Reference no: EM133300235

Assignment:

Adidas Ends Tie-Up with Kanye West After Anti-Semitic Remarks October 26, 2022, Daily News The Americas Adidas has cut ties with rapper and fashion designer Kanye West and condemned his anti- Semitic remarks, in a move that is expected to halve the sportswear maker's profits this year.

The German company said it did not "tolerate anti-Semitism(1) and any other sort of hate speech", adding that it would end the partnership "immediately".

The decision comes after West, now known as Ye, said in a recent interview that he could "say anti-Semitic things and Adidas can't drop me".

Note:

(1) Anit-Semitism: hate or strong dislike of Jews, or actions that express hate of dislike of Jews

Adidas Has 99 Problems and Kanye Is One

Felix Richter, Oct 25, 2022, Statista

Ending a successful partnership dating back all the way to 2013, Adidas announced today that it's cutting all ties with Kanye West, effective immediately. The move comes after a string of controversies culminating in West, who now goes by the name of Ye, taunting Adidas in a video that surfaced on Monday. "I can say antisemitic things and Adidas can't drop me. Now what?" the rapper said provocatively, leading to calls for a boycott of Adidas unless the sportswear company stopped working with West.

Following several antisemitic comments made by West over the past few weeks, Adidas had put the partnership with West under review earlier this month, but so far refused to give up on what it called "one of the most successful collaborations in our industry's history." The company's inaction sparked significant online backlash and even prompted the Anti-Defamation League to address CEO Kasper Rorsted and Thomas Rabe, chairman of the board, in an open letter. "Ye, formerly known as Kanye West, has recently used his media presence and social influence to espouse antisemitic tropes about Jewish intimidation, power and control," the watchdog wrote.

"At a time of rising antisemitism, when incidents in the U.S. reached an all-time high in 2021, such statements are more than damning - they are dangerous. In light of all of this, we urge Adidas to reconsider supporting the Ye product line and to issue a statement making clear that the Adidas company and community has no tolerance whatsoever for antisemitism."

Five days later, arguably a little too late, Adidas did exactly that, joining Balenciaga, Gap and others in cutting ties with West. In a brief statement published on Tuesday, the sportswear giant from Herzogenaurach, Germany said that it wouldn't tolerate antisemitism and any other sort of hate speech.

"Ye's recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company's values of diversity and inclusion, mutual respect and fairness. After a thorough review, the company has taken the decision to terminate the partnership with Ye immediately, end production of Yeezy branded products and stop all payments to Ye and his companies. adidas will stop the adidas Yeezy business with immediate effect."

The Yeezy brand, which is estimated to generate around €1.5 billion in annual sales, will leave a hole in Adidas' top and bottom line, with the company expecting to take a €250 million hit on its 2022 net profit.

This comes at the worst possible time for Adidas, after the company had shaved €500 million off its 2022 outlook as recently as last week, citing weakness in Greater China and inventory build-up among the reasons for the downgrade. As the following chart shows, the company's share price plummeted almost 70 percent from its August 2021 peak, leaving the new CEO, who has yet to be found, with a lot of work when he or she takes over from Rorsted in 2023.

Questions:

1) The partnership between Adidas and Kayne West (as known as Ye) has been successful since 2013. Please illustrate your comments how Adidas could create value through this partnership.

2) From the perspective of strategic control, please comment what Adidas should do if the company is about to identify another partner to replace Ye?

3) From the last paragraph of the narrative, what recommendations you would give to the new CEO of Adidas to help the company to address to the relevant pain points such as weakness in China and inventory build-up? You may think of external and internal environment analysis.