Introduction Founded in Herzogenaurach, Germany in 1924, Adidas is amultinational corporation that started off as a sports footwear brand but hasventured deeper into the fashion industry. With its reputation as Forbe’s 3rdmost valuable brands in sports, Adidas continues to delve in various sports andmaintaining its reputation as one of top sports brands.
Adidas has constantlybuilding itself on a passion for sports and a sporting lifestyle. It has over60, 617 employees in 2016 worldwide and has over 1,700 concept storesworldwide. In 2016, Adidas Group’s net sales amounted to about 19.
29 billioneuros. In this report the mode of entry that Adidas has taken tomake its brand known is discussed as well as the political, legal, economicsand social structure of America that affects the organisation. It is important tounderstand mentioned factors to properly place the business internationally andsuccessfully. By learning about the market and the host country, businesses canmarket their product effectively to the right audience. FindingsMode of entryIt is important that an organisation chooses the right modeof entry to make its mark in the country and in turn building up the reputationof the organisation. There is a total of 5 modes of entry and Adidas touches 4out of 5 of it; exporting, franchising, licensing and wholly ownedsubsidiaries.
Adidas goods are mostly manufactured in China but have a fewother manufacturers around the globe such as in Vietnam, Cambodia, UnitedStates of America and many more. The products are then exported to a lot of thedifferent countries such as Singapore, Malaysia, Japan and Brazil. The act ofexporting overseas, helps Adidas to avoid the cost of manufacturing operationsin Germany. However, Adidas has recently opened Speedfactory in Germany inhopes to open a new industry and provide better technology in facilitatingmanufacturing of sports goods.
The three-striped brand has more than 13,000 franchise storesopen worldwide. The stores around the world uses their sub-brands such asAdidas NEO and Adidas Originals to target different audience in the country.This allows them to have a wider range of audience with different needs.
Adidasis anal on franchising that upholds a premium standard. The organisation aspireto have a global standard instead of focusing on each different market andwould like all the franchises to follow such standards. This means that theyhave a lot more control on how the franchise will operate.Licensing is common with the organisation as they believethat Adidas must continuously grow.
One way is to enter an agreement with otherspecific businesses to make, sell or distribute their products. Adidas Grouphas their own licensing division, Sports Licensed Division (SLD). An example wouldbe Mitchell & Ness Nostalgia Company which is a wholesaler, marketer anddistributor of authentic vintage athletic product, is licensed to Adidas. SLDuses its manufacturing and design expertise to grow and strengthen the aforementionedcompany’s position in the United States’ market as well as key markets aroundthe world.
Adidas is known to have wholly owned subsidiaries as wellthough not many is known. Adidas has control over the operations in suchcountries over operational matters. Having control also helps Adidas to getdata and analytics faster to remain competitive in the market. An example of awholly owned subsidiary Adidas has is in Korea.
Adidas acquired the subsidiary withwanting to strengthen Adidas Korea’s leading position in Asia. OrganisationStructureAdidas is known to have a decentralised structure where eachbrand runs its own researches, designs and development activities. This is inline with the unique positioning that each brand has as well as environmentalmanagement. Adidas also has separated operating units choosing software thatsuited internal preferences and geography. However, the fundamental andbiomechanical researches are still shared across the Group as well as sharing Research& Development (R) in each brand.
The organisation also adopts a worldwide area structurewhere it focuses Asia, Europe, Latin America and North America. Thesecontinents each have a headquarter set up to oversee the business in suchareas. By adopting this structure, Adidas has the ability to customise to localmarket needs. An example would be that in China, the middle class areconstantly evolving and exploring who they are and how they see themselves inbrand new ways. This is their concept of individualism which can be seen astheir ‘freedom’ to consume western branded goods. Adidas is focusing on thesegroup of people in the Chinese market to gain a bigger following. PLES in AmericaPolitical, legal, economic and social systems are importantfor business to take note of. This is because businesses should be aware of theenvironment that the host country has in order to penetrate the marketseamlessly.
These factors also evolve continuously and have differentimplications when setting up a business overseas. Thus, it is important thatbusinesses understand these factors in the host country. In this section, thecountry that will be discussed is America. America adopts an individualistic approach in its politicalsystem.
It believes in the freedom of speech and constantly stands up foroneself and has a path of their own. The idea itself was established byAmerican Founders when creating the Declaration and the Constitution. It wasmeant to acknowledge each individuals’ rights to life, liberty, property andthe pursuit of happiness. It is believed that the result of individualism isinnovation which leads to many inventions and industrial revolutions.
This suggest that Adidas can practice their own way ofpromoting the brand and being innovative as they have a right to do so. Adidasthemselves, promotes the act of being individualistic in terms of the arts andsports. This is in line with their new motto “Creating the New” where itfocuses on innovative sports technology to improve individual’s health andhappiness which incorporates sportswear as well as streetwear.
America also practices democracy where it secures peace,expands open markets, promote economic development, improve global environmentand many more. It is said that having democracy helps the economy of thecountry as it makes the country more stable and other established democraciesare open to trade and invest. Thus, Adidas investing inthe American market would allow them to access to many other organisations thathave a fair, stable and transparent ruling that can help them establish thebrand name.
The Americans follows the common law legal system. Thismeans that actions are taken based on precedent where judicial decisions havealready been made with similar cases in the past. The judge has the power tointerpret law in the different situations and will appropriately determinesentences. Businesses should be aware of the laws in the country to adhere itand regulate its business practices. Treaties also playa part in facilitating commerce between nations. For example, the Germany-USAtaxation treaty where it removes double taxation on income earned by theAmerican and German resident doing business in the other country. America has a market economy where the different producersand consumers determine the kinds of goods and services produced and the priceof the products as well.
The market brings together buyers and sellers who establishesthe market prices and output levels for different goods and services. Producershave 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 theproduct. This back and forth of the producers setting a high price whilst theconsumers want a low price will ultimately determine the price of goods andservices. Thus, Adidas should be aware of the market prices and determine theprice of products based on that to stay competitive. Social systems are also important to take note in order tochoose 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 othernon-Christian faiths. The main language spoken is English with Spanish beingthe second most spoken language.
The social structure of Americans is dividedinto three: the upper class, middle class and the lower class. The upper classbeing the wealthiest whereas the middle class are often white collared andmostly work professional jobs. The lower class refers to the blue collaredworkers that work on a minimum wage. Adidas, should assimilate the socialsystems and the culture and apply proper policies and strategies to marketingin accordance to the cultureEducation is regarded important in America; however, it isknown that its education system is failing. Some reasons include insufficientfunding for public schools, lack of teachers that are equipped with propertrainings, lack of diversity and many more. America has yet to address suchissues due to the lack of financial, time and support resources that can helpto inspire efforts.
This shows that schools fail to prepare graduates for theincreasingly competitive global economy. There would be less competitive workforceand business will have a hard time finding the right people to hire for thejob. ConclusionIn conclusion, there are many ways to enter a market and notnecessarily that all the modes of entry need to be used. This affects how theorganisation, in this case – Adidas, is able to land its feet in a differentmarket each time to effectively gain network and wider range of audiences. Theorganisational structure also helps to understand where the organisation findtheir data and analytics on the market as well as how decision-making power inthe organisation is. Lastly, it is important to understand the host country aswell so that business strategies are mindful of the culture and the environmentit is in.
Recommendation One improvement Adidas can make is to establish a jointventure with another company. Some markets of a host country can be hard tounderstand and even harder to penetrate. By working with another company fromthat particular market, Adidas will be able to penetrate such markets faster.This is because the other company will have extensive knowledge on how themarket works and knows the culture better. Having a joint venture helps toreduce cost as well due to the fact that cost is shared between both companies.
The establishment can also discuss what financial resources they need togetherin order to penetrate markets more efficiently. This can also help Adidas totap on markets that have yet to be explored.With declining number of graduates prepared to take on theprofessional life, Adidas can provide resources to their current employees tocontinuously educate themselves through courses and training. This is to retainthese employees for the future if the workforce gets less competitive. By continuouslytraining employees, Adidas can also increase its productivity and innovationwithin the company in the ever-changing economy and business trends.