Adidas was founded in the year 1924 by Adolf Dassler and his brother Rudolf Dassler. The company when opened was originally named Dassler Schuhfabrik by the brothers. The headquarters of Adidas is situated in Herzogenaurach, Germany. The company mostly deals in sportswear, sports equipments and also sells toiletries. The company has its stores all over the globe. It has also been reported that the company has outlets more than any of its competitors which gives it an added advantage to sell at places where its rivals cannot. Adidas comes under the ‘Adidas Group’ which also owns Reebok, TaylorMade, CCM and Runtastic(Austrian Fitness Technology company). Adidas hires a lot of people worldwide. According to latest reports it hires around 60000 people worldwide and amongst that had around 600 people working in the region of Australia. The employment of Adidas is more than its rivals Nike or Puma. This shows that the company has been taking good care of its social dimensions as well. The company puma was founded by one of the brothers after they both got into an argument. Rudolf left working with Adolf and opened its new company Puma. Since then, both the companies have been giving good competition to each. Puma has lately diverted more into fashion clothing’s and accessories too apart from sportswear whereas Adidas is stuck to its verities and tries produces better and more advanced products every day. Adidas generally targets the upper middle class people and the luxury class. It does not really cater to the need of lower class which gives other brands a chance to target more people. Adidas’s USP is to keep its customer base intact and provide them with the products that would cater to their needs. If they can’t get more consumers to buy their products, they don’t even want to lose the already created base. One thing where Adidas is behind is the range of products that it provides to its consumers. In this case, its rivals Nike and Puma are ahead of them as they have more diversified range of products and they cater to the needs of more set of people than Adidas. Adidas Company has kept growing every year and has been reported to be the second biggest sportswear brand in Europe. Adidas focuses a lot on grabbing new opportunities from the environment and making the fastest and the best use of it before its competitors. By doing this, it makes the use of opportunities and technology, and provides the customers with newest and best quality of products. Adidas sponsors some of the biggest events and sportsperson in the world. Events like FIFA World Cup and UEFA Champions League is sponsored by Adidas. Sportspeople like Lionel Messi, Eric Gordon, Gareth Bale, Mesut Ozil and many others are being sponsored by Adidas. The company also is also a sponsor of sports team like the German International Football team, The England Cricket team. Adidas has its name all over the world which gives it the exposure that any company would desire. Style and comfort has been the top most priority of the company.
Before selling any product or service, it’s very important to keep in mind about all the laws and regulations of a country that a company is operating in and has to follow so that it does not engage in any illegal activity (Borowski and Arkadi, 2011). Every country has its own set of regulatory frameworks and here we will see if any regulatory framework of Australia is affecting the operation of Adidas.
One of the main points where the company is getting affected the most is the tax rate department. The corporate tax rate of Australia is much higher when compared to all other countries around the globe. Adidas is a big company and it makes millions of revenue every year. The tax rate in Australia is 30% which is almost one-third of the profits that the company makes. Looking at this the other way, we can say that the company loses 1/3rd of its profits earned in Australia every year (Peng, Chen and Narain, 2007). The corporate tax rate in other countries is very different. In countries like UK, the tax rate is 19%, in Germany, the imposed tax rates vary between 14%and 17%. In such countries, even if the revenue of the company is a little less, it makes a decent profit as the tax rates are low which helps the company in making more profits (Kennedy, 2001). But Australia being more of the major continents of the world is very developed and has a strong consumer base, so even if the company did not want to set up a base there because of the problems it faces, it would eventually go in a loss. As the saying goes “something is better than nothing”. But the tax rate is a major setback for big companies like Adidas. The trade laws of Australia also cover several points which every company engaging in import or export has to follow. These points are given below:
Adidas has to make sure that they comply with all these rules, the rules stated has its advantage if being followed properly like avoiding fines, keeping the customers satisfied and saving money by not unintentionally giving the products away just like that. But it also has its disadvantages. Any error or ignorance of any law can lead to the company paying huge fines.
The World Trade Organization Agreement on Trade Facilitation was signed in Bali on the 7th of December 2013. The treaty is called Agreement on trade Facilitation (ATF) in short. The treaty was adopted by all the World Trade Organizations members on the 27th of November 2014 (The Parliament Of The Commonwealth Of Australia, 1987). It was a multilateral type of trade agreement and it dealt with the subject of customs and tariffs of international trade with respect to the World Trade Organization. This treaty enabled free flowing form of international trade among all the countries that signed it. This led to unrestricted trade among all the signatories including Australia and Germany (Australian Government, 1973). The custom and tariff rate were lowered so as to allow companies to sell their products in Australia at a nominal rate for the Australian consumers.
Adidas being a Multinational company in Australia was entitled to take full advantage of the same. According to a research, the amount of exports Adidas recorded in the year 2015 to the Australian territory was its highest ever (Standard International Trade Classification, 2006). Since the custom rates and the tariff rates had already been lowered, keeping in mind the trade agreement, Adidas did not have to worry about the pricing of its products as it would be low. More people in Australia could afford the European brand making it a household name. People started to love the product that Adidas had to offer which ultimately led to Australia becoming one of the most important markets for Adidas (Sawer and Geoffrey, 1987). They employed more resources here in exchange for greater returns.
Australian Government also signed a trade agreement with the Government of the Democratic Republic of Germany in the year of 1974. The treaty was signed in Canberra on the 16th of May in the year 1972. This particular treaty is no longer in force in the Australian country but back in the day it also helped Adidas strengthen the Australian Market. This was a bilateral treaty i.e., Germany and Australia. This treaty came into force on the 28th of February 1974. Adidas was relatively an unknown company in the year 1974 but this agreement on trade enabled Adidas to work on its goodwill in the land of the Kangaroos (Qureshi and Asif, 1998). People started to know about the product that Adidas had to offer and since Australia is a nation full of sports lovers, Adidas quickly found the base consumers to set its foot in the relatively untapped market. Its rivals too were limited in number back in the day and all this played a huge role in the development of Adidas in Australia. Whenever any company sets its foot in an untapped and new market the possibilities for the company are endless and for this reason it always gives its 100 percent in those markets. The treaty enabled Adidas to enter into the market and offer their top quality product and top notch services to the Australian consumers.
The Government of Australia also signed another treaty with The Government of Germany on cultural cooperation. The Australia Treaty Database lists the treaty as ATS 22 (Das and Lal, 2007). This treaty was signed in Dresden on the 7th of November 1997. This treaty is still in force in the two countries. The treaty was signed to improve the already efficient relationship among the signatories Australia and Germany. It was as a result of this treaty that Adidas were able to set up their factories in the land of Australia (Jarratt and Phil, 2011). Adidas setting up a factory in the Australian territory meant it could increase its production exponentially and It would not have to shell out extra money in the name of duties, customs and tariffs. This lowered the pricing of Adidas even further making them a consumer favorite product. This treaty enabled Adidas to strengthen its foothold in the Australian Market.
Another such agreement that greatly helped Adidas is the Marrakesh Agreement Establishing the World Trade Organizations. This is listed as ATS 8 in the Australian Treaty database (Treaty Series). This Treaty was signed on the 15th of April 1994 in Marrakesh. This was also a multilateral trade agreement between many countries. This treaty was also singed keeping in mind the issue of International Trade. This was looked after by the World Trade Organization. This treaty also protected the multinational companies on issues of copyrights and copyrights infringement. This treaty is still in force in Australia. It administers the foreign trade between countries and their exports and imports.
All the treaties and agreements that have been signed by the Australian Government have been signed keeping in mind the benefit of the Multinational Companies. Adidas has in one way or another, directly or indirectly benefited from all the treaties that have been signed on this subject. All of these external factors have played a pivotal role in determining the strategies of Adidas.
Conclusion
From the above report, it can be concluded that operating in a continent like Australia is very difficult but it is also very important as it has a wide and important customer base. Even though Adidas faces a lot of problems, it has always managed to overcome the obstacles and stay in a good and respectable position. The firm has managed well to follow all the guidelines and laws and make sure that they do not fall in any sort of illegal dispute with anyone. The trade laws in Australia are different from other countries and it is not easy to operate in such a situation. Nevertheless, Adidas has grabbed the opportunities and made best use of the external factors before any of its competitors keeping in mind all the regulation frameworks.
References
Borowski, Arkadi. Adidas Marketing Strategy. Norderstedt: Grin Verlag, 2011. Print.
Jarratt, Phil. Australia. Richmond: Hardie Grant Books, 2011. Print.
Peng, Yangjun, Jiaojiao Chen, and Serena Narain. Adidas. Singapore: Page One, 2007. Print.
The Parliament Of The Commonwealth Of Australia. Canberra: Australian Government Pub. Service, 1987. Print.
Das, Bhagirath Lal. The World Trade Organisation. New Delhi, India: Bookwell, 2007. Print.
Kennedy, Kevin C. Competition Law And The World Trade Organisation. London: Sweet & Maxwell Ltd, 2001. Print.
Qureshi, Asif H. The World Trade Organisation. Manchaster: Manchester University Press, 1998. Print.
Standard International Trade Classification. [New York]: [United Nations], 2006. Print.
Treaty Series. Print.
Australian Government. Canberra: Australian Government Pub. Service, 1973. Print.
Sawer, Geoffrey. Australian Government Today. Melbourne: Pitman Pub., 1987. Print.
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