1.

0 BACKGROUND

1.1 Adidas

Adidas is one of the pioneer and leading brands in the sports wear industry. Originated
from Germany in the year 1924, Adidas has now become a multinational corporation owning
branches across the world. However, Adidas did not inherit its name from its pioneer days, when
Adolf Dassler found the company it was initially called Dassler Schuhfabrik and adopted the
famous Adidas name as of today after the year 1949 (Adidas, n.d.).

Figure 1: Picture of Adolf Dassler, founder of Adidas

Adidas has set its standard as one of the most renowned luxury sports wear brand in the
market with very few competitors. Adidas focuses on high quality, unique design and cutting-edge
technology based designs on their products, putting them ahead of their competitors. Adidas
produces and sells products ranging from men`s and women`s clothing, jackets, hoodies, pants,
leggings, sport shoes, jerseys, sport accessories, football, basketball, baseball, golf sets, rugby,
tennis and other sport related equipment.
 Figure 2: Adidas famous three-striped logo

Adidas`s signature 3-Stripes Logo has been a trademark ever since 1952 as they acquired
the design from the athletic footwear brand, Karhu Sports. The Logo is a 3-Stripe ascending logo
which represents the challenges athletes face in their journey to success. The symbol behind the
logo is very powerful as the design relates directly to the users of their products who are athletes
themselves. This also shows that Adidas uses athletes as their focus group on delivering their
products to. Over the years, Adidas has developed an image and reputation upon their product with
their logo which is their professionalism to serve athletics and sports enthusiasts. When consumers
are looking for sportswear products which are comfortable, suitable, fitting and of high quality,
they would automatically seek for brands such as Adidas (Quora, 2016). In addition to that, Adidas
has also provided sponsorships for prestigious sport events and leagues like the NBA, NBDL and
WNBA for the past few decades. This proves the authenticity of the brand`s statement as it is
accepted by not only professional organizations in elite sports leagues like the NBA, but also
millions of people around the world. (S. Douglas, 2016)

Even though Adidas controls a large portion of the market share, this does not mean that
they do not have rivalries. Converse, New Balance and Li Ning are a few of Adidas` close
competitors, with Nike being its biggest rival (Hitesh, 2015). However, Adidas manages to stay
ahead of the competition by focusing on consumer brand loyalty as its main marketing strategy.
Brand loyalty is something that large organizations such as Adidas utilize as brand loyalty ensure
customers continuously return to buy their products over time. To create consumer brand loyalty,
Adidas needs to ensure that they can provide the consumers what they want as well as setting a
high standard for their products.
 Figure 3: Famous athletes sponsored by Adidas as part of marketing ploy

To make Adidas products more attractive not just to the athletes but also to mainstream
market, Adidas approached a renowned lead designer in Japanese fashion world Yohji Yamamoto
to empower and to add a flair into Adidas style, creating fashion statements all over the sportswear
industry in the early 20th century that are now iconic to Adidas (A. Gupta, 2016). However, style
and design alone are not sufficient to attract new customers into the brand. Therefore, Adidas
resorted to sponsoring famous sport celebrities like Lionel Messi, David Beckham, Andy Murray,
Kareem Abdul-Jabbar, Derrick Rose, Jeremy Lin and other sport icons to influence mass
consumers into product awareness and drive up product purchases (R. Jha, 2016). In addition to
that, Adidas approaches young rising stars to become brand ambassadors among younger
customers demographics.

1.2 Nike
Like Adidas, Nike is one of the largest, if not the largest sportswear company in the world.
Nike first started off in 1964 as a company named Blue Ribbon Sports but then adopted the name
Nike Inc in 1971. Unlike Adidas, the company was founded by 2 founders, namely Bill Bowerman
and Phil Knight. As of today, this multinational corporation is responsible in designing, developing,
manufacturing and selling high quality footwear, apparel, sport equipments, accessories and
services all around the world (Nike,n.d.). Nike`s apparels have very high sense of style allows
users to wear them as casual wear. Nike is best known for their footwears especially when it comes
to basketball, football, tennis and golf sneakers (J. Hague, 2008).
 Figure 4: The two co-founders of Nike, Bill Bowerman and Phil Knight

As a testament to the brands popularity, Nike`s famous logo is recognized by people all
around the world, shaped like an arc with a movement or aptly described as swoosh for the sound
people typically hear when something fast passes by. In other words, the logo represents flight,
victory and speed, indicating performance on their behalf. This is especially true that when it
comes to the technology and the performance Nike incorporates into their product designs as Nike
is second to none. This proves that Nike creates a focus around the idea that their products can
enhance the performance and the capability of the wearer. Even though it is proven that the
sportwear has very little significance towards the overall performance of an athlete, this does not
disregard the brand power drives the desire of professional athletes and the aspiring ones to crave
for their products. Other than the logo, Nike also made the now famous slogan Just Do It, the 3
words catchphrase that has become one of the core components in Nikes branding. These 3 words
have proven its significance as the slogan inspires Nike to push the boundaries of the impossible
as it pushes consumers to grasp their dreams (Hurley,2015).
 Figure 5: Nikes famous swoosh logo

Like Adidas, Nike relies on consumer loyalty to stay ahead of the industry due to its high
luxury class of goods. Nike also employs many high-profile athletes and sports team around the
world like Michael Jordan, Kobe Bryant, Lebron James, Cristiano Ronaldo, Zlatan Ibrahimovic
and Rory Mcllroy as the brand ambassadors. Big names as such allow Nike to promote and
advertise their products, technology and designs to their consumers easier. For instance, one of the
most successful Nike product line-ups is called Air Jordan in collaboration with the now retired
professional basketball player Micheal Jordan. The success of Air Jordan products line-up that is
still generating money for Nike today proves just how powerful the star athlete collaboration is to
gain consumer loyalty (B. Allan, 2017). However, Nike could not rely solely on athletes to sell its
products. Therefore, Nike employs its own team of designers, scientists, coaches and statisticians
with goals of improving the world of sports as well as taking a step into the next generation of
sportswear business. (I. Thomas, 2008)
2.0 ENVIRONMENTAL FACTORS

2.1 Internal environmental factors

The internal environmental factors of an organisation are the factors that not only affect
employees behaviour but also the organisation itself through management, organisation culture
and current employees.

2.1.1 Employee

According to Nikes official website on Jobs.nike.com (2017), the companys goal is to

promote balanced lifestyle among employees. To do that, the employees are given many benefits
to help them to stay in shape and being healthy, thus providing a creative and conducive working
environment for all the workers. For instance, Nike has built onsite fitness centres for employees
so that they can have an easy access to do workouts after working hours. In addition to that, Nike
has provided health insurance, paid holidays and maternity leaves as well as products discount for
the benefit of the benefits. However, the benefits differ from one employee to another based on
the employees position, working performance, location and years of service with Nike.

On the other hand, Adidas provides training programmes and learning opportunities
focussing on strength and skill development for the employees to help them improving their
working performance and overcoming challenges. For example, The Functional Trainee
Programme (FTP) created by Adidas is an eighteen-month programme which consists of six
assignments in different departments and are typically held in foreign countries to improve the
employees experience (Adidas-group.com 2017). Moreover, Adidas is regularly carrying out
employee engagement surveys to gauge the motivation, working environment and the opinion of
the employees which can help Adidas to improve their workforce strategies. Furthermore, Adidas
also encourages internal communication activities between employees to increase their
engagement among each other. As an example, Live is a collaboration platform between
departments in Adidas through internet and other online applications which allows the employees
to share their knowledge, skills and experiences.

Generally, the way both organizations treating their employees is quite similar. Both Nike
and Adidas are promoting healthy and active lifestyle for their employee. The employees working
benefits are also the same such as wage bonuses, holidays, and companys products discounts.
However, Adidas provides more freedom and active communications activities between the
employees than that of Nike.

2.1.2 Organisation Culture

According to Young (2017), the organisation culture in Nike is based on three components
Talented, Diverse and Inclusive. The Talented feature of Nike is geared towards providing
human resource support for product development and internal services in the corporation to keep
talent and infrastructure needs for production. Next, the Diverse culture leads to productive
workforce and increase product development cycles, especially in new designs while the
Inclusiveness culture will reduce the boundary between the employees. These features give Nike
the advantage in the sportswear industry in terms of improving the employees performance.

Meanwhile, Adidas also has a very diverse culture in which all the perspectives concerned
are respected. These are defined as 3C culture collaboration, confidence and creativity (Adidas
Group Careers 2017). In Adidas group, employees background is diverse and everyone with
different age, race and beliefs are welcomed. Employees are encouraged to collaborate with others
to discuss or share their ideas and even solving problems together. Adidas also gives the employees
opportunities to be creative with their product designs without any restrictions.

The organisation culture for both company is very different. The organisation culture in
Nike is generally more towards individual-focused performance while Adidas encourages
collaboration between different departments to come up with innovative ideas.

2.2 External Environment Factor

2.2.1 Political

Different countries have different policies which leads to different business environment
for the two organizations. Steady political environment for example will provide Nike with
opportunities to expand its market in a country easier. However, there are some other countries
that are still prohibiting foreign brands to penetrate local market especially in Asian region.
Different taxes imposed from local governments will also affect the profitability of the
organizations. Over the past two decades or so, the rough political conditions worldwide have not
been friendly for Nike and that forces Nike to spend a lot of money to gain local government
support. Based on a report OPENSECRET, in the year 2015, Nike has spent around $1.3 million
to gain support from policy makers simply to create a friendlier business environment for Nike in
local markets (Politics 2017). Hence, the political factors have huge impact on a companys
business profit and marketability.

Adidas however focuses more on environmental related rules primarily on minimizing the
usage of harmful substances in its production line to protect human health and environment. This
includes removing the usage of polyvinyl chloride (PVC) from production line and substitutes it
with more environment friendly alternatives such as polyurethane, ethyl, vinyl, silicones and
thermoplastic rubber. Also, Adidas provides training courses for employees to help them
understand more on health, safety, workspace, human resource system and employee rights.
Another example is that Adidas allowed authorities to check on factories, cleaning stations, and
disinfection units during SARS outbreak in order to protect the local or global environment
policies.

There is a distinct different and focus in the way both organizations are handling political
environment. Nike is leaning towards business policies and taxes whereas Adidas is focusing more
on environment and employment laws.

2.2.2 Economic

Global economic view also plays an important role in affecting both organizations
marketability. Countries with a stable, developed and high demand local market such as America
and England provide these organizations with opportunities to expand its business quickly.
However, the same cannot be said for other countries when it comes to global market as the sales
performance depends entirely on the state of world economy. When the economic state is falling,
the global market demands and purchase power will be reduced as well. This is because customers
are trying to cut down expenses and this will lead to less profit for the organizations. The world
economy has faced many great crises over the last decade in which a lot of brands suffered great
losses but not Nike. According to Marketwatch.com 2017, the annual gross income for Nike has
been increasing since the year 2013. Nike has made about $11.17 billion in 2013 and that figure
increased to $14.47 billion last year which is a stunning improvement. The profitability graph for
Nike is improving every year despite the fluctuation of world economy which has impacted
international market negatively.

As a comparison, Adidas group has not been experiencing steady gross profit growth
according to the data released in Adidas official website (Adidas-group.com 2017). It was a
frustrating duration for Adidas from year 2012 to 2014 as the gross income has decreased from
7,103 million to 6,924 million. However, Adidas has managed to rebound its income in year
2015 and in the following year, it has made a stunning 9,379 million. Also, against the tide of
global economic downturn, Adidas has managed to increase the number of employees every year.
This in turn helps other countries economy by increasing job opportunities. For reference, most
of Adidas factories are in Asian region due to lower labour cost.

The profit growth for Nike in the past five years have been consistent while Adidas
experienced losses in profit but managed to make significant improvement in the last two years.
Both organizations focus on Asian region for production centres due to cheaper labour costs to
maximize profit.

2.2.3 Social

Sociocultural is one of the crucial factors that a lot of organizations and business premises
tend to ignore. Marketing and product trends differ from market to market in different countries
due to local societal influences in addition to global influences. Nike uses different advertisements
and local brand ambassadors in different countries relevant to each of the countries sociocultural
influences to promote the products and establish companys image locally. In terms of sportswear
products, people nowadays are looking for products that look athletic, feeling comfortable and
being fashionable all at the same time. Nike as a giant in sportwear brand can keep up with the
market demand. Sport events like Olympic and FIFA World Cup are important for Nike because
these events open new opportunities for the organization to further popularize its brand and
generate more profit through advertisement and sponsorships. For example, Nike introduces newer
and better football shoes during FIFA World Cup and advertising them by sponsoring top football
players to use these new shoes and this move has managed to generate a lot of hype, interest, and
sales for these models of shoes.
 One of Adidas more iconic approach towards sociocultural influence is the usage of the
now-famous slogan Impossible is Nothing. Through this slogan, Adidas goal is to rebrand its
sportswear line-ups that are suitable of any lifestyle or sports activities without the concern of
individuals skin colour, race, religion, sex and age. Also, Adidas collaborated with famous artists
such as Kanye West, a famous rapper in America, to design higher end lifestyle product line-such
as Yeezy and Ultra Boost line-ups to cater wealthier customers.

Both organizations design their sportswear products based on new trends and in addition
to sponsoring athletes as well as famous artists to generate interest and popularity in their products.

2.2.4 Technology

The use of technology has helped these two organizations to manage important things such
as marketing, production, handling of new products and stock control. Nike takes advantage of
high-tech equipment to integrate comfort into their sportwear line-ups without sacrificing their
athletic functional use. One of the well-known example is called Nikes Dri-Fit technology. It
uses the combination of high performance microfiber and polyester fabric that removes sweat from
the body easily while keeping the surface of sport apparels dry (Help-en-us.nike.com, 2017). Other
than that, Nike also uses social media to their advantage to grow their business internationally
especially among tech-savvy consumers. For example, Nike successfully introduces new product
line-up such as Nike Flykit Racer shoes through Facebook and Youtube advertisement to great
effect as the advertisements incorporated youthful element relevant to the demographics of the
users that surf Facebook and Youtube websites the most.

Similarly, Adidas also uses online social media platforms to great effect, as proven by the
staggering 27.6 million followers on Facebook. This shows that Adidas too has worldwide appeal.
Apart from using advertisements in social media, Adidas is also one the worlds technologically
advanced sportwear manufacturers. One of its well-known technology is called TECHFIT on
sports jerseys which is aimed to improve posture, performance, joint coordinate, and muscle
balance of the wearer. The jerseys that incorporates this technology is designed skin-tight on
purpose by the compressive materials inside the jersey to reduce muscle vibration and increase
blood streaming into muscles. Hence, these jerseys will help the wearers to reach effective and
optimal power effort as well as reducing unnecessary energy consumption (Adidascentre.com
2017).

Both organizations are taking advantage of social media platforms to gain popularity and
setting up brand images. In addition to that, both organizations have patented and incorporated
their own technologies into their sportwear line-ups that are beneficial to the wearers.
3.0 SUSTAINABILITY

As Adidas is taking full responsibility on creating sustainability in their products line-ups,

there are a few extras steps that Adidas has taken to ensure the sustainability goal can be achieved.
In Germany for example, Adidas has started the initiative to replace plastic straws and plastic food
containers with the ones made of recyclable paper. Adidas also uses less water in producing their
products in respect the DryDye initiative by reducing products redundancy. Through this
initiative, Adidas has produced approximately 2 million fewer samples from the year 2011 to the
year 2015 (Adidas Group 2015).

Figure 6: Sport Infinity sustainability loop

Moreover, Adidas also strives to produce material that can be recycled repeatedly, dubbed as
Infinity Cycling by using waste free, adhesive-free process. The project Sport Infinity is aimed
to produce recyclable products that use 3-dimensional, shapeable materials. For example, a sport
shoe that is made of these materials can be recycled, broken down and remolded again,
transforming it into a brand-new product (Adidas Group 2015).

Furthermore, Adidas has a plan path of using better and more sustainable cotton down the
road. The clothes and bags that Adidas made from cotton could only achieved up to 43 percent
sustainability in the year 2015 but Adidas has planned to use a newer and innovative type of cotton
that can achieve 100 percent sustainability in the year 2018. A sustainable cotton sourced from
cotton trees that are using way less water and pesticide. The quality of the fibers in a sustainable
cotton is also preserved and does not degrade. In addition to being sustainable, this move will also
promote better working condition for the working farmers at the cotton farms (Adidas Group 2015).

Also, Adidas together with several other big apparel brands have formed a partnership with
Sustainable Apparel Coalition (SAC) which started since the year 2010. Through this partnership,
Adidas as well as other organizations have formed a shared commitment to be transparent on issues
like environmental and labor issues. In addition to that, this deep collaboration helps organizations
involved to share idea and come out with a more sustainable technology called Zero Discharge of
Hazardous Chemicals (ZDHC) materials in producing their products (Adidas 2016).

On the other hand, Nike is one of the most innovative when it comes to producing sustainable
goods. This is made evident during the 2014 World Cup whereby Nike has announced that the
football jerseys that they supplied to the competing teams were made from recycled plastic bottles
(Soccerbox.com 2017). To do so, Nike has started an initiative to collect as many used plastic
bottles as possible in which approximately eight plastic bottles were required to produce a single
authentic jersey. Once the used plastic bottles were collected and cleaned out, they were crushed
into tiny pieces and then melted down into polyester in chemical plant. Once this process was done,
the substance was being spun into a yarn and the final step was where the design of the jersey took
place. Through this innovative sustainable technology, a new Dri-Fit jersey could be produced
that retains the same cutting-edge technology in terms of comfort and staying dry for the athletes
while at the same time minimizing the environmental impact and cost of materials used.

Besides that, since the early 1990s, Nike has come up with a program called Nikes Reuse-A-
Shoe program to reduce the number of shoes headed for landfills and therefore lessen the impact
on environment (Gabriel 2012). Through this program, old shoes that are worn out are being
recycled and are repurposed into Nike Grind which is a type of recycled material has multipurpose.
The material is now commonly used in producing playground surfaces, gym rubber mate flooring
in addition to some other Nike products. Through this program, Nike has thus far collected more
than 28 million pairs of old shoes that are destined for landfills from more than 150 locations.
Besides that, Nike also utilize the Nike Grind recycled material to produce a lighter but durable
shoes box which uses up to 23% less material than the old box design. This translates into 200,000
of trees being saved every year.

In comparison, both organizations have made tremendous efforts to introduce sustainability

into their production line-up, such as using recyclable materials and repurposing older products
into the production of newer products. With technology getting more advanced as time goes by, it
is only a matter of time until both competing organizations can achieve 100 percent sustainability
rate in all their products and productions plants as sustainability is a popular topic that more and
more people are getting aware of and choose as a point of comparison.
4.0 ETHICAL ISSUES

Ethical issues are problems that are plaguing almost every big organizations in the world
as these organizations are trying to maximize profit and minimizing costs by taking extreme
measures that are deemed morally wrong in which most of the time are punishable by law. Any
big organizations that are found to commit these wrongdoings would have to face massive PR
problems as these ethical issues would tarnish the image of the organizations considerably.
Therefore, ethical issues are undesirable and big companies and corporations are trying to avoid
scandalous ethical issues, even if some the issues are not punishable by law.

Figure 7: Typical working environment of workers in factories

Despite being in the sportswear business for more than 5 decades, Nike too faced several
ethical issues and has been criticized for them. One of these issues include the use of both forced
and child labors in factories that are not well monitored by the local authorities. Moreover, Nike
has been accused of employing labor workers below the minimum wages and above the allowable
working hours in countries like China and Indonesia through subcontractors. Another ethical issue
that is facing Nike is the unhygienic and poor working conditions of the labor factories in third
world countries. For example, in the year 2008, it was reported that one of Nikes factory in
Malaysia was revealed to be employing foreign workers and these foreign workers were said to
have their passport withheld and were living in small rooms considered to be unacceptable by
todays standard (Sage 2008). In a separate case, Nike also faced worker abuse claims when The
Associated Press released an expose style documentary that showed how labor workers working
in Converse factory, a brand recently owned by Nike, were physically abused and insulted by the
working supervisors in Indonesia. These two examples are some of the stories that have been
exposed by the media press and this led to many activism and boycott movements against the
brand. The global boycott in the 90s was considered successful as Nike, which had a very bad
reputation on labor issues prior to that era, had become gradually more transparent and open with
its factories operations. While Nike as of today has not fully and successfully eliminated labor
issues, Nike as an organization has been credited for moving towards the right direction to tackle
the malpractices.

Another ethical problem that Nike is facing every now and then is the environmental issues
such as pollutions from factories as well as the usage of hazardous materials in their products.
Pollutions issue is especially prevalent for labor factories in third world countries that have rarely
enforce environmental regulations to reduce pollutions. These pollutions include waste, water
pollution, air pollution and high carbon emission. Nike is also accused of using toxic material in
their products. For example, in June 2016, an investigation conducted by a renown environmental-
focused organization Greenpeace revealed that Nike merchandises sold in conjunction with FIFA
World Cup 2014 Brazil were found to contain hazardous chemicals exceeding the normal values.
In addition to that, Nike has been using real leather made of animal skin in some of their products,
which is viewed to be unethical by animal rights groups. While Nike has addressed some of these
issues such as using greener materials like recycled cotton and polyester in most of their products
as well as introducing waste and water reduction strategy in factories, Nike is still not showing
enough commitment to eliminate hazardous chemicals totally.

Likewise, Adidas too faces ethical issues like the ones that are faced by Nike. In relation
to labor-related issues, it was revealed that labor workers for Adidas in Indonesian factories
worked for 15 hours a day with a minimum of 70 hours a week in addition to getting paid for less
than $60 a month which is below the international labor wage standard. The same workers were
subjected to salary deduction if they refused to do overtime or taking medical leaves. In addition
to that, there was an uproar right before 1998 FIFA World Cup when it was revealed that the
footballs produced were made by child laborers in India. Similarly, when it comes to
environmental issue, Adidas too was at the center of the spotlight when it was exposed that Adidas
has been using kangaroo skin to produce a relatively more comfortable and fashionable pair of
football shoes, known as cleats. It was alleged that the kangaroos had been indiscriminately killed
in the most inhumanely way possible by hitting the kangaroos down with vehicles for faster
operation. Regarding these ethical issues, multiple labor rights and environmental organizations
have made these issues known to Adidas group and several boycott movements have been
attempted as a sign of protest. Like Nike, Adidas has addressed a number of these issues including
making tighter restrictions to avoid factories subcontractors from abusing the employees as well
as dropping the usage of kangaroo skin from the production and use alternative materials.

As a comparison, both Nike and Adidas are guilty in committing malpractices that lead to
ethical issues especially regarding labor rights such as forced labor, worker abuse and poor
working environment as well as environmental ethics like poor wastage disposal and the use of
toxic materials. While both organizations have made efforts to tackle these issues, they are unable
to eliminate these issues completely. This is where both organizations should cooperate with local
governments and authorities to regulate labor laws and pollutions.
5.0 SOCIAL RESPONSIBILITY

Social responsibility is a businesss intention, beyond its legal and economic obligations,
to do the right things and act in ways that are good for society. This part of the report shows the
impact of both Nike and Adidas to the society and how they benefit society.

5.1 Nike

Nikes mission is to bring inspiration and innovation to every athlete around the world.
Nike considers everyone with a body as an athlete. This has been achieved and guided by the 11
Maxims that help to guide its employees in daily duties and representation of Nike globally. They
believe that through nurturing the right organizational culture and motivating employees
engagement in business activities, they will achieve their vision. They consider Nike as a company,
a brand, and it is their nature to innovate, simplify and go, let the consumers decide as they evolve
immediately. They do the right thing and master the fundamentals, are always on offense, and that
they are a sponge. Its core principles for the management team include to lead, coach, drive, and
inspire. Therefore, their vision is to help the business and their consumers thrive in a sustainable
economy where planet, profit and people are at balance (Nike 2017).

Nike is also committed in creating positive social change around the world. The followings
are the examples of how Nike benefits the society.

5.1.1 Nike School Innovation Fund

The Nike School Innovation Fund's mission is to fuel excellence in education through the
power of innovation. Since 2007, Nike has partnered with school leaders in Oregon to engage
students and support teachers to help all students realize their potential. The fund aims to increase
the number of students who graduate on time and prepare all students to succeed in high school
and beyond. In 2015, Nike launched a state-wide initiative to accelerate college and career
readiness for all students in Oregon. Together with our partners, Nike supports teacher training,
curriculum materials and leadership development in middle and high schools across the state.
Schools and their districts commit time and resources to implement an elective class for first
generation college-goers and train teachers in proven best practices for student success. A unique
partnership between Nike Leaders and local schools is at the heart of the Nike School Innovation
Fund. Nike leaders are paired with select high schools and serve as business partners to help seed
and implement school-based innovations (Nike 2017).

5.1.2 Nike Community Impact Fund

The Nike Community Impact Fund (NCIF), in partnership with Charities Aid Foundation
of America and the Oregon Community Foundation, is a collaborative approach to grant making
that directly impacts local communities. Since 2010, the NCIF has been administered from Nike
World Headquarters by a committee of employee volunteers that has awarded 300 cash grants
totalling more than $3.2 million dollars to local programs that promote sports and physical activity
for youth and address pressing community needs. In 2016, NCIF expanded from an Oregon-
focused program to include the backyards of all Nike Community Stores in the U.S. These
additional stores include: East Los Angeles, South Chicago, downtown Detroit, New Orleans,
Washington DCs Ivy City neighbourhood and Flatbush, Brooklyn. Each of these Nike
Community Stores will offer $40,000 in annual grants, of $5,000 each, to eight local non-profit
groups that make physical activity, play and sport a highly valued part of everyday life.
As part of the programs expansion, NCIF will engage a committee of employee volunteers
from each of the local communities where grants will be awarded. During this fiscal years granting
cycle, Nike employees will help award nearly $800,000 in grants to non-profit organizations and
schools across communities in the U.S (Nike 2017).

5.1.3 Nike Community Ambassador

The Nike Community Ambassador program gives Nike employees the opportunity to make
a positive impact in their communities. In schools and communities around the world, Nike
Community Ambassadors volunteer to provide quality coaching for kids in sport and physical
activity, passing on their passion for sport to the next generation. By giving children early, positive
experiences with sport and physical activity, Nike Community Ambassadors are not just helping
them to be active today, they are inspiring and equipping them to be active for life and helping to
reverse the physical inactivity (Nike 2017).

5.1.4 Hurley and Waves for Water

 Every day, people living in impoverished areas die from drinking dirty water. That is why
Hurley has teamed up with Waves For Water to distribute portable water filtration systems to help
an estimated 5 million people gain access to clean water (Nike 2017).

5.1.5 The Girl Effect

Nike believes in the power of human potential and invest in and support the Girl Effect,
the idea that adolescent girls have a unique potential to end poverty for themselves and the world
(Nike 2017).

5.2 Adidas

As a global sports company, Adidas believes that they have the power to change lives in a
positive way through sport. Sport has a positive impact on the society and this is what they want
to advance with the communitys engagement. Adidas believes that community involvement
strengthens team spirit and enhances the skills of employees. Their employees may get opportunity
to develop and practise a wider range of skills that they do in their paid work especially teamwork,
leadership, decision making and communication, which increases employees commitment and
motivation (Adidas 2017).

5.2.1 Support for Refugees

The Adidas Group has been involved in refugee initiatives for many years. Their overall
approach to support refugees follows Adidas three-pillar model that is based on humanitarian aid,
close collaboration with public authorities and external partners as well as volunteers, and the
development of possible employment integration.

The Adidas Group has started to implement its initial activities within the Wir Zusammen
(Us Together) integration initiative, giving the first young refugees the opportunity to gain
insights into the company. As part of a two-year integration course, ten young people from four
different countries of origin did a four-week student internship with the Adidas Group. In addition
to language tuition, the company also offers the young people workshops on intercultural
communication, job application training and sports courses (Adidas 2017).

5.2.2 Save the Children

 As a global company, Adidas Group has mature relationships with humanitarian aid
organisations to help them to bring supplies into the areas affected by natural or other disasters.
Save the Children was founded in 1919 to support children and their families in Germany after
World War I. Since then, the organisations mission has been to to deliver immediate and lasting
improvements to childrens lives in more than 120 countries worldwide. As Eglantyne Jebb, the
founder, said in 1928: The worlds children stand in urgent need of better protection, because it
is they who today pay the heaviest price for our short-sighted economic policies, our political
blunders, our wars. (Adidas 2017).

5.2.3 Together for Strong Personalities

Through this project, the Adidas Group enables financially deprived people with
disabilities to participate in leisure activities and to enjoy learning opportunities. The key features
of the programme are sociability, recreation and fun. The people with disabilities discover new
talents and develop their creative potential. People with and without disabilities meet, get to know
each other, and as a result, gain new experiences. The programme supports participation and
inclusion in the community (Adidas 2017).

5.2.4 Women Empowerment Programme

As part of Adidas Groups on-going engagement to protect the vulnerable groups involved
in the global apparel and footwear manufacturing industries, including the promotion of rights of
female workers, Adidas initiated a project called Womens Empowerment Programme. The
project kicked off in September 2015 with two objectives, improve the knowledge and skills of
the redundant female workers to earn income and find new employment, and help female workers
at Adidass suppliers to have better opportunities in the workplace (Tony 2017, Adidas 2017).
6.0 STRATEGIC ANALYSIS OF THE TWO ORGANIZATIONS

6.1 SWOT Analysis of Adidas

6.1.1 Strength

One of Adidas biggest strength is via sporting events and athletes sponsorship. Adidas has
been sponsoring big international sport events such as Summer Olympics and FIFA World Cup
and this move has increased Adidas popularity in addition to attracting new customers. Adidas is
also known to be endorsing famous athletes such as David Beckham with a lifetime sportwear
sponsorship agreement worth $160.8 million (Sportsbusinessdaily.com, 2003).

Also, Adidas is known to have a strong culture and legacy. Adidas was first established in
1949 has experienced multiple economic crisis along the way but Adidas still stands tall as one of
the top brand in the industry. The diversified culture has made Adidas more united as an
organization and this helps Adidas to produce a variety of good quality products.

In addition to that, Adidas has a stable financial position in the market. In year 2016, Adidas
is reported to have a net income worth 1 billion with 2300 outlets globally, putting Adidas in a
strong financial position for years to come.

6.1.2 Weakness

One of Adidas biggest weaknesses is that their products are relatively expensive. While
Adidas is known to implement advanced technology into their products for comfort and durability,
this has made manufacturing process to be more expensive, putting their products high in price
range. High price tag makes Adidas products to be less customer-friendly and targeted more
towards more affluent customers. Yeezy Boost Adidas shoes for example cost from $300 to $800
on the market.

Moreover, Adidas is known to outsource their production in third world foreign countries.
This is a weakness because while subcontracting factories in third world countries is beneficial
from economic standpoint due to low labour cost and ease of available resources, this has led to a
decrease in quality control of the products (Adidas-group.com, 2017). Not to mention, there are a
lot of reported cases whereby the workers in these factories have been abused and have not been
paid accordingly.

Furthermore, Adidas has a rather relatively narrow product line. Now, Adidas currently
owns only three brands under their organization, some of which are from merger and acquisition,
which are Reebok, Taylormade Golf, and Adidas itself. While these brands have plenty of
selections to offer, they are still relatively limited in comparison with their competitors, which
means there is still more opportunities for expansion and improvement.

6.1.3 Opportunities

As a giant in sportwear industry, Adidas is always looking for opportunities for market
development. To do this, Adidas has to tap into new countries through talent and fund investment.
Official Adidas group has stated in year 2015 that it would focus on six developing cities for
market development in order to continue its market growth. They are Los Angeles, New York,
London, Paris, Shanghai, and Tokyo.

Besides that, Adidas is looking for an expansion in product line. Adidas current and near
future focus is on its own main brands Adidas, Reebok, and Taylormade. However, Adidas has
promised to further diversify by unleashing a new product line in the future (Adidas-group.com,
2017). This strategy will give an added advantage to Adidas through potential opportunities that a
new product line can provide.

Additionally, Adidas has seen an increased demand for their premium products. This can
be seen through the gradual increase in sales and profit that Adidas has experienced worldwide
and especially in their home country Germany due to higher demand of quality products.
(www.dw.com), 2017). Thus, this proves that market for premium products still exist especially
in developed countries and this will lead to further market expansion and new product launches.

6.1.4 Threats

As one of the biggest brand in sportwear industry, Adidas has plenty of competitors.
Competition in sportswear industry has been very fierce. Nike for example has always been
considered Adidas biggest rival as Nike is currently holding the number one position in terms of
brand revenue. Other than that, traditional rivals like Puma and the newcomers like Under Armour
have been fighting for the same market share in the industry.

Whats more, Adidas has been facing several roadblocks due to unfavourable government
policies. Most of Adidas products are manufactured in foreign countries especially in the
developing Asian region. Different countries have imposed different taxes rates onto Adidas to
manufacture in their countries and this has huge impact on determining the final price of the
products.

On top of that, Adidas has been combating counterfeit products in the market. Fake replicas
have been causing a lot of economic trouble for Adidas as they are usually sold at price cheaper
than the original products, making these fake products extremely popular in underdeveloped
countries. Eventually, some of these lower quality replicas are falsely advertised as original
products and this would damage the image of Adidas.

6.2 SWOT Analysis for Nike

6.2.1 Strength

One of Nikes biggest strength is that it has an extremely competitive organization. This is
evident by the usage of the slogan Just Do It and the famous Swoosh logo that add character
into the organization that is different from other companies. The principle of Nike has always been
about making shoes that is suitable for anyone who can walk or run and this has been the guiding
backbone of Nike.

Also, Nike is outsourcing its manufacturing factories in foreign countries. This is

considered a strength as it is relatively cheaper to manufacture products in third world countries.
This will benefit the company as Nike does not have to bear as much cost and therefore can focus
more on its expenditure onto Research and Development team instead to produce better and higher
quality products.

In addition to that, Nike is an internationally recognized brand. Nike was first established
in 1964 and since then it has become the number one brand in sportwear industries for decades
long. Being the number one brand helps Nike to boost its popularity as more and more consumers
tend to choose the best and the top brand when it comes to purchasing decision for premium
products.

6.2.2 Weakness

However, Nike is plagued with issues like low labour wage problem among the workers.
Nike has been accused of providing poor labour condition for workers in third world countries
factories which leads to negative publicity and damaged reputation. According to Jilani 2011,
female workers in Nikes Indonesian factory were underpaid, physically abused and some even
fired for taking sick leave. Reporters are using the term Sweatshops to describe the poor condition
of oversea factories owned by Nike.

Moreover, Nike products are known to have a very high price range. The average price for
a pair of Nike shoes is not affordable for everyone around the world especially in the third world
countries. Nike product line-ups are premium and are targeted mainly for affluent customers.
Nikes premium shoes line-ups like Air Jordan 1 for example cost around $140 to $220.

Another main weakness in Nikes organization is that its sales and profits are mainly driven
by footwear market. While Nikes footwear line-ups have been a global success, Nike is accused
of becoming too reliant on this category even though Nike also produces variety of sportwear and
casual attires. For instance, in year 2015, a huge chunk of Nikes profit worth $2.25 billion has
been contributed by Nikes Air Jordan shoes line-up alone (Leach 2015). Over dependent on one
category is not going to be profitable in a long-term and Nike should focus more on other products
to generate the money.

6.2.3 Opportunities

Despite the success that Nike has made over the last few decades, the organization is
constantly looking for opportunities for market development. Tapping into Asian markets such as
China and Taiwan will give Nike stunning amount of revenue because there are many customers
in this region that are eager to adopt foreign lifestyle by buying foreign brands products.

Also, Nike is considering products diversification in their sales line-ups. Initially, Nike
started off as a company that sells only sport shoes. However, the company has moved on to
diversify into other products such as sports equipment and casual attires. This move would help
Nike to gain more profit in other business and giving extra advantages in the industry.

In addition to that, Nike has given extra focus on product development to come out with
better products. Nike has been emphasizing on improving the design of products to look
aesthetically pleasing and suitable for everyone. Through the investment in new technology, Nike
has created many products that are highly advanced while remain attractive and comfortable to
wear to differentiate them from other competitors. For example, Nike has recently introduced Nike
HyperAdapt 1.0 sneakers with self-lacing technology that not only looks great, but also beneficial
for wearers who have medical conditions that prevent them from tying their own shoe laces.

6.2.4 Threats

It comes to no surprise that Nike has many tough competitors. Despite being the number
one brand in sportwear industry, Nike is constantly facing pressure from brands like Adidas and
Puma that produce equally great products. The current state of competition as well as the addition
of new rivals such as Under Armour have forced Nike to constantly innovate to come out with
newer and better products.

Despite being a successful organization, Nike is still at the mercy of currency fluctuation.
The product price of Nike differs from country to country due to currency exchange rate on top of
currency value fluctuation. This will have huge negative impacts for Nike because Nike has world-
wide supply chain structure that could negatively affect Nikes profit margin.

Last but not the least, Nike is occasionally facing bad brand image and poor publicity. This
is especially true as Nike is always accused for the lack of actions towards Sweatshops owned
by Nike as well as environmental issues coming out from the production process. The company
has been sued several times for underpaying the factory workers as well as causing environmental
pollutions and this has forced Nike to spend tremendous amount of money to fix these issues.
According to Foster 2011, more than 70% of China rivers are polluted with Nike being one of the
biggest culprit and there were several protests conducted to inform the company to clean up their
act.
6.3 Porters Five Forces Analysis

There are five main forces of Porters analysis that help these two organizations to analyze
the dynamic level of competition within the industry, thus playing significant roles in shaping the
companys strategies.

Figure 8: Graphical presentation of Porters five forces

The first force is called rivalry among existing competitors. Big organizations like Nike
and Adidas have very high internal rivalry between existing and competing firms within the same
market. In other words, both Nike and Adidas, the two biggest sportwear firms, together with
smaller sportwear firms like Puma and New Balance, are fighting for the same pot of profits and
the higher degree of rivalry will translate to more difficulty in generate profit and deteriorating
sales. One way to attract new and loyal customers into buying the products is by competing on
price. However, the competition is fierce because if one of the organizations cannot compete on
price alone, they need to innovate their products constantly through product differentiation and
that costs more money for Research and Development process. Other than putting the price of their
products at abundant price levels, both Nike and Adidas too conducted mergers and acquisitions
to stay ahead in the market. Adidas for example acquired Reebok together with its market share,
thus causing Nike to face a temporary but significant downfall in sales. Similarly, Nike too
acquired Converse, a company that is made famous for canvas and casual sneakers, as a way to
differentiate its products (Maureen Tkacik 2003).

The second force is called the bargaining power of buyers. This second force is relatively
high for big companies like Nike and Adidas. This means that the buyers have the ability to
pressure these organizations into decreasing the price of the products subject to the buyers
sensitivity to price tag changes. In sportwear industry, these buyers are both the end users as well
as the big retailer dealers like Wal-Mart in America or Al-Ikhsan in Malaysia. While purchasing
power is relatively high for buyers of these products, the organizations are struggling constantly
to sway buyers to buy their products instead of the products of the competitors because if the
buyers are unhappy with the price and the quality of the products, they can easily change their
brand preference towards the competitor. In addition to organizing product sales at discounted
price from time to time, both Adidas and Nike are constantly innovating new technology to make
their products the better products in every aspect including comfort and durability while keeping
the price tag as low as possible for the buyers in order to retain and attract customers.

The third force is called the threat of new entrance. This is in relation to the introduction
of new and rising companies that may affect the competition by entering into the market with
existing and established brands. Threat of new entrance is relatively low for big organizations like
Nike and Adidas. While a free market dictates that a new company can enter the market freely, the
probability of a company to set up in the sportwear industry is low because existing brands such
as Nike and Adidas have a loyal customer base. At any given time, both Nike and Adidas can
indulge in price war or control the supply chain to fend off newcomers. However, there are a few
rare cases whereby newcomers are able to penetrate the market such as Under Armor which
employed similar tactic as Nike and Adidas by doing aggressive sponsorship and endorsement
onto sport events and famous athletes to gain a following (Ashley Lutz 2016).

The forth force is called as threat of substitute. Threat of substitute can be defined as the
ease of which buyers can buy similar products from another brand or supplier. In this case, the
force is relatively low for both Nike and Adidas. This is because products that are made by both
Nike and Adidas are of similar build quality and price range. The only thing that differentiate the
two brands are the design. Also, both Nike and Adidas have their own loyal customer base that are
not likely to switch brand. In addition to that, players or athletes endorsement play a big role as
most of the customers are buying their sportwear products based on what their sport idols are
wearing. In this case, both Nike and Adidas have similar amount of brand ambassadors from
different variety of sports.

The fifth force is called the bargaining power of supplier. A supplier is considered to have
a strong bargaining power if it has control over a sizeable amount of raw supplies and therefore
controlling the price of the supply. For this case, the force is considered low for both Nike and
Adidas because both companies can opt to subcontract the manufacturing process to suppliers who
are able to provide the best price per quality ratio for these two organizations. While both
companies have previously been criticized for the lack of control over the working condition of
the workers from the suppliers side, Nike and Adidas are continually working with local
authorities to improve the labor quality and will terminate contracts of the suppliers who fail to
meet these standards.

Overall, both Nike and Adidas share a lot of similarities in terms of strategic management.
This is because both of these organizations have similar SWOT analysis as well as Porters five
forces that drive these companies forward in sportwear industries.
7.0 ANALYSIS ON DECISION MAKING STYLEOF THE TWO ORGANISATION

7.1 Well-Structured and Unstructured Problems

There are many problems that Nike and Adidas are facing. The problems can be
categorized into well-structured problems and unstructured problems. Well-structured problems
are those in which the initial state, goal state, and constraints are clearly defined by the organization.
On the other hand, unstructured problems are those that are new or unusual and no clearly
alternatives are chosen or implemented.

Organization Well-structured problems Unstructured problems

Nike Competition Buyers

Pricing Counterfeit Problems
Adidas
Quality Management

7.2 Counterfeit Problems

The market for fake goods is on the rise and unsurprisingly, Nike shoes are the most
counterfeited goods in the world. As such, Nike has come out with several decisions especially in
design department to ensure that buyers can differentiate genuine products with counterfeited
products. For example, genuine Nike Air Jordan 14 shoes have 14 Jumpmen symbols hidden inside
the shoes. Also, genuine Nike Air Jordan 2010 shoes have handwritten midsole texture. Nikes
workers have put a lot of work into the design of these shoes to protect both the organization and
the customers. In addition to that, Nike encourages buyers to purchase their products from
authorized retailers as this is the most secure way to ensure that the products bought are genuine.
Besides, Nike as the NFL (National Football League) official uniform supplier has partnered with
the leagues management in a legal strategy focused on shutting down unauthorized websites that
are selling counterfeited goods. The cooperation also involves local and federal law enforcement
authorities to stem the flow of bogus NFL products entering America, mostly from China.

Adidas too employs the similar tactics as Nike when it comes to combatting counterfeit
products and black-market sales. For example, Adidas has taken legal action against 285 websites
that sell fake Adidas products in the 2015 alone. Moreover, Adidas encourages buyers to shop
their products only from retailers that are listed as authorized dealers to ensure that the customers
get original products without any issues.

7.3 Competition

Based in America, Nike is the largest sportwear manufacturer in the world, but the
competition is always stiff. Some of their biggest competitors include the traditional German rival
Adidas and the newcomer Under Armour. Although Nike is the larger brand than the two, Adidas
and Under Armour are both successful sportwear manufacturers and have been cutting into Nikes
market share steadily. Adidas for example has announced a full-on, long-term partnership with
celebrity music artist Kanye West for new lifestyle apparel line-ups in the year 2016 to a high
degree of financial success.

To fight off the competition from other companies, Nike made an interesting decision to
give extra focus on women wearable and apparels in the newer line-ups. Through this shift in focus,
Nike is capitalizing on the functional-yet-fashionable fitness-wear trend known as athleisure that
has proven to be very popular among women lately. Nike believes that targeting the untapped
female market is their biggest opportunity to compete with other company. In this case, Nike has
two areas of competitive advantage: Nike has the resources to come up with the most
technologically advanced products, and it has access to a vast network of focus groups that allows
Nike to better understand what the female consumers are looking for. Amy Montagne, head of
Nike's women's business believes that with these two advantages, Nike can gain customers
appetite more than any other of company. Under her leadership, over the last three years, Nike has
been working on developing new products that carefully address very specific needs in the women
market. For example, Nike launches its most innovative sports bra to date, the FE/NOM Flyknit
bra, which took two years of intense testing to produce. The womens market business has proven
to be lucrative for Nike as it sees 20% growth in 2014 which is twice the rate of Nikes men market
growth of 9%.

On the other hand, Adidas has faced tougher financial challenges than Nike in the recent
years. According to The Wall Street Journal, Adidas share sales have declined by 17% since 2013,
compared to Nikes 59% increment. This is mainly because Adidas is losing its battle with other
competitors. To address this issue, Adidas has taken several steps, one of which is by having a
change in the companys leadership. The change in the company leadership was deemed necessary
because of poor communication between the company and the stakeholders as Adidas under the
previous leadership rarely shared or discussed information and problems faced with stakeholders.
Another step that Adidas has taken is by aggressively sponsoring famous athletes and international
sport events. This move helped Adidas to rise in popularity among the consumer and eventually
overtook new rival Under Armour as the No. 2 sport brand in America.

7.4 Endorsement and Sponsorship

Both Nike and Adidas aggressively endorse famous athletes and sponsor international sport
events to increase brand popularity, awareness and market share. Some of the notable athletes that
Nike has sponsored include LeBron James in basketball and Cristiano Ronaldo in soccer. Adidas
on the other hand has the likes of Lionel Messi from soccer and Jessica Ennis from athletics under
its belt. It is clear that Nike focuses more on athletes and sport events that are popular in America
such as NBA whereas Adidas focuses more on soccer and other sports that are popular in Europe.
For example, Adidas has made multi-million jersey deals with top soccer teams around the world
such as Manchester United and Real Madrid.

However, Nike has recently experienced an embarrassing blunder when it missed out
sponsorship deals with Stephen Curry, currently regarded as the best basketball player in NBA.
While Nike did contact Stephen Curry on a potential endorsement deal, Under Armour managed
to get his signature and now Under Armour is currently reaping the benefits of this deal. Analysts
stated that signature basketball shoes tied to NBA star Stephen Curry outsell Kevin Durant and
Lebron James of Nike in the year 2016.

7.5 Non-linear thinking styles

Decision making involves a series of steps in which individuals practice on a daily basis.
It is especially crucial for big time organizations like Nike and Adidas. As the worlds first and
second biggest sportwear manufacturers respectively, their main mission is to make profit and
design products that are preferred by the customers. The designers of companies are working hard
day by day to come out products of different designs to cater as many buyers as possible. The way
that the companies make decisions on their products design is non-linear to impress the market
and buyers.

7.6 Linear thinking styles

To compete with other competitors, Nike and Adidas are working hard on their quality
management. The way that both companies make comfortable, reliable and efficient products that
are stylish and easy to maintain without making the price exorbitantly expensive is considered
linear thinking styles. The basic strategy is to introduce advanced technology into production line
and runs the test repeatedly before the products are launched to the market. The basic ideal of
linear thinking styles is to know what the customers want and give them what they want. High
quality and relatively affordable price are what customers want when choosing sportwear
equipment.
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9.0 APPENDIX