On Shanghai's fashionable Huaihai Roadnot far from the outlets of Apple, Gucci, and Nikea multistory store invites shoppers to try a brand hailing from a small town in Germany. In Herzogenaurach, the intense rivalry between Adidas and Puma has propelled both sports shoe manufacturers onto the international stage. Adidas pulled ahead with innovative approaches to sport sponsorship, placing its three stripes on the sports kit of many international competitions. After taking over US sports brand Reebok in 2005, Adidas became the world's second-largest provider of sports shoes and clothing (after Nike) while expanding into the much broader market of leisure clothing. Adidas has a truly global footprint. Western Europe is still the most important region, accounting for 27% of sales, followed by North America with 18%. Yet about half of Adidas's sales already come from emerging economies, including Greater China (16%), other Asia and Middle East (14%), and Latin America (9%). The success in China builds on two decades of brand building and a major marketing push ahead of the 2008 Olympics, featuring advertisements associating Adidas with the Chinese national team and its successes. In the highly competitive premium segment in China, global brands such as Nike and Adidas have been challenged by local rivals such as Li Ning. Yet, by focusing on innovation and product quality, global brands have sustained their popularity among the increasing affluent young urban people.

Not only have sales become global, the value chain of Adidas has also extended across the globe. Since the 1980s, the labor-intensive parts of shoes and clothing manufacturing have been moved to locations with low labor costsoften outsourced to independent suppliers. In 2018, Adidas reported 783 primary suppliers around the world. Many of them are based in emerging economies, led by China (151), Vietnam (79), South Korea (75), and Indonesia (74). They are complemented by suppliers in developed economies such as the United States (77), Japan (32), and Germany (15).

With a global value chain, labor relations have also become global. Many consumers in Europe and North America take an active interest in where and how their shoes and clothing are made. The shoe and textile industry historically has a poor record on working conditions in its factories, especially in Asia. Therefore, Adidas has continuously engaged with numerous stakeholders and developed its standards of engagement. These codes and processes cover a wide range of issues, such as forced labor, child labor, discrimination, wage and benefits, collective bargaining, environmental requirements, and community involvement. They are supported by auditing tools and procedures, some of which are outsourced to independent third parties. Audit teams visit factories not only to monitor compliance, but also to train the management in the use of the standards of engagement and to explain the likely benefits of higher standards for the business itself. The teams rate each factory on several criteria, and these compliance ratingstogether with quality criteriainfluence decisions on which suppliers to use. In the interest of transparency, since 2007, Adidas has been publishing a full list of all its suppliers on its website, which is a rare practice in the industry.

Adidas cannot stand still. Fashions and user habits are constantly changing, so are best manufacturing practices. Online sales are becoming increasingly important. Adidas is not only developing its own mobile-phone app and an online supply chain, but is also assessing its global network of traditional outlets. Also, manufacturing technologies are changing. In 2017, Adidas built a 3D printing plant that could produce shoes fully automatically in Germany, while one of its US suppliers was experimenting with textile machines that could stitch together T-shirts completely automatically.

Question: From a VRIO standpoint, what are Adidas's secrets behind its success?

Answer rating: 100% (QA)

From a VRIO standpoint Adidass success can be attributed to several key factors 1 Value Adidas has c... View the full answer