Alpha Tribes: Nike and Adidas

Industry: Sports Apparel – The Contenders: Adidas vs Nike

With the World Cup currently going on in South Africa and much being said in the press about- Adidas’s Jabulani ball ( http://www.csmonitor.com/World/Africa/2010/0618/World-Cup-2010-Is-the-Jabulani-ball-bad-for-the-World-Cup)

and

Nike’s ambush marketing attempts

(http://www.reuters.com/article/sportsNews/idUSTRE65A5AO20100611 ).  It seems an appropriate time for us to share our Alpha Tribes analysis of Nike and Adidas – is it all about function or is there more to it?  We’d love to hear your thoughts.

The Winner: Nike

Summary

Nike is globally synonymous with innovation, performance and is a very good example of a company that has intuitively taken on tribal principles of the brand as they have moved towards market excellence.  In the mid 2000s, the brand was heavily criticised for the poor working conditions of employees in developing nations and protest groups urged consumers not to buy Nike products. The company appears to have emerged from this crisis stronger and with a focus on the engaging with its brand tribe more effectively.

Performance and Sustainability

As an organisation, Nike has proved to be extremely successful. It is the largest manufacturer of athletic footwear and apparel worldwide by sales and its revenue in its 2008 fiscal Year were in excess of $18.6 billion. The Company is targeting top line revenue growth of $23 Billion by 2011, and anticipates that 75% of this growth will be generated by the Nike brand and will be driven by focusing on creating premium consumer experiences built on product innovation, brand leadership and elevated retail presence.

Innovative Tendencies

Nike has been synonymous with innovation throughout its entire history. Unlike its competitors, the company has always focussed on building brand belief and has always been opportunistic and unique in terms of how it promotes itself. Rather than making adverts about trainer technology, the company focussed on promoting an ideology of self-improvement with its slogan, “Just do it”.

In terms of products, Nike created the waffle shoe and then the iconic Nike Air range. Innovation and adapting to change are close to the core of the brand and people at Nike don’t seem phased by the prospect of change. Like the elite sports people they serve, Nike’s leaders are more likely to embrace a challenge and set new standards than stick to the status quo.  Nike Town and the brand’s unique approach to the store experience is just one example of this.

Tribal Leadership

Nike was not only quick to understand the concept of the tribe but it was able to leverage its collective assets to build an incredibly strong brand tribe. Widely accepted as one of the few iconic brands, Nike has been able to develop a status that transcends functional benefits. The declining authority of traditional institutions like the Family and Church has created a society that questions a lot of things, but retains the need to believe and belong. Nike as a brand took leadership and was one of the earliest brands to focus on filling this void.

Most people will have heard of Phil Knight the company founder, a charismatic leader with a penchant for doing things differently. Aside from building a major force in the business world, and a reputation as business leader many in the modern business world respect, what Knight and his tribal leadership team have been most successful at doing within Nike is to synchronise the brand, culture and strategy.

Nelson Ferris, Head of Nike’s Corporate Education Department once stated that, “The Swoosh represents something other than just a company. It represents a whole value system.” Ferris, a long-time employee, even has the Swoosh tattooed above his ankle. “It stops being a job and starts to become a way that you are defining the way you are living on earth.”

Tribal Influence

Nike has made understanding its heritage and brand an intrinsic part of its corporate culture.  Its brand is truly ubiquitous – the company’s growth has never really been based on the technical superiority of its products, its success has been built on transforming the technology and design of its products into a high performance brand people believe in.

Product vs Brand Focus

Many of Nike’s competitors get hung up on what exactly Nike is selling in a rational sense and try to compete on technical superiority. This is of little consequence to Nike as it is too busy focusing on its brand and the opportunities this brings.

Authenticity/Magnetism/Honesty

Authenticity goes someway to explain why Nike wasn’t terminally damaged by the Asian sweatshop fiasco.  Whilst the anti-sweatshop tribe caused Nike trouble, it found it difficult to completely penetrate the brand. Nike never presented itself as a “wholesome nice competitor” rather it is more closely representative of the “survival of the fittest” ethic. Nike represents a “give it a go and see if you can win” mentality as does the majority of its tribe.  The Nike brand belief is central to everything the company does, and this works for customers and employees together.

The Loser: Adidas

Summary

Adidas is a successful brand but it has run into significant challenges in recent years and has suffered from dwindling market share in numerous major countries.  Adidas clearly plays second fiddle to the alpha brand tribe that is Nike – Nike controls 33% of the market worldwide and has a large but surmountable lead over all of its rivals. If Adidas continues to focus on process and product excellence rather than its brand there will be further competitive pressures from emerging brands such as Chinese athletic wear maker Li Ning.

Whilst Adidas is a highly successful brand that has ridden its luck throughout its history, at some point the luck is going to run out and it will need a contingency plan.

Performance and Sustainability

Whilst the company has traditionally performed well, Adidas has seen a decline in demand for its products in mature markets. Although Adidas and Nike are believed to control around 40% of the world’s wholesale market for active sportswear and athletic footwear, and a little over half of the branded segment, Nike almost wiped out Adidas in the United States causing its market share to drop from 60% to less than 3% in the early 1990s.

In 2009, Adidas’ fortunes waned in much of the world, except for Latin America. In the first nine months of the year, North American sales fell 11% from the previous year; European sales declined 8% while Asia fell 9%. However, the brand enjoyed a 19% year-over-year gain in Latin America.

Remember the time when sneakers were just sneakers. The only big decision a consumer had to make was whether to go for high tops or low tops. Nowadays consumers buy different pairs for different occasions and situations and they are faced with numerous brand choices.

Nike raced ahead of the market by identifying and unifying a tribe around its brand, the rest scrambled around. Adidas followed by focussing on product innovation but they have evolved to stand for individual talent- an idea related to competing and winning against your internal limitations and fears.

Innovative Tendencies

The initial strength of Adidas was its product innovation – Adi Dassler registered more than seven hundred patents.  Today, Nike has seemingly taken the lead in this area and Adidas simply follows. For example, celebrity and athlete endorsements, a concept perfected by Nike in the 1980s has only recently been adopted by competitors such as Adidas and Reebok.

Tribal Leadership

Adidas’ takeover of Reebok presents both opportunities and challenges for the future. On one hand, the company now has ownership of a truly American brand in the US but on the other, developing a brand authenticity that incorporates the strengths of both organisations and unites both organisations’ brand tribes, will be a substantial hurdle to overcome.

Tribal Influence

For a brand to be relevant in the 21st Century and sustainable over time, it must understand, bring together and influence its brand tribe inside and outside. This is the opposite of manufacturing a series of external brand images in the hopes that one of them will eventually be attractive to the target audience. Adidas seems to be masters at manufacturing images but less effective at building a strong unified brand tribe.

The company also appears to be more of a follower than a leader when it comes to influencing or encouraging change. For example, Nike Town changed the nature of retailing. Adidas has seemingly copied this formula and has started to launch branded stores to compete. However, these stores still remain product-focussed rather than brand-focussed.

Product vs Brand Focus

Adidas is still focussed very strongly on endorsements and the quality of its products rather than nurturing its brand tribe. It is surprising that they have not learnt from Nike in this respect and mimicked the company’s approach – as it has with other aspects of the business.

Authenticity/Magnetism/Honesty

Is a strong brand that started with a single person’s dream of providing athletes with the best sports gear possible? Over the year, Adidas has grown through venturing into various other markets as a result of acquisitions and increasing its product range, which excelled in markets.

Adidas’ salvation will be in functional products which remain desirable but the company will need to evolve. The brand has to be the place where identity is created, and communicated. For Adidas the brand needs to be the background against which it evolves and changes. The brand can be that magnet for all the pieces of the complex business jigsaw to finally join together.

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