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Download this Document for Free -----------------------------------Aug 13, 2005Nike versus Adidas Case Study and Competitive Analysis-----------------------------------Nike vs Adidas, market and comprehensive competition analysis and case studyEXECUTIVE SUMMARYSince the birth of the Internet in 1969 to its commercial adoption in the 1990s,the World Wide Web has enabled businesses and consumers to connect with one another to exchange and share information, anywhere and anytime. The web has provided consumers and businesses with enormous advantages by reducing the transactiontime and increasing the level of convenience.As we leap

into the twenty first century, it seems as though everyone is on theInternet and more companies are establishing an online presence to maintain their competitive edge. Along with high speed Internet connections, the Internet hasbecome an essential tool for any business to compete domestically or globally.In today's high speed environment, one would be hard pressed to find a Fortune 500 company conducting business with either other businesses or consumers to nothave its own web site . Businesses are developing web sites to provide their consumers and business partners with information and e-commerce. Large firms who have not adopted ecommerce as part of their strategic initiatives will miss out on opportunities to attain growth and competitive advantage.Nike and Adidas are two primary footwear companies along with their competitorswho have adopted an online e-commerce strategy to increase their sales and product awareness. Most importantly, companies like Nike and Adidas have invested heavily into online brand building and image development. Nike launched the nike.com web site in August 1996 primarily to provide information to its consumers. In1996, there were no e-commerce capabilities present, however the web site servedas a brand building tool for the company. In 1999, Nike redesigned their web site with expanded e-commerce functionality. Adidas launched their web site in thespring of 2000, which was later integrated with e-commerce capabilities duringthat summer.Attaining market share is important to both Nike and Adidas. In order to maximize their market share, both Nike and Adidas have placed a great importance in developing their branding and marketing strategies on the net through web appearance and user friendly functionalities such as ease of purchase, speed, and navigation.Nike and Adidas have adopted a merchant model which encompassed three pillars oftheir e-commerce strategy: pure-play e-tailer, bricks and clicks, and their online store. The main purposes of acquiring relationships with pure-play e-tailersis to promote and market products; focus on the content to create new exposureand; gather, gain and transfer market knowledge to their business counterparts.The Internet has proven to be a useful tool for firms such as Nike and Adidas byincreasing sales and reducing cost. But most importantly their web sites have provided them with an intangible asset such as market research and consumer buying behaviors. With the data retrieve from consumers, these firms are able to analyze and monitor the buying behaviors of their consumers. The data can also be used to exploit new marketing campaigns and promotions. Furthermore, the data collected can be used to produce innovative designs and improve their research capabilities. Although, there are perceived benefits in conducting e-business over the Internet there are also potential barriers. The major barrier of e-

commerce with respect to large firms such as Nike and Adidas is the technological barrier ranging from infrastructure to security. An ongoing battle the e-commerce industry faces is security. With time and additional research and resources, this problem will be mitigated. Meanwhile, both Nike and Adidas must minimize their technological risks.While both Nike and Adidas currently have an essential advantage over their rivals, there are chances that their advantages will not last forever. The Internethas redefined competition therefore changing the evolution of competition. Although, Nike and Adidas have engaged in e-commerce there are apparent gaps within their ebusiness strategy. E-commerce is only available in restricted regions such as the United States and the United Kingdom, therefore opportunities exists within the global market to expand. The future will prove to be very interesting for both Nike and Adidas, and those who move quickly will dominate the market.INTRODUCTIONA daring dream began in 1920 when Adi Dassler fashioned his first shoe in Herzogenaurach, Germany. In 1948, Adidas was founded along with its identifying trademark, the three stripes. From its inception, Adidas has faithfully adhered to three guiding principles embedded deep into its DNA: produce the best shoe for therequirements of the sport, protect the athlete from injury, and make the productdurable. As time has passed, Adidas has evolved and is now one of the premier global leaders in sporting brands offering athletic footwear, apparel and accessories. This feat has been cultivated through continuous innovation and a broad product portfolio. With time, Adidas discovered that in order to continue to evolve further its strategy had to include the Internet. This led to the developmentof www.thestore.adidas.com, an e-commerce site focused on interactively profiling Adidas's extensive product offerings accompanied by detailed product information.Initially, what started as Blue Ribbon Sports in 1962 became Nike Inc. in 1972,based in Beaverton, Oregon. Nike was named for the Greek winged goddess of victory. The founders were Bill Bowerman, a track & field coach and Phil Knight, a runner under Bowerman. From their modest start, Nike has grown to be a global leader in the sporting goods industry. It is recognized as the world's leading designer, marketer and distributor of athletic footwear, apparel, and accessories fora wide variety of sports and fitness activities. For Nike, an established and growing organization, a strong Internet presence felt like a natural extension totheir already globally focused strategy. Today www.niketown.com, Nike's e-commerce site offers a unique experience, products and product information for its potential and existing customers.ANALYSIS OF E-COMMERCEAttaining market share is important to both Nike and Adidas. In order to maximize their market share, both Nike and Adidas have placed a great importance in developing their branding/ marketing strategies on the net through web appearance and user friendly functionalities. The

analysis below represents the web site positioning map which identifies some of the key performance criterion in determining the web site positioning strategy for both Nike and Adidas. The upper right quadrant indicates a high rating in both web site appearance and user friendly functionalities. While the lower left quadrant indicates both a low web site appearance and user friendly functionalities. It's apparent in the figure below thatNike has the most favourable web site with both high web site appearance and user friendly functionalities. However, Adidas web site is slightly more favourablein user friendly functionalities while lagging on overall in web site appearance in comparison to Nike's web site. OVERALL COMPANY VALUE CONFIGURATIONThe value curve below illustrates an evaluation of Nike and Adidas's focusing onthe company as a whole but with the focal point of e-commerce extension.Nike.comAdidas.comThe inputs to the e-commerce value configuration for both Nike and Adidas are: Brand Image, Price, Web site design, Service, and Innovation. Analyzing the graph, Nike.com has a slight edge over its arch rivals Adidas. Adidas with growing popularity has narrowed the gap from previous years. The brand image for both Nikeand Adidas is immense; however Nike has attained a considerable competitive advantage due to its reputation for quality and innovation. In terms of e-commerce,both Adidas and Nike are analogous, however, Adidas' web site is a bit more user friendly and navigation is fairly easy. The functionalities are identical in both cases. Overall, Nike's continued efforts in innovation coupled with its brand image, is a unanimous leader of the athletic footwear and apparel industry. Interms of the e-commerce portion of the industry, Adidas with its web site design and functionality has narrowed the gap between the market leaders and the market follower. Nike.com's value proposition is an easy to use web site that is highly interactive, secure as well as its reputation and brand image of their product. For Adidas.com, similar to Nike, the value proposition is an interactive website that is secure and easy to use. For the soccer industry, Adidas.com positions itself as the leading brand in apparel and footwear.The value chain configuration for both Nike and Adidas is supply chain. The value configuration has multiple components. To the right is a table which summarizes these components and the respective percentages for a $100 product (footwear).Because the operations of both companies are similar, the table below only lists Nike's value chain breakdown. Adidas' value chain although slightly different,is similar in nature in comparison to the industry. Essentially, the breakdownof the value chain indicates for both Adidas and Nike that the cost to produce and sell an item over the Internet costs these companies almost 50% of the priceof the item.ItemPercentageMaterial Cost16%Labour Cost2.6%Administration and Overhead4.6%Profit

Margin1.9%Net Factory Price25.1%Shipping, Customs and Finance3.9%Net Landed Price29%Warehousing and distribution0.8%Royalties0.4%Quality Costs0.3% Direct Ship Allowance0.2%Research and Development0.2%Other costs of sale0.1%Total Cost of Goods Sold31%Sales and discounts4.6%SG&A8.3%Corporate Overhead1.8%Interest Expense0.2%Income Taxes2.6%Total Nike Cost48.5%Financial Analysis of Nike and AdidasBelow is the Nike and Adidas stock performance comparison in Euros. There is noquestion Nike is the market leader in not only the product aspect but also the financial aspect of this industry. However, over the last few years, Adidas has been slowly eroding the market share from Nike. The financial comparisons of bothcompanies indicate Nike having a substantial financial advantage over Adidas. The operating margin and return on assets is slightly lower for Adidas. This could be indicative of the market leader and market follower relationship. Adidas needs to improve in both operating margin and return on assets to gain ground on Nike.NikeAdidasMeasureNikeAdidasIndustryEmployees23,30014,71623 ,000Market Cap16.36 Billion13.97 Billion240.81 MillionRevenues10.70 Billion6.523 Billion 482.62 MillionOperating Margin10.89%6.71%N/AReturn on Assets11.97 %5.3%N/AReturn on Equity 20.12%21.1 %N/ABelow is a figure extracted from a study conducted at Cornell University, whichillustrated the distribution of market shares in the U.S. and in foreign markets. This research was conducted in 1998, since this time, Adidas has comfortably moved to the second spot in this highly competitive industry. For Nike to successfully remain as the market leaders, it must continue to innovate and produce leading edge designs that attract the diverse markets. One important point to highlight is the market share Adidas has gained since 1998. Adidas evolved from a minor player in the industry to the second biggest company in the industry. Footwear Market ShareSWOT Analysis for Nike.com & Adidas.comNike.comAdidas.comPosition Market Leader Market FollowerSTRENGTHSStrong management team and good corporate strategy in both North American and overseas marketsFirst movers advantage in e-commerceBrand recognition and reputationTrademark "Just Do It"Diversity and variety in products offered on the web (footwear, apparel, sporting equipment, etc.)Strong control over its own distribution channelStrong customer baseStrong financial position with minimal long term debtsInnovative designs in footwear enabling consumers to design their own shoes onlineBrand reputation and recognitionDiversity and variety in products offered on the web (footwear, apparel, sporting equipment, etc.) Adidas even offers items not available in its retail storesEmerging brand namePricing strategy is

competitive to Nike'sMerger with Salomon will allow Adidas to gain a strong foothold in the Skiing IndustrySecondary web sites (i.e. soccerevolution.com to simply promote soccer, Adidas leads the market in this sport)WEAKNESSESNegative image portrayed by poor working conditions in its overseas factoriesE-commerce is limited to USAThe direct sale to consumers is creating conflicts with its own resellersCurrently available supply chain, manufacturing, and fulfillment technologies aren't easily integrated with online build-toorder systemsNot known for its research and development leading to innovative designsThe e-commerce is limited to USA, however, has planned to expand to Canada and i Nike Versus Adidas Case Study and Competitive Analysis Download this Document for FreePrintMobileCollectionsReport Document This is a private document.

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