adidas AG (ADR) (ADDYY), HENNES & MAURITZ AB (HNNMY): How NIKE, Inc. (NKE) Will Dominate Emerging Markets

Competitors

Nike’s classic rival, adidas AG (ADR) (OTCBB:ADDYY), became stronger after the 2006 acquisition of Reebok. The German sports equipment maker is making steady progress in international expansion, and will also benefit from a sales boost coming from the World Cup next year as it will be sponsoring strong teams, such as Germany, Argentina and Spain. However, by securing more than half of the teams in the 2010 World Cup, including the French and Brazilian national soccer teams, Nike will be the main figure.

HENNES & MAURITZ AB (OTCMKTS:HNNMY) is an example of an indirect competitor. Although the company is best known for style accessories, its interest in the sportswear segment became evident after announcing that it will clothe Sweden’s Olympic teams at the winter and summer games.The company just launched a new and promising marketing campaign where athletes sell fashion clothes.

Although HENNES & MAURITZ AB (OTCMKTS:HNNMY) is a new player in the industry, it has two strong competitive advantages. First, it uses aggressive pricing to attract new customers in emerging economies. Second, it has a huge distribution network. As the world’s largest apparel retailer, it operates more than 2,600 stores all over the world, and no factories. Naturally, the company’s supply chain is riskier than adidas AG (ADR) (OTCBB:ADDYY) or Nike. The good news is that by outsourcing its whole production, HENNES & MAURITZ AB (OTCMKTS:HNNMY) not only has avoided massive capital investments and controversy regarding sweatshops, it has also been able to achieve relatively high profit figures.

What a Fool Believes

The industry certainly looks fierce. That should not be a problem for Nike, however, which has all the competitive advantages needed to keep its leading position in the global athletic footwear, apparel, and equipment market, which is worth as much as $284 billion. With more than a thousand factories all over the world and one of the strongest global brands ever created, Nike is well prepared to capitalize on its emerging markets business and welcome one billion new consumers on the way.

The article How Nike Will Dominate Emerging Markets originally appeared on Fool.com and is written by Adrian Campos.

Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Nike. 

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