Introduction for the Adidas group. Adidas entered into

Introduction

 

Adidas Group is a German sportswear company, holding the second largest market share (10.3%) in the global sportswear market with 2800 retail locations and 50 e-commerce sites worldwide. The company’s primary business is men’s footwear and womenswear which cater for the middle-class consumers. The company offers a wide range of athletic and sports lifestyle products through its core brands: Adidas, Reebok and Taylor-Made. Adidas operates through 145 subsidiaries in Europe, the Americas and Asia. Western Europe is the biggest market, followed by North America and China. Its main rival Nike which is the largest apparel and footwear in the world.  This essay will focus on China market which
is a booming market for the Adidas group. Adidas entered into China market
since 1997 and its headquarter is located in Shanghai and there are more than
9000 stores in China. In addition to globally designed products, Adidas
produces relevant products that suit local consumers’ tastes.

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2. STP Analyses     p214 theory

 

Market Background

Adidas
have more than 9,000 retail stores in China and it provides the best shopping
experience for Chinese consumers. Adidas opened its first China brand center in
Beijing in 2008 and the second one in Shanghai in 2012. In 2014, the Beijing
Brand Center was upgraded to be the first store under the new global Adidas
Homecourt concept, remaining as the largest Adidas store in the world.
According to Euromonitor, Adidas improved from 8.5% to 13.8% of market share
from 2011 to 2015, which made China become one of the biggest sportswear’s
industries in the world. In addition, Adidas reported that the sales and
profits in China has already outpaced its key rival Nike and growing fast
online according to Reuters.

 

Market segmentation

According to Smith’s (1956) theory, different
products have different marketing strategies based on different market
segments. Referencing to Kotler’s (1984) DAMP theory, based on the different
usage scenarios, we can classify Adidas China market into four segments,
geographic segmentation, psychographic segmentation, behavioural segmentation
and demographic segmentation. The Adidas group has four brands in its
strong portfolio, Reebok, Adidas and
Taylor. Adidas uses differentiated target strategy to target the high-end or potential young customers whose
average age are 25-30 and like to chase the fashion trend.

 

Geographic Segmentation divides the market into regions, states, counties or cities:

A.     Densely School areas

B.     High Streets

C.     Boomtowns

D.     Populous areas

 

Psychographic Segmentation divides buyers into different groups based on social class, lifestyle or personality
traits:

A.    Sense of belonging

B.    Self-Concept (Desired self-image)

C.    Self-values

 

Behavioural Segmentation which divides the consumers according to their attitude,
knowledge, response and use of the product:

A.    Benefits (Desired Product features, Convenience and
Services)

B.    Sports lovers (Gym regular users and (E)Sports fans)

C.    Athletes

D.    Image seekers

E.    Brand Freaks

 

Demographic Segmentation divides segment consumers by easily measured characteristics:

Age: 15 to 45

Income
level: middle-class in China

Social
Class: Lower to high upper

Gender:
Both Male and Female

 

 

3. Marketing Mix Analyses

 

3.1. Product

The
understanding on how the consumers perceive, think and use the products are
crucial in the marketing strategy, especially when a brand want to launch a new
product campaign, it is quite important for the brand to understand how the new
products be developed and meet the customers’ needs (Baines, Fill, Page, 2011). Adidas offers a wide range of athletic and sports lifestyle products through its core brands: Adidas, Reebok and Taylor-Made.
In China market, Adidas divide its categories primarily into men, women and
kids.  Under the categories, there are
several product lines which can cater for the different needs of the consumers.
The product lines focus on Originals which is cater for those people who like
to chase fashion trends, Neo which is targeting primarily
towards the young generation, especially the teenagers. The product series are
focusing on sports series such as football, running, training, basketball,
tennis, golf. Adidas also deals with selling
sports bags and sports-wear for people. The TaylorMade- Adidas golf segment
includes golf, Rockport designs and leather goods caters the hockey segment.

 

3.2  Price

The price of Adidas
products is not cheap in China because of the positioning is for middle-class. And
for customers, they usually think high-price means high quality of the
products. At the same time, since Adidas employed the multi-brand strategy,
e.g. Adidas Neo is only half the price compared with the other product lines
due to it targets for the young people. According to Adidas’ annual report, Gross Domestic Product (GDP) growth rates as well as consumer
price inflation will affect the price in China. On the other hand, Since Adidas outsource almost 100% of production from independent third-party suppliers, primarily located in China. The exposure to foreign markets might affect the fixed costs fluctuated and might be decrease its supply when the exchange rate is higher in a short-run.

 

3.3 Place

There are more than 9,000
retail stores in China. Adidas is going to place
considerable emphasis on expanding our activities in Greater China by opening
3000 new stores in China according to Annual report of Adidas in 2016.  Apart from its retail stores, Adidas launched Homecourt
concept in Beijing, China which offers a tangible showroom to improve its brand
image. Traditionally, retailers usually sell goods by the physical
place, however, with the new things booming rapidly in China, the sellers prone
to sell goods by e-commerce to the market. According to Financial times, Adidas is going to shift their focus from “first tier” cities
such as Shanghai and Beijing to some smaller cities, where Adidas believe
people who live in those small cities are affluent and they might be the
potential consumers for the brand. At the same time,
E-commerce platforms as another place which can reach out to more consumers in
China.

 

3.4 Promotion

Two forms of communication are crucial for brand
communication. One is word of mouth and the other one is the internet (Gelb, Betsy D. , 2001 ).  As a sports
leader, Adidas is strongly committed to the promotion of sports in China,
partnering with many Chinese sports athletes, sponsoring major sporting events
such as the Beijing 2008 Olympic Games. 
By doing these sponsorship activities, Adidas promote its brand image
and achieve the word-of-mouth effect.

 

On the other hand, with the advent of social media, Adidas
China has shifted their focus from traditional campaign such as TV, magazine to
social media. This because the social media in China is booming rapidly, almost
all of the brands choose social media as one of the important channel as
communication  Dragon social reported, it
would be better for foreign brands who want to succeed in China to use wechat
advertisement. According to statista, the monthly active WeChat users are 963 million by the
end of 2nd quarter 2017.  For Adidas, it
has already open its public account on wechat so that consumers can read the
new information or press release by subscribing the public account. It is
noticeable that the structure of the public account looks simple but it can
link to the E-commerce online shopping mall on wechat so that consumers can buy
any of products by wechat directly. However, apart from wechat platform, Adidas
group is cooperating with different categories of medias which can be divided
into several segments as below,

 

a)     Fashion media, Vogue, SELF, GQ which has a portfolio media tools such as magazine,
website and APP. Since Adidas is a high-profile brand, it focuses on the
high-end media and fashion magazine. This because the readers of these medias
are the targeted consumers who are the middle class or people who love fashion
trend for Adidas. In the past, Adidas China marketing department spent huge
amount of budge on print media for the advertising campaign.  However, due to the print media is decreasing rapidly in recent years due to the
internet booming in China and the shift of consumers’ habit on media, a few magazines closed the print business in China.
Under this circumstance, the marketing strategy that Adidas employed is starting to
shift from the print media to the digital area. Another important reason is
that consumers can buy the goods on the digital media by clicking the ad and
then it can link to the Adidas’ official website or Tmall Adidas online
shopping mall which is belong to Alibaba directly.

 

It is noted that cooperating with the fashion media, Adidas China marketing team complied with the global marketing strategy “all in for my girls” and launched its own campaign to target China market. This because the increasing levels of participation in women’s sports and training leads to a surge in the demand for women’s products. Women usually buy clothes not only for themselves but also for other family members which will increase the market share in the sportswear industry and it can also increase the revenue for the firm.  Thus,
the product line of women department in Adidas China are spending huge amount
of marketing budget on women campaign which cooperate with some female vertical
websites, such as Vogue, Bazzar. Among these campaigns, Adidas is engaging with
some celebrities who has the high-profile image with huge fans to improve its
brand image and achieve its brand awareness in China.

 

b)    
Video media, Qiyi, youku, tudou, tencent which
are the biggest video media in China. According to E marketer, the
marketing spending in China video platforms will reach $50.31 billion. It is
noted that video is the fastest growing ad in China and its momentum seems that
outpaced the traditional TV, accounting for 13.4% of all media ad expenditures
in the future.   

 

In addition, E-commerce as one of the China marketing
strategy which plays an important role in the whole strategy.  It is noted that millennials in China have
strong passion on E-commerce shopping according to Emarketer. In addition, the
post-80s and post-90s are the primary consumers contributing the e-commerce
shopping.  According to emarketers
estimation, the penetration of Chinese digital buyer will reach 65.5% in China.
Aiming at the e-commerce platform is a smart move for Adidas China and they
have already run the Tmall online shopping mall, wechat online shopping, its own official online shopping
website in China which can bring a huge amount of sales revenue from the
e-commerce.

 

3.5 Physical Evidence

The customers experiences strategy
related to the memories and the impact that make the consumers can imagine and
interact with the offering from the brand (Tynan and Mckechinie,2009, cited in
Baines, Fill, Page, Marketing).  This
physical evidence is related to how the products or service are perceived in
the marketplace. Good user experience can add the value for the brand and it
can also strengthen the bonds between brands and users. The good example for
physical evidence of Adidas is it opened its first retail academy in shanghai
in December 2016.  

The
retail academy is 2000 square meters with a high-tech interactive learning
space, lecture halls and conference rooms in which employees can apply their
learning to a realistic retail setting. The companies that
succeed are those that “sit
alongside their customers, joining the conversation
and relishing the fact that they are interacting with one another”
(Kingsnorth 2016). By establishing a new sport retail academy, it
not only can build the brand loyalty but also can facilitate the relationship
with the customers who can get physical evidence in the solid store

 

“The state-of-the-art academy represents a major step forward
for Adidas Group is to build the talent establish itself as China’s best sports
brand by 2020”, according to the CEO of China.

 

3.6 Process

The process of marketing mix is an
important part of the marketing plan which play a decisive role. A marketing
plan is the key factor for the marketing strategy process and it should be meet
the external and internal changes (Baines, Fill, Page, 2011). There are several
strategies are adopted by Adidas China, marketing department from four
dimensions.

 

a)   Product and pricing strategy: Since the
majority of Adidas’ products mainly target the middle-class consumers, the
group want to keep the core business and high price strategy. However, with the
advent of consumers who live in the tier-two or tier-three cites in China,
Adidas shift their focus to the lower segments by enhancing both products and
pricing.

 

b)   Multi-brand strategy: Adidas used different
sub-brands to improve different aspects of the brand. For instance, the
company’s “Originals” product is focus on fashion trends and target for the
consumers who like to chase fashion trends. While Adidas NEO targeted young
people whose average age around 14-19 and the price is about half lower than
Adidas Originals. At the same time, the multi-brand strategy helps the company
penetrate into lower tier cities.

c)   Sponsorship strategy: Adidas increased its
brand awareness by sponsoring certain sports events and activities in China
market which can improve its brand image and achieve the effect of brand
awareness in the market.

 

d)    
Innovation
Product Strategy: According to Annual report of 2016, Adidas partnered with
Chinese real estate and sports business giant Wanda Group as its strategy in
China.  Adidas will sponsor two of Wanda’s
IRONMAN events and will develop sports business in China. Wanda as a
multi-business group whose business penetrates to all the important
cities.  The cooperation can be seen a
good start for Adidas China marketing strategy. This because Adidas is able to
improve its brand image and boost its sales revenue by the cooperation with
Wanda shopping mall. In addition, by leveraging the network from Wanda Group,
Adidas will have more opportunity to approach the other brands to extend its
existing business in China market.

 

e)    
Internet
Strategy: Adidas launched its Chinese e-commerce market since 2010 on tmall.com
which belongs to Alibaba group. Although there are more than 9000 stores in
China by the end of 2016, Adidas sought to reach its existing and potential consumers
of lower tier cities by the e-commerce platforms since the distribution in some
small areas of China can only be delivered by couriers.

 

 

3.7 People

People who work for Adidas play an important role because those
people interact with the customers and how satisfied consumers are crucial for
the business. Thus, it is important for us to understand the Theory of Planned
Behaviour (TPB) which means people’s behaviour is related to an intention
affected by perceived behavioural control (Baines, Fill, Page,2013). For
instance, people who work in the retail store should provide the better service
to the consumers so that it can enhance the users experience for shopping.
Those people who work for the e-commerce of Adidas are supposed to provide
personal selling service for attracting customers.

 

 Conclusion