Adidas - Phase 3 Presentation

[Virtual Presenter] Good morning everyone, as we all know, our company has been hoping to increase the current market share of Adidas in Greater China. Today I will be presenting a tactical plan that outlines the initiatives needed to achieve this goal within a realistic timeline, exploring the resulting financial and organizational impacts. Let's begin..

[Audio] Let us discuss our tactical plan to increase our market share in Greater China. We have identified focus areas in the plan that should ensure our success. Our plan will include a marketing and supply chain plan as well as considering the impact this plan will have on our organization, people, and financial projections. Let's start..

[Audio] Strategic goal of Adidas in Greater China is to increase its market share from 11% to 23%. This can be achieved by utilizing effective marketing and supply chain initiatives. With mid-term goal of 19%, three year goal of 15%, and five year goal of 23%, success is quite attainable with focus and dedication to the tasks ahead..

[Audio] Adidas is targeting to double its current 11% market share in Greater China within the next 2-3 years. This plan is designed to capitalize on the second largest consumer market in the world, which offers immense potential for increasing market share. The objectives will be achieved through strategic marketing and supply chain initiatives and should produce significant financial and organizational results..

[Audio] Adidas has experienced a substantial reduction in its market share in Greater China over the past three years, dropping from 19% to 11% by 2022, as reported by Euromonitor. Its current market share is far behind that of its rivals Nike and Li Ning, who together have over 50% of the market. It is clear that Adidas must take drastic measures to improve its market share and restore its competitive edge in this region..

[Audio] In order to reach the ambitious goal of increasing Adidas’s market share in Greater China from 11% to 23%, we must focus on two areas, marketing and sales, and supply chain management and operations. When it comes to marketing and sales, we’ve seen a significant decrease in revenue from 2019 to 2021, and an even more concerning decrease in market share from 19% to 11%. Additionally, local brands are quickly overtaking the market in Greater China. On the operations side of things, we’ve seen a decrease in operational margin of 15%, as well as a high degree of inventory writeoffs and supplier incidents. In order to increase our market share, we must act quickly and decisively in these two key areas in order to turn our fortunes around..

MARKETING PLAN.

[Audio] Adidas' current marketing activities and challenges in Greater China is representative of their current stance in the market. The company has had to make a double-digit cutback in their marketing expenditures in 2022, leading to a decrease in their operating profit, as well as a reduction in their marketing initiatives and expenditure in Greater China. Unfortunately, the collaborations with Western markets were not as influential as the CEO had anticipated, as Chinese customers are not moved by the Western-influence and prefer their own brands. As a result, CEO Kasper Rorsted has been prioritizing marketing in the West, believing that it would have a residual effect in Greater China. This belief was backed by his statement: "If Kanye West or Jerry Lorenzo launches something in Los Angeles, it will be noticed in Shanghai." This sort of collaboration with Gucci and Fear of God in the U S should be influential on a global level, especially in Greater China..

[Audio] Adidas has been actively expanding in Greater China over the recent years, but the 11% market share is still far from its target of 23%. A 3-year tactical plan was devised to make this journey. Year 1 of 2023 involves understanding the industry, segmentation and targeting, as well as formulating a new product line to reflect Chinese culture. Year 2 of 2024 sees the product launched as well as online store, other sales channels as well as the marketing channels being set up, like celebrity marketing, influencer marketing, and the social media Douyin, WeChat, and RED. Year 3 of 2025 focuses on reviewing the performance of Year 2, improving online presence, and providing stellar customer service to develop a solid reputation. This plan is expected to get Adidas to the 23% market share goal in Greater China..

[Audio] Adidas has set their sights on the Greater China region in order to expand their market share. Their geographic segmentation has identified urban areas in Beijing, Shanghai, Hong Kong, Taipei, and Shenzhen as key areas of focus. The company is targeting Generation Z, those born between 1990 and early 2000, as well as individuals with an affinity for fitness, patriotism, and cultural awareness. Furthermore, they aim to keep an eye on consumer behavior related to sports and health. The news was first reported by Ma in 2019..

[Audio] Adidas is focusing on Gen-Z fitness enthusiasts and athletes, as well as those who are patriotic and culturally aware, in order to increase its market share from 11% to 23%. These groups are passionate about physical activity and are essential for understanding local markets and connecting to the consumers. Consequently, Adidas has the potential to significantly increase its presence in the Greater China market by targeting this key target group..

[Audio] Adidas believes that forming partnerships with key brands is the most effective way to maximize customer value and increase market share in Greater China. To this end, Adidas has joined forces with China Literature and Art Foundation, two leading cultural institutions in the region. By partnering with them, Adidas will have access to a larger audience over multiple platforms to communicate their values and mission. In addition, access to valuable resources will aid in the marketing efforts, with the purpose of creating deeper connections with the Chinese consumer and growing Adidas' presence in the region for a more profitable future..

[Audio] In order to achieve our aim of increasing our market share in Greater China, we realize that we need to provide customers with value. To this end, we are exploring two key partnerships that could help us push forward our strategy: The China Literature and the Art Foundation. The China Literature gives us access to a wide range of customers, while the Art Foundation is the largest provider of cultural art and entertainment marketing services in Greater China. Both organizations have an established presence in the region and can help us fulfil our aims through their various channels and expertise. We are convinced that these alliances will be beneficial for both parties and will help us redefine our customer relationships in Greater China and bring lasting value to our customers..

[Audio] Customer service is a major risk for any business as the quality of the customer relationship can significantly impact the company's reputation and sales. Adidas in Greater China is no exception, as customers have grown increasingly dissatisfied with the company's online customer service. To increase its market share, Adidas must focus on improving customer service and customer relationship management to create a positive customer experience and further strengthen its customer base..

[Audio] Adidas is undergoing a digital transformation to increase its current market share in Greater China. Evaluation of our current digital strategy has identified key challenges and their corresponding solutions related to increased traffic periods, response periods and delivery times. Investment in online store website performance provides a direct-to-consumer approach and personalized user experience. Further, multiple customer service channels have been created in response to negative feedback on customer service responsiveness and returns. These changes are expected to not only ensure Adidas remains competitive in the Greater China market, but also enable it to increase its market share..

[Audio] Digital strategy plays an essential role in enhancing market share in Greater China. We need to make sure our digital strategy is up to date and provides our customers with the best user experience. It is necessary to evaluate our existing digital strategy, including website operation, D2C strategy, utilizing AR/VR for virtual trials and interactive user experience, introducing AI chat-bots to reduce our response time, as well as facilitating the return and refund procedure. An effective strategy can increase our market share in Greater China and maximize our success..

[Audio] Adidas is planning to allocate a total budget of €1 billion over the next three years to increase its brand investments. In the year 2022, this budget will be €2.8 billion, where 15% will be directed to Greater China. Additionally, an extra €1 billion will be invested from 2023 to 2025, with 30% of the amount being set aside for Greater China. The aim is to increase Adidas' market share in Greater China from 11% to 23%..

SUPPLY CHAIN PLAN.

[Audio] Adidas has been attempting to increase their market share in Greater China however, their collaboration with Xinjiang cotton has caused numerous boycotts of their products internationally. Additionally, they do not have any physical stores in the region, leaving them without an offline presence. Lastly, the Covid-19 pandemic has resulted in significant inventory write offs and high discounting strategies up until 2022..

[Audio] For the next 3 years, Adidas will lay the groundwork to reach its ambition of 23% market share in Greater China. Year one will focus on finding and collaborating with suppliers to create quality products and construct a product portfolio. Quality control measures will also be assessed. Year two's plan consists of inventory determination, manufacturing strategies and online product launch. Additionally, they will create a plan to handle order fulfillment and reverse logistics. By the third year, Adidas will roll out flagship stores, demand forecast store sales and adapt a DTC Business model. As this plan is executed, we expect a market share of 12% by year one, which will steadily climb to 15% by the end of year three..

[Audio] Supply Chain plan is a vital element of our strategy to achieve higher market share. To conform with our corporate intentions, we will apply the Supply Chain SCOR model. This comprises of upgraded Demand Forecasting, Stock Optimization, Provider Variedness, improved Visibility and Compliance, Quality Assurance, Stabilization of Offline Presence, Decreasing of High Discounts, and setting up an efficient Reverse Logistic Network with effective Return Rules. By putting these into effect, we can guarantee to reach our target of increased market share in Greater China..

[Audio] Establishing a budget of 100 million to reinforce our offline presence by opening flagship stores in Greater China, we have allocated 50 million to this endeavor. Furthermore, 75 million has been set aside to optimize our supply chain. Additionally, 225 million has been set aside for our manufacturing and production budget, allowing us to ensure our supply chain management is working effectively and efficiently..

ORGANISATION & PEOPLE.

[Audio] Adidas is strengthening its presence in Greater China with a range of initiatives, focusing on marketing, supply chain and staff investments. This includes recruiting or training staff with knowledge of Chinese culture, patriotism, art and literature, and investing in online capabilities such as employee training and online store management. Celebrity and influencer marketing, social media management for Chinese platforms Douyin and WeChat, and investments in supply chain analytics, demand forecasting, inventory management, and store sales and management have all been implemented. In order to finance these plans, Adidas is committing 15 million to its HR department for Greater China..

[Audio] Our tactical goal to increase our current market share from 11% to 15% until 2025 has the potential to add significant value to our shareholders. This slide presents an overview of the estimated financial impact over this period, including projected increase in revenue, reduction in cost, and positive return on investment..

[Audio] 2022 does indeed look very promising for Adidas. The company's projected income statement reveals a total revenue of 14,541 million euros, a 13% increase year-on-year. Gross profit margin is expected to rise to 48.8%, with a corresponding net profit of 1,621 million euros. The balance sheet projects a total shareholders' equity of 8,154 million euros, representing a 12% increase. This is a result of the company's long-term strategy of reinvesting in its marketing initiatives, supporting growth in the Greater China region. These figures clearly demonstrate the impact of Adidas' marketing and supply chain initiatives, and the potential for a significant increase in the company's market share in Greater China..

[Audio] This presentation is based on an array of research sources including Statista, Reuters, and Warc.com, as well as an Adidas Group Report for 2022, with the purpose of justifying our goal of increasing Adidas' market share in Greater China from 11 to 23 percent. Our strategy revolves around leveraging both marketing and supply chain initiatives. Moving forward, we will discuss some of the insights gleaned from these sources, along with our strategies for success..

BACKUP-SLIDES.

[Audio] Thank you for your attention as I shared the impact of our initiatives on people and organisation. By focusing on market specifics and through recruiting or training staff, hiring expertise, expanding and launching online, specializing in Chinese social media, as well as establishing and optimizing the supply chain, we have allocated a total HR budget of 15 million dollars for Greater China. Adidas has the potential to make great advances towards our goal of increasing market share and will be sure to measure the impact of these investments in the upcoming year. Thank you again and I look forward to our continued success..