2008 Adidas Corporate Restructuring essay
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Before the restructuring of Adidas in 2008, the company had been involved in an expansion venture which led to venturing into areas in which it was not as efficient. The company did not concentrate on areas of specialization in which it had competitive advantage as compared to rivals such as Nike which had far better results in the same period. In the period after its restructuring, the company, the company decided to narrow down its marketing segments and thus take advantage on its core competencies and areas in which it had competitive advantage. The company in the meantime also continued to offer diverse products for its diverse clientele through its unique brand portfolio (Thompson & Thompson, 2012). Apart from basketball, football and running products, the main focus of its Sports Performance division is outdoor and training. Other than Sports Performance, the Sports Style division was deemed to be an important aspect of its rebranding efforts. By pushing its slogan of “Impossible is Nothing” via its premium price strategy and the differentiated market approach, the company is now more likely to attain its aim of becoming the top sports brand in the world.
Apart from North America, Adidas experienced exponential growth of sales of its major brands all over ht globe for the 2008 economic year. In terms of overall revenues measured according to neutral currency, the data shows that Adidas revenues were up by approximately 14% in 2008. The Sports Performance division was by far the best performing division of the group accounting for 80% of total sales. The Sports Style division accounted for 20% of the entire sales which indicates that the Sports style index needs more restructuring (Thompson & Thompson, 2012). There were made efforts to restructure the different aspects of the business divisions so as to enhance efficiency through new concepts in marketing, setting of clear responsibilities and target, and ensuring the optimal attainment of results in the marketplace. The use of the 9 cell matrix is not a good fit for Adidas given its structure and operational format. While the business units are geared towards the achievement of competitive advantage through differentiation, there is still an aspect of dissimilarity of products in the value chains.
Given the nature of the industry in which Adidas is operating, I do not believe its business lineup has exhibited a good strategic fit. A good example is the alliance between the company and Mavic which is not strategic since while Mavic is involved in sports business, there are differences in the business model with regard to marketing, manufacturing, and distribution of Mavic that are very different to Adidas (Thompson & Thompson, 2012). This is because Mavic is involved in the business of cycling hardware while Adidas is involved in athletic footwear. There is however a value chain matchup between the two companies in the marketing aspects of performance shoes and performance bicycles. Since many companies such as Salomon AG that have had associations with Adidas have remained intact, it is clear that the issue of brand sharing does not arise. The transfer of skills is also a less significant issue given that the businesses are to a large extent differentiated in terms of structure and functioning. Cost sharing is however significant since there are reduced costs associated with common development of marketing schemes of selected products. Prior to divestiture, strategic fits for Adidas and Salomon AG were as a result of the production of sports goods, operation in similar geographic locations, and having the latency to put into effect partnered efforts in marketing (Thompson & Thompson, 2012).
The business lineup of Adidas has not exhibited good resource fit in the period from 1998-2007. A large part of the overall sales numbers were from Adidas with the remainder attributed to Salomon AG and Taylormade. In comparison to other diverse areas of business units at Adidas, Salomon performance was relatively lower. Salomon AG’s operating profits, capital expenditures, and contribution to overall profits for the whole company are also deadweight on the alliance during this period of operation. Adidas was without doubt the cash cow in the period having made over 80% of the sales and revenues of the strategic alliance (Thompson & Thompson, 2012). Salomon AG was clearly the cash hog in this arrangement since it performed dismally in nearly all aspects of its business while accounting for only a small proportion of the business. North America and Europe were responsible for the major part of Salomon AG’s sales, while Asia and South America offered the rest. North American sales were on the decline year on year while Asian sales showed a consistent rise year on year.
I believe the restructuring process undertaken by Adidas in the period from 2005-2006 was to some extent effective in achieving its business objectives. It was instrumental in enabling the company get rid of or restructure divisions in the company that were not competitive. The acquisition of Reebok would offer the company much impetus that it requires if it is to compete with Nike on the global stage. The acquisition of Reebok offers a good strategic fit which may offer higher returns for stakeholders since both Adidas and Reebok are top brands in athletic apparel and footwear thus they would complement each other (Thompson & Thompson, 2012). The acquisition also presents Adidas an opportunity to concentrate on core competencies. Adidas may now concentrate on Performance athletic wear while Reebok may be marketed as fashion and leisure wear. This is a strategic fit which is bound to offer greater returns for stakeholders going forward.