Determinants of adidass supply chain performance in asia pacific region

MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY
--- oOo ---

NGUYEN NGOC QUOC

DETERMINANTS OF ADIDAS’S SUPPLY CHAIN
PERFORMANCE IN ASIA PACIFIC REGION

MASTER OF BUSINESS ADMINISTRATION THESIS

Ho Chi Minh City – 2011


MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY
--- oOo ---

NGUYEN NGOC QUOC

DETERMINANTS OF ADIDAS’S SUPPLY CHAIN
PERFORMANCE IN ASIA PACIFIC REGION

MAJOR: BUSINESS ADMINISTRATION
MAJOR CODE: 60.34.05

MASTER THESIS
INSTRUCTOR: DR. VO THI QUY

Ho Chi Minh City – 2011

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ACKNOWLEDGEMENTS
I would like to express my deepest gratitude to my research Instructor, Dr. Vo
Thi Quy for her intensive support, valuable suggestions, guidance and encouragement
during my study.
I would like to express my sincere gratitude to all of my teachers at Faculty of
Business Administration and Postgraduate Faculty, University of Economics Ho Chi
Minh City for their teaching and guidance during my MBA course.
Also, I fully appreciate those who were willing to participate in interview and
survey session.
My sincere thanks are extended to Ms. Hoa Ly (Footwear Country Manager of
adidas Viet Nam) and Mr. Woj (Head of Operation of NEO label category) for their
comments on my proposal as well as the approval to conduct the survey within adidas
supply chain.
Last but not least, the deepest and most sincere gratitude go to my beloved
parents, my wife, my sons and my closest friends for their boundless support, abundant
love and encouragement throughout my period of study. I, therefore, dedicate this work
as a gift to all of them.

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ABSTRACT
It goes without saying that supply chain management has played major role in every
business locations under globalization and intensive world-wide competition. More and
more firms have been aware of importance of supply chain management (SCM) and
attempt to enhance the effectiveness of SCM in order to secure their competitive
advantages. This paper aims at investigating the relations between supply chain

practices (Strategic supplier partnership, Product creation, Purchasing/Supply planning,
Sourcing Production (manufacturing), internal lean practices (Fast and Lean)) and
adidas supply chain performance in a pull-based supply chain. A framework expressing
the hypothesized relations among the above-mentioned variables has been developed
and validated by examining the validity and reliability of measurement scale, the
findings add credence to the positive effects of Product creation, Purchasing/Supply
planning, Internal lean practices (Fast and Lean) as antecedents to higher performance in
the supply chain. This work can support managers in taking supply chain design
decisions and in defining countermeasures to mitigate their effects on supply chain
performance.

Keywords: Supply chain; Supply chain management; supply chain practices,

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TABLE OF CONTENTS
Chapter 1: Introduction to study ------------------------------------------ 10
1.1. Background or Rationale .......................................................................... 10
1.2. Research problem ..................................................................................... 12
1.3. Research questions and research objectives ............................................. 15
1.3.1 Research questions .......................................................................15
1.3.2 Research objectives......................................................................16
1.4. Scope and Limitation of research ............................................................. 16
1.4.1. Research scope ............................................................................ 16
1.4.2. Research limitation .....................................................................17
1.5. Research method ....................................................................................... 18
1.6. Structure of research ................................................................................. 18

Chapter 2: Introduction to adidas Limited Sourcing Company ---- 20

2.1. Introduction about adidas group ............................................................... 20
2.2. Adidas‟s Strategy ...................................................................................... 22
2.3. Major locations and partnerships .............................................................. 26
2.4. Business performance in FY09 and its action plans in FY10 ................... 26
2.4.1 Business Performance ..................................................................26
2.4.2 Its Action Plan in FY10 ............................................................... 27

Chapter 3: Literature Review ---------------------------------------------- 34
3.1 Literature review ........................................................................................ 34
3.1.1. Strategic supplier partnership ..................................................... 34
3.1.2. Product creation .......................................................................... 36
3.1.3. Purchasing/Supply planning ....................................................... 40
3.1.4. Sourcing production (manufacturing)......................................... 43
3.1.5. Internal lean practices (Fast and Lean) .......................................46
3.1.6. Postponement-Inbound Customs, Order Fulfillment/Warehouse and
Outbound/Point of Sale .................................................................................... 47
3.1.7 Supply Chain Performance .......................................................... 48

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3.2. Conceptual framework and Hypotheses ................................................... 53

Chapter 4: Research method ----------------------------------------------- 54
4.1. Research Design........................................................................................ 54
4.2. Measurement scale development .............................................................. 56
4.3. Sampling technique and Data collection .................................................. 59
4.3.1. Sampling technique.....................................................................59
4.3.2. Data collection ............................................................................ 60
4.4. Data analysis methods............................................................................... 61

4.4.1. Unidimensionality Analysis with Exploratory Factor Analysis .62
4.4.2. Reliability Analysis with Cronbach‟s Alpha .............................. 62
4.4.3. Assessment of Conceptual Model and Hypotheses .................... 63

Chapter 5: Empirical results of the research --------------------------- 64
5.1. Descriptive Analysis ................................................................................. 64
5.2. Exploration Factor Analysis .....................................................................66
5.3. Reliability analysis .................................................................................... 69
5.4. Testing Hypothesis with Linear Regression ............................................. 71

Chapter 6: Conclusions and Suggestions -------------------------------- 77
6.1 Theoretical contributions ........................................................................... 77
6.2. Managerial contributions .......................................................................... 77
6.3. Limitations and Suggestions for Future Researches .................................82

References ---------------------------------------------------------------------- 84
Appendix 1 --------------------------------------------------------------------- 88
Appendix 2 --------------------------------------------------------------------- 92
Appendix 3 --------------------------------------------------------------------- 94
Appendix 4 --------------------------------------------------------------------- 95

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LIST OF FIGURES
Figure 1.1 Research Scope ............................................................................ 17
Figure 1.2 Structure of the study ..................................................................19
Figure 2.1 Global Operations in Go-to-Market Process ............................ 27
Figure 2.2 Suppliers by footwear production by region ............................ 32
Figure 3.1 adidas Product Creation Process ............................................... 39

Figure 3.2 Conceptual framework................................................................ 53
Figure 4.1 Research process .......................................................................... 56
Figure 5.1 Structure of chapter 5 .................................................................64
Figure 5.2.The revised model of determinants of Supply chain
Performance ...................................................................................................76

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LIST OF TABLE
Table 3.1 Studies related to sourcing strategy ............................................ 43
Table 4.1 Constructs for SCM practices, Supply Chain Performance .....57
Table 4.2 Respondent characteristics........................................................... 60
Table 4.3 Statistical information about collected samples ......................... 61
Table 5.1 Descriptive statistics results ......................................................... 65
Table 5.2 Factor loading analysis results ..................................................... 68
Table 5.3 Results of Exploration Factor Analysis .......................................70
Table 5.4 Means and standard deviations ................................................... 71
Table 5.5 The correlations of factors of SC ................................................. 72
Table 5.6. R Square and Adjusted R square ............................................... 73
Table 5.7 Results of linear regression analysis ............................................ 73

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ABBREVIATIONS
EMEA

Europe, Middle East and Africa

GPS

Global Procurement System

ILP

Internal Lean Practice

ILS

International Logistics Planning System

PC

Product creation

PSP

Purchasing/Supply Planning

R&D

Research and Development

SAP

Systems, Applications and Products in Data Processing

SC

Supply Chain

SCM

Supply chain management

SCP

Supply chain performance

SP

Sourcing Production

SSP

Strategic Supplier Partnership

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CHAPTER 1
INTRODUCTION TO THE STUDY
1.1.

Background or Rationale:
It goes without saying that supply chain management (SCM) has played major

role in every business locations under globalization and intensive world-wide
competition. An increased focus on SCM as an operational phenomenon that can be

leveraged to achieve superior organizational performance (e.g., Hult, Ketchen, &Slater,
2004) has been studied. A supply chain (SC) is defined as the “network of facilities and
activities that performs the functions of product development, procurement of material
from suppliers, the movement of materials between facilities, the manufacturing of
products, the distribution of finished goods to customers, and after-market support for
sustainment” (Mabert & Venkataramanan, 1998, p.538).SCM is the management of a
network of interconnected businesses involved in the ultimate provision of product and
service packages required by end customers (Harland, 1996). SCM is also “a key
strategic factor for increasing organizational effectiveness and for better realization of
organizational goals such as enhanced competitiveness, better customer care and
increased profitability” (Gunasekaran et al.2001, p.71).The major goals of SCM are to
minimize non-value-added activities and associated investment cost and operating cost,
increase customer responsiveness and flexibility in the supply chain, and enhance
bottom-line performance and cost competitiveness (Stewart 1995). A recent study
conducted by Petrovic-Lazarevic and Sohal (2002) reported that effective management
of the supply chain has been identified as being of significant importance to achieving
and sustaining a competitive advantage for firms in the Australian textiles, clothing, and
footwear industry.
Supply chain performance (SCP) is affected by exogenous variables (e.g. demand
and lead time variability), SCM and planning decisions and supply chain design
decisions (Forrester, 1961; Sterman, 2000; Lee et al., 1997a, b; Chen et al., 2000; Sezen,

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2008). More recent work has identified such emerging themes as value networks (e.g.,
Ehret, 2004), learning within these networks (e.g., Håkansson, Havila, & Pedersen,
1999), and conceptualizing industrial marketing networks as a series of resources,
activities, and actors (Gadde, Huemer, & Håkansson, 2003).
Another reason is that while an increasing number of firms are interested in

supply chains, some have considered the literature to date descriptive and anecdotal (e.g.,
Handfield & Nichols, 2003; Moore, 1999). In reality, there is a huge potential
improvement to reduce the inefficiencies caused by poor performance of suppliers,
unpredictable customer demands, and uncertain business environment. An integrated SC
has a clear advantage on the competitiveness of the individual companies. As a result,
the chain-chain competition has started to take over the enterprise-enterprise
competition, although many enterprise-enterprise competitions do exist particularly in
the less developed economies (Koh et al., 2006).
Many companies are trying to find tools for performance improvement in
response to turbulent business markets and for efficiently controlling their business
activities. The objectives of performance measurement are to improve the efficiency and
effectiveness of a SC (Beamon 1999; Gunasekaran et al. 2001). In addition, Keeber
(2000) also stated that the purpose of performance measurement is to reduce operating
costs and customer service in logistics activities, improve firm‟s revenue growth, and
enhance shareholder value. Consequently, organizations began to realize that it is not
enough to improve efficiencies within an organization, but their whole SC has to be
made competitive. It has been pointed out that understanding and practicing SCM has
become an essential prerequisite to staying in the competitive global race and to
growing profitably (Power et al., 2001; Moberg et al.,2002).
Sportswear is a globalised industry, with major production undertaken in Asian
countries, and three international brands dominating worldwide sales – Nike and
Rebook from the US, and Adidas from Europe (Just-style.com 2001). Moreover, sports
superstars, TV sports programs and sports activities have great influence on this market.

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The sportswear market possesses the same characteristics as the fashion market: strong
seasonality, short product life, volatile demand, and high impulse purchasing
(Christopher and Peck 1997; Fisher et al. 1994; Fisher et al. 2000). The seasons are

affected not only by weather but also by the sporting calendar (Ashford 1997). The costs
of stockout and markdown for big companies like Sport Obermeyer would be more than
10% of sales (Fisher et al. 1994). Thus, SCM in the sportswear market is critical to
ensure that stock does not become out dated with the short product life cycle resulting in
stockout and markdowns, thus reducing profits at the retail level.
The SC in Asia possesses special socio-economic characteristics such as a
preponderance of small independent retailers with big international suppliers dominating
the market. Moreover, there are many other reasons why Asia accounts for such a big
part of the sourcing volume and SC. Besides the lower labor costs in comparison to
other areas, Asia offers many other advantages, e.g. relatively lower political,
economical and financial risks, better conditions in terms of infrastructure, qualified
employees, etc. and the domestic demand within Asia keeps growing, which makes this
market more attractive, especially China, India, Japan...
1.2. Research problem:
There are many previous empirical studies investigating factors affecting SCP.
Some researches have focused on certain aspect of the internal SC, such as total quality
management practices (Tan et al., 2002), internal integration (Pagell, 2004 and Braganza,
2002), agile/lean manufacturing (Womack and Jones, 1996, Naylor et al., 1999 and
McIvor, 2001), and postponement (Beamon, 1998, Naylor et al., 1999, Van Hoek, 1998
and Van Hoek et al., 1999). On the other hand, some research have focused on supplier
side, such as supplier selection, supplier involvement, and manufacturing performance.
(Choi and Hartley 1996 and Vonderembse and Tracey, 1999), the influence of supplier
alliances on the organization (Stuart, 1997), success factors in strategic supplier
alliances (Monczka et al., 1998, Narasimhan and Jayaram, 1998 and Stuart, 1997), and
supplier management orientation and supplier–buyer performance (Shin et al.2000).

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Studies such as those by Clark and Lee (2000) and Alvarado and Kotzab (2001), focus

on the downstream linkages between manufacturers and retailers. A few recent studies
have begun to consider both the upstream and downstream sides of the SC
simultaneously. Tan et al. (1998) explores the relationships between supplier
management practices, customer relations practices and organizational performance;
Frohlich and Westbrook (2001) investigate the effects of supplier– customer integration
on performance. Tan et al. (2002) studies SCM and supplier evaluation practices, Min
and Mentzer, 2004 S. Min and J.T. Mentzer, Developing and measuring supply chain
concepts, Journal of Business Logistics 25 (2004) (1), pp. 63–99.Min and Mentzer
(2004) develops an instrument to measure the supply chain orientation and SCM at
conceptual levels. Cigolini et al. (2004) develops a set of supply chain techniques and
tools for examining SCM strategies. Li et al (2005) also conceptualizes, develops, and
validates six dimensions of SCM practices (strategic supplier partnership, customer
relationship, information sharing, information quality, internal lean practices, and
postponement) which covers upstream, internal and downstream side of a SC. Taken
together, this research is representative of effort to address various aspects of SCM
practices. However, Li et al (2005) noted that the implementation of various SCM
practices may be influenced by contextual factors, such as firm size, a firm's position in
the SC, supply chain length, and channel structure. For example, the larger organizations
may have higher levels of SCM practices since they usually have more complex supply
chain networks necessitating the need for more effective management of supply chain.
Consequently, it is necessary to do more researches studying SCM practices for
different industries or different supply chain models.
Adidas is a German-based leading producer of sportswear and sports equipment,
offering its products primarily through four brands: Adidas, Taylor Made-Adidas Golf,
Maxfli and Reebok (Datamonitor, 2007)

The Adidas group and its 150+ subsidiaries

are directed from the headquarters in Herzogenaurach, Germany, and employ 26,376
people (Adidas, 2007).The Adidas product line includes more than 20,000 items, with

thousands of product variations. To keep up with market demand, the company changes

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its product range twice a year; more often if new technologies are available and in
demand (Webex, 2004). Company‟s revenue for 2008 was listed at €10.799 billion and
the 2007 figure was listed at €10.299 billion or about $15.6 billion.
The company‟s SC is long and complex, relying on about 1,120 independent
factories from around the world who manufactured its products in 68 countries. Many of
these are in one of the following six countries: China, India, Indonesia, Thailand,
Turkey or Vietnam. In Asia alone, its suppliers operate in 18 different countries. It has a
global supply chain network with the complete SC being outsourced.
Using of various global manufacturing resources is an important part of adidas‟s
SCM strategies. One of the reasons is utilizing the industry strength of different
countries. In particular, adidas is looking for manufacturing resources which are taking
advantages of low labor cost, low import taxes, high efficiency in manufacturing
management and political stability. Consequently, Vietnam, China, India and Indonesia
are good alternatives that adidas is choosing for key manufacturing resources. This way,
adidas is also flexible to shift production from one country to another if they feel cost
concern; political stability or trade restriction in certain country caused any problems for
them. In recent years, adidas has tended to shift production from Indonesia and China to
Vietnam. Because political stability in Indonesia is the concern that adidas does not
want to take risk whereas labor cost in China is rapidly being increased recently.
However, adidas is also facing some problems from outsourcing strategy in these
countries.
Strategic supplier partnership is a key concern that adidas is struggling. Almost
main material suppliers are from developed countries such as Japan, Korean, Taiwan
and China. As a result, long material lead-time is one of main problems negatively
affecting adidas‟s SCP. Based on trust and commitment, adidas is building strategic

partnership with contract factories as well as main suppliers in order to enhance its
overall SCP.

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Manufacturing management is also a weakness of developing countries.
Productivity of Vietnam and Indonesia workers is very low. Productivity of workers in
these developing countries is just approximately 1/3 compared with productivity of
workers in developed countries like Japan, Korea, etc. In other words, even adidas is
utilizing low labor cost in developing countries, but low productivity is also a trouble
that adidas and its partners are facing. In order to enhance productivity and quality
stability, Lean philosophy has being implemented in almost adidas‟s contract factories.
However, the achievements in some recent years are not up to its expectation in terms of
efficiency and benefits. That‟s the reason why lean application and proliferation are
always put on top targets of its fiscal year strategy.
Product creation plays an important role in SC and many big sports brands now
are moving their product creation centers into Asia as well. It means that they want to
locate product development and production as one place to reduce lead time for all
related processes and cost from production creation stage to mass production. That is big
challenge to them since this is the first time that they have done this experiment.
Basing on theoretical model of Li et al (2005) together with FY10 of adidas
sourcing Limited operations strategies which have focused on 9 key drivers of SCP as
from Strategic Demand/Design, Product Creation, Demand planning, Purchasing/Supply
Planning, Sourcing Production, Inbound Customs, Order Fulfillment/Warehouse, and
Outbound/Point of Sale which also covers internal based-successful SCM, as well as the
current SC problems it is facing, this study will identify the factors which affects its SCP
and develop a theoretical model/ measurement scale that would be appropriate to apply
in real situation of adidas‟s SCM practices.
1.3. Research question and research objectives:

1.3.1 Research question

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Research questions involve the research translation of “problem” into the need
for inquiry. The research problems which are defined as above will lead to the following
research question:
What are the relationships between SCM practices- Strategic supplier partnership,
Product creation, Purchasing/Supply planning, Sourcing Production (manufacturing),
Internal lean practices (Fast and Lean) – and adidas SCP?
1.3.2 Research objectives
A research objective is the researcher‟s version of a business problem. Objectives
explain the purpose of the research in measurable terms and define standards of what the
research should accomplish (Zikmund 1997, p. 89). In solving the research problem
previously mentioned, the objectives of this paper are to:
o

Identify key factors of SCM practices affecting adidas SCP in Asia.

o

Measure relationship between SCM practices and adidas SCP.

From the above objectives, this research is expected to help supply chain managers of
adidas to evaluate the SC with relevant data and to give recommendations to improve
SCP of adidas SC in Asia.
1.4. Scope and Limitation of research
1.4.1. Research scope
The research is studying the determinants of SCP of adidas in Asia. However,

due to some limitations, the research just focuses on Asia region with manufacturing and
operating activities which are located in Asia countries. The adidas‟s SCP from other
regions will be conducted in other researches.

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Besides, due to the limit of time, the research will focus on adidas Footwear
contract factories „tier 1” and “tier 2” suppliers. Raw material suppliers and distribution
centers will be conducted in other researches.
Figure 1.1 Research Scope

Research scope

1.4.2. Research Limitation.
Collecting survey data from single respondents per locations may result in
inaccurate measurement even if the respondent is a top manager or executive of
surveyed companies. However, perception of the respondents through feeling may result
in inaccurate assessment about performance discrepancy between the company and its
competitors.
This research focused on SCM practices of manufacturing firms. Therefore, the
construct of internal lean practice may not be appropriate for distributors or retailers.

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The Postponement factor is not suitable for the characteristics of adidas‟s supply
chain; therefore, it was not included in this research.
This research deems delivery dependability as measurements for SCP.
Other measurements such as inventory cost, cash-to-cash cycle time, etc. are

confidential information of the company. Therefore, it is difficult to collect accurate data
of these measurements for this research.
1.5. Research Method
This research study is designed to identify key factors of SCM practices affecting
SCP of adidas SC in Asia then measure relationship between SCM practices and adidas
SCP. Thus, “exploratory” is viewed as an appropriate research type.
In this research, survey are used as main methods and it are considered as a
research technique in this study to identify key factors of SCM practices affecting SCP
of adidas SC in Asia then measure relationship between SCM practices and adidas SCP.
Questionnaires are designed and directly asked/sent to interviewees to collect
data related to SCM practices. The argument for choosing survey is twofold. Firstly,
surveys provide quick, efficient and accurate means of assessing information about the
population. Secondly, surveys are more appropriate in cases where there is lack of
secondary data.
Finally, SPSS Version 16 software program are used to analyze data.
1.6. Structure of research
This research includes six chapters:
The first chapter (Introduction) demonstrates the rationale and background of the
research. Furthermore, this chapter briefs some previous research that is relevant and
helpful for the author to look for the research gap. Deriving from research gap, the
research questions and research objectives are also generated. The study scope, research
methodology, limitation and structure of research are also mentioned in this chapter.

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Chapter 2 (Introduction to adidas Limited Sourcing group) briefs the general
information about adidas, its strategy, its majors location, partnerships in the world as
well as its business performance in FY09 and its action plan in FY10.
Chapter 3 (Literature review) summarizes theories and previous study, which is

helpful to build up the hypothesis and conceptual framework.
Chapter 4 (Research methodology) explains research process and the method of
data analyzing in each stage.
Chapter 5 (Empirical results of the research) analyzes collected data from each
survey stage in more detail.
Chapter 6 (Conclusion and suggestions) details the conclusion and
recommendation of the research.
Figure 1.2 Structure of the study
Chapter 1

Introduction to study

Chapter 2

Introduction to adidas Limited Sourcing Company

Chapter 3

Literature review

Chapter 4

Research Methodology

Chapter 5

Empirical results of the research

Chapter 6

Conclusions and Suggestions.

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CHAPTER 2
INTRODUCTION TO ADIDAS
2.1. Introduction about adidas group.
adidas – a name that stands for competence in all sectors of sport around the
globe. The vision of company founder Adolf Dassler has long become reality and his
corporate philosophy the guiding principle for successor generations.
The idea was as simple as it was brilliant. Adi Dassler‟s aim was to provide every
athlete with the best possible equipment. It all began in 1920, when Adi Dassler made
his first shoes using the few materials available after the First World War.
Today, the adidas product range extends from shoes, apparel and accessories for
basketball, soccer, fitness and training to adventure, trail and golf.
The adidas name dates back to 1948, deriving from the first two syllables of Adi
Dassler‟s first and last name. One year later, Adi Dassler registered the Three Stripes as
a trademark. After a period spanning almost 70 years, the Dassler Family withdrew from
the company in 1989, and the enterprise was transformed into a corporation
(“Aktiengesellschaft”).
French-born Robert Louis-Dreyfus was Chairman of the Executive Board from
April 1993 to March 2001. It was he who initiated adidas‟ flotation on the stock market
in November 1995. Since 2001, Herbert Hainer has been leading the Group.
adidas Group – In 1997, adidas acquired the Salomon group, and the company‟s
name changed to adidas-Salomon AG. The Salomon group also included the
TaylorMade golf brand.
In October 2005, the Salomon business segment, including the related
subsidiaries and brands Salomon, Mavic, Bonfire, Arc‟Teryx and Cliché, was sold to the
Finnish Amer Sports Corporation. The company will change its legal name to “adidas

AG” following shareholder approval at the Annual General Meeting in May 2006.
On January 31, 2006, adidas-Salomon AG acquired Reebok International Ltd.
The closing of the Reebok transaction marks a new chapter in the history of the adidas

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Group. By combining two of the most respected and well-known brands in the
worldwide sporting goods industry, the new Group will benefit from a more competitive
worldwide platform, well-defined and complementary brand identities, a wider range of
products, and a stronger presence across teams, athletes, events and leagues.
The new adidas Group has more than 25,000 employees worldwide, with more
than 2,000 working at the company‟s headquarters in Herzogenaurach. A team of
designers, product developers and experts for biomechanics and material technology
carries out research in Portland and at adidas‟ second technology centre in Scheinfeld
near Nuremberg.
In Scheinfeld models, prototypes and made-to-measure performance products are
also manufactured and tested. It is here that adidas maintains the only sports shoe
production facility still in existence in Germany.
More than 80 subsidiaries guarantee marketplace presence for adidas products
around the world. Sales and distribution of adidas products is grouped in four regions
worldwide: Europe/Emerging Markets, North America, Asia/Pacific and Latin America.
Today, adidas is Europe‟s biggest supplier of athletic footwear and sports apparel.
For over 80 years the adidas Group has been part of the world of sports on every
level, delivering state-of-the-art sports footwear, apparel and accessories. Today, the
adidas Group is a global leader in the sporting goods industry and offers a broad
portfolio of products. Products from the adidas Group are available in virtually every
country of the world. Its strategy is simple: continuously strengthen our brands and
products to improve its competitive position and financial and performance.
Adidas

Footwear, apparel, and accessories
Reebok
Footwear, apparel, and accessories
TaylorMade-adidas Golf
Golf Equipment: metal woods, irons putters, golf balls, footwear, apparel and accessories

Rockport
Dress, casual and outdoor footwear, apparel and accessories

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CCM-Hockey
Hockey equipment and apparel
Activities of the company and its more than 170 subsidiaries are directed from
the Group's headquarters in Herzogenaurach, Germany. It is also home to the adidas
brand. Reebok Headquarters are located in Canton, Massachusetts. Taylor Made-adidas
Golf is based in California. The company also operates creation centers and
development departments at other locations around the world, corresponding to the
related business activity adidas Sourcing Ltd., a fully-owned subsidiary headquartered in
Hong Kong, is the worldwide sourcing agent for the adidas Group. Effective December
31, 2009, the adidas Group employed 39,596 people.

Its Mission
The adidas Group strives to be the global leader in the sporting goods industry with
sports brands built on a passion for sports and a sporting lifestyle.
It is consumer focused and therefore it continuously improves the quality, look, feel
and image of our products and our organizational structures to match and exceed
consumer expectations and to provide them with the highest value.
It is innovation and design leaders who seek to help athletes of all skill levels achieve

peak performance with every product it brings to market.
It is a global organization that is socially and environmentally responsible, creative
and financially rewarding for our employees and shareholders.
It is committed to continuously strengthening its brands and products to improve its
competitive position.
It is dedicated to consistently delivering outstanding financial results.
2.2. Adidas’s strategy
Adidas‟s goal as a Group is to lead the sporting goods industry with brands built
upon a passion for sports and a sporting lifestyle. Inspired by its heritage, it knows that a
profound understanding of the consumer and customer is essential to achieving this goal.

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To anticipate and respond to their needs, it continuously strives to create a culture of
innovation, challenging to break with convention and embrace change. By harnessing
this culture, it pushes the boundaries of products, services and processes to strengthen its
competitiveness and maximize the Group‟s operational and financial performance. This,
in turn, will drive long-term value creation for its shareholders.
Reorganization of Group provides solid platform for growth
In 2009, the adidas Group took the strategic decision to move from a vertically
integrated brand structure into a functional multi-brand structure for the adidas and
Reebok brands. This led to the creation of a Global Sales function responsible for the
commercial activities and a Global Brands function responsible for the marketing
activities of both brands. In addition, the Global Sales organisation was split into
Wholesale and Retail, to cater more appropriately to the different needs of these two
distinctive business models. This new structure follows two important principles: to
foster further alignment and strengthen brand management to drive long-term
sustainable growth, while at the same time ensuring coordinated and best practice
execution in the marketplace.

To transition to the new structure, the Group initiated several measures in 2009
including:
o Establishment of joint operating models for the adidas and Reebok brands in
most markets around the globe.
o Elimination of regional headquarters, moving to more direct interaction between
local markets and global functions.
o Separation of the responsibility between Global Brands and Global Sales
management on the Board level. Herbert Hainer, adidas Group CEO, additionally
assumed direct responsibility for Global Sales. At the same time, Erich Stamminger,
Member of the Executive Board of the adidas Group, took responsibility for Global
Brands.
The new structure will allow it to better leverage the strengths of its management
team and deliver best-in-class service to its consumers and customers. Due to the

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different business models of Taylor Made-adidas Golf, Rockport and Reebok-CCM
Hockey, these operating segments are not part of the new matrix structure.
Diverse brand portfolio
Consumers want choice. Whether it is the athlete looking for the best possible
equipment, or the casual consumer searching for the next fashion trend, adidas group is
inspired to develop and create experiences that engage consumers in long-lasting
relationships with its brands. To maximize its consumer reach, it has embraced a multibrand strategy. This approach allows it to tackle opportunities from several perspectives,
as both a mass and a niche player, providing distinct and relevant products to a wide
spectrum of consumers. In this way, each brand is able to keep a unique identity and
focus on its core competencies, while simultaneously providing adidas Group with a
broad product offering, increasing its leverage in the marketplace.
Investments focused on highest potential markets and channels
As a Group, it targets leading market positions in all markets where it compete.

However, with almost 180 subsidiaries worldwide, adidas Group has prioritized its
investments based on those markets which offer the best medium- to long-term growth
and profitability opportunities. In this respect, it continues to place a considerable
emphasis on expanding its activities in the emerging markets; particularly China and
Russia see Subsequent Events and Outlook.
No matter in which market it operate, it recognizes that consumer buying
behavior and the retail landscape are unique. Therefore, to fully exploit market
opportunities, it tailors its distribution strategy to present adidas brands to the consumer
in the most impactful way. This is achieved by following a distinctive channel approach.
It strives to provide its customers with superior service to secure prime shelf space for
its brands, while continuing its commitment to building a strategic competency in own
retail and e-commerce see Global Sales.
Creating a flexible supply chain
Speed and agility are key elements to outpacing the competition. Adidas Group is
committed to meeting the full range of customer and consumer needs by ensuring

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product availability in the correct size and colour, providing game-changing technical
innovations and also the latest high-end fashion product to the highest quality standards.
It strives to shorten creation and production lead times by continuously improving
its infrastructure, processes and systems. By sharing information from point of sale to
source and vice versa, it strives to connect and more closely integrate the various
elements of its supply chain, to enable quick reaction to changing consumer trends. To
this end, it focuses on building maximum flexibility. While leveraging the efficiency of
common infrastructure and processes, the Group strives to provide tailored solutions for
all its business models, be it the wholesale or retail channels, or the performanceoriented or style-oriented businesses.
Leading through innovation
Everyone in the adidas Group is responsible for driving innovation. Therefore, it

fosters a culture of challenging convention and embracing change, and requires all areas
of the Group to generate at least one new meaningful innovative improvement per year.
In particular, the Group believes that technological evolution and cutting-edge design in
its products are essential to achieving sustainable leadership in its industry see Research
and Development (R& D). Beyond this, enhancing services for its customers, and
implementing more efficient and effective internal processes are other areas where its
organization strives to innovate.
Develop a team grounded in our heritage
The Group‟s culture is continuously shaped by influences from the past, present
and future. It perpetuates its founder‟s commitment to the athlete/consumer, pride in
what it does, quality and love of sport. The Group wins as a team through open
communication, collaboration and our shared values found in sport.
Further, the Group is particularly focused on ensuring best-practice social and
environmental standards. It encourages socially and environmentally responsible
behavior, because it knows it will generate superior long-term value for the Group.
Creating shareholder value
Sustainable revenue and operating profit growth are critical to its success.
Creating value for its shareholders through significant cash flow generation drives its
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