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Nike and Adidas Market Structure

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Question 1:

The concept of market structure is an important aspect to both marketing and economics since they are both concerned with stringent decision making. The brands in this study are Nike and adidas. Market structure plays an important role in decision making analysis since it has an impact on the decision making environment. The behaviour choice is based on the characteristics and extent of competition in the market. The marketing structure is characterized through the large number of independent and well-informed buyers and sellers who in the course of business exchange products which are identical.

To begin with, Adidas as a brand and a look at its market shares in the US identifies it as a monopolistic competition in its market structure. Nike is identified as an example of a monopolist competition type of market structure. It is a multinational corporation which gets involved in designing, development and the worldwide selling and marketing of footwear products ranging from equipment to accessories (Adidas). It is identified as monopolistic since through its marketing strategies, it can be seen to present a perfect competitive aspects. However, it is slightly different since the products it produces are somehow different from what their competitors produce. Their characteristic is product differentiation seen through the perceived or real products competing in the same industry. The impact is that it has profit maximization which depends on production to ensure the equity of its marginal cost and the marginal revenue.

Nike on the other hand portrays characteristics of monopolistic competition market structure but it is an oligopoly since it does multiple production through creation if similar types of products making it difficult to enter the market because of the market producers and its high price setting power thus domination of the market (Jung, 2013). The impact is such that when one firm acts the other firm runs into a risk of losing its customers. As such there can be higher prices and profitable operation in markets that have higher barriers to entry of products and with fewer competitors.

The market structure has an impact on the market outcomes since it affects the opportunities, motivation and decisions made on the economic factors that participate in the market. The economic market structure aims at isolating the effects that come in place so as to predict and explain the outcomes in the market. Furthermore, market structure evaluates which market is favourable for the business and at a lower cost that the consumers are more interested in the products.

The company or brands can be able to save money when the market structure is analysed and focusing on the markets that are accessible. Furthermore, the analysis of market structure according to porters five forces weigh the competition of the rival firms or to identify the new firms or competitors in the industry (Jung, 2013). To sum up, these two brands are able to understand the needs of their customers and deliver appropriately so as to satisfy them accordingly.

References

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Nike And Adidas Market Structure - Queen Essay

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Learning from Adidas' Speedfactory blunder

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Learning from Adidas’ Speedfactory blunder

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Adidas will end its revolutionary manufacturing program this year, but that doesn’t mean the principles of distributed operations should be abandoned by other players.

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Battle of the Sportswear Brands: How Nike & Adidas are Competing for Young Consumers in the US

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Take a pen. Now draw the first brand logo you can think of. If that piece of paper contains an unmistakeable bold, rounded tick, congratulations, you've identified the world's most valuable apparel brand.

Worth $28 billion, it's a title Nike has held for eight consecutive years, according to an annual ranking by strategy consultancy Brand Finance. It's not difficult to see why: boosted by smart marketing and a well-timed launch at the height of the 1970s-80s fitness boom, Nike has been imploring tentative exercisers to 'just do it' for more than three decades. The company's 'swoosh' logo is imprinted onto our collective consciousness, with Complex Magazine naming it the most iconic brand logo of all time in 2013.
Danger Signs
However, a look at the brand's finances suggest its dominance may be on the wane. While Nike retained its top spot in the Brand Finance ranking, the company's brand value actually declined 12% from $31.7bn in 2017.

The reasons for this are two-fold. Firstly, attrition by rival sportswear brands - particularly Adidas - has eaten into Nike's brand equity: the Brand Finance ranking shows Adidas' brand value growing significantly by 41% to $14.3 billion in 2018, outpacing Louis Vuitton to become the fourth most valuable apparel brand in the world.

Contributing to this, consumer preferences around activewear have evolved. The rise of athleisure - wearing exercise clothing like leggings and sneakers for everyday activities, not just for playing sports or going to the gym - means that brands not previously involved with the sportswear market want a slice of the pie and are creating ranges to appeal to this new segment. From ASOS launching an Activewear section of its site to niche brands selling high-end leggings, the market is becoming crowded, and some brands are riding the wave more effectively than others.

US Teens Favour Adidas

Nowhere is this battleground fiercer than in the US. Falling sales in the region were a key reason for Nike's declining brand value, with teenagers in particular starting to shift towards Adidas' and Vans' more accessible everyday activewear. GlobalWebIndex data reinforces this trend: factoring in a broader sample of Generation Z, 16-24 year olds in the US are 42 percentage points more likely than the average US consumer to have purchased Adidas products in the previous year, and 35 percentage points more likely to have bought from Converse.

Piper Jaffray's Spring 2018 ' Taking Stock With Teens' survey also had some tough implications for Nike, revealing that the brand's popularity among US teens had slipped for the first time in years. This decline was most pronounced in the footwear category, where mindshare around Nike products was down by four percentage points from the previous Fall. In contrast, Adidas rose by three percentage points on this metric. Indeed, Adidas overtook Nike's Jordan as the number two brand for sports footwear in the US last year, bolstered by sales of its more lifestyle-orientated Superstar and Yeezy sneakers.
Increasing Appeal among Generation Z Consumers
What can Nike do to win back its US Generation Z audience? The most obvious step would be an overhaul of its product strategy, pivoting towards streetwear and athleisure, as Adidas has done with its Originals label. Young consumers want comfortable clothing that meets the needs of a broader spectrum of occasions, including jogging pants, leggings and sneakers that can be worn when hanging out with friends, not just to the gym.

On a marketing level, a digital-first approach is important - these consumers have grown up online so stereotypes about a generation attached to their phones remain relevant. 35% of US 16-24 year olds, for example, have made a purchase via mobile in the past month, over-indexing by 20 percentage points compared to the average US consumer. Similarly, nearly half of this audience used social networks to find out more about brands and products.

However, equally important is the emotional resonance of activity. Brands should also aim to foster a sense of community to retain brand-hoppers - Generation Z consumers are slightly less likely than average to be brand loyal - and make them feel that Nike is part of their visual identity.

Examining some of the top differentiation points among this audience vs. the average US consumer, a couple of trends stand out:

The need for affirmation from peers

Brands are seen as a signifier of identity

Desire for newness, but...

Not above a certain price point

By tapping into some of these motivations, Nike can help recapture some of the audience lost to challenger brands.
The Future
It's important to note that despite these threats, Nike remains the top sportswear brand in the world.

In 2017, the company unveiled its ' Consumer Direct Offense', targeting consumers in 12 key global cities where it predicts 80% of all projected growth through 2020 will be achieved. These cities, which include New York and Los Angeles, are home to what Forbes identified as HENRYS (High Earners Not Rich Yet), suggesting that Nike is consolidating its strategy to target active, affluent and slightly older consumers - i.e. a different audience from those currently being drawn away in the US.

For a taste of how this strategy might play out, just look to the brand's ' Nothing Beats a Londoner' ad, celebrating London's sportspeople and communities. One of the year's advertising highlights to date, it earned a potential 94 million impressions on Twitter and drove a huge amount of brand advocacy: 41% of mentions were positive in tone. One Reddit user hailed it as "the only corporate mass ad campaign to really get the vibe of London".

As a method of growing brand advocacy by celebrating local communities, this was certainly a buzz-worthy tactic and with reach across popular media properties patronised by Generation Z, one that might attract younger audiences by default. And in an era of increasingly fractured communities, we at EntSight are excited to see how this will translate to US audiences.
If you're interested in learning more about our insights services for brands then please take a look here

Take a pen. Now draw the first brand logo you can think of. If that piece of paper contains an unmistakeable bold, rounded tick, congratulations, you've identified the world's most valuable apparel brand.

Worth $28 billion, it's a title Nike has held for eight consecutive years, according to an annual ranking by strategy consultancy Brand Finance. It's not difficult to see why: boosted by smart marketing and a well-timed launch at the height of the 1970s-80s fitness boom, Nike has been imploring tentative exercisers to 'just do it' for more than three decades. The company's 'swoosh' logo is imprinted onto our collective consciousness, with Complex Magazine naming it the most iconic brand logo of all time in 2013.
Danger Signs
However, a look at the brand's finances suggest its dominance may be on the wane. While Nike retained its top spot in the Brand Finance ranking, the company's brand value actually declined 12% from $31.7bn in 2017.

The reasons for this are two-fold. Firstly, attrition by rival sportswear brands - particularly Adidas - has eaten into Nike's brand equity: the Brand Finance ranking shows Adidas' brand value growing significantly by 41% to $14.3 billion in 2018, outpacing Louis Vuitton to become the fourth most valuable apparel brand in the world.

Contributing to this, consumer preferences around activewear have evolved. The rise of athleisure - wearing exercise clothing like leggings and sneakers for everyday activities, not just for playing sports or going to the gym - means that brands not previously involved with the sportswear market want a slice of the pie and are creating ranges to appeal to this new segment. From ASOS launching an Activewear section of its site to niche brands selling high-end leggings, the market is becoming crowded, and some brands are riding the wave more effectively than others.

US Teens Favour Adidas

Nowhere is this battleground fiercer than in the US. Falling sales in the region were a key reason for Nike's declining brand value, with teenagers in particular starting to shift towards Adidas' and Vans' more accessible everyday activewear. GlobalWebIndex data reinforces this trend: factoring in a broader sample of Generation Z, 16-24 year olds in the US are 42 percentage points more likely than the average US consumer to have purchased Adidas products in the previous year, and 35 percentage points more likely to have bought from Converse.

Piper Jaffray's Spring 2018 ' Taking Stock With Teens' survey also had some tough implications for Nike, revealing that the brand's popularity among US teens had slipped for the first time in years. This decline was most pronounced in the footwear category, where mindshare around Nike products was down by four percentage points from the previous Fall. In contrast, Adidas rose by three percentage points on this metric. Indeed, Adidas overtook Nike's Jordan as the number two brand for sports footwear in the US last year, bolstered by sales of its more lifestyle-orientated Superstar and Yeezy sneakers.
Increasing Appeal among Generation Z Consumers
What can Nike do to win back its US Generation Z audience? The most obvious step would be an overhaul of its product strategy, pivoting towards streetwear and athleisure, as Adidas has done with its Originals label. Young consumers want comfortable clothing that meets the needs of a broader spectrum of occasions, including jogging pants, leggings and sneakers that can be worn when hanging out with friends, not just to the gym.

On a marketing level, a digital-first approach is important - these consumers have grown up online so stereotypes about a generation attached to their phones remain relevant. 35% of US 16-24 year olds, for example, have made a purchase via mobile in the past month, over-indexing by 20 percentage points compared to the average US consumer. Similarly, nearly half of this audience used social networks to find out more about brands and products.

However, equally important is the emotional resonance of activity. Brands should also aim to foster a sense of community to retain brand-hoppers - Generation Z consumers are slightly less likely than average to be brand loyal - and make them feel that Nike is part of their visual identity.

Examining some of the top differentiation points among this audience vs. the average US consumer, a couple of trends stand out:

The need for affirmation from peers

Brands are seen as a signifier of identity

Desire for newness, but...

Not above a certain price point

By tapping into some of these motivations, Nike can help recapture some of the audience lost to challenger brands.
The Future
It's important to note that despite these threats, Nike remains the top sportswear brand in the world.

In 2017, the company unveiled its ' Consumer Direct Offense', targeting consumers in 12 key global cities where it predicts 80% of all projected growth through 2020 will be achieved. These cities, which include New York and Los Angeles, are home to what Forbes identified as HENRYS (High Earners Not Rich Yet), suggesting that Nike is consolidating its strategy to target active, affluent and slightly older consumers - i.e. a different audience from those currently being drawn away in the US.

For a taste of how this strategy might play out, just look to the brand's ' Nothing Beats a Londoner' ad, celebrating London's sportspeople and communities. One of the year's advertising highlights to date, it earned a potential 94 million impressions on Twitter and drove a huge amount of brand advocacy: 41% of mentions were positive in tone. One Reddit user hailed it as "the only corporate mass ad campaign to really get the vibe of London".

As a method of growing brand advocacy by celebrating local communities, this was certainly a buzz-worthy tactic and with reach across popular media properties patronised by Generation Z, one that might attract younger audiences by default. And in an era of increasingly fractured communities, we at EntSight are excited to see how this will translate to US audiences.
If you're interested in learning more about our insights services for brands then please take a look here

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How Nike and Adidas are Competing for Young Consumers -

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Take a pen. Now draw the first brand logo you can think of. If that piece of paper contains an unmistakeable bold, rounded tick, congratulations, you've identified the world's most valuable apparel brand. Worth $28 billion, it's a title Nike has held for eight consecutive years, according to an annual ranking by strategy consultancy Brand Finance.

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The State of the Sneaker Market

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Both companies have looked to the secondary market for success.

Adidas, Nike, and Under Armour recently announced their quarterly earnings: not surprisingly, Adidas was the fastest riser (+26% in North America), with Nike stagnating (+1% in North America). Under Armour, meanwhile, experienced one of its worst quarters - quarterly losses of $12M, and historically low stock prices.

However, until 2016, Nike still reigned supreme - and what they had built to that point was nothing short of incredible. The brand fervor exhibited by their fans was only matched by Apple, giving rise to a new concept: the sneakerhead.

How did Nike do this?

Two ways: sponsorships and leveraging the secondary sneaker market.

With sponsorships, Nike created their brand through what I call the "contained shotgun" approach: where they have outspent all their competitors within specific categories.

The best example is in basketball, where Nike has occupied all levels of the sport: high school, college, professional leagues, and even pro-am leagues, such as Drew League. This brand affinity has become massive enough that college teams are willing to take a discount to partner with Nike.

That goes multiple levels: players want to play for a Nike school, and merchandise sales increase with a Nike logo.

The logic is the following: take a discount to partner with Nike, and you make up that difference in the extra revenue you receive by recruiting a star player, and by selling jerseys. For Nike, the goal here was to become all-encompassing for basketball fans, while also becoming the first brand to mind when thinking of the sport.

Next, to nurture a burgeoning secondary market (which resembles a black market), Nike created limited releases - strangling supply, which in turn increased prices in the resell market. Sneakerheads occupy the secondary market, and are (like drug addicts) characterized by their low price elasticity and high willingness to pay.

The secondary market created a massive overall brand premium, and while this did not necessarily translate to direct revenues to Nike, it created spillover demand for other products, improving overall net profitability. In other words, as long as:

Held true, it was rational to continue creating limited releases.

And god damn, has Nike been successful at this. In 2014, within the resell market, Nike comprised of 96% of total sales.

In creating and nurturing the sneakerhead segment, Nike maintained a firm hold on the resell market.

Adidas' rise

In February 2015, Under Armor's Kevin Plank called Adidas his "dumbest competitor". I'd argue that in the years since that statement, Adidas has made more intelligent strategic decisions than anybody else in their industry - leading to an ascendant market cap (share price times shares outstanding).

(I included Plank's Under Armor in red, for good measure).

The reason behind this growth was a revamped strategy, centered around the same two factors that led to Nike's success: sponsorships and distribution.

Through a completely refreshed sponsorship strategy, Adidas began to reallocate their investments into a category undervalued by traditional sporting apparel brands: the lifestyle market. At the same time, Nike doubled down on segments that were stagnating, such as basketball (through their massive NBA partnership ¹) and athletics. Funnily enough, Adidas has executed a similar contained shotgun approach in soccer, with a flood of new and extended partnerships with clubs, leagues, and players. This culminated in the highest number of sponsorships of any other brand for teams contending for major titles in 2017.

Targeting Americans wearing athletic wear for casual use (75% of all customers) was the perfect example of a classic whitespace strategy: examine where your competitors are not occupying, and if profitable, invest heavily into that space. Their endorsements of public figures such as Kanye West and Pharrell Williams, was in many ways, buying low on the lifestyle stock.

From the distribution angle, Adidas borrowed Nike's strategy: creating limited releases and catering to the secondary market, with releases such as the Yeezy Boost and NMDs. At the same time, Nike started to increase their supply in the market. During this period, Adidas saw resell margins of up to 400%, while new Nike products began to falter. As with Nike's limited releases, Adidas created spillover demand for products such as their Superstars - the top selling sneakers of 2016. ²

All that said, Adidas' strategy was straight out of the Nike textbook: sponsor aggressively into specific categories, and cut supply for limited releases. This coincided with Nike's missteps within both areas, leading to gains for Adidas: sneaker sales for Adidas grew 80% in 2016, as per the NPD Group, contributing to the doubling of their market share (11.3% as of May '17). Meanwhile, as a result of declining basketball sales, Nike moved their focus from the secondary market to the retail market through signatures and player editions - attempting to leverage their unmatched athlete roster.

Looking forward

While Adidas has made headwinds into the sneakerhead segment, it is still Nike's territory (by recent estimates, a 67% share). Resell margins still serve as one of the best measures of brand strength in sneakers, and outside of a few new entrants within the top 10, the swoosh is still prominently featured. A couple years of popularity is not enough to diminish Nike's brand - in many peoples' minds, Nike is still the top sneaker brand.

Therein lies the power of a brand. While Adidas has made all the right decisions over the past two years, for them to overtake Nike within consumer minds, it will take a colossal effort and years of positive reinforcement to do so.

It will not be difficult for Nike to regain some market share within the sneakerhead segment. They have already begun to make their way back into the secondary market. However, Adidas' entrance into the lifestyle market may have led to a first mover advantage large enough to be insurmountable, at least in the short term.

This advantage should be concerning to Nike, given that their existing partnerships may be well past the point of diminishing returns. These partnerships are all a part of brand building - and a few more years of success may aid in Adidas' goal to win the sneaker wars.

¹ To be clear, NBA player endorsements are still effective, especially in a league that is increasingly becoming more player-driven. ^

² For an exhaustive history of Adidas resell, check out Josh Luber of StockX's outstanding analysis here. ^
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The State of the Sneaker Market: Nike and Adidas - Front Office Sports

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Both companies have looked to the secondary market for success. Adidas, Nike, and Under Armour recently announced their quarterly earnings: not surprisingly, Adidas was the fastest riser (+26% in North America), with Nike stagnating (+1% in North America). Under Armour, meanwhile, experienced one of its worst quarters - quarterly losses of $12M, and historically low stock prices.

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The Microeconomics of Adidas

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THE MICROECONOMICS OF ADIDAS By: Scarlet Herrera, Carla Villafana, & Sabrina Villalva Market Structure Adidas' Revenue Introduction (continued) Total revenue was almost 4 billion euros which is about 4.5 billion USD. Advertising Strategies Adidas is an imperfect competition

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1. Characteristics of the market structure

Market structure of Adidas: Monopolistic competition

Support from key sources:

A multinational corporation which gets involved in designing, development and the worldwide selling and marketing of footwear products ranging from equipment to accessories

Through its marketing strategies, it can be seen to present a perfect competitive aspects.

Characteristics of the Market Structure of Adidas

Market Structure of Adidas: Monopolistic Competition

The market structure of Adidas falls under Monopolistic Competition. This category of market structure is essentially a middle ground between a monopoly and perfect competition. The key feature of a Monopolistic market is the Product Differentiation which is when products are similar but not identical. The features of a Monopolistic market includes:

Many firms in the industry sell similar products but not perfect substitutes.

To achieve higher returns, firms aim to differentiate their product by using advertising to brand their products differently.

A high level of ease and freedom when entering & exiting the market.

Firms in this market are considered price makers but they each hold the same and relatively low degree of market power.

Price elasticity of demand is also relatively high and sensitive to price changes.

Adidas is considered to be in a Monopolistic Competition as:

In terms of competitors, there are several of them competing with Adidas including Nike, Reebok, Under Armour, Puma and New Balance.

Information is widely available as buyers are able to compare prices & products easily. Entry into the shoe industry is considerably easy also.

Each of these firms are providing sportswear and offer similar products but they largely differ in terms of their branding and image with no company having total control or dominance.

1. Relevant demand and/or supply factors of the chosen industry/product

Relative demand and/or supply factors of Adidas

Relevant demand factor of Adidas: Taste and Preferences

Support from key sources:

US Teens Favour Adidas: Teenagers in particular are starting to shift towards Adidas’ [and Vans]’ more accessible everyday activewear. GlobalWebIndex data reinforces this trend: factoring in a broader sample of Generation Z, 16-24 year olds in the US are 42 percentage points more likely than the average US consumer to have purchased Adidas products in the previous year

Adidas overtook Nike’s Jordan as the number two brand for sports footwear in the US last year, bolstered by sales of its more lifestyle-orientated Superstar and Yeezy sneakers.

consumer preferences around activewear have evolved. The rise of athleisure – wearing exercise clothing like leggings and sneakers for everyday activities, not just for playing sports or going to the gym – means that brands not previously involved with the sportswear market want a slice of the pie and are creating ranges to appeal to this new segment.

Relevant demand factor of Adidas: Number of buyers

Support from key sources:

Increasing Appeal among Generation Z Consumers: 35% of US 16-24 year olds, for example, have made a purchase via mobile in the past month, over-indexing by 20 percentage points compared to the average US consumer.

Nearly half of this audience used social networks to find out more about brands and products

Relevant supply factor of Adidas: Technology

Support from key sources:

By transitioning to advanced engineering techniques, such as 3D printing, to cut the manufacturing process down to a few steps, apparel companies could save on labor costs and reduce energy needs and waste along the chain.

The company uses laser and other eco-friendly technologies to improve productivity, reduce water and energy consumption and thus remove damaging emissions and waste.

Relevant supply factor of Adidas: Factor Price

Support from key sources:

The entire production cycle would be faster, cheaper and far less ecologically damaging.

The funds they could save using new tech would help balance out those costs.

That labor costs are more closely tied to the number of steps needed to make an article of clothing — not the number of people behind those steps.

Apparel companies could save on labor costs and reduce energy needs and waste along the chain through the transition to advanced engineering techniques such as 3D printing to cut the manufacturing process down to a few steps

Price elasticity of demand: Inelastic

The price elasticity of demand (PED)  for Adidas is inelastic - which means that even with rising prices, Adidas consumers will likely still purchase their goods.

Factors affecting adidas’s PED are availability of substitutes and consumer habits

Availability of substitutes: Adidas has cultivated a loyal following of customers who jump at the chance to purchase anything with the trademark Adidas logo and branding. This cult-like consumer market is highly driven by effective marketing, such as exclusive celebrity endorsements, limited edition shoe lines and rampant advertising.

Hence even though there are technically other substitutes for sneakers and shoes in the market, there is no substitute for the Adidas brand.

In fact, the PED for Adidas is so low that there is a huge resell or black market dedicated to purchasing and selling limited edition and highly desirable sneakers. The prices for these products often surge way beyond its original price, purely due to the high demand but low supply of the shoes.

Consumer habits: Many of Adidas customers are “sneakerheads”, who are customers who place a large emphasis on sports and shoe culture in their daily lives. Hence even when price increases, these customers who are accustomed to a certain lifestyle, will not be as deterred from continuing to purchase Adidas products.