adidas VS nikeA bird’s eye view of the e-marketing concepts incorporated by the giants ofsports apparel.Deepak Krishnamurthi8/20/2007
Contents1. Introduction2. Porter’s Competitive Forces3. SWOT Analysis of Adidas and Nike4. E-Business Model5. Effectiveness of E-Business
INTRODUCTION A daring dream began in 1920 when Adi Dassler fashioned his first shoe inHerzogenaurach, Germany. In 1948, Adidas was founded along with its identifying trademark,the three stripes. From its inception, Adidas has faithfully adhered to three guiding principlesembedded deep into its DNA: Produce the best shoe for the requirements of the sport, protectthe athlete from injury, and make the product durable. As time has passed, Adidas has evolvedand 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 abroad product portfolio. This led to the development of www.thestore.adidas.com, an e-commerce site focused on interactively profiling Adidass extensive product offeringsaccompanied by detailed product information. Initially, what started as Blue Ribbon Sports in 1962 became Nike Inc. in 1972,based in Beaverton, Oregon. (Nike – Greek Goddess of Victory) The founders were BillBowerman, a track & field coach and Phil Knight, a runner under Bowerman. From theirmodest start, Nike has grown to be a global leader in the sporting goods industry. It isrecognized as the worlds leading designer, marketer and distributor of athletic footwear,apparel, and accessories for a wide variety of sports and fitness activities. For Nike, anestablished and growing organization, a strong Internet presence felt like a natural extension totheir already globally focused strategy. Today www.niketown.com, Nikes e-commerce siteoffers a unique experience, products and product information for its potential and existing
customers. MICHAEL PORTERS FIVE COMPETITIVE FORCESMichael Porter has identified five forces that determine the intrinsic long-run attractiveness ofa market or market segment : industry competitors, potential entrants, substitutes, buyers andsuppliers.INTENSE SEGMENT RIVALRYThe rivalry among existing competitors in the footwear industry is quite high. Large firms suchas Nike and Adidas have grown immensely over the last two decades. Their global reach hasexpanded through all continents; this is attributed to the emergences of the Internet and e-commerce. Online selling has enlarged the reach for these firms allowing them to increase saleswhile minimizing operating costs. Most individuals in North America have access to high speedInternet and online purchasing has become the new trend for the twenty first century.THREAT OF NEW ENTRANTSDue to the large scale of both Nike and Adidas, these firms are able to control their costs toretain performance advantage over emerging competitors in the industry. Their web sites aremore sophisticated and enticing to browse. The capital injection into web site development ishigh and must be updated frequently with new promotions and added features to attractonline shoppers. Selling footwear online is highly competitive; however, barriers to enter intothis e-commerce industry are quite low. The capital requirement for setting up an online shop iscomparatively lower than setting up a traditional bricks and mortar establishment. Therefore,the online footwear industry is highly abundant with hundreds of online merchants.
THREAT OF SUBSTITUTE PRODUCTSConsumer substitutes for athletic footwear products are low because there are littlealternatives to switch, some substitutes for athlete footwear could be boots, sandals, dressshoes or bear feet. Consumers are not likely to substitute due to the performance specificationof the product. For instance, a basketball player would not wear boots to play basketball.Therefore, there are no real substitutes for athletic footwear.THREAT OF BUYER’S GROWING BARGAINING POWERThere 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 theirbrands against competitors, in order to increase sales and market share. The use of online toolshas helped to enhance the accessibility of users. For example, Nikes "nikeid.com" link allowsconsumers to customize and design their own footwear by permitting customers to specify thedesired colours and the option to personalize the footwear with their name.THREAT OF SELLER’S GROWING BARGAINING POWERThere are many suppliers in this industry. There is very little differentiation among thesuppliers, which eliminates suppliers bargaining power. Leather, rubber, and cotton arecommodities available abundantly in the market. Companies such as Nike and Adidas have adefinite advantage and power over their suppliers. These suppliers become dependent onthese firms for survival. Moreover, Nike and Adidas have standardized their input procedurespertaining to the materials used, their labor force, supplies, services, and logistics. Firms areable to switch between suppliers quickly and cheaply, due to the globalised networks of cheaplabour.
SWOT ANALYSIS OF NIKE AND ADIDAS (With respect to e-commerce)STRENGTHS WEAKNESSES 1. First movers advantage in e- 1. Negative image portrayed by poor commerce. working conditions in its overseas 2. Brand recognition and reputation. factories. 3. Diversity in products offered on the 2. E-commerce is limited to USA. web. (footwear, apparel, sporting 3. Online customer service not “helpful” equipment etc). or easy to find. 4. Strong control over its own distribution 4. The direct sale to consumers is creating channel. conflicts with its own resellers. 5. Innovative designs in footwear enabling consumers to design their own shoes online. 6. Secondary websites (eg., soccerevolution.com)OPPORTUNITIES THREATS 1. Increased demand in the industry for 1. Increase in price of providing products available online. technological solutions (e-commerce). 2. E-commerce will reduce the cost of 2. Strong competition from some of its goods sold. major challengers in all branches of the 3. Expand e-commerce to global markets. business. 4. Possibility of outsourcing web 3. Negative image created by the development and e-commerce to a sponsored athletes (i.e. Kobe Bryant
third party developer. and his sexual assault case). 5. Expand e-commerce to global markets 4. Possibility of distress from growing 6. Growing reputation in non-basketball beyond its capabilities. sports will boost e-business. E-BUSINESS MODELNike and Adidas have adopted a merchant model which has three pillars of their e-commercestrategy: 1. Pure-play e-tailer 2. Tricks and clicks 3. Their online store.The main purpose of acquiring relationships with pure-play e-tailers is to promote and marketproducts on an international level. Nike has landed a deal with Fogdog Sports which will selltheir entire Nike product line on its web site. Adidas signed an agreement with SportsLine.com
and Sports.com. Fogdog.com, Sports.com, and SportsLine.com have the initial coverage in theUS, UK and eventually in Asia. Nike and Adidas will also operate their traditional o, while sellingtheir specialty products on their e-commerce web sites. This business model is referred to as"Bricks and Clicks." The primary goals of operating a bricks and click site is to increase sales,reduce cost, increase market reach, applying competitive pressure, promoting new products,improving customer service, and progress in addressing user concerns. EFFECTIVENESS OF E-BUSINESSNikes ability to realize the potential of the Internet has placed them in the e-commerceleadership position among other sporting goods companies. Through its initiative to be the firstto market with its e-commerce web site launch back in 1999. By continuously relying oninnovative companies to redesign the site, Nike acquired the luxury of owning a site thatsevery bit as inspirational as it is informational, an important milestone for a market leader.Today, Nikes store enables online consumers to design key elements of the shoes theypurchase. This program is the first time a company has offered such mass customization offootwear.Adidass approach to e-commerce was that of a follower since Nike was first. As a result, Adidasrelentlessly pursued innovation and refreshing content to differentiate itself from Nike. Adidasalso realized that in order to be successful it has to be fully committed to this initiatie. Thatswhy it included adidas.com as part of its three pillar strategy along with pure play e-tailers,bricks and clicks. The final result is a web site that successfully portrays Adidass productportfolio in an interactive and informational manner.Nike and Adidas seem to follow similar online strategies but Adidas experienced a greatertransformation from being a minor, insignificant player back in 1998 to the number twoposition in the athletic footwear and apparel industry. Part of this success is due to Adidassability to thoroughly leverage the Internet as a marketing and e-commerce medium, most of itat the expense of Reebok. In the Nikes case the online strategy ensured its strong leadership
position in the intensely competitive market. No other athletic footwear company is able tooutshine these two firms when it comes to e-commerce. VS