Long-term investment: ADIDAS GROUP. Financing and controlling in the internationalisation process

Report about a long-term investment


Term Paper, 2017
11 Pages, Grade: 1,7

Excerpt

Table of Contents

1 History and background of Adidas group

2 History of the stock price and merger

3 Worldwide operation policy
3.1 Speed
3.2 Cities
3.3 Open-Source

4 Why will the long term investment gain profits?
4.1 Accelerated growth
4.2 Sponsoring ship in football

5 Conclusion

VI References

IV List of Figures

1 History and background of Adidas group

The history of the multi-national company began In July 1924 in Herzogenaurach, when Adolf Dassler and his brother Rudolf Dassler started their business under the name 'Gebrüder Dassler Schuhfabrik'. The pair started the venture in their mothers' laundry (cf. Smit, 2009; but at that time, electricity supplies in their town were unreliable. The pair sometimes had to use pedal power to run their factory.

After 23 years the brothers split up in 1947 (cf. James, 2006). So Rudolf started to form a new firm in 1948 that he called Ruda, which consists the first two letters of Rudolf and Dassler (cf. w.a. 2006). Nowadays the brand is known as Puma. On the other side, Adolf, whose nickname was 'Adi', registered the Adidas AG in 1949, which consists his whole nickname and the first two letter of his family name (cf. Adidas Group)

In 1952, following the 1952 Summer Olympics, Adidas acquired its signature 3-stripes logo from the athletic footwear brand, Karhu Sports, for two bottles of whiskey and the equivalent of 1600 euros (cf. Chadwick, Arthur, 2007, p.438). The original famous Adidas logo with the trefoil is now used as the Adidas Originals logo.

Since 1924 the only product of the three stripes company was producing shoes. The 'Franz Beckenbauer' tracksuit was the first apparel which was revealed from the company in 1967 (cf. Adidas Group.). Today the Adidas AG is the largest manufacturer of sports bras in the European market and the second largest manufacturer in the world (cf. statista 2017).

The German company takes parts in every sector in the world of sports. In the US sports world, for example, they sponsored the successful baseball team New York Yankees from 1997 to 2008. In the National Basketball Association, Adidas is also the current outfitter of all 30 franchises until the end of the 2016/17 season. Moreover, they represent their brand in sports like for example Cricket, Golf, Gymnastics, Lacrosse, Rugby, Running, Skateboarding, Tennis, Kabaddi and much more. One of the most important departments of Adidas has always been football kits and the associated equipment. They are a major supplier of team kits for international association football teams and clubs. Since 1970 Adidas have designed footballs for the FIFA World Cup, which is one the most famous and popular event of the world. The long relationship began with the 'Telstar'- ball for the FIFA World Cup in Mexico. Nowadays the German sports supplier had created twelves World-Cup footballs for the tournament (cf. w.a. WM-Ball)

Furthermore, the three stripes brand is one of the official sponsors and equip the UEFA Champions League tournament in Europe (cf. UEFA, 2012)

The executive board of the company is composed of seven members. Kasper Rorsted is the Chief Executive Officer of Adidas AG, Roland Auschel is responsible for global sales, Glenn Bennett take care of the global operations, Eric Liedtke look after the global brand, Harm Ohlmeyer is the head of the finance department, Karen Parkin keep an eye on the employee as the head of the Global Human Resources and Gil Steyaert (cf. Adidas Group).

Nowadays, the company employed 59,661 people. For the first quarter of 2017, they have reached a net sale of € 5,671,000,000 with a gross profit of € 2,790,000,000 and an operating profit of € 632,000,000 (cf. Adidas Group, 2017)

2 History of the stock price and merger

In 1989 Adidas was changed in a joint-stock company. On the 7th of July 1990, the Dassler family sold 80 percent of their shares to a French businessman Bernard Tapie for 1.6 billion francs, which was about 470 million Deutsche Mark (cf. Maurer, 2005). After several issues, Robert Louis-Dreyfus took over the company in 1993, which was the comeback of the three stripes (cf. Berufsstart). The history of the stock began in 11th November 1995, when they went public in the stock market in Frankfurt. They started with a nominal capital of DM 226,746,00 with 45,349,200 bearer shares with par value (cf. Adidas Group)

Afterward, the stock went into the MDAX in the 18th March 1996 and DAX in 19th June 1998. The dividend per share of the last ten years developed from 0.42 EUR in 2006 to 2.00 EUR in 2016. Adidas prefer to divide the money among the shareholders in May. The last total pay­out for 2016 was € 403 million, which reflects a pay-out ratio of 39.6% of net income attributable to shareholders. The target range of 30% - 50% is defined in the dividend policy of Adidas, (cf. Adidas Group). In the last decade, the shares of the German company developed very well. They sold 2,362,290 stocks with a price of € 46.43 on 29th May 2007 and € 172.15 on 26th May 2017 with a volume of 551,430. The lowest point of the last ten years was on 19th November 2008 with a stock price of € 22.33 and the highest price was € 184.35 on 27th April 2017 (cf. Adidas Group).

In the latest ownership analysis, which was conducted January 2017, Adidas identified almost 100% of the shares outstanding. The largest investor group were represented by the institutional investors, which is 87% of the shares outstanding. 8% belongs to the private investors and undisclosed holding. Less than 1% of the total held by the current members of the executive and supervisory boards. Lastly, Adidas AG currently holds 4% of the company's shares as treasury shares, reflecting shares purchased as part of our share buyback program which was partly used for shares transferred following the exercise of conversion rights from the convertible bond. The 87% of the institutional investor are distributed all over the world. For example, number one is the North American market with 40% of the institutional shareholdings. The following countries are the UK with 21%, Germany with 8%, Belgium and France for 9% and 5% and the rest 17% were identified in other regions of the world.

All in all, at this time the Adidas AG has about 60,000 shareholders (cf. Adidas Group)

In 1997 Adidas merged the French Salomon group, which focus on equipment of winter sports, for 2.4 billion DM. The acquisition consisted TaylorMade because at this time the golf company was still part of the Salomon group. The objective of the deal was to follow the strategy of product differentiation. However, the acquisition proved to be a loss-making business. After 8 years Adidas sold the French sports equipment manufacturing company to Amer Sports for 485 million euro without TaylorMade, which kept working with the Adidas golf department until 2017 (cf. Bruhns 2009).

In the following year, the German giant signed another huge deal with a global athletic footwear and apparel company. They have associated with the competitor Reebok to strengthen their position In the US shoe market, while the new Adidas partner wanted to get a strong market position In Europe. The main reason why Adidas wanted to conquer the American market was to go against the market leader in this huge area.

At this time the American giant Nike was the world market leader with a turnover of 11.6 billion Euro in 2005.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1 : Organisational structure Adidas Group

3 Worldwide operation policy

In 2015 Adidas announced their strategy and business plan for the following years until 2020. The motto of the corporation is 'Creating the New', which will focus on establishing desire of the brand. Net sales and profit are expected to grow significantly. Compare to the forecast of 2015, the net sale will increase with an average of a high one-digit percentage, while the net profit will increase about 15% per year.

The new business plan for the 7 years consists three aspects: Speed, Cities, and Open-Source.

3.1 Speed

Since Adidas NEO, the Adidas Group has set new standards in market launch times.

The business model allowed to shorten the production times significantly. One of the results is the possibility to produce within a season. Based on the successes, they will continue to expand on the subject of speed.

At the same time, the Adidas Group will raise the net sale over 60% with self-controlled sales areas. In addition, they want to reach the goal of implementing over € 2 billion in the department Omni-Distribution-Channel in the eCommerce business until 2020.

Moreover, the company will continue to develop its production capabilities in order to offer consumers more opportunities for product personalization.

Herbert Hainer, the former CEO of Adidas group, said that we are living in a rapid change world.

Only the new things are relevant for the consumer. That is one of the reasons why they constantly work on new projects to create something new for the customer. Furthermore, they have to reinvent themselves to be the leader of the change process in their sector.

Abbildung in dieser Leseprobe nicht enthalten

3.2 Cities

The percentage of the big cities in the global gross domestic product is 80% and the global trends are shaped in the metropolises. That is the reason why Roland Auschel, the global sales manager, want to place special focus on six cities like Los Angeles, New York, London, Paris, Shanghai, and Tokyo. They are going to invest a huge sum of money into disproportionate talents and potentials, marketing and visibility. For reaching the whole country, they want to conquer the running sports market in Los Angeles and New York successfully, because the global sales manager of Adidas thinks that trends and brands are always established in big cities. Two mega Adidas stores opened in New-York at the start of 2017 with an Investment of more than € 50 million. Therefore, Adidas want to own market share as much as possible and get the high attention in important cities all over the world.

3.3 Open-Source

For an effective use of the growth opportunities, the Adidas group concentrate their investigation into the main brand like Adidas, Reebok, and TaylorMade. Moreover, the three stripes brand want to strengthen their relationship with the consumer. In this way, the consumer will have a strong influence on how Adidas create, develop and present their products. Through this strategy, the brand wants to grow in their desirability and the company wants to have a close relationship with athletes, retailer, and partner. Eric Liedtke, the global brand manager has a strict vision for the future. They will not only speak to the consumer but also speak with them. The objective is to be the first sporting goods manufacturers, which invites the athletes, consumer, and partners, to be a part of their brand. Today, the Germans are working with the most creative, innovative and influential person and companies like Stella McCartney, Kanye West, BASF or Google (cf. Adidas Group, 2015)

One of the biggest 'hype' in the last three years was about Kanye West 'YEEZY'. It is the official sneaker and clothing collaborative project between athletic company Adidas and American hip-hop artist Kanye West. The main trend is the sneaker. So far, they have released Adidas Yeezy Boost 350 VI and V2, Adidas Yeezy Boost 750 and the Adidas Yeezy Boost 950 Duck Boot. Every single release of the Yeezy Boost, they choose to enter into the retail market with only a limited number of shoes. This special strategy makes the pair of sneaker hard to get and so rare because every pair of shoe will be offered for sale only once. All over the world, the customers have to camp in front of the sneaker stores or they have to win a raffle to get the access for buying. One of the disadvantages for the shoe collector at the moment are the resell prices. The strong imbalance of supply and demand of the shoes is the main reason for the huge price in the C2C market. For example, the retail price in 2015 for the first Adidas Yeezy Boost 350 Turtle Dove' was € 200. Nowadays, people are willing to buy it with an enormous price of over € 1000.

[...]

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Details

Title
Long-term investment: ADIDAS GROUP. Financing and controlling in the internationalisation process
Subtitle
Report about a long-term investment
College
Shanghai University
Grade
1,7
Author
Year
2017
Pages
11
Catalog Number
V507420
ISBN (eBook)
9783346079398
Language
English
Tags
long-term, adidas, group, financing, report
Quote paper
Long Nguyen (Author), 2017, Long-term investment: ADIDAS GROUP. Financing and controlling in the internationalisation process, Munich, GRIN Verlag, https://www.grin.com/document/507420

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