Project with Feedback Adidas PDF

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Academic Administration

Assignment Cover Sheet for submission of individual and group work Course/Unit code

Assignment number

Assignment due date

Group/Session name (if applicable)

MKTG1199

2

5th October 2017

LF01 - Group 12

Course/Unit name

Program title Bachelor of Business (Logistics and Supply Chain Management) Tutor / Marker’s name (if applicable)

Marketing Principle Lecturer/Teacher’s name Patricia Lui

This statement should be completed and signed by the student(s) participating in preparation of the assignment. Declaration and statement of authorship: 1. I/we hold a copy of this assignment, which can be produced if the original is lost/damaged. 2. This assignment is my/our original work and no part of it has been copied from any other student’s work or from any other source except where due acknowledgment is made. 3. No part of this assignment has been written for me/us by any other person except where such collaboration has been authorised by the lecturer/teacher concerned and is clearly acknowledged in the assignment. 4. I/we have not previously submitted or currently submitting this work for any other course/unit. 5. This work may be reproduced and/or communicated for the purpose of detecting plagiarism. 6. I/we give permission for a copy of my/our marked work to be retained by the School for review by external examiners. 7. I/we understand that plagiarism is the presentation of the work, idea or creation of another person as though it is your own. It is a form of cheating and is a very serious academic offence that may lead to expulsion from the University. Plagiarised material can be drawn from, and presented in, written, graphic and visual form, including electronic data, and oral presentations. Plagiarism occurs when the origin of the material used is not appropriately cited. 8.

Enabling plagiarism is the act of assisting or allowing another person to plagiarise or to copy your work.

Family name

Given name

Student number

Lim

Heng Yi

S3684154

Lee

Ying Yi

S3684128

Lim

Zi Xuan

S3684205

Tay

Geraldine

S3684791

Lim

Xin Yu

S3684190

Prayogo

Ruben

S3684638

Student signature

Date

Further information relating to the penalties for plagiarism, which range from a notation on your student file to expulsion from the University, is contained in Regulation 6.1.1 ‘Student Discipline’ www.rmit.edu.au/browse;ID=11jgnnjgg70y and Academic Policy: ‘Plagiarism’ www.rmit.edu.au/browse;ID=sg4yfqzod48g1.

Assessor’s comments

Grade

School date stamp

(Office use only)

COLLEGE OF BUSINESS // SCHOOL OF BUSINESS IT AND LOGISTICS BACHELOR OF BUSINESS (LOGISTICS AND SUPPLY CHAIN MANAGEMENT)

MKTG1199 – Marketing Principle SEMESTER 2 YEAR 2017

For: Ms Patricia Lui Date of Submission: 5th October 2017 Word count: 3987

By Name

Student ID

Lim Heng Yi

S3684154

Lee Ying Yi

S3684128

Lim Zi Xuan

S3684205

Geraldine Tay

S3684791

Lim Xin Yu

S3684190

Ruben Prayogo

S3684638

MKTG 1199 – Assignment 2 1.

Company Mission

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2.

Company Objective

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3.

Market Overview 3.1 Market Definition

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3.2 Market Size

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3.3 Market Potential

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3.4 Market Structure

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3.5 Market Trends

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4

Competitors

06

5

Segmentation and Buyer Behaviour 5.1 Segmentation

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5.2 Buyer Behaviour

08

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Internal Analysis

09

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SWOT Analysis

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8

Marketing Objectives

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Target Defined Market

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Desired Positioning

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Strategies Using 4P framework

12. 13.

11.1 Product Strategy

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11.2 Pricing Strategy

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11.3 Marketing Communication Strategy

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11.4 Distribution Strategy

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References

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Performa TABLE OF CONTENT

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MKTG 1199 – Assignment 2

1) Company Mission The Adidas Group strives to be the global leader in the sporting goods industry with brands built on a passion for sports and a sporting lifestyle. We are committed to continuously strengthening their brands and products to improve their competitive position (Adidas 2016).

2) Company Objectives Adidas’ aim is to become the number one manufacturer of sporting equipment in the World.

3) Market Overview 3.1. Market Definition Adidas focus on sports apparel and accessory category. They provide a range of products from head to toe to meet buyer needs.

3.2. Market Size Adidas targets a large market in the sports footwear category. Their main target audience are mostly young adults with active lifestyles as they seek for new fashionable, comfortable and durable sport shoes.

3.3. Market Potential Adidas is an ongoing growing market. From Adidas’ 2016 annual report, the company have achieved the targeted gross margin as shown in Figure 1. The company continues to set a higher target for year 2017, which will continue to boost total profit for the company.

Figure 1 - Gross margin comparing target 2016 with actual result 2016 (Adidas, 2016)

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MKTG 1199 – Assignment 2

Figure 2 - collaboration with Stan Smith (Satran R 2015)

In terms of product life cycle, Adidas footwear is undergoing the stage of “growth”. Adidas’ design and innovation team continuously comes up with new designs footwear, creating a different perception to the brand itself. This draws the attention of shoes enthusiasts as they will anticipate the new releases.

3.4. Market Structure Adidas group is under monopolistic market structure. They trade over a range of prices, differentiating their shoes from other competitors using their Unique Selling Proposition (USP). They can set prices according to their product and company image. Too brief

3.5. Market Trends Macro-environmental trends that affects Adidas is the natural, technological and political factor. For the natural and political factors, due to the increasing pollution, Adidas used innovative technology and techniques in its manufacturing processes to reduce its environmental impact. These technologies include DryDye technology, a process called “NoDye” and a low-waste initiative. For political factor, the public are concerned about the social responsible behavior of the organisation. Adidas understand the importance for this factor, thus they do not support child exploitation and makes sure that they are dealing with ethical suppliers. They also developed a program to support fair wages and wage progression when workers achieve proficiency, performance and competencies in their jobs. Good

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MKTG 1199 – Assignment 2

4. Competitors Nike A direct competitor of Adidas, they specialise in sportswear apparels and footwear for different activities. Nike prioritises the development of new products through product innovation to maintain its lead in sportswear. They also apply strategic marketing campaigns to secure its position. To cut costs and encourage consumers to use their new online site, Nike has stopped supplying its merchandises to smaller sports goods stores in Singapore. Nike has also implemented internet strategy to expand its consumer base online through third party platforms such as Lazada and Zalora, their online website also offers customization services. However, they do not have a local social media account for media marketing in Singapore (Euromonitor 2017). Nike’s corporate culture to sustain its business and market competence is Talent, Diversity and Inclusivity. Training and mentoring programs are established to coach employees allowing them to develop skills for product development in the company. They believe in sustaining talent to produce better shoes. HR programs are implemented to promote diversity and innovation. Inclusiveness includes programs that allows everyone to be included within the company to minimize problems in the workforce (Young 2017). Do not list what you read only. What are the implications?

Figure 3: Market share between Adidas and competitors (Euromonitor 2017)

As shown in Figure 3, Adidas and Nike had the same market share in 2011 to 2012. However, over the years Adidas market share improved compared to Nike to 3.2 in 2016. This shows that Adidas has a better profitability and is successful in keeping their competitors away. Nike alliance with Apollo Global Management, LLC(NYSE:NKE) to increase regional manufacturing and enable more efficient delivery of customized product to consumers and investment drive in sustainability and increase customer satisfaction(Nike 2016). Do not list what you read only. What are the implications?

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MKTG 1199 – Assignment 2

Figure 4: Financial strength of Adidas and Nike (IG Analyst, 2017)

Figure 4 shows Nike has a larger market revenue and profit while Adidas has done better in stock performance with a last annual net profit of 52.2%, triple of Nike’s at 15%. Adidas are much profitable compared to Nike with its higher price-to-earnings (IG Analyst 2017). Do not list what you read only. What are the implications?

Bata An indirect competitor of Adidas, sells a wide variety of footwear to meet the needs of consumers of different lifestyles along with promotional activities. They target low-income markets. Their market strategy is to price their shoes at profitable prices by analysing price points of the shoe line to achieve maximum margin with economical material (Blach 2014). Do not list what you read only. What are the implications?

Figure 5: Market share between Adidas and competitors (Euromonitor, 2017)

Since 2011 (Figure 5), Bata has a market share of 1-1.1% (Euromonitor 2017). They have an increased revenue of 52% over the last 6 months (Investing 2017). Bata opened schools for children in third world countries. Their employees also participated in volunteering activities. They support women rights by

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MKTG 1199 – Assignment 2 employing more women and collaborated with NGOs to sell footwear. From Bata’s sustainability reports, it shows that they highly value customer service (Bata 2016). Bata does not have any alliances with any company. In terms of customers understanding and public relations, Nike, Adidas and Bata provides special membership privileges and services to cater customers’ needs. With their advance technology, Adidas and Nike have a competitive edge over Bata in regard to designing comfortable sport shoes. Good point

5. Segmentation and Buyer Behaviour 5.1) Segmentation Through segmentation, companies divide large heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs (Kotler 2011). The three segmentation variables that Adidas adopts are mainly demographic, psychographic and behavioural.

Demographic segmentation is used primarily for Adidas segmentation strategy. Buyers are divided into groups based on variables such as age, gender, occupation and income. People that purchase Adidas sports shoes under this segmentation are mostly males and females ranging from teenager to young adults. Psychographic segmentation is used when a firm divide their buyers into different groups based on social class, lifestyle or personality. Adidas focuses a lot on social class as people within a given social class tend to have similar buying behaviour (Henry 2002). Do not list what you read only. What are the implications?

Behavioural segmentation divides their buyer into groups based on variables such as occasion, benefit, user status, usage rate and customer’s loyalty. Adidas behavioural segmentation includes athletes, sports lovers and regular gym users. Explain further

5.2) Buyer Behaviour 8

MKTG 1199 – Assignment 2

One’s buying behaviour can be affected by immediate family members as they tend to discuss with them before purchasing a product. Moreover, by having family members that have purchased Adidas product, it will affect their buying behaviour, such as wanting to buy the same brand as them. Lifestyle is a person’s pattern of living which includes their activities, interests and opinions. This can affect consumers’ behaviour as when they are keen or interested in going to gym or doing sports, they would want to purchase specific sport shoes to boost their performance. Customer would consider Adidas as an option as it is one of the top sport shoe company in the market. People from the same generation can be defined as a group of people that are around the same age living within a society. Individuals would most likely follow the trend of what their generation does or wears by taking notice of the trending clothes and activities. Need to apply theories

6. Internal Analysis In 2016, Adidas’ sales increased by 18%, achieving its target of increasing at a rate between 10% to 12%; Gross margin reached 48.6%, reaching beyond its target of 47.8%. Operating margin has also increased by 1.3pp, from 6.5% in 2015 to 7.7% in 2016. Need to include a reference Looking at the segmentation variables, Adidas adopts differentiated marketing, targeting several market segments and designing separate offers for each. Adidas offers mid-range to premium sports shoes for the different segments, reaching out to people of different purchasing powers. Adidas positions and differentiates themselves by designing high-performance sports shoes with trending modern fashion, using sustainable materials. They collaborate and sign on with celebrities and key athletes, elevating the brand in the eyes of consumers. They integrate sustainability into their shoes with innovative technology by collaborating with organizations such as Parley of the Ocean, an organization that addresses major threats towards marine environment, to transform marine plastic pollution into performance sports gear. The branding strategy Adidas adopt is line extension. From Adidas Sports Performance, they extended to Adidas Originals, Adidas NEO, Adidas Collaborations and Five Ten, reaching out to the different demographic and/or behavioural segments targeted. Add depth

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MKTG 1199 – Assignment 2 Adidas uses skimming prices and competitive pricing due to its style, design and promotion. Adidas’ sports shoes are higher priced due to brand equity of Adidas in the market, and the higher pricing helps in price quality approach and psychologically, customers think that a higher price will mean better quality. The distribution channel of Adidas, multi-channel distribution, is as follows: 1)

Manufacturing > Adidas outlets > End customer

2)

Manufacturing > Distributor > Multi-brand showrooms

3)

Manufacturing > Online fashion websites/Adidas website > End customer

For promotions in the marketing mix of Adidas, a majority of their marketing is concentrated on the television and internet, with their energy-filled advertisements known to pump adrenaline in their customers, attracting them towards the brand. By promoting on the internet, Adidas has high selectivity of who the target audiences are, and it requires low cost, unlike on the television. However, there is low impact and audience can control exposure to the adverts.

7. SWOT Analysis Adidas Sports Shoes Strengths: 

Long heritage with high brand value and image

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Multiple product portfolios with different ranges of products

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Collaborations and integrating sustainability into business model – Partnerships with Parley of the Oceans and Better Cotton Initiative (BCI)

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Branding by creating touch points with community – Celebrity endorsements and sponsoring major sports organizations such as FIFA, UEFA, NBA and Olympics, increasing awareness and customer base.

Weaknesses: 

Premium price range due to innovative technology and production methods.

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More scope for product line expansion even though there are 2 brands under their group with deep assortment.

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93% of production outsourced to third party manufacturers, which may affect the overall quality of products perceived by consumers

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Stiff competition between similar bigger brands

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MKTG 1199 – Assignment 2

Opportunities: 

Rise in demand of premium goods and services, due to changes in tastes, preferences, education and lifestyle

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Venture into making more stylish designs and cuts

Two points only?

Threats: 

Competition

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Imitation goods

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Social concerns regarding human right violations and employment policies due to outsourced manufacturing

Nike Strengths: 

Nike is known as the world’s no.1 shoemaker for a variety of sports.

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Strong at research and development, shown by its rapidly evolving and innovative product range

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Globally known number one sports brand, with strong brand image and its famous, instantly recognizable ‘Swoosh’

Weaknesses: 

Income of business is heavily dependent on its share of the footwear market

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Most of Nike’s income is derived from selling to retailers, which margins tend to get squeezed as retailers try to pass some of the low-price competition pressure onto Nike.

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Labor controversies

BATA Strengths: 

Global presence

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Able to manufacture a huge range of footwears at a very affordable price

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Differentiated line of products

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MKTG 1199 – Assignment 2

Weaknesses: 

Low quality image due to low pricing

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Limited market share and falling sales due to competition

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Inability to keep up with trends

8. Marketing Objectives Adidas targets to enhance brand desirability and increase the overall market share of Adidas Group by 3% in 2019 compared to 2015 and continue to stay in the lead and aims to become the leading sports brand in the world. Justification needed, any supporting evidence? E.g. Euromonitor? In addition to Adidas’s latest strategic implementation, with ‘Creating the New’, by becoming the fastest within the industry by satisfying consumer needs, sharing growth within the identified six key cities and inviting athletes, consumers and partners to join our brand (Adidas n.d.). Adidas can cater the needs and desires of our consumers effectively. ok

9. Target Defined Market Adidas sports shoes main target audience are adults, young adults and children who have passion in fitness and sports. The age...