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- Performance Overview:
Adidas has an impressive record during the year 2013. Its licensees grew 16% and the number of factories under these licensees grew by 46% and the total number of factories under its social compliance system grew by 8.5% over the previous year. The number of employees grew by 10%. The group achieved a gross margin on 49.3% and an operating margin of close to 9%. Group sales reached Euro 14.492 billion representing a 3% increase in sales! A very impressive growth record in the fiscal 2013.
The average operating working capital reached 20.9%. The company expended Euro 479 million in capital expenditure, and borrowed Euro 1.334 billion a reduction of 0.2% over the previous year. Earnings per share (EPS) increased to Euro 4.01 an increase of 6% over the previous fiscal. Net income attributable to shareholders increased by 6% to Euro 839 million with Euro 1.5 per share as the dividend payout. During the same period the share value of the ADIDAS AG increased by 38%. All these show an impressive track record of the company.
- Strategic Challenge:
One of the key challenges that ADIDAS and its competitors face is the fall out of the Bangladeshi issue. All multinationals in the industry face the same challenge as the customers grow more aware of the issues related with remote factories especially those in the third world countries. The challenge is to have transparency in the supply chain management of the company. ADIDAS has embarked on a series of initiatives towards it. In its 2012 sustainability report the company reported many successes it had in improving transparency in supply chain management. It also reported implementation of many sustainable manufacturing processes. It reported improving energy efficiency in many of its stores and reduction in its carbon foot print. It also outlined its shortcomings and challenges in the same report. It also has set out a series of very aggressive objectives that it intends to meet in environment, governance and social dimensions by 2015. The sustainability progress report of 2013 outlines its progress and indicates satisfactory performance in three of five key areas it has identified as strategically important for the organization.
The company is on track in meeting Water, household waste and Paper targets while not done satisfactorily on energy consumption and carbon footprint dimensions. The company’s Global Director of Social and Environmental affairs has indicated that being a sustainable company was important to the organization and it was a long term effort and not a short term one. The company has got involved with the third party factories and coaches them to adhere to the norms set out by the company. The key strategy is to come out as an ethical company. Towards this end instead of behaving like a policeman and intimidate the contractors the company has taken a coaching route which endears it to its contractors and there by an excellent strategy to achieve the overall goal of the organization.
- Alternates and Recommendations: While the company has taken on its own shoulders the responsibility of compliance it becomes important for the company also to watch out for its own limitations. Can using an internal third party organization be beneficial is something that is to be seen. A subsidiary company owned by ADIDAS itself can help with the compliance angles thereby bringing in more transparency to the entire process. This is a strategic recommendation that is made.
ADIDAS AG. FAIR PLAY - Performacne Report. Annual Report. Herzogenaurach: ADIDAS AG, 2013. Paper.
—. Green Company Performance Analysis 2013. Sustainability Report. Herzogenaurach: ADIDAS, 2014. Print.
—. Group Strategy. 2014. Electornic. 26 November 2014.
Kaye, Leon. Adidas Implements New Strategies to Lead in Supply Chain Transparency. 3 June 2013. Electronic. 26 November 2014. <http://www.sustainablebrands.com/news_and_views/supply_chain/adidas-implements-new-strategies-lead-supply-chain-transparency>.