In this chapter, we have reviewed the Organizational Structure and Culture of Adidas. Though Adidas-Salomon is a company, which is in the business of manufacturing and marketing a wide range of products, the emphasis of our study is on the footwear business (core business) of Adidas.
A Review on the Organizational Structure of Adidas
The Head Quarter of Adidas-Salomon is situated in a small town named Herzogenaurach in Germany. This head office only manages the support function of Adidas such R&D, marketing sales etc. and that too of the European, African and Asian regions only.
The American region is monitored by Adidas America, which is an autonomous division and has been made to increase the market share of Adidas in USA. Adidas America has got its own support functions, which help it respond to the market needs as quickly as possible.
In 1997, Adidas acquired “Salomon”, one of the world's leaders in sporting goods. The acquisition broadened its product range through the addition of three leading sports brands. “Salomon” for winter sports equipment, “Taylor Made” for golf equipment and “Mavic” for cycle components.
The core brand of Adidas-Salomon is Adidas which is in the business of making athletic equipment, footwear and apparel. Adidas has gone through a lot of structural changes since 1924 i:e when two brothers Rudolf and Adi Dassler founded this shoe making company.
In 1948, the two brothers split from each other and Rudolf founded a rival sporting company named “Puma”.
Adidas started growing and to cut its prices short, it started manufacturing its products outside Germany. It moved to countries such as the Czech Republic, Hungry, Poland and Russia.
As the company grew big, it was rent by family quarrels. As Adi’s son, Horst, split with his parent and opened a rival branch in France, complete with its own designers and factories. Horst eventually took over the parents company in 1985. By then, Adidas’ share of the key American Market was crumbling. It had dwindled to just 2% from 70%. Adidas’ share was taken by Nike and Reebok.
Horst died in 1985, leaving Adidas leaderless. His sister finally sold the company in 1989 to Bernard Tapie, a roguish French financer for $ 320 million. Tapie was soon declared bankrupt and Adidas fell into the hand of the creditors.
Louis-Dreyfus, scion of a prominent French trading dynasty with an M.B.A. from Harvard, earned a reputation as a doctor to sick companies after turning around London-based market research firm IMS. With no other company or entrepreneur willing to gamble on Adidas, Louis-Dreyfus got an incredible bargain from the banks: he and a group of friends from his days at IMS contributed just $10,000 each in cash and signed up for $100 million in loans for 15% of the company, with an option to buy the remainder at a fixed price 18 months later.
One of Louis-Dreyfus’ first move was to replace nearly all of the senior managers, bringing in young people from all over the worked. He flattened the organizational hierarchy and moved his own office into middle of the marketing group, working directly with the product managers. Then he doubled the marketing budget – which had been reduced year after year to control costs.
Louis-Dreyfus moved production to low-wage factories in China, Indonesia and Thailand and sold Adidas' eastern European factories for a token one Deutsche mark apiece. This shift of manufacturing was due to the reason that prices in eastern Europe had been rising for the some time. This hit the competitiveness of Adidas and sent it towards locations in Asia, North Africa and Southern Europe. At this time, 90% of the shoes and apparel of Adidas in made Asia, Africa and southern Europe.
Adidas is also having its products manufactured by sub-contractors in countries like Korea. This sort of contract manufacturing is handled by regional offices (in this case Hong Kong). These regional offices...