Comparative Analysis of Adidas and Nike's Business Strategies

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Introduction to Business and Management
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Table of Contents
Introduction......................................................................................................................................3
The External Environment...............................................................................................................4
Organizational Structure:.................................................................................................................5
Organizational Performance............................................................................................................9
Comparison....................................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
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Introduction
This is a globalised world. Business scenario is changing day by day. Every business
organization is competing with each other. Maximizing profit is the key motive for every
business organization. To maximize the profit every business organization follows different
strategy. Even in the same industry different organizations have different structure and strategy
(Dumas et al., 2013). In this assignment we are going to discuss about external environment,
organizational structure, and organizational performance of two companies in the same industry.
We are taking Adidas and Nike Inc in sports shoe and sportswear industry.
Adidas was founded in 1949 by Adolf Dassler (Adidas, 2019). Adidas has headquartered in
Germany. This company is the largest sportswear manufacturer in Europe and second largest in
the world. Adidas has a unique logo and its simple three stripes (Adidas, 2019). The marketing
strategy of Adidas is same as its rivals. It is associated with almost every sport. Adidas sponsors
many famous teams around the world.
Nike Inc is another big name is the same industry. Nike Inc founded in 1964 by Bill Bowerman
and Phil Knight (Nike, 2019). It is an American multinational company. Nike is the largest
sportswear manufacturer in the world.
The External Environment
We can know about different factors which effect the growth of a company. Here we will do the
PESTLE analysis of Adidas and Nike. PESTLE means the analysis of political factor, economic
factor, social factor, technological factor, legal factor and environmental factor.
PESTLE of Adidas:
 Political Factors: It is an important factor for the business of Adidas. Adidas is a global
company. The company is operating globally. Every country has its own taxation rule
and labor law. Adidas has to follow those laws. As Adidas is very strict about legal
matters (Adidas, 2019). They formulate their strategy in accordance with the law.
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 Economic Factors: Adidas deal with sportswear industry. These products are not
necessity. These are luxurious product. Spots industry is fluctuating. This industry is very
competitive. Adidas is operating globally. Therefore, Adidas is facing completion from
many local companies.
 Social Factors: As a corporate company Adidas has its corporate social responsibilities
also. Adidas makes product for health conscious people who have love for sports (Burns
and Dewhurst, 2016). The company has changed their product design also, but the basic
ethics of Adidas is remaining same. Adidas always try to design product keeping in mind
the social effect.
 Technological Factors: Adidas is very aware of modern technology. They use natural
material for the product for durable solution of health issues (Erasmus et al., 2016).
Adidas also use modern technology for sales and marketing of product. They use online
marketing and social media for promotions. There is an online buying option for the
customer also.
 Legal Factors: Adidas is well aware about legal matters. They have their copyright for
intellectual property and knowledge. They have their own patents.
 Environmental Factors: Adidas is committed to save the environment. They often use
natural element for product making. Adidas is very much ethical about environment
saving.
PESTLE analysis of Nike:
 Political Factors: Nike is operating around the globe. They have to obey the rules and
regulations of every country. Due to some political issue Nike cannot produce equipment
for Iranian football team (PANDEY, 2017). Political scenarios are different in different
countries.
 Economic Factors: Nike produce sports shoe and others sportswear. Sportswear market
is very competitive. Though it is the largest producer, it is facing extreme competition
from its rivals. Besides from Adidas, Puma, many local providers are also giving strong
competition.
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 Social Factors: Now a day peoples are very health conscious. Customers are ready to
provide more money for a quality product. There is a social acceptance for Nike products
due to its quality. Nike cannot compromise its quality. But the price of Nike product is
little high. It should be available for middle class people also.
 Technological Factors: Nike always uses modern technology for its product.
Technologically it is a very advance company. Even its marketing strategy Nike use
modern technology. From marketing to sale they use technology throughout. Now they
gave online buying option also.
 Legal Factors: Nike is an American multinational company. They are the largest
provider of sportswear and spots shoes. Nike is operating worldwide. The labor laws are
different is different countries. There are different taxation criteria and rules (Noe et al.,
2017). Nike has to obey those rules and regulations of different countries.
 Environmental Factors: Environmental awareness is increasing among companies.
Nike is also aware of environmental issues. Many Chinese organizations have allegation
that Nike is polluting environment. Big companies like Nike and Adidas are trying to
save the environment.
Organizational Structure:
Adidas and Nike have almost same organizational structure. Organizational structure refers to a
format of how the company operates. Generally CEO is the top position of a company.
Organizational structure of Adidas: CEO is the top of the hierarchy. He is the key policy
maker and decision taker. After CEO there is CFO. Chief corporate communication officer
comes after CFO. After Chief corporate communication officer there is general counsel
(Hierarchical Structures, 2019). After that, global head of the brands comes. He is responsible for
the brand image globally. Then there is a post of head of public relations. Then there are
members of management board, Global operations. After that, members of management board,
global sales come. Then there is a post for chairman of the board. Vice chairman of the board is
the second person. Then there is unique post, which is vice chairwoman of the supervisory board,
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employee representative. After that, vice chairman of the supervisory board comes. At the last
stage, there are members of the supervisory board.
Figure 1: Organizational structure of Adidas
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(Source: Hierarchical Structures, 2019)
Organizational structure of Nike: Organizational structure of Nike is not much complicated.
Figure 2: Organizational structure of Nike
(Source: Hierarchical Structures, 2019)
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At the top of the hierarchy there is Chairman .After the Chairman there is chief executive officer
(CEO). After CEO Nike has general manager (GM). After GM there are administrative
professionals (Nike, 2019). There are marketing officials, technology officials, human resource
officials, sales officials and financial officials. There is a head in each of the department. After
administrative professionals there are many non-administrative professionals (Hierarchical
Structures, 2019). Helpers, supervisors, security staff and cleaners are non-administrative
professionals. Every department of non administrative professionals is run by a head of the
department. Every employee of each department has significant contribution for the growth of
the company.
Organizational Performance
Every business organization has a primary objective of maximizing their revenue. Revenue gain
depends upon organizational performance. Organizational good performance always produces
good revenue. Here we will discuss about the organizational performance of Adidas and Nike.
Organizational performance of Adidas: Adidas is a global player in sports shoe manufacturing
and marketing. They are the largest spots shoe manufacturer in Europe and second largest in the
globe after Nike.
In Q2 2018, we can see that the revenue growth is 10% currency-neutral and it is a growth of 4%
in terms of euro (Adidas, 2019). The gross margin of the company Adidas has increase 2.2pp to
52%. Adidas operating margin has also improves. In operating margin Adidas has an
improvement of 11% (Adidas, 2019). Adidas net income has also increased. Adidas is continuing
is development. It has developed its product qualities also.
Organizational performance of Nike: Nike is the largest manufacturer and marketer of spots
shoe and apparels. Fourth quarter ended in 1st may, 2018. We have the repot of Q4. In this
quarter the revenue has increased by 13% (Nike, 2019). Nike did extremely good business in
North America. They reach in double digit increment this time. Their share price has also
increased by 15%. This year Nike faces a lower tax rate which helps in revenue increment.
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In Q4 the revenue has increased by 9% and the total revenue is 9.3 billion US dollar. The gross
margin of Nike has increased by 60 BP and it is 44.7% (Nike, 2019). This year the products of
Nike sale also increased by 17%. This year the effective tax rate has decreased. Ultimately the
new income of Nike has increased by 13% in Q4 (Nike, 2019).
Comparison
Nike has headquartered in USA. Whereas, Adidas has it’s headquarter in Germany. Nike is the
largest sports shoe and apparel manufacturer in the globe. Adidas is the second largest in the
same field. Adidas is the largest shorts shoe provider in Europe. Sports are the main market for
both the company. But there is a different between the markets of these two companies. Major
market of Nike is cross training, basketball, running, children shoes and woman shoes. On the
other hand the main market of Adidas is Athletics, soccer and tennis. Nike is the sponsor of
Tiger Woods, Brazil soccer and Michael Jordan (Nike, 2019). On the other hand, Adidas is the
sponsor for University of Tennessee and Kobe Bryant. The main different between this two
companies is the strategy. Strategic difference makes them unique. Nike mainly focuses on
domestic market. Adidas has focus on European market. To get international recognition Nike
has shifted its focus to soccer. Nike always tries to change its shoe style. Nike is very conscious
about design and style. Nike knows it very well that their main market strategy is their design.
Mainly elite class people and youth are the key buyers of Nike. Keeping this in mind Nike tries
to know the product choice of these classes of people. On the other hand Adidas is the main
players of world market and especially in the soccer market. Nike and Adidas both use emotional
marketing. These two companies are very unique in their marketing strategy. But both the
company has their loyal customer base. Those customers are so loyal that they use the product of
these two companies only. Nike is very aware about technological advancement. They use the
bliss of modern technology in their production and marketing. Adidas also use modern
technology but they are way behind of Nike. Nike has its own marketing and advertising
strategy. Now a day social media is a very strong medium of communication. People’s choice is
affected by advertisement. Therefore, companies are wisely choosing their advertising technique
(Adekola and Sergi, 2016). Both the company use online marketing. There is an option for the
customer to buy the product of their choice without visiting the physical store. This makes the
product easily available to the doorsteps of the buyers. Nike and Adidas always try to focus on
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the comfort of the customers while buying their product. The physical outlet is an important
factor. The physical outlets of Nike are better than Adidas. The frontline sales persons are the
representative of the company to the customers. Their behavior effect a lot to make a choice of
buying a specific product. Adidas has a system of providing training on regular basis to this
frontline sales team. Nike also does the same practice in a different manner. HR policies of Nike
are stricter than Adidas. Often it is seen that, employees are leaving Nike due to this strict HR
rules. Whereas, the HR rule are more employee friendly in Adidas.
Conclusion
This is a globalised world. Every company is competing with each other world-wide. As a
business organization they always try to be ahead of their rivals. Profit maximization is the main
objective of a business organization. To maximize its revenue or profit, companies have to focus
on customer’s choice. Ultimately customers are the key revenue providers. Keeping this in mind
every company is trying to formulate their strategy in accordance with customers comfort
(Desbordes and Richelieu, 2012). Adidas and Nike are the two global players in sports shoe and
sportswear industry. Adidas is the largest sportswear company in Europe where as Nike is the
largest company in the same filed around the globe. Both the company has different company
structure and marketing strategy. But they are same in one point that, they always focus on
customers comfort. Nike and Adidas both have their loyal customer base. They have their
targeted customers. Nike frequently changes the design of their product to attract the customers.
Adidas has different advertisement strategy to attract their targeted customers. They are same in
one point that, customers are the main focus.
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References
Adekola, A. and Sergi, B.S., 2016. Global business management: A cross-cultural
perspective. Routledge.
Adidas (2019). [online] Available at: https://www.adidas.co.uk/ [Accessed 25 Apr. 2019].
Adidas (2019). [online] Available at: https://www.adidas-group.com/en/media/news-
archive/press-releases/2018/adidas-continues-strong-financial-performance-q2/ [Accessed 25
Apr. 2019].
Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan
International Higher Education.
Desbordes, M. and Richelieu, A. eds., 2012. Global sport marketing: Contemporary issues
and practice. Routledge.
Dumas, M., La Rosa, M., Mendling, J. and Reijers, H.A., 2013. Fundamentals of business
process management (Vol. 1, p. 2). Heidelberg: Springer.
Erasmus, B., Strydom, J.W. and Rudansky-Kloppers, S. eds., 2016. Introduction to business
management. Oxford University Press Southern Africa.
Hierarchical Structures (2019). Hierarchical Structures - Visual Organisational Charts For
All Categories. [online] Hierarchy Structure. Available at:
https://www.hierarchystructure.com/ [Accessed 25 Apr. 2019].
Nike (2019). [online] Available at: https://www.nike.com/gb/ [Accessed 25 Apr. 2019].
Nike (2019). NIKE, Inc. Reports Fiscal 2018 Fourth Quarter and Full Year Results. [online]
Nike News. Available at: https://news.nike.com/news/nike-inc-reports-fiscal-2018-fourth-
quarter-and-full-year-results [Accessed 25 Apr. 2019].
Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M., 2017. Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.
PANDEY, B.C., 2017. Nike Inc-Complete Analysis: SWOT, PESTLE and Marketing
strategy. BookRix.
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