strategic-management

Competition
Competition in the athletic footwear and apparel industry is extremely fierce. Exhibit 10
provides comparative information of Nike versus all athletic footwear firms. Numerous brands
compete worldwide for athlete endorsements, customer loyalty, and sales. Worldwide, Nike is
the leader in athletic footwear, with an estimated 37 percent of worldwide sales.
Adidas
The number-two competitor in athletic footwear is Adidas, with an estimated 22 percent of
worldwide sales. Adidas, based in Herzogenaurach, Germany, was founded in 1924 by the
brothers Adolf and Rudolf Dassler. The company took its name from “Adi,” a nickname
for Adolf, and “Das” from Dassler. The foundation of what would become the Adidas
group began with the equipping of several athletes for the 1928 Olympics, and it was
cemented with Jesse Owen’s quadruple gold medal performance at the 1936 Summer
Olympics wearing Adidas footwear.
Today, the Adidas group is a world-class provider of athletic footwear, apparel, and
sporting equipment. Their mission is “to be the leading sports brand in the world.” Led by their
flagship Adidas brand, the company posted 2008 revenues of 10.8 billion euros, a 4.9 percent
improvement over its 2007 results. Worldwide, the company employs over 23,000 employees
and tallied a record operating profit of 3.8 billion euros with a gross margin of 48.7 percent.
Adidas was the Official Sportswear Partner for the Beijing 2008 Olympic Games, supplying
more than 3 million products to participants and organizers of the Games. The company also
contracts with Chinese basketball superstar Yao Ming to endorse a line of Reebok basketball
shoes, contributing to Adidas’s position as a market leader in both Europe and China.
The company is organized into three main divisions: Adidas, Reebok, and
TaylorMade Golf. Its core Adidas division sells athletic footwear, apparel, and equipment
under the brand name Adidas. Net sales in this division were 7.8 billion euros, a 10 percent
improvement over 2007 performance. Reebok was acquired by Adidas in 2006. With roots
in women’s fitness, this division sells athletic footwear, apparel, and equipment under the
Reebok, Rockport, and Reebok-CCM Hockey brand names. Net sales for the Reebok
division were 2.1 billion euros, a net decline of 8 percent over 2007 results. Commenting on
the Reebok division’s results, Herbert Hainer, CEO of Adidas, said, “2008 was a challenging
year and I am disappointed not to be able to show the financial improvements we anticipated
at the beginning of the year.” The TaylorMade Golf division was acquired by Adidas
in 1997. This division sells golf clubs, balls, footwear, and apparel under the TaylorMade,
Adidas Golf, and Ashworth brand names. Net sales for this division were 812 million euros
in 2008, a 1 percent improvement over its 2007 results.
EXHIBIT 10 Nike versus All Firms in the Athletic Footwear Industry
Athletic Footwear
Nike Industry
Market Capitalization 26.74B 308.96M
# Employees 34,300 740
Qtrly Rev Growth -7.40% 4.50%
Revenue 19.18B 303.83M
Gross Margin 44.87% 38.93%
EBIT 2.80B 11.21M
Oper Margins 12.80% 0.93%
Net Income 1.49B N/A
EPS 3.030 0.52
Note: M = millions
B = billions
Source: Based on information at www.finance.yahoo.com.
CASE 27 • NIKE, INC. — 2010 269