Adidas Shoes

ADIDAS SHOES
Presented by:-
Ashish Gutgutia(19)
Abhishek Mehta(4)
Prashant DAR(62)
Supreet Khanuja(41)
Soham Ghosh Ray(86)
Introduction
• Started by Adolf ‘Adi’ Dassler
• 2nd largest footwear brand with 27% market
share after Nike.
• 2005- purchase Reebok
• Already great performer
in Asian and Latin American
Market.
SUPPLY CHAIN
• Adidas products are manufactured by

suppliers under contract to the adidas Group
• Adidas works with more than 1,120
independent factories
• It manufactures their products in 68 countries
• Retail outlets
Product Lifecycle
• Getting a new shoe model on a store shelf
could take 15 to 18 months
• Volumes were determined far before shoes
arrived at consumer outlets
• Requiring careful forecasting
• Shoe had a market life of 3 to 6 months
• Not possible to adjust production runs to
meet unexpected levels of consumer
demand
• Adidas did not try to match supply of any
given shoe model with demand
Law Of Demand
Demand for Adidas
The table and graph below represent the demand for
Adidas products
Demand(sales in
Year million €)
2003 6,266
2004 6,478
2005 6636
2006 10084
2007 10299
2008 10799
Consumer Behavior
• The consumers are mainly the youth
• They prefer comfort and style
• Adidas has close competitors

• Consumers has the choice of buying from
close substitutes
Elasticity of Demand
• There are 3 types of demand elasticity.

1.Price elasticity
2.Income elasticity
3.Cross elasticity
Elasticity of Supply
• This is a measure of how much quantity supplied (QS)
reacts to a change in prices. Elasticity of Supply is
equal to "percent change of QS" divided by "percent
change in price".
• Finally we can say that our product i.e. Adidas is more

demand elastic. But in short run elasticity is low and in
long run it is more demand elastic.
Cost structure – distribution
Material Cost
Value Chain for $100 Pair of ADIDAS Shoes Direct Labor Cost
Material Cost $15.67 Administration &
Overhead
Direct Labour Cost $15.35
Administration & Overhead $3.56 Factory Profit Margin
Factory Profit Margin $1.90 Shipping, Customs, and

Finance Charges
Shipping, Customs, and Finance Charges $2.88
Warehousing &
Warehousing & Distribution $0.76 Distribution
Royalties $0.38
Royalties
Net Quality Costs $0.27
Net Quality Costs
Direct Ship Allowance $0.21
Research And Development $0.23 Direct Ship Allowance
Other Costs of Sale $0.17 Research And

Development
Marketing Exp. $4.61
Other Costs of Sale
Corporate Overhead $1.75
Interest Expense $0.21 Marketing Exp.
Income Taxes $2.56 Corporate Overhead
Total ADIDAS Cost $50.51 Interest Expense

ADIDAS Net Profit $4.00
Income Taxes
Gross Wholesale Price $54.51
ADIDAS Net Profit
Retail Costs And Profit $45.49
Cost structure - input/raw
material markets
• Raw material and labour costs 70% of the cost
of sales (approx)
• Almost 80% of the footwear is outsourced
while rest is manufactured by Adidas itself
• Prices of raw materials such as rubber, oil etc.
are subject to the risk of price changes
• Ordering process and price negotiations usually
take place around six months in advance
• Reaction time to manage and plan for sharp
increases in input costs
• To reduce cost, lean manufacturing techniques
at their partner factories
Athletic Footwear Industry Market Share by Sales
Volume
Companies Market Market Share
Nike Share
Adidas 42% Nike
Reebok 27% Adidas
Puma 12% Reebok
New Balance 6% Puma
Skechers 5% New Balance
K-Swiss 3% Skechers
Vans 2% K-Swiss
Asics 1% Vans
Saucony 0.30% Asics
0.70% Saucony
Market for Adidas shoes
• The foot wear industry is dominated by few large firms where
the majority of the market players have less than 5% market
share. The market is dominated by the major players like Nike,
Adidas, Reebok and Puma. Now after the Acquisition of Reebok,
Adidas has acquired a market share of 39% where the players
like Nike has 42% market share and Puma has 6% market share
• Here market for Adidas comes under non-collusive oligopoly in

the professional Football industry
• Except to that domain Adidas comes under the monopolistic

competitive market
• Adidas has a strong position in the footwear and apparel

industry. Integrating to its existing line of business is a key
advantage to both companies relative to its competitors
Cont…
• There are a large number of buyers relative to the number of
firms in this industry. Therefore, companies like Nike and Adidas
must continuously market their product and differentiate their
brands against competitors, in order to increase sales and market
share.
• Bargaining Power of Suppliers is Low as Adidas have standardized

their input procedures pertaining to the materials used, their
labor force, supplies, services, and logistics. Suppliers have
become dependent on these firms as their means to survival.
• Threats of Substitutes are Low as consumers are not likely to

substitute due to the performance specification of the product.
• Rivalry among Existing Competitors is High as Large firms such as

Nike and Puma have grown immensely over the last two decades.
Their global reach has expanded through all continents.
New entrants
• Entry barriers for new companies are high
• Large economies of scale needed
• Requires high initial capital investments
• Requires large marketing and advertising
costs
Pricing and marketing strategies
• Employs a premium-price strategy
• Marketing expense is the largest operating expenses
• Approximately 23% of total other operating expenses
• Makes most of its money by selling at wholesale rates
to large retailers
• Recently two most influential events – Reebok
acquisition and FIFA world cup
• Rapidly expanding its presence in emerging
markets like Asia and Latin America
• High profile sponsorships to heavily boost
worldwide sales
• They have focused on “PERSONALIZATION”.
Questions?
Thank You!

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What is Adidas' supply chain model?

What is Adidas' supply chain model?

What are the different types of demand elasticity?

What are the different types of demand elasticity?

ADIDAS SHOES

• Adidas products are manufactured by

• The consumers are mainly the youth

• They prefer comfort and style

• Adidas has close competitors

• There are 3 types of demand elasticity.

• Finally we can say that our product i.e. Adidas is more

Factory Profit Margin $1.90 Shipping, Customs, and

Other Costs of Sale $0.17 Research And

Income Taxes $2.56 Corporate Overhead

Total ADIDAS Cost $50.51 Interest Expense

Reebok 27% Adidas

Puma 12% Reebok

New Balance 6% Puma

Skechers 5% New Balance

Saucony 0.30% Asics

• Here market for Adidas comes under non-collusive oligopoly in

• Except to that domain Adidas comes under the monopolistic

• Adidas has a strong position in the footwear and apparel

• Bargaining Power of Suppliers is Low as Adidas have standardized

• Threats of Substitutes are Low as consumers are not likely to

• Rivalry among Existing Competitors is High as Large firms such as

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