
& Development (R) in each brand.
The organisation also adopts a worldwide area structure
where it focuses Asia, Europe, Latin America and North America. These
continents each have a headquarter set up to oversee the business in such
areas. By adopting this structure, Adidas has the ability to customise to local
market needs. An example would be that in China, the middle class are
constantly evolving and exploring who they are and how they see themselves in
brand new ways. This is their concept of individualism which can be seen as
their ‘freedom’ to consume western branded goods. Adidas is focusing on these
group of people in the Chinese market to gain a bigger following.
PLES in America
Political, legal, economic and social systems are important
for business to take note of. This is because businesses should be aware of the
environment that the host country has in order to penetrate the market
seamlessly. These factors also evolve continuously and have different
implications when setting up a business overseas. Thus, it is important that
businesses understand these factors in the host country. In this section, the
country that will be discussed is America.
America adopts an individualistic approach in its political
system. It believes in the freedom of speech and constantly stands up for
oneself and has a path of their own. The idea itself was established by
American Founders when creating the Declaration and the Constitution. It was
meant to acknowledge each individuals’ rights to life, liberty, property and
the pursuit of happiness. It is believed that the result of individualism is
innovation which leads to many inventions and industrial revolutions.
This suggest that Adidas can practice their own way of
promoting the brand and being innovative as they have a right to do so. Adidas
themselves, promotes the act of being individualistic in terms of the arts and
sports. This is in line with their new motto “Creating the New” where it
focuses on innovative sports technology to improve individual’s health and
happiness which incorporates sportswear as well as streetwear.
America also practices democracy where it secures peace,
expands open markets, promote economic development, improve global environment
and many more. It is said that having democracy helps the economy of the
country as it makes the country more stable and other established democracies
are open to trade and invest. Thus, Adidas investing in
the American market would allow them to access to many other organisations that
have a fair, stable and transparent ruling that can help them establish the
The Americans follows the common law legal system. This
means that actions are taken based on precedent where judicial decisions have
already been made with similar cases in the past. The judge has the power to
interpret law in the different situations and will appropriately determine
sentences. Businesses should be aware of the laws in the country to adhere it
and regulate its business practices. Treaties also play
a part in facilitating commerce between nations. For example, the Germany-USA
taxation treaty where it removes double taxation on income earned by the
American and German resident doing business in the other country.
America has a market economy where the different producers
and consumers determine the kinds of goods and services produced and the price
of the products as well. The market brings together buyers and sellers who establishes
the market prices and output levels for different goods and services. Producers
have free reign of what they sell and how much they want to sell it for.
However, the consumers are the ones to decide whether the money is worth the
product. This back and forth of the producers setting a high price whilst the
consumers want a low price will ultimately determine the price of goods and
services. Thus, Adidas should be aware of the market prices and determine the
price of products based on that to stay competitive.
Social systems are also important to take note in order to
choose the right target audience and to understand the culture of the country.
In America there’s a large 70% of Christians, 20% of Catholics and 6% of other
non-Christian faiths. The main language spoken is English with Spanish being
the second most spoken language. The social structure of Americans is divided
into three: the upper class, middle class and the lower class. The upper class
being the wealthiest whereas the middle class are often white collared and
mostly work professional jobs. The lower class refers to the blue collared
workers that work on a minimum wage. Adidas, should assimilate the social
systems and the culture and apply proper policies and strategies to marketing
in accordance to the culture
Education is regarded important in America; however, it is
known that its education system is failing. Some reasons include insufficient
funding for public schools, lack of teachers that are equipped with proper
trainings, lack of diversity and many more. America has yet to address such
issues due to the lack of financial, time and support resources that can help
to inspire efforts. This shows that schools fail to prepare graduates for the
increasingly competitive global economy. There would be less competitive workforce
and business will have a hard time finding the right people to hire for the
In conclusion, there are many ways to enter a market and not
necessarily that all the modes of entry need to be used. This affects how the
organisation, in this case – Adidas, is able to land its feet in a different
market each time to effectively gain network and wider range of audiences. The
organisational structure also helps to understand where the organisation find
their data and analytics on the market as well as how decision-making power in
the organisation is. Lastly, it is important to understand the host country as
well so that business strategies are mindful of the culture and the environment
it is in.
One improvement Adidas can make is to establish a joint
venture with another company. Some markets of a host country can be hard to
understand and even harder to penetrate. By working with another company from
that particular market, Adidas will be able to penetrate such markets faster.
This is because the other company will have extensive knowledge on how the
market works and knows the culture better. Having a joint venture helps to
reduce cost as well due to the fact that cost is shared between both companies.
The establishment can also discuss what financial resources they need together
in order to penetrate markets more efficiently. This can also help Adidas to
tap on markets that have yet to be explored.
With declining number of graduates prepared to take on the
professional life, Adidas can provide resources to their current employees to
continuously educate themselves through courses and training. This is to retain
these employees for the future if the workforce gets less competitive. By continuously
training employees, Adidas can also increase its productivity and innovation
within the company in the ever-changing economy and business trends.