Strengths -Strong success in Europe -High-performance products -Recent selling of subsidiary “dog” SalomonWeaknesses -American athletes endorsed by adidas are not as popular as Nike’s -Nike gaining ground on European soccer market -Public dissent over use of sweatshops Opportunities -Acquisition of Reebok -Growing strength in golf industry through TaylorMade and recent acquisition of Maxfli -Growing revenue from opening of own retail storesThreats -Foreign exchange rates will result in loss of actual profits As mentioned on their website adidas has been a leader in Europe for years and have been able to become comfortable there.
Another strength is that adidas-Salomon produces high-performance shoes. They have been able to attract hardcore athletes as customers due to efficiently made shoes (adidas. com). adidas recently announced that it will be selling its Salomon brand to Amer Sports Corporation for $624 million. Salomon was originally acquired by the adidas Group in 1997 when it paid $1. 4 billion for Salomon and its subsidiaries, including golf brand TaylorMade and cycling brand Mavic. The sale will include the brands and subsidiaries Salomon, Mavic, Bonfire, Arc’Teryk, and Cliche.
Herbert Hainer, adidas-Salomon Chairman and CEO, stated that “Salomon has been a great member of our group. However, we have decided that now is the time to focus even more on our core strength in the athletic footwear and apparel market as well as the growing golf category” (Bloomberg). This move will allow adidas to rid itself of the recently slumping Salomon brand, which posted a 1 percent drop in revenue along with a 74 percent drop in operating profit in 2004. The sharp decrease in operating profit is due to recent restructuring that reduced French production of Salomon products from 55 to 35 percent with new production aking place in Romania and China. News of the sale spiked adidas’ shares up 9. 2 percent, reaching its highest point in six years, while Amer Sports shares gained 7. 6 percent. A major weakness of the adidas brand is that they are currently third in the American market for athletic footwear sales. Another weakness is adidas’ recent fall in the soccer shoe market. Nike took over first place in the European soccer shoe market with its success of the Air Zoom Total 90. adidas’ final weakness that must be mentioned is their use of sweatshops.
Strengths Of Adidas
There were allegations of inhumane conditions in adidas’ Asian factories in 2000. However, adidas-Salomon maintained that they were trying to fix the conditions. adidas has a huge opportunity on its horizon. The acquisition of Reebok should allow adidas to have greater access to the American market, where Reebok is currently second in the athletic footwear industry. Another opportunity for adidas-Salomon is the possible expansion of their TaylorMade brand. Although adidas is currently selling the Salomon brand for nearly half of what it paid for it in 1997, the deal does not include the golf brand TaylorMade.
TaylorMade-adidas golf has a strong hold on the golf industry and was ranked as the number one driver on the United States and European PGA tours (adidas-Salomon. com). TaylorMade holds 7. 5 percent of the market share for golf balls and adidas increased its opportunities in 2002 by acquiring golf-ball maker Maxfli from the Dunlop Slazenger Group. Finally, adidas can expect to see revenue increases due to their newly implemented and recently successful own-retail activities. These include concept stores, factory outlets, Internet sales, and parts of Asian markets.