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Shoe Wars: Nike vs. Adidas

Brian Siguenza

Tiffin University: MGT-526

December 9, 2018

Shoe Wars: Nike vs. Adidas

Research Question

Is there a significant difference in the price of Adidas vs. Nike products?

Literature Review

As further explained below in the introduction section, Nike and Adidas are prominent consumer brands worldwide. When in the market for acquiring goods, consumers are drawn to major brands with mass advertising and increased prices because of the prestige these brands are thought to bring, perceived or otherwise, according to Bae (2004), whose study shows Nike and Adidas as ranking one and two in most popular athletic brands among college students both in the United States and South Korea.

Much of these brands' success can also be attributed to knowledgeability about the product. People who are active in sports are more likely to purchase a product that fits in with their needs. Athletic shoe companies play on this savviness by recruiting well-known athletes to appear in advertising campaigns to promote their products. (Chew & Leng, 2016)

Adidas employs what Ali Mahdi, Abbas, Ilyas Mazar & George (2015) call a “market skimming strategy” (p. 173). That is, it releases a product at a high price in an effort to entice consumers who feel they must have the product. As time goes on, the price is then lowered (Monash Business School, n.d.). In the case of Adidas, the presentation of a shoe will dictate how much it costs (Ali Mahdi, Abbas, Ilyas Mazar, & George, 2015).

Nike's strategy, on the other hand, is much different, Ali Mahdi et al (2015) found. Its products are priced “higher overall than Adidas,” because Nike focuses on value-based pricing, which is more aimed at specific market segments, and price leadership, where the market leader determines a price that is then followed by competitors (Ali Mahdi et al, 2015, p. 173; Marzec, n.d.).

While studies have been conducted on the pricing strategies for both Adidas and Nike, a comparison of prices between the two does not appear to exist. This research seeks to answer whether there is a significant difference in the prices by comparing 30 similar or like products, from Nike and Adidas.

Introduction

Any time Nike and Adidas are mentioned, the first thing that might pop into mind is sports. It's a fair inference to make since the origins of both companies were spun out of athletic competition. The name Adidas is derived from its founder, Adi Dassler, who created specialized shoes for track-and-field and soccer (Garcia, 2018). Meanwhile, Nike began as a line of shoes marketed toward runners (Mahtani, 2015).

Both brands would become part of the mainstream culture in the later part of the 20th century as they brought in celebrities to endorse their products. Nike's Air Jordan, released in the mid-1980s with then-rising NBA star Michael Jordan, was an immediate success (Mahtani, 2015). Not to be outdone, Adidas went beyond the world of sports and signed Run-DMC, a rap group known for wearing the company's apparel when performing and even recording an ode to the brand, titled "My Adidas” (Garcia, 2018).

Over the years, the two firms have engaged in a fierce competition, though Nike has maintained the upper hand (Garcia, 2018). More recently, Adidas and Nike have encroached each other's home territory, the Germany-based Adidas gaining market share in North America, while the United States' Nike has seen growth in Europe, as well as Africa and the Middle East (Thomasson, 2018).

Stated Hypothesis

The null hypothesis is stated that there is no difference in the prices between the two brands. The alternate hypothesis is stated as Nike will be higher than Adidas.

Methodology

In reviewing whether there is a significant difference in the average price of Adidas products as opposed to the same products by Nike, the website of a major national sporting goods chain was used to identify 30 different categories—17 men's and 13 women's—across a number of different sports (baseball, basketball, football, golf, lacrosse, running, soccer, tennis, track and field, training, volleyball and wrestling), as well as casual wear.

An average on each product is used due to the numerous options available in each category. Adidas, for example, sells at least 28 pairs of men's running shoes on the website used ranging in price from $59.99 to $199.99. Meanwhile, Nike has 24 pairs of men's running shoes with a price range of $59.99 to $249.99. The average is meant to serve as a general idea of what a typical product may cost a consumer.

Other brands that are part of the Nike Inc. portfolio such as Jordan and Hurley are included in the assessment of Nike prices, Jordan due to the assumption that it is closely recognized as a Nike brand as a result of the company's long association with Michael Jordan, and Hurley because it uses technology in Nike brands such as Dri-FIT. On the flip side Reebok, a brand of Adidas Group, is not included in the analysis because there is no known use of Adidas technology in Reebok products.

The original price of all items was input into Microsoft Excel for averaging. Sale prices were not considered. Single products with a price range were also disregarded for the purpose of our study. Finally, the t-test for independent samples was used to test the stated alternate hypothesis.

Results

The descriptive statistics and figures below illustrate the analysis of the 30 categories where Nike and Adidas do the most competing. The mean for Nike is $81.90 and Adidas' mean is $81.56, suggesting that Nike does indeed have a higher price. Adidas, however, has a much wider range of 146.09 to 118.1. This can be attributed to Adidas having a much higher average price of men's golf cleats. The maximum for each of the brands we found in this category was $249.99 for Adidas and $199.99 for Nike.

Table 1

Descriptive Statistics: Minimum, Medium, Maximum, Quartiles, Mean, Range

  Adidas Nike/Jordan

Minimum 15.1 17.6

Q1 39.765 37.82

Medium 93.265 91.58

Q3 114.415 116.4875

Maximum 161.19 135.7

 

Mean   81.56 81.90

Range 146.09 118.1

Table 2

Descriptive Statistics: Standard Deviation, Sample Size, Standard Error

Adidas Nike/Jordan

Standard Deviation 41.92 39.84

Sample Size 30 30

Square Root of the Sample Size 5.48 5.48

Standard Error of the Mean 7.65 7.27

Discussion

Although Nike was found to have a higher average price than Adidas, the research question asked if the difference would be significant. The p-value of 0.9744 is higher than the alpha of .05. Based on the Independent t-test results, the alternate hypothesis is rejected in favor of the null hypothesis (Ravid & Haan, 2008). The prices of Nike and Adidas products are the same and there is not a statistical significance.

Figure 1 at the end of the report shows the relationship between the mean prices of Nike and Adidas. As stated in the results section, Nike has a higher price than Adidas, at $81.90 to $81.56. The apparel companies act as the independent variables, while the mean prices are the dependent variables.

Figure 2, meanwhile, is a graphical representation of the information found in Table 1. In this box-and-whisker plot, Adidas is shown on the left and Nike on the right, with the lines on each end indicating the overall range. The boxes themselves depict the middle of the range's distribution, with the lines dividing the boxes serving as the midway point. The areas between the box and lines are respectively the lowest and highest quarters of the range (Ravid & Haan, 2008). The means are marked by an “x.”

The second figure is the best evidence that Adidas and Nike prices are not statistically significant. In fact, the middle distribution for both companies is almost identical, the higher price for men's golf cleats mentioned earlier is what makes Adidas' range much wider.

Summary/Limitations

To summarize, an analysis of 30 Adidas products and 30 Nike products showed no statistical significance in price between the two.

Ultimately, the averaging of prices and sample size are limitations of this study. Stating the average does not tell the entire story insofar as how much a consumer can expect to pay for Nike or Adidas products. This can be found in the tests of the range between the higher and lower prices. Furthermore, a sample much larger than 30 would need to be tested across a wider number of products.

However, even limiting the test to one product would not necessarily make the results any more statistically significant. A t-test conducted on soccer cleats, for example, would yield a p-value of 0.319 which, when compared to the test alpha of .05, would still result in a rejection of the alternative hypothesis.

This research was a fascinating look at the different prices of popular apparel and footwear in today's society. The major takeaway is that the results show a similarity in the world's leading athletic manufacturers as far as price and tend to complement the value-based pricing model discussed by Ali Mahdi et al (2015) where Nike sets the tone for its competition to follow.

What it is not meant to suggest is the superiority of one brand over the other. That is best left to the personal preference of the consumer. If they cannot choose between springing for something with a swoosh or three stripes, looking at price as a factor will not be of much help to them.

Figure 1

Bar Graph: Relationship between Adidas and Nike mean prices

Figure 2

Box-and-whisker plot: Relationship between Adidas and Nike mean prices

References

Ali Mahdi, H.A., Abbas, M., Ilyas Mazar, T., & George, S. (2015). A comparative analysis of

strategies and business models of Nike, Inc. and Adidas Group with special reference to competitive advantage in the context of a dynamic and competitive environment. International Journal of Business Management and Economic Research, 6(3), pp. 167-177.

Bae, S. (2004). Shopping pattern differences of physically active Korean and American

university consumers for athletic apparel. Tallahassee, FL: Florida State University.

Retrieved from http://purl.flvc.org/fsu/fd/FSU_migr_etd-0878

Chew, S.S., & Leng, H.K. (2016). The role of social influence in purchasing sports apparel.

Athens Journal of Sports, 3(4), pp. 276-284.

Garcia, J.D. (2018, January). Adidas (company). In Salem Press Encyclopedia. Retrieved from

https://eds-b-ebscohost-com.tu.opal-libraries.org/eds/detail/detail?vid=2&sid=97e2a02e-d5de-49ad-bcee-ab1812390e73%40pdc-v-sessmgr01&bdata=JnNpdGU9ZWRzLWxpdmUmc2NvcGU9c2l0ZQ%3d%3d#db=ers&AN=113931073

Mahtani, S. (2015). Nike, Inc. In Salem Press Encyclopedia. Retrieved from https://eds-b-

ebscohost-com.tu.opal-libraries.org/eds/detail/detail?vid=3&sid=97e2a02e-d5de-49ad-bcee-ab1812390e73%40pdc-v-sessmgr01&bdata=JnNpdGU9ZWRzLWxpdmUmc2NvcGU9c2l0ZQ%3d%3d#AN=87998594&db=ers

Marzec, E. (n.d.). What is the price leadership model? Houston Chronicle. Retrieved from

https://smallbusiness.chron.com/price-leadership-model-11927.html

Monash Business School. Market skimming pricing. (n.d.). Monash University. Retrieved from

https://www.monash.edu/business/marketing/marketing-dictionary/m/market-skimming-pricing

Ravid, R., & Haan, P. (2008). Practical statistics for business. Lanham, MD: University Press of

America, Inc.

Thomasson, E. (2018, November 7). Adidas slips in Europe as Stan Smiths, Superstars go out of

fashion. Reuters. Retrieved from https://finance.yahoo.com/news/adidas-hikes-2018-profit-guidance-064153116.html

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