I. THE RESEARCH

Methodology

In order to effectively study the chosen industry, the researchers will use specific

methods in order to gather essential data and information.

Visits to the office of the chosen firm are essential in conducting the industry study.

Interviewing the top managers and some employees for information, as well as gathering

general-purpose financial information for numerical data will be done by the researchers for the

said visits. After acquiring the said information through the visits, the researchers plan to hold

group discussions to analyze the data gathered.

In order for the researchers to have a firm grasp about the whereabouts of the industry,

the researchers will either contact or visit statistics agencies for statistical data about it. To

further strengthen the information taken from statistical agencies, the researchers will also

conduct both library and internet research. Only credible sources from established and well-

known information banks will be considered.

Significance of Research Findings

Conducting a research study for a particular industry in our economy entails studying the

firms that compose it as well as the kind of environment that these firms dwell in. One has to

study the firms that make up the industry. Having an in-depth study and analysis of just a single

firm in the industry, coupled with some bite-sized information about its competitors (the other

firms in the industry), is sufficient in studying the said industry.

Through paying a visit to the firm itself, the researchers will be able to gain inside

knowledge about its operations and business functions. Likewise, the firm’s financial statements

will provide the researchers a brief description of its performance and financial standing. Is it

successful? Is it fulfilling its purpose of satisfying the customer? Moreover, interviewing key

persons of the firm will give the researchers background knowledge of the firm itself. In addition

to knowing its primary purpose of creating a customer, the researchers will learn what other

objectives it has. Such as how the firm hopes to contribute to society etc.

As specified earlier, studying the firm itself is not enough. Studying its fellow firms is

also essential. Through the information about the other firms given by the chosen firm itself, by

statistical agencies, as well as by intensive library and internet research for credible sources, the

researchers will have a clear view about the activities going on inside the industry. Whether it be

the stiff competition amongst the firms or the origins and breakthroughs of the whole industry

itself through various moves made by the firms, knowing such activities of the industry is

essential to have a great understanding about it. After all these steps have been done, the

researchers will be in a better position to talk about the industry.

Scope and Limitations of the Study

The study will only focus in the sportswear industry, thus the data and information about

the sporting products of the chosen firm as well as with the other firms will be the only concern

for research and analysis. The wide range of athletic wear that Accel (the chosen firm) offers will

be the focus of the study. The methods that the researchers will use in order to gather the

necessary data will seek those that are about all sporstwear.

II. The Firm

Brief Description

Accel primarily is an athletic equipment brand. It caters to the needs of Filipino

consumers who are into sports. Aside from selling basketball shoes which are its first

products, the brand is also selling athletic shoes for running, badminton and cross-training.

The brand also manufactures sports accessories which include sports bags, wristbands, socks

and many more. Licensed PBA jerseys are also part of the brand’s long list of available

products because it is the official outfitter of the PBA. Being a Filipino-owned brand, the

primary target consumers of the brand are Filipinos. That is why the sizes sold for the

brand’s shoe products are rather small compared to the shoe products sold by international

brands. Price is another important point in this matter. Unlike the hefty price tags of the

products of international brands, Accel’s products are affordable. It is the vision of one of the

brand’s founders to provide Filipinos with high-quality, yet affordable products.

History of the firm

The firm’s history is definitely a Cinderella story. It all started as a vision for

Philip Go, one of the firm’s founders and is currently the chairman of the firm’s mother

company, Sporteum Philippines, Inc. After graduating from the University of Santo Tomas

with a degree in accountancy, Philip Go immediately worked as a clerk for Rubberworld, the

mother company of Grosby and Kaypee, which were local athletic shoe brands back then. Go

worked his way to be the vice president and general manager of Rubberworld’s Adidas

Philippines division. While working, Go learned the different aspects of making athletic

footwear. Rubberworld eventually folded because of external financial issues. This closure of

Rubberworld paved the way for the decision of the original German umbrella company of

Adidas to launch a subsidiary in the Philippines. Go then became Adidas Philippines Inc.’s

President and Managing Director. While working for Adidas, Go conceptualized the

possibility of having a Filipino sporting brand. He wanted Filipino consumers to have high-

quality sporting goods without having to pay much. For him, Filipinos are paying much to

acquire sporting goods from international brands.

Thus, Accel, from the word “acceleration”, was born. Together with Wilfredo

Ortiz and Louie Larosa, his fellow officemates in Rubberworld, they formed Accel. They

started the firm from scratch. Their very first office was a small room with just a computer

and a fax machine at Go’s house in Libis. The founders built the very foundations of the firm

by initially persuading factories in China to manufacture the shoes that they designed. After

the manufacturing dilemma, the three also had to work hard in order to put these shoes on the

shelves of stores. They also persuaded PBA players to wear the basketball shoes that they

manufactured. Fortunately, luck went their way and the rest is history. Accel is currently one

of the top sporting brands in the country. Currently making 250,000 pairs of shoes a year,

Accel’s massive growth from just a vision to a household name is definitely something that

Filipinos should be amazed of and proud of at the same time.

Important Figures

The firm’s total assets are currently P 150 million. Its office is situated in Pasig

which houses its regular and contractual employees that are 58 and 140 in number

respectively. Gross revenue or total sales for the year 2006 amounted to P 157 million. There

is no official market share data but the firm estimates it to be around 7 to 8 percent. On the

other hand, Return on Investment (ROI) during the year 2006 was 30 percent.

III. THE INDUSTRY

Definition

The sportswear industry can be basically defined as an industry which caters to the

sporting needs of consumers. It encapsulates various sports, from basketball to football, from

badminton to tennis. Sportswear does not refer mainly on athletic shoes. Rather, sport-specific

garments such as t-shirts, shorts, track pants, wristbands, headbands, socks and the like are also

part of the variety of products sold by sportswear firms. Firms which sell only athletic shoes are

not considered as a sportswear firm. In order for a firm to be classified under the sportswear

category, it should sell not just athletic shoes but also athletic apparel like those mentioned

above.

Background History

There is no recorded history for the actual origin of the sportswear industry. But its origin

can be traced to the founding of Rubberworld Philippines Inc. Rubberworld, was the only firm

that caters to the sporting needs of consumers back then. Besides from making and selling home-

grown products, Rubberworld also owns sole licenses of some international brands, meaning it

has the sole right to distribute and sell these imported brands in the county. It can be inferred that

during those times, locally made sporting goods were patronized more by consumers since

imported sporting goods were scarce. This scarcity of imported sporting goods can be attributed

to the expensive fees in importing goods from other countries. Since it was expensive for the

local firms to get imported goods from other countries, very few imported sporting goods came

to the country. And these few goods were obviously high-priced since importing them was

costly. This kind of situation opened the door for smuggling. Smuggling was rampant during

those times since many wanted low-priced imported sporting goods. Smuggling was a resort in

order to avoid the high tax fees for imported goods.

All this came to an end during the Ramos administration in the mid 90’s. Under the rule

of then president Fidel V. Ramos, the taxes for imported goods were lessened. Thus, prices of

imported goods became cheaper compared from before. This move was part of Ramos’ plan to

open-up the once closed-door economy of the country in order to attract foreign investors.

Because of this, international sporting brands such as Nike and Adidas established their own

Philippine subsidiaries. This led to the downfall of Rubberworld because international brands

were now patronized. The once local firm-controlled industry is now dominated by international

brands.

Major Players and their Influences

Since the country has become friendly to importers due to the economic amendments of

the Ramos administration, international firms took control over the whole sportswear industry.

Currently, two firms reign supreme. Nike Philippines Inc. and Adidas Philippines Inc. are the

two current major players in the sportswear industry. Statistical data from the year 20051 show

that Nike and Adidas’ total revenue for that particular year was P 1,300,723,000 and P

1,067,356,000 respectively. Compared to their competitors whose average total revenue for that

same year is just around 118 million, it can be clearly seen how dominating these two firms are.

In sports terms, it can be said that these two firms have been dictating the pace of the game in the

whole sportswear competition.

According to Mr. Philip R. Go, the Chairman of the mother company of Accel, the

group’s chosen firm, there are two ways on how Nike and Adidas are able to influence the entire

industry. The first influential factor is the matter on trends. These two leading firms dictate

what’s in and what’s not. They are able to dictate the kind of design, color, and even the

technology that’s going to be proclaimed as hip and trendy. For example, if Nike will release

low-cut shoes and market it as the new trend, other firms will definitely do the same. Because if

the other firms will not follow to the trend set by the two big firms, it is highly probable that their

revenues will drop since they do not sell the “in” products in the market. The other influential

factor of these big firms is the case about surpluses or overstocks. If ever there will be an

overstock on a particular product, these big firms will definitely sell it with a big discount in

order to solve the overstock problem. This particular scenario can greatly influence the sales of

the small firms because in this case, the price of the product that is given a big discount will

more or less be the same as the cheaper prices of the products of the small firms. As Mr. Go said,

1 Top 7000 business profiles 2005 by Philippine Business Profiles and Perspectives, Inc.

a basketball shoe aficionado will definitely buy a P 2,500 discounted Nike shoe rather than buy

an Accel shoe worth the same price.

Current Industry Size

The group consulted the Top 7000 Business Profiles for the year 2005 prepared by the

Philippine Business Profiles and Perspectives, Inc. in order to compute for the estimated industry

size. The group was able to come up with the estimate by adding the total revenue of the firms in

the industry that are articulated in the said book. Figure 1 summarizes the statistical figures with

the addition of the ranks of the firms for the year 2005.

Figure 1

Industry Rank (year 2005) Revenue (in peso)Adidas Philippines Inc. 728 1,067,356,000Nike Philippines Inc. 613 1,300,723,000Sporteum Philippines Inc. 3144 178,137,000Fil Concept 2087 123,019,000Cougar Resources 3752 138,672,000Realzbach Ventures 6512 33,752,000Total Market Size 2,841,659,000

Importance to and Inter-relationships with economy and other industries

Since the sportswear industry’s products revolve from rubber shoes, t-shirts, and the like,

the industry can be connected with two other industries, namely, both the rubber and textile

industry. It is pretty obvious that rubber is the main component of athletic shoes. This makes

athletic shoe makers loyal customers to rubber-making firms. Whatever happens to both these

firms clearly affects the other. For example, if the demand for athletic shoes will drop, then

manufacturers will surely decrease production. This would further entail a decrease in the

demand for rubber. On the other hand, a decrease in the supply of rubber would definitely mean

a decrease in athletic footwear production.

Since sports clothing such as t-shirts and shorts are made through materials that are also

used and produced by the textile industry, there is a clear connection between the two. The

manufacturing of clothing is of course the specialty of textile industries. Any innovation or

technological change in the whole manufacturing process in the textile industry affects the

sportswear industry since they too should change. Any discovery from either the two industries

affects the other since the two are both concerned in manufacturing clothing. An example is the

conception of the dri-fit concept of Nike. Since new fibers were discovered in the textile

industry, sportswear firms tend to adopt certain fibers to sporting use. The dri-fit technology of

Nike is a perfect example since the discovery of new fabrics paved the way for a new material in

making sportswear. With the dri-fit, the athlete is kept dry because the fabric used in the clothing

quickly absorbs the athlete’s sweat and the sweat quickly evaporates.

In the case of the country’s economy, the sportswear industry is greatly affected by the

economic situation that the country has. As Accel’s Chairman, Mr. Philip Go would describe it;

sportswear is not part of the consumers’ basic necessities. According to him, sportswear is the

last priority of consumers. If ever a consumer would go to the mall and shop, buying athletic

shoes or gym wear will be the last thing that will ever cross his or her mind. In this case, the

country’s worsening economy would mean financial problems for sportswear firms. Consumers’

demand for sporting goods will surely decline because they will definitely allot a bigger portion

of their income for basic necessities since there is price inflation for these goods. Lower demand

for sporting goods would mean lower income for these sportswear firms. And the price inflation

for basic necessities for fuel and electricity would mean higher operating expenses for the firms.

IV. THE INTERNAL ENVIRONMENT OF THE FIRM

Organizational Life Cycle

In just 6 years, Accel has been able to become one of the top ten firms in the sportswear

industry. Their increasing profits seem to indicate that they are still in their growth stage.

Likewise, they were able to gain 6-7% market share during their company’s injection into the

industry.

Current Problems and Issues

The problem that the firm is currently facing is the country’s current struggling economic

situation. As stated by the chairman, Mr. Go himself, sportswear is not one of the basic

necessities of consumers. Buying sporting goods is the last priority of consumers. And since the

prices of basic necessities are rising, the portion allocated by the consumers for sporting goods

decreases. The demand for sporting goods decreases because of this. This may lead to a decrease

in the revenue of the firm. Because of this, maintaining operations for the firm is difficult. Their

problem is not solely based upon decreases in demand of consumers, for it is also based on the

prices of basic utilities for the firm. With rising electricity and fuel prices, budgeting the firm’s

operating expenses has also become an alarming problem.

Shared Vision

As the only local brand that as a complete range of categories, from footwear to apparel,

to accessories, Accel’s mission is to be an alternative brand for consumers of sporting goods. It is

because of this mission that Accel is up and running. Products of international brands are pricey;

thus, Accel wants to provide the Filipino consumers with sporting goods that are affordable

without sacrificing quality. To formally state its mission, the following mission statement was

taken from Sporteum Philippines Inc.’s (Accel’s mother company) company profile:

“Sporteum’s vision and mission is to offer an alternative sports brand to our consumers, with equally high in quality and performance and with various innovative designs, but certainly at more affordable and very reasonable prices. It also aims to look for other popular Brands focusing on sports that can be distributed in the local market.”

It is also Accel’s vision to be included to the top 10 sportswear brands in the local area.

They have been successful in accomplishing this feat since in a span of just 6 years, Accel was

able to rank 7th in the top 10 sportswear brands.

Strategies

Accel was able to survive and at the same time, be successful in the sportswear industry

amidst the supremacy of international brands because its initial strategy is not directly to

compete with the leading brands. Instead it positioned itself as an alternative brand for

consumers. Since the prices of the products from international brands are relatively high, Accel

offered reasonable and affordable prices for its products without sacrificing quality. Since the

target market of the big firms is the class A market, Accel provided products for classes B and C

that are at par with the products of the international firms. Because of this, Accel was able to

quickly increase its market share in a seemingly impenetrable industry that is dominated by

international brands.

Even though majority of Accel’s products are manufactured in factories in China just like

the products of international brands, Accel is able to sell them at low prices because their

advertising strategy is not extravagant compared to those of the international brands. According

to Accel’s Chairman, Mr. Philip Go, the prices of the products of international brands are

relatively high because the muli-million costs that these brands spend to advertise their products

are passed on to the consumers. Unlike these brands, Accel does not advertise extravagantly in

order to keep the prices of the products very reasonable and affordable.

Resources

Physical Resources

Warehouse

Office

Delivery trucks

Customized display modules on stores

Financial Resources

Bank credit lines

Organizational Resources2

60 regular employees

250-265 contractual employees from outsourcing agencies

Systems and Processes – Information Systems

The overall information system (software, hardware and database) is managed by an IT

administrator. The company keeps their inventory records by using software called Distribution

Management System (DMS) in which sales orders are encoded to the time that the accounts are

paid by the customers. It also handles their sales, receivables and payables systems. To add

more, the DMS is a fully integrated system that handles inventory records automatically. This

means that when a particular sale is booked, the items in the sales invoice are automatically

deducted from inventory and booked as sales and accounts receivables.

2 Please refer to the Organizational Chart for a more-detailed organizational resource structure

Also, the inventory module is another system that manages how the inventories are

tracked. The process starts when the purchase is made and delivered, then it is encoded and

becomes part of their inventory.

Systems and Processes – Production/Operating Processes

The firm does not own any production facilities and therefore only uses accredited

factories to produce items for them. These factories are mostly from China and some in local

areas. They are being inspected first if they (the factories) are in accordance with the standards of

the firm and if they do, then they are accredited.

Systems and Processes – Management Control Systems and Procedures

The Board of Directors (BOD) is the one who mainly controls the management systems

inside the firm. This board includes the President and Directors who are delegated to oversee the

daily events occurring within the company. Since they are the ones who govern the company, the

major decisions should comply first with the verdict of the BOD before they are undertaken.

They are also the ones in charge of preparing and approving targets and budgets every fiscal

year. Likewise, each department in the company such as Sales, Marketing, and Sourcing are

mandated in order for the firm to reach sales targets. These departments also ensure that the firm

operates within the operating budgets approved. Therefore, overall performances of the officers

are based from the actual sales and profit results vis-à-vis the budget established.

In addition, the BOD also administers the internal approval processes like disbursement

and expenditures. To ensure that everything is organized, the company also hires external

auditors to examine the books and all records of the company and these are reported to the BOD.

Networks (Supplier network, Distribution network, other alliances and tie-ups)

The company accepts suppliers who are in accordance with their standards. The Sourcing

Director is the one who usually looks for these suppliers and is also the one who approves them.

Their distribution network has two models: outright and concession. Outright accounts

are the outright purchases of the stores, while the concession model is like a consignment.

Merchandises are consigned to the retailers and by the end of the month, these retailers report

their actual sales and then get their sales commission. The distribution network is mainly

composed of all major sporting shops like Toby’s, Olympic Village, Royal Sporting House,

Sports Central and all major department stores like SM, Robinsons, Gaisanos and the like.

Sports organizations such as PBA, PBL, POC, etc. are their other alliances in promoting

their products to the end users as well as sports personalities who are mostly PBA players like

Mark Caguioa, Allan Caidic and Asi Taulava.

Corporate Social Responsibility (CSR)

The rejects which they get from factory production are given to boy’s towns. Of course,

these products are checked to see if they are still useable and safe. Aside from providing free

goods the less-fortunate Filipinos, Accel also runs basketball shooting camps for the youth with

the help of PBA Legend, Allan Caidic. In these camps they gather 10-15 talented youths and

train them. They also have 3 pt shooting competitions. In addition to this, they gather homeless

people who like to play and form a futsal team. This team is outfitted with their products.

Accel believes that they are partly responsible for the athletic development of the youth

and that it is their job to help nurture and develop these young talents.

Overall Performance for the last 3-5 years

Modesty aside, Mr. Philip Go describes the performance of his firm to be quite successful

because they were able to penetrate the market from scratch. Again, Accel is the only local brand

displayed side by side with the international brands such as Nike and Adidas. The firm is proud

to say that they were able to gain 6-7 % of the market share on a span of just 6 years.

V. THE INDUSTRY (EXTERNAL MICRO) ENVIRONMENT

Industry Life Cycle

In order to determine the current stage of the entire industry, it is essential to look at the

financial figures of the two dominant players (Nike and Adidas) for this indicates the

profitability of the entire industry and as well as look at the products since this industry is

product-driven. By the looks of the financial data from both the dominant players, it can be

clearly seen that both are undeniable growing. Products-wise, the whole industry had

experienced and is currently experiencing exciting product innovations for the benefit of

consumers. These growing financial data, together with the exciting continuous development of

products, it can be clearly seen that the industry is currently on the growth stage and is showing

no signs of leaving. Through continuous product development that would both excite and greatly

help consumers perform better in their respective sports activities, the sky is the limit for this

industry.

Current Problems and Issues

One of the main issues that the industry faces is child labor. Again, since this industry is

product-driven, manufacturing of products through factories is essential. Most of the factories

that manufacture products for these firms are contractual, thus, firms do not have an eagle’s eye

view on the happenings inside of these factories. In this particular case, firms are not aware of

the workers that are employed by these contract factories. As published in Independent/UK, Nike

admitted their mistake over child labor.3 Another major problem that the industry faces is the

working conditions of the factory workers. This is a vital challenge that the industry has to deal

with because they should comply with the China Labor Law since most of its factories can be

found in China. It is been documented that the employees are overworked and underpaid.4 They

employ young kids and women to work on their factories and were exposed to unsafe conditions

such as hazardous chemicals, noise, heat and dust. This issue really damaged their reputation at

some point and it may be very devastating for them in the long-run. They may lose their assets if

such unpleasant issues were associated with their image.5

In order to answer and solve these issues that concerns the manual laborers for these

firms, Nike aims that by the year 2011, they will be able to eliminate excessive overtime in

contract factories. Also, they vowed to implement human resource management systems to solve

the child labor issue. Furthermore, they also aimed at educating these laborers especially those

who are the breadwinners for their families.6 Both Nike and Adidas implemented Codes of

Conduct for their contract factories in order to ensure the workers of a safe working

environment.

Competitive Analysis (Porter’s 5 Forces)3 http://www.commondreams.org/headlines01/1020-01.htm4 http://cbae.nmsu.edu/~dboje/nike/nikemain1.html5 http://www.american.edu/projects/mandala/TED/nike.htm6 Nike’s Corporate Responsibility Report – Workers in Contract Factories

Using Porter’s 5 forces in analyzing competition in an industry is a must for every firm.

In the case of the competitive force of suppliers, firms face a huge threat especially in the

Philippine market. Majority of the products of firms are manufactured in China or in other Asian

countries were labor is cheap. Suppliers or manufacturers of these products pose possible threats

to firms because reportedly, they are also the ones who manufacture counterfeits. The Chairman

of Accel himself said that factories in China only need a product catalogue in duplicating a

particular product. Counterfeits of sporting goods are prevalent in the market. Counterfeits are

often sold in various tianges and in low-end shopping centers. A perfect concrete example would

be the shoe stalls in Greenhills Shopping Center where counterfeits of Nike and Adidas products

are sold. The prevalence of these counterfeits pose revenue threats to firms since they are cheap.

It is highly probable that a practical consumer would buy a counterfeit over an original since the

price difference is large.

On the other hand, the competitive force for new entrants poses only a minimal threat to

existing firms. This is because building a firm for this particular industry requires a relatively

high capital. In order for a company to venture in such an industry, it needs to have a

groundbreaking product that offers and showcases something different that would set it apart

from the existing products in the market. And in making a groundbreaking product, huge

amounts of money is needed for research and development. The high costs do not stop in making

a product that is different from the existing ones in the market. Even if lets say a company did

came up with a distinct product, marketing and advertising that particular product would be

definitely expensive since newbie companies need to totally announce their arrival to consumers.

Even if they are able to come up with a groundbreaking product, it would be useless to sell it if

consumers wouldn’t recognize it because of insufficient advertising. Consumers don’t actually

buy products from unknown brands because most of the time, unknown brand is equal to

doubtful quality. Because of expensive initial capital in order to venture in this industry, the

barriers to entry can be considered as high.

On the other hand, the competitive force of rivalry among competing sellers is a factor

that firms should somewhat reckon with. In terms of a neck-to-neck, intense rivalry, the only

concerned firms are the two leading ones – Nike and Adidas. Since both are doing well in the

market, the advantage really lies on the firm that can offer the best products to consumers. It is

estimated that almost 70% of the total market share is divided between these two giants. The

remaining 30% is fought at by the remaining firms. For these remaining firms, the advantage lies

within the firm who will be the best alternative brand for consumers who cannot afford the

products of the two leading brands.

The competitive force of close substitutes is weak in this particular industry. There are no

close substitutes for sporting goods.

Lastly, the competitive force of buyers, especially of Filipino consumers should also be

considered by firms even if it is not that strong of a threat. Sporting goods are not on the top of

the list of the consumer’s basic necessity list. In order for firms to fight this relatively moderate

force, they should influence the consumer to consider sporting goods as an essential necessity.

In conclusion, reasonable pricing, good product development, good marketing and

advertising are the essential tools for survival in the whole industry. All existing firms need not

be bothered by possible entrants. They should all focus on developing their products and in

pricing them reasonably. For the two leaders, they should always benchmark in product

development and marketing. The remaining firms should capitalize on what’s left on the table for

them.

Marketing Practices/Strategies/Characteristics of Dominant Players

Since the sporting goods industry is obviously product-driven, firms, especially the

dominant ones focus on product research and development. This focus on product R&D is the

reason why the industry is enjoying its stay on the growth stage. The industry does not show any

sign of leaving this stage. Because of breakthroughs in product development like innovative

soles and cushioning for athletic footwear for example, these brands which are led by the

dominant ones are able to generate something good that Adidas stated as one of its marketing

strategy that is to generate consumer excitement and enhance brand profitability. Consumer

excitement is brought about by products which are innovative, stylish and functional.

Of course, no innovative product would be successful without the help of proper

marketing and advertising. The breakthrough that a particular product has will not entice

consumers to be excited about it without the help of proper marketing and advertising.

Before the process of innovating and marketing the product, firms should also consider

careful planning, what to innovate/create and how to market/advertise. So far, it can be observed

that the dominant players in the industry which are always trend-setters in product development

are able to effectively provide and excite consumers with innovative and stylish products that

really improve athletic performance through product use.

ADIDAS

(information courtesy of www.adidas-group.com)

Adidas offers majority of its products at high and mid-level price points. The company

believes that the best defense against a promotional retail environment (competition at retail via

price wars) is a strong brand image. In order to build a strong brand image, the company has the

following strategies at their disposal:

“Impossible is Nothing” Campaign, Endorsers and Partnerships

In the case of Adidas, their current advertising and marketing campaign is the

“Impossible is Nothing” campaign. This is a global campaign that encourages consumers to

achieve their personal “impossible” goals no matter what they might be. In reaching for the

“unreachable”, Adidas vows to provide the consumer with high-quality, high-performance and

innovative products. Adidas’ products will be the essential tools that will help consumers reach

unparalleled heights. In order to effectively manifest the idea of limitless possibilities for

consumers through the use of Adidas products, the effective marketing and advertising tools are

the endorsement contracts with famous athletes around the globe. Basketball stars such as Tracy

McGrady, Gilbert Arenas, Kevin Garnett and Dwight Howard are the perfect endorsers of

Adidas in promoting limitless possibilities to the consumers. For football, players such as David

Beckham, Michael Ballack and Kaka spearhead the promotion of “Impossible is Nothing”. These

athletes, who have thus far reached so many “unreachables” in their respective fields, are the

perfect promotional icons for Adidas since they are idolized by many.

Aside from handing endorsement contracts to top athletes from certain sports, Adidas’

other marketing/advertising strategy is its partnerships with big sports institutions and household

names. Currently, the brand is the official outfitter of the NBA. FIFA and UEFA, two of the

leading football associations in the world, are also partners of the brand. Locally, Adidas is the

official outfitter of the Ateneo De Manila University as well as the De La Salle University.

Through these partnerships with big-name institutions, Adidas is able to advertise and promote

its products well.

Strategies on the apparel sector/sports lifestyle

To go into further detail, Adidas currently focuses on expanding the men’s and women’s

apparel businesses and the Adidas Originals. According to the firm, training is the sporting goods

industry’s largest apparel category. That is why they want to capitalize on this fact by expanding

the apparel business. Currently, Adidas claims to be the global leader in training apparel. The

brand wants to extend this leadership position. In order to further move forward on this

leadership, the brand is going to release innovations in their apparel product line. For men’s

apparel, the brand is going to expand the TechFit business in 2008 on the back of strong

communication and sports marketing support. In addition, the brand will also work closely with

key retailers and support them with a quick replenishment and the “never-out-of-stock” program.

On the other hand, for the women’s apparel, the brand intends to further grow the business with

extended product offerings in the high-end adilibria, the Fuse, and the gym wear Clima 365

collections.

Aside from the training apparel section of the industry, the brand also seeks to capitalize

on the sports lifestyle segment of the industry. According to Adidas, the market for streetwear

and lifestyle fashion represents a unique opportunity for sporting goods companies as it is more

fragmented and larger in size than the market for goods used in sports activities. Also, the sports

lifestyle market has a higher profitability rate as a result of lower R&D expenses. Furthermore,

the sports lifestyle market is also growing faster than the actual market for sports products. In

order to strive at this segment of the whole industry, the brand plans to expand the Adidas

Originals. Adidas considers the Adidas Originals as the cornerstone of the Sport Style Division.

The company plans to address three consumer segments for the entire sports lifestyle portion of

the whole industry:

Metropolitan consumer

Urban Segment

Coastal Segment

Optimizing the wholesale business

Another strategy of Adidas is optimizing the wholesale business. The company

reportedly generates 83% of its revenues through its wholesale business. Its major customers are

sporting goods, sport specialty, athletic specialty and family footwear retailers as well as high-

end department stores. The company generally does not sell its products to value or discount

chains in order to preserve the premium image of the Adidas brand. In line with this kind of

distribution strategy, the company focuses on the expansion of controlled space:

By further growing its own-retail business and extending the mono-branded store network

particularly in emerging markets

By diversifying its own store formats and establishing a multi-dimensional store portfolio

comprising Metropolitan stores, concept stores, e-commerce and factory outlets

By accelerating its roll-out of shop-in-shops with key retail partners in mature markets

Operating Practices/Strategies/Resources of Dominant Players

In this particular industry, the dominant players are the trend-setters. They dictate what

products are fashionable and what are not. They also dictate what’s new and what’s not.

Dominant firms, control the tempo of the entire industry. Since they are trend-setters, it can be

concluded that apart from shipping and selling their goods, a major part of their operations is

allotted to product research and development. In the case of Nike Inc., their World Headquarters

which is located in Oregon houses 16 buildings named after legendary athletes. It is on these

buildings that sporting goods of tomorrow are carefully conceptualized and tested.

The products are then manufactured in the factories. Most of the factories that

manufacturers the products of these firms are located in China since the cost of labor is cheap.

Finished products are then transported through company-authorized distributors. It is then

marketed to different countries through subsidiaries.

Human Resource Management of Dominant Players

(information courtesy of Nike’s Corporate Responsibility Reports & Adidas’ HR Programme)

The dominant players in the industry, namely, Nike and Adidas, share the same

philosophy when it comes to their human resources management systems. For these two industry

leaders, diversity in their respective workforces is a focal point behind their success. According

to Gina A. Warren, Nike’s VP for Global Diversity and Inclusion,

“Diversity and inclusion is fundamental to Nike’s performance. It’s what makes us better. It’s what makes us smarter. It helps our business grow and helps us connect with consumers.”

For Nike, diversity and inclusion is what drives creativity and innovation. Since these

companies are global, they employ talents from different countries. Their respective rosters of

talents are composed of diverse people with diverse backgrounds and skill sets. In order to

effectively use this diverse workforce Nike uses the following strategies:

Cultivate diversity and inclusion to develop world-class, high-performing teams

Ignite change and inspire critical conversations around diversity, inclusion and

innovation

Create venues and environments for open dialogue, diverse opinions and a multitude of

perspectives

This vision of Nike on diversity and inclusion does not mainly rest on the shoulders of its top

directors; rather, Nike employees themselves from around the globe articulated a consistent,

four-pronged business case for diversity:

Diversity drives recruitment of the most dynamic people

Diversity enriches the creativity and innovation that shapes the brand

Diversity grows competitive advantage

Diversity heightens the stature and belief in the brand and within our culturally diverse

consumer base

Furthermore, Nike’s Diversity and Inclusion team focuses on three areas:

Engaging Employees

Providing Business Consultation

Developing Innovative Tools, Models and Designs

Employee Networks

Nike also has employee networks. These networks are designed to help the company

move toward greater diversity. The intended role of each network is to

Foster professional development

Enhance work performance

Identify mentors

Assist in recruiting diverse professionals

Develop increased community interaction

Encourage improved teamwork and interaction within and across work groups

These are Nike’s current employee networks (Asia Pacific Employee Network is given detail):

Native American Employee Network

Latino Employee Network

Gay, Lesbian, bisexual, transgender & friends Employee Network

Disabled Employee Network

Asia Pacific Employee Network

Mission: To support Nike’s globalization efforts by enhancing the understanding of Asia

Pacific cultures within Nike and the local community. (Awareness for Asia Pacific

cultures helps in formulating business strategies for the Asia Pacific consumer)

Black Employee & Friends Network

Nike’s Global Women’s Leadership Council

In addition to Nike’s Employee Networks, the company also has the Global Women’s

Leadership Council. This council, otherwise known as the GWLC promotes and supports the

career advancement of women within the company. Through its mentoring programs, flextime

policies and consistent representation of women, the GWLC is able to support current and

emerging women leaders at all levels throughout the company. Nike wants to be the employer

and brand of choice for talented women around the world.

HR Programme of Adidas

In the case of Adidas, they are able to effectively handle their employees (more than

27,000 employees working at more than 150 locations in more than 50 countries) by first

identifying the common challenges that they face wherever they operate. In order to identify

these common challenges, Adidas’ HR Programme implements the following strategies:

Talent management (to identify, recruit and retain the most talented people and develop

career opportunities for them tailored to the specific needs of our company)

Employee-oriented leadership (to strengthen the alignment of management and

employees by improving communication and enhancing employee feedback systems)

Motivation (to provide reward and incentive schemes as well as a working environment

that promotes employees’ commitment, engagement and wellbeing)

Communication (to improve transparency and efficiency in communication at all levels

of the Group and wherever we operate)

Employee Benefits

In terms of employee benefits, Nike and Adidas ensure that all of their employees are

treated well. Nike’s recent recognitions in various business magazines says a lot about this

unwavering commitment of Nike when it comes on this employee issue. Fortune magazine

named Nike as one of the “100 Best Companies To Work For” for the year 2008. Furthermore,

the company was also listed on Business Week’s Top 100 Best Places To Launch A Career List.

To name a few of these benefits, Nike employees are given the opportunity to choose from a

variety of health plans provided by the company. The company also has the Performance Sharing

Plan (PSP) in which the company has an annual bonus plan that rewards employees based on the

company’s performance and individual performance. Also, Nike employees have the opportunity

to allot 1-10% of their payroll to buy Nike stock at 15% off the fair market value.

On the side of Adidas, the company has the Global Salary Management System (GSMS).

This system sets employees’ salaries in a clear, understandable and measurable way. This

particular system also relates performance evaluation and uses a clear defined system for setting

salaries in line with market requirements and performance levels. There are also health and

safety management programs that ensure the safety of workers and employees. There are core

guidelines as well as specific ones for each facility in accordance to its specialty or specific

function. Furthermore, since Adidas firmly believes that global presence and success in

worldwide markets require a workforce willing and able to work around the world, the company

also provides training and cultural preparation to familiarize the relocating professionals and

their families with their new living and working environments.

Factory Workers on Contract Factories

Office employees are not the primary concern of both these big companies. The

contractual workers from the contract factories of these firms are also given primary concern.

For Nike, the company aims that by 2011, they will be able to eliminate excessive overtime in

contract factories, implement human resources management systems and educational training for

workers about their rights to freedom of association in key contract factories. The company

wants to address this issue simply because they believe that it is a possible problem for the

industry at large. As stated in the Workers in Contract Factories portion of Nike’s Corporate

Responsibility Report, they want to bring about change for workers’ rights within the supply

chain and the industry at large. One effective tool that Nike employs in exercising this solution is

the code of conduct which was drafted in 1991 for contract factories. This was the first step of

the company in its effort to improve working conditions in contract factories. Nike directs

contract factories to post the code of conduct visibly and in the appropriate local languages.

Financial Strategies/Resources/Profitability

Since the industry is product-driven and it is currently in the growth stage, it can be

inferred that majority of its money-spending activities lie on product research and development

as well as on product marketing and advertising. Recently, Nike released the Hyper Dunk which

is said to be the lightest and strongest basketball shoe available at the market. It showcases new

technological innovations, the Flywire technology and Lunarlite foam that constructs the

lightness and durability of the shoe. Developing this kind of basketball shoe costs money. This is

a good example on how dominant players spend their money – on product development.

Innovate products will surely be flops if not for good advertising. Nike and Adidas are

known for their extravagant advertising gimmicks. For Adidas, they currently launched the

global campaign entitled “Impossible is Nothing”. On the side of Nike, they hosted the Nike+

Human Race: The World’s Largest One Day Running Event that spans multiple continents and

covers 25 cities. Again, these events that are mainly for advertising purposes costs lots of money.

In addition to events, dominant firms also spend a lot on endorsement contracts for leading

athletes from various sports.

Aside from spending on R&D and on advertising, dominant firms also made big financial

moves in buying other firms in the industry. Nike has bought Converse, Cole Haan, Umbro and

Hurley X. Adidas, on the other hand, has bought Reebok and Taylor Made. This move by the

dominant players does not show their aim to control the industry alone. These firms bought these

other companies in order to flex their respective financial capabilities. Owning more companies

indicates expansion of financial capabilities. If managed the right way, these firms will continue

to dominate and even prolong the industry’s stay in the growth stage since they have a wad of

products that they will develop and market from a line of established companies at their arsenal.

In conclusion, it can be said that these financial strategies of dominant firms are thus far

effective. Financial figures from both Nike and Adidas show that their profitability and ROI are

increasing. These financial strategies do good not for the dominant firms alone for the entire

industry benefits from it too. These strategies that are focused on spending on product

development and advertising continue to entice consumers to patronize the products of the

industry. Because of these financial strategies of dominant firms that are anchored also on their

operations and marketing strategies, not only these firms, but the entire industry as well, is

definitely growing.

Growth and Expansion Strategies

Initially selling running shoes with soles made from plastic molded from waffle makers,

Nike and Adidas definitely reached high in striving for dominance and excellence. From initially

selling running shoes, both firms eventually expanded and are now selling shoes for various

sports activities such as basketball, golf, football, soccer and the like. Aside from footwear, these

firms also sell sports apparel, and sports equipment. These firms are able to be in the position

that they are now because of product development, innovation and diversification. They both

started on selling running shoes. After gaining profit in doing so, they developed and further

improved these running shoes. The cycle here is pretty simple. After they were able to innovate a

particular shoe, they were able to attract consumers. Thus, customer creation leads to profit

creation. With more profit, these firms eventually ventured on other products. These firms did

not limit themselves on selling mainly athletic shoes. They eventually ventured on

manufacturing and selling other sport-related products. After shoes, then came apparel, and

equipment.

From expanding through product diversification and innovation, these dominant firms

then ventured on firm acquisition. Nike acquired several firms namely, Converse, Cole Haan,

Umbro and Hurley X. On the other hand, Adidas was able to acquire Reebok and Taylor Made.

Through these acquisitions from both sides, the dominant players indeed expanded. These

expansions lead to financial flexibilities and product diversity. Again, not just these firms

themselves are able to grow because of these expansion moves, for the entire industry itself,

experiences growth through these continuing expansions.

VI. THE GENERAL (EXTERNAL MACRO) ENVIRONMENT

Socio-cultural Environment

In order to determine the drivers of market demand in any industry, one has to consider

looking at the socio-cultural background of consumers. The growth of the sportswear industry

can be attributed to two factors. One factor is that Filipinos are some of the world’s most avid

followers of basketball.7 The other factor is that Filipinos today are undeniably health and figure-

conscious.

The first factor needs no further introduction. It is highly evident that the Philippines is a

basketball-crazy nation. Filipinos love basketball. In any city, town, or province, may it be a

posh location or a squatter’s area; there is always a basketball court. This indicates the love of

Filipinos to the sport. This love of Filipinos to the game of basketball is one of the reasons

behind the sportswear industry’s growth. Filipinos constantly demand for basketball equipment.

It is also important to take note the popularity of the game’s premier league, the NBA. Filipino

basketball fans idolize NBA hoop stars. They buy the equipment (i.e. shoes, jerseys, etc.) that

these basketball stars use. The advertising and marketing strategy of firms is evident in this

scenario. Since consumers are idolizing these basketball players, the firms use these players to

endorse their products so that the consumers will do the same with their products. One concrete

example is the current craze on the basketball shoes of Gilbert Arenas which are produced by

Adidas. Gilbert Arenas’ popularity and fan base here in the Philippines led to shoe’s success and

popularity. Countless pairs of Arenas’ signature shoes were sold in every athletic equipment

store.

The second evident factor that drives the industry’s growth is the fact that Filipinos today

are health and figure-conscious. Filipinos today view being thin is being beautiful.8 This does not

concern primarily adults. According to a veteran nutritionist, even young Filipinos are

7 http://en.wikipedia.org/wiki/Basketball_in_the_Philippines8 “Experts say it’s harder for obese people to be happy” by Nikko Dizon, Philippine Daily Inquirer

increasingly becoming conscious of their weight. 9 The prevailing mentality among Filipinos is

that a well-chiseled body, especially for men, is the ideal body that one should possess. Because

of this, gyms suddenly became a household name. Gold’s Gym, Fitness First and Slimmer’s

World are some of these gyms that have various branches nationwide. The constantly increasing

members of these gyms entail an increase in the demand for training equipment. This claim holds

water because as proclaimed by Adidas in their list of marketing strategies, they want to expand

globally in terms of training apparel and equipment because it is currently a strong and growing

portion of the entire sportswear industry. Adidas, one of the dominant firms in the entire

industry, plans to capitalize on this situation by expanding its hold on the training apparel portion

of the industry. For the firm, this can be done by further providing consumers with high-

performance training equipment.

Technological Environment

Factories and Machineries

The entire process of producing athletic shoes and apparel is definitely labor intensive.

While there are machineries in producing these products, the whole process is not highly

technical/technological. Even though the assembly line can be automated, it still requires manual

labor. Some of the basic machineries that factories possess are the following:

Cutting machines

Sewing machines

Lasting machines

Conveyor belts

Oven

Dryers

Buffing machines

Pressing machines

The ones listed above are the basic machineries for the industry. It can be inferred that

machinery development and innovation only comes into play whenever production of a new

product will entail a new machine.

9 Ibid.

Product Research and Development (R&D)

The sporting goods industry’s growth is anchored to technological innovations in product

research and development. Through constant product innovations, consumer excitement is

maintained for these breakthroughs also bring forth better product performance and quality. As

said by Sporteum Phils. Inc.’s Chairman, Philip Go, the dominant players are the trend setters in

terms of product development and innovation. This opinion of his can might as well be treated as

a fact because obviously enough, it is very evident that these dominant players really do set the

tone of technological innovations in the entire industry.

In terms of athletic shoes, the technological development is focused on the soles and the

material of the shoe. The entire industry is witness to these sole and material technological

innovations. Concrete examples are the emergence of the Nike Air sole technology. This

innovation by Nike prompted the other firms to develop their own sole technology and it is

evident today that almost all brands have a shoe model that has an air sole. Another example in

terms of sole innovation is Nike’s Shox technology. Because of this breakthrough by Nike, its

rival, Adidas, released their own by the name of A3. The A3 is no longer available and is replaced

by the new Bounce technology from Adidas.

On the other hand, technological innovations in terms of sports apparel are also evident.

Once again, Nike was the first one to release an innovative product in the name of Dri-Fit. This

release by Nike prompted of course its competitors to do the same. Eventually, Adidas did

release an apparel line that carries the same concept. Adidas released the Clima-Cool products to

directly compete with the Dri-Fit of Nike.

It is very evident that in the industry’s technological environment, the dominant firms are

the most influential factors. A dominant firm’s release of a new product will prompt the other

firms, especially its rival/s, to release one of their own. Since in this particular industry, the two

dominant firms (Nike & Adidas) conquers more than half of the total market share, technological

moves from one will definitely force the others to move as well. If the other firms will not follow

the flow that is set by these dominant firms, they will be left behind.

Economic Trends

It can be readily observed that the Philippines’ economy is struggling. Currently,

exchange rate between the Philippine Peso and the US dollar is more or less 46 pesos. 10

According to Meralco, the price of electricity per kilowatt hour is set to increase. Even if there

are rollbacks in terms of the prices of petroleum products, they are still expensive nonetheless.

These increasing prices and economic problems definitely affect the entire sportswear industry as

a whole. Even if all of the manufacturing facilities of the firms are situated in other Asian

countries, specifically in China where labor costs are low, the firms here in our country,

especially the small players are still suffering from these economic setbacks. These firms are

suffering from high operating costs. With the expensive prices of gasoline and electricity to

name a few, all the firms in the industry are undeniably facing high transportation costs since

majority of the products that they sell came from factories from other countries. Transporting

these products from the ports to their respective outlets can be very costly given the expensive

costs of petroleum products.

These economic setbacks do not affect the firms in the industry through operating costs

alone. They also affect the entire industry through its effects on the demands of the consumers.

As said by Sporteum Phils. Inc.’s chairman, Philip Go, sporting goods is not part of a Filipino

consumer’s list of basic necessities. If it does land on the list, it is usually the last one prioritized.

Only a small portion of a consumer’s income is allotted for sporting goods. It is also important to

take note that consumers don’t buy sporting goods often. For example, athletic shoes are not

bought every month. This goes for other sporting equipment such as basketballs, footballs, etc. as

well. Consumers do not buy basketballs every week. Unlike food which is a basic necessity, we

do not buy sporting goods often. Demand for basic necessities is relatively higher than demand

for sporting goods. Since the prices of basic necessities are also increasing because of the

country’s struggling economy, it can be inferred that consumers today, especially those who

belong to the 30% of the total population who live below the poverty line (2003 est.) 11 do not

anymore allocate a part of their budget for sporting goods. Furthermore, it can also be inferred

that even the consumers who belong above the poverty line, those who are in the middle class,

have also lessened the portion of their income allocated for sporting goods.

Even if the country is suffering from such an economic struggle, the sportswear industry

still manages to continuously grow. This can be attributed to the present socio-cultural

10 Bangko Sentral ng Pilipinas – Reference Exchange Rate Bulletin, 05 Sept 200811 CIA – The World Factbook, Philippines

environment here in our country that is directly compatible to the products released by the

industry. The industry capitalizes on the present socio-cultural environment of the country in

order to maintain consumer demand despite of the country’s economic setbacks. The current

weight and health-conscious mindsets of Filipino consumers and the fact that Filipinos love

basketball are the aspects of the present socio-cultural environment which maintains consumer

interest on sporting goods.

Political or Regulatory Environment

During the early days of the sportswear industry, it was purely dominated by local firms

particularly Rubberworld Philippines Inc. Imported sportswear products were expensive and

scarce due to the closed-door economy of the country back then. Due to these high taxes on

imported goods because of the country’s closed-door economy policy, smuggling was rampant in

order to bring in imported goods in the country and sell it at lower prices. Locally, it can be said

that one of former president Fidel V. Ramos’ economic reforms benchmarked the growth of the

industry. During Ramos’ presidency in the 90’s, he opened the once closed-door economy of the

country in order to achieve his goal of economic growth. In can be inferred that before Ramos’

economic reform, the sportswear industry is rather small because there are only a few players.

Foreign firms were discouraged to invest in the country due to high import taxes. Ramos’ reform

opened the door not only for the economy, but for the growth of the entire sportswear industry as

well. Because of his reform, the big players then came to the country to build their respective

branches. The industry then became large because international firms also come into play. It can

also be said that even though this reform of Ramos spearheaded growth for the economy and for

the local sportswear industry, this move of his also weakened local firms in the industry. Since

imported goods are now available at cheaper prices because taxes are not high anymore,

consumers tend to buy imported goods more than the locally made ones since it is deemed that

imported goods possess higher quality. This eventually led to the downfall of the once ruler of

the local sportswear industry – Rubberworld Philippines Inc. The industry which was ruled over

by local firms is now dominated by international firms. This move then by former president

Ramos has its pros and cons. On one side, it elicited growth and on the other, it served as the

reason for the decline of Filipino owned sportswear firms.

Natural Resource Environment

According to Sporteum Phils. Inc.’s chairman, Philip Go, while there are no direct

adverse effects of pollution and global warming in the sportswear industry, it is still an important

concern. It is an important concern because it is the industry that can influence the problem on

pollution and global warming. Due to this, firms in the industry take specific actions, particularly

in the manufacturing of their products in order to address the issue and not contribute to it.

Since bigger firms have bigger environmental footprints, they have a bigger

responsibility on managing their impact on the environment as well as on society. In the case of

Adidas, the firm addresses these environmental issues through its Managing Environmental

Systems. These systems are used in order to mitigate the negative impacts of their manufacturing

process to the environment. Energy efficiency, waste reduction and pollution prevention12 are

some of the key points that these management systems focus on. For Adidas, the first step is to

improve the materials that go into the products and the next step would be to tackle pollution in

the factories.13 In improving the materials that go into the products, the firm selects materials that

are non-toxic in use and disposable. Also, they select materials which do not cause toxic

emissions during the manufacturing process. Eliminating PVC is also one of their solutions to

reduce the impact on the environment. As for reducing the pollution emitted by them, the firm

has also lowered VOC consumption in the manufacturing process of the products. Aside from

manufacturing, Adidas also aims to minimize carbon dioxide emissions that come from

transporting the goods.

As for Nike, almost the same action as Adidas’ are employed. Energy efficiency,

improvement of raw materials for product manufacturing, and reduction/elimination of toxic

emissions in the manufacturing process are also Nike’s concern with regards to this issue. To be

more specific, they incorporate 5% organic cotton as well as use environmentally preferred

rubber and recycled polyester in their products. Just like Adidas, Nike also minimizes PVC. The

figure below shows Nike’s management systems to address the environmental issue.

12 http://www.adidas-group.com/en/sustainability/_downloads/Guidelines/Guide%20to%20Best%20Environmental%20Practice_Nov%202005.pdf13 http://www.adidas-group.com/en/SER2007/e/e.asp

Global Environment

On a grander scale, the entire sportswear industry is growing. Spearheaded by Nike and

Adidas, the sportswear industry is continuously expanding through its various product

innovations. It does not fail to excite consumers. Most importantly, it continues to provide

consumers, specifically athletes all around the globe with high-performance products. Through

these products which are constantly innovated, athletes from around the globe are able to defy

impossibilities for these sporting goods enable them to perform better.

In terms of the global economy, the only major threat would be the subprime mortgage

crisis. The subprime mortgage crisis is a current economic problem. It is characterized by

contracted liquidity in the global credit markets and banking system.14 With regards to this

worldwide economic issue, the International Monetary Fund says that the worldwide losses

stemming from the US subprime mortgage crisis could run to $945 billion.15 The bad effects of

this issue are evident.

Even though the subprime issue is still at hand, the growth of the entire industry is still

unwavering. When it comes to sports, the industry knows no borders. The big names in the

industry have branches in various countries. The dominant firms’ success globally is the main

driver behind the continuously growing industry. Athletes around the globe speak the same

language, that is, their respective sport. A good manifestation of this was the recently concluded

Summer Olympics that was held in Beijing. This is a perfect manifestation on how sports are

able to unite different races. Of course, this big event is backed up by firms in the sportswear

industry. Again, the sportswear industry knows no borders. It caters to every consumer/athlete.

Its mission is to provide consumers with performance-enhancing equipment wherever possible.

VII. SWOT ANALYSIS & KEY SUCCESS FACTORS

SWOT Analysis for the Firm

Strengths

Competitive pricing – this particular strength of the firm ensured both the entry of the

firm in the industry as well as its growth and survival. The firm’s vision and mission to

be an alternative brand – to offer products at affordable prices without sacrificing quality

benefited average consumers who find the products of foreign brands to be quite pricey.

Accel was able to position itself as the best 2nd choice.

Strong Distribution Network – since Accel’s founders were once the big bosses of Adidas

Philippines, the firm was able to get hold of a good distribution network. All of the work

experience and connections that its founders had when they were still working for Adidas

proved beneficial for the growth and stability of the firm. Also, Accel’s mother company,

Sporteum Philippines Inc., is also a sub-distributor of other foreign brands like Nike and

Puma. Because of the firm’s access to various distribution channels through its other

14 http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#Effect_on_world_economy15 New home sales fell by record amount in 2007 - Real estate - MSNBC.com

endeavors, it was able to ensure that their products are set side by side with the

international giants in sports stores. As their chairman said, Accel is the only local brand

that is set side by side with the international giants in local sports stores.

Brand is already established – due to the efforts of its hardworking founders, Accel

became a respected local sportswear brand. It can be observed that in less than a decade,

Accel was able to emerge as a sports brand worth looking at – a rare feat by a Filipino

firm particularly in the sportswear industry where players are entirely foreign.

Weaknesses

Poor/lack of concentration on R&D – when it comes to R&D, the firm’s performance is

weak. This is mainly because of lack of necessary funds to pursue such endeavor.

Because of lack the absence of an R&D department, the products of Accel, particularly

its shoe products do not showcase any extraordinary feature. In this case, they are in a

disadvantage in terms of innovative features since the products of their competitors

showcase these innovative features. In this particular scenario, the consumer might find

the products of the international firms as far more enticing and vibrant than the ones from

the firm since it does not showcase any innovative feature.

Poor Advertising – it is pretty evident that the advertising strategies of the firm are fairly

week. They have no commercials whatsoever. But since commercials for sportswear

firms are not at all frequent, weak performance in this regard is forgivable. But in terms

of print-ads and billboards, the firm performs weak too. In comparison with the print-ads

of the dominant firms, Accel’s print-ads explicitly showcase a sense of inferiority and

mediocrity. While those of the foreign brands showcase excitement, uniqueness and

ingenuity. Accel should focus on fixing this weakness because the image of their

company rests in this matter. Brand image is important in the industry. They must not let

their brand be considered by consumers as a weak attempt of a Filipino firm to have a

local sportswear brand. Sarcastically speaking, they should not be viewed as push-overs.

Instead, their print-ads must show a sense of Filipino ingenuity. It should convey the

message that Filipinos too can have a sportswear brand of their own that is equally of

high quality like the foreign brands.

Opportunities

Focus on apparel and Sports Lifestyle category – this is a good opportunity for the firm if

they want to further expand and earn more money. Since the sports lifestyle category is a

growing portion in the industry, they should capitalize on this by being the alternative

choice for consumers. Since the dominant firms will surely offer products that are pricey,

they should be the first ones to act in offering consumers with a more affordable

alternative.

Threats

Counterfeits – it is very evident today that counterfeits in the market are rampant. There

is a tendency that consumers would settle for counterfeits of the international brands

rather than settle for alternative brands such as Accel since some of these counterfeits are

almost alike as the original ones.

Current Economic Crisis – with the inflation of prices of basic expenditures, the firm is

currently facing problems in terms of operating costs. Since the country is facing

economic instability, and since sporting goods were defined as goods which are last on

the list of consumers, it can be inferred that buyers for sporting goods will lessen. This

would mean lower sales which will is bad for the company since it is already facing

problems in terms of high operating costs.

Current legal actions of the government towards Globalization – tax exemptions for

foreign firms are just some of the legal moves of the government in order to favor

globalization. Because of this, there is a tendency for the prices of imported goods to go

down. If this will happen, the prices of imported goods, which are better products in the

eyes of consumers, will be bearable/affordable. In this scenario, the firm is in a clear

disadvantage since most likely, if the prices of its products are almost the same as those

of the foreign brands (because if tax exemptions), consumers would prefer imported ones

than local ones.

Industry’s key success factors

Highly Influential Marketing and Advertising Tools/Strategy – since the success of the

entire industry is mainly because of the huge efforts of the dominant firms, it is but right

to cite the strategies employed by these firms as the success factors for the entire

industry. The continuous growth of the entire industry is made possible by highly

influential marketing and advertising tools. These tools and strategies are highly effective

in terms of persuading consumers in buying products. The entire industry is earning profit

because the marketing and advertising strategies employed are able to make consumers

buy products. Key tools in this matter are the endorsement contracts dished out by the

firms to athletes. These athletes are highly idolized role models of society. Because of

this, through the use of these athletes, the firms are able to make consumers buy their

products.

Focus on Diversity and Innovation – because of innovation and diversity, the whole

industry became very profitable and exciting. Every year, new products are featured. This

focus on innovation and diversity is the reason behind the unwavering excitement of

consumers in terms of buying sporting goods. The consumers know that each new

product will showcase a new feature that will further improve product performance.

Diverse employee roster – the dominant firms have employees that came from various

cultures and nations. Product development, marketing and advertising strategies are

carefully devised through various opinions and ideas that came from different cultural

backgrounds. This way the industry is able to cater to not just a sole culture or nation.

Rather, products became global. Products are designed and produced not just for a

particular few. The products are maid for everyone. The products are tailored for every

culture every nation. Product selling defied boundaries.

Knack to see opportunities – the firms in the industry, particularly the dominant firms

have been keen in seeing possible opportunities for further growth and expansion. Going

back to the origins of the industry, it all started with running shoes. Today, the firms’

products cater to various sports disciplines. Another good proof would be the current

focus of the dominant firms in capitalizing on the sports lifestyle category. Sporting

goods nowadays are not just for athletic use alone. It also has become a fashion

statement. Firms have located this opportunity and are now venturing in further

unraveling this untapped goldmine of the industry.

VIII. CONCLUSIONS & RECOMMENDATIONS

For Accel

There is no question about the success of Accel as a local brand. It has indeed established

itself as a brand that can be placed side by side with the likes of Nike and Adidas on the shelves

of sports stores. Its vision to be an alternative brand to the dominant brands – to provide sporting

goods to consumers at affordable prices, has been an effective strategy that ensured not only the

survival of the brand but also its fast growth. From starting with just an office at its chairman’s

house in libis, Accel is currently the official outfitter of the country’s premier basketball league –

the PBA. The success of this firm is definitely laudable.

In order for Accel to maintain its current standing and further expand, the researchers

recommend the following:

Improve advertising strategy

Improve product designing

Venture on the “sports lifestyle” category

Improve Advertising Strategy

It would be very beneficial for the firm to improve its advertising since it would further

strengthen brand image. Currently, the only strong tool of Accel in strengthening its brand image

is through its partnerships with various sporting bodies in the country and through its

endorsement contracts with famous local basketball stars. Advertisements-wise, particularly in

print-ads, television commercials, and billboards, the firm’s performance is poor. This is pretty

evident in their print-ads which obviously lack luster in terms of catching the attention of

consumers. Their print-ads are somewhat simple and mediocre compared to the advertisements

of their foreign counterparts. Accel also doesn’t have television commercials.

When asked about their current advertising practices, Accel’s chairman, Philip Go said

that they don’t spend huge sums of money on advertisements because this will only increase the

prices of the goods that they offer. He also added that the foreign firms’ extravagant advertising

practices are contributing factors to the high prices of their products. He doesn’t want to spend a

lot of money advertising and then pass the expensive advertising costs to the consumers through

high prices of products.

What the researchers want to recommend is to improve advertising practices but not on

the scale just like the strategies employed by the dominant firms. The researchers do not

recommend excessive and extravagant spending. Rather, the researchers recommend that the

firm should fix the strategies that they currently employ. The firm should make its print-ads more

vibrant, make it attention catching. Their print-ads should convey the message that the brand is

indeed established. If their products convey a sense of practicality due to its affordable prices,

their print-ads should convey a sense of quality and class. This way, they can effectively

manifest their vision and mission to be a brand which offers products that are affordable without

sacrificing quality.

Improve Product Designing

Another recommendation of the group for the firm is to improve product designing. This

strategy goes hand in hand with the later recommendation. Accel should design products that are

different from their foreign counterparts. From observations from visits from various sports

stores, the group has observed that some of the shoe products being offered by Accel possess the

same design like those of the foreign brands. If the firm’s goal is to be the best alternative brand

for consumers, then they should offer products which have the same design like those of the

products of the dominant brands. If the firm will continue on designing products just like those

of the dominant brands, the consumers might think that Accel is just a copycat brand of the

dominant firms. Worst case scenario would be that Accel’s products will be labeled as close to

counterfeits, that their products aren’t considered as such because it bares a brand name of its

own. But if the brand is taken out, it can be readily considered as a counterfeit.

To effectively pursue its goal to be the best alternative brand, the firm should value the

ingenuity of their products. They should design their products, particularly their shoes in such a

way that it is considerably different from its counterparts. It is important to take note here that

product development in terms of innovative features are not taken into consideration since

application of this factor would entail bigger spending and this could heighten up the price tags

of Accel products. Since the firm’s Chairman firmly believes that high performance footwear

boils down only to cushioning, and that the firm has already perfected this factor, then they

should indeed focus more in product designing. They should make their products more upbeat,

more unique. This could go smoothly with a new advertising strategy. They do not have to spend

a lot by imitating the spending strategies of the dominant firms. They just have to make their

products the “best other”.

Venture on the “sports lifestyle” category

The last recommendation of the group to the firm would be to venture on the sports

lifestyle category of the industry. Adidas saw this category as a growing section of the industry.

Sporting goods aren’t used anymore for the sole purpose of sports activities. Sporting goods,

particularly footwear, has become a fashionable material. Rubber shoes are not used mainly for

basketball or football anymore. They have become part of consumers’ everyday fashion. Since

the dominant firms are currently capitalizing on this niche of the industry, the firm should also

join the bandwagon. The firm should also apply its vision to be the alternative choice in this

regard. It is expected that the dominant firms’ products in the sports lifestyle category will

definitely be pricey for the average consumer. Accel can capitalize on this by offering sports

lifestyle products that are more affordable. This way, consumers can have an affordable choice

for sports lifestyle products. Instead of buying counterfeits of the foreign brands that are of low

quality, consumers can be rest assured that they can buy affordable sports lifestyle products from

Accel that possess high quality.

For the industry

No doubt about it, the entire sportswear industry has experienced tremendous success. It

is currently growing and expanding. It is as if this industry will stay in the growth stage forever.

New generations produces new athletes, new trends, new designs, and new concepts. One cannot

insert the word saturation for this industry. The group only recommends one thing for the entire

industry, which is to be more critical in terms of launching new innovative technologies for their

products. This goes out particularly for the dominant firms which are considered as the main

trend-setters for the entire industry. To be critical is to be mindful of certain factors in terms of

product R&D. As an industry concentrated in manufacturing, they should be mindful of the

materials that go in the development and production of new product technologies. That means

that they should ensure that raw materials used should be environmental-friendly particularly in

its disposal. Secondly, they should be mindful in a sense that the innovations that they pursue are

really for the benefit of consumers. These innovations should be pursued not because for the sake

of creating marketing hypes. Rather, they should keep in mind that these innovations developed

in their pursuit of providing consumers/athletes with products that further enhances performance,

to make the athletes one with the sport. This way, fraudulent marketing and advertising strategies

are employed. What they are offering are real high-performance products, not marketing hypes.