Nike v Adidas: the big match with a prize worth billions

The multimillion-pound machinations of the global sportswear industry will seem a world away from the Millennium Dome this morning, where thousands of teenage footballers will compete in a three-a-side tournament over the next two weeks.

With dreams only of emulating their World Cup heroes, the younger players, boys and girls, may be unaware they are pawns in a marketing strategy conceived in Beavertown, Oregon, the headquarters of the world's leading sportswear manufacturer, Nike.

The Scorpion KO competition, which runs each day until 15 June, is staged simultaneously in 13 other "Nike parks" from Seoul to Mexico City. It has been devised to win over customers early to the latest Nike football range – focusing on the sleeveless shirt – while delivering a sting in the tail to its main competitor, Adidas.

Since Nike was founded by Phil Knight, a retired runner and marketing prodigy, in 1971, the company has gone on to achieve world domination in the manufacture of sportswear. But football remains the bastion of Adidas, its more venerable German rival.

The Scorpion KO tournament is Nike's boldest – and most costly – attempt yet to usurp Adidas, which has enjoyed a reputation for technical excellence since the cobbler-cum-entrepreneur Adi Dassler invented leather boots with nailed studs in 1925.

Charlie Brooks, the UK spokesman for Nike, said: "We are the leading sportswear manufacturer in the world and number two in the football market. We fully intend to become the biggest."

The company believes that football will be the vehicle through which to match the sales phenomenon Nike achieved in America through its association with basketball. Nike's dominance there was achieved by expensive gambling on big-name players including Michael Jordan and Allen Iversen, whose endorsement was intended to inspire children to buy its trainers. The strategy paid off, giving the company the lion's share of the $4bn (£2.7bn) US basketball shoe market.

That deal worked because the Nike Air range was deemed cool streetwear by the "slacker generation" in the early 1990s as well as being a credible sports shoe. It is no coincidence, therefore, that the three-a-side tournament, played at fast pace in a 30ft by 80ft cage, bears a striking resemblance to basketball.

Nike's interest in the World Cup is nothing new. Mr Knight, the chief executive, became convinced that football was the route to stronger sales outside the US before the 1994 World Cup in America. If the company's investment in that tournament was relatively modest – a mere $5m – the same could not be said of its involvement in the 1998 finals in France, where it spent £270m securing the long-term endorsement of the Brazilian national team.

Nike has increased its overall marketing budget for football endorsements to $155m this year – 40 per cent of its global marketing expenditure. It has also paid £300m to kit out Manchester United for the next 13 years in the biggest sports sponsorship deal in history, starting in August. United's current sponsors at Umbro, which also supplies the national team, were left standing in the bidding war.

To coincide with the World Cup, Nike has launched the three-a-side tournament with a television advertisement featuring Thierry Henry, Luis Figo and Roberto Carlos, whose skills are accompanied by the first remix of an Elvis song, "A Little Less Conversation (A Little More Action)".

Nike's reluctance to play by normal advertising rules, which, to be fair, is forced on the company by Fifa's long-standing relationship with Adidas, has inevitably led to acrimony. In Euro 96 and the US Olympics in the same year, Nike upset the establishment when, instead of paying £3.5m to become an official sponsor, it bought up poster sites around the grounds – one in four people believed Nike was the official sponsor.

In response to its recent adoption of "guerrilla" tactics, which include projecting giant images of sports stars onto buildings, the company was recently described as a "parasite" by Fifa. The world governing body has Swat-style teams on stand-by in Japan and Korea to prevent the same thing happening again.

In 1998, Nike was accused of ruthless manipulation of its contracted players when Ronaldo under-performed in the final against France. The company has steadfastly denied claims that it forced Brazil to pick a player believed to have had a fit hours before the game.

But Nike has earned admiration from the advertising industry. Hugh Baillie, group business development manager at the advertising agency BBH said: "Nike has set itself up as operating outside the establishment and is independent and slightly irreverent in its approach. Originally, Nike could not afford official sponsorship – now it would never become an official sponsor because it doesn't fit the image."

Nike, according to Mr Baillie, still leads the way by its creation of an affinity for the famous "swoosh" label through events such as the Dome three-a-side tournament and the weekly London run from its Niketown store in Oxford Street to Regent's Park.

Adidas has previously been caught flat-footed by the tactics of its arriviste rivals. Its advertising failed to capture the Zeitgeist by being too glossy and commercial, Mr Baillie said.

As official sponsor the Adidas three-stripes logo will be emblazoned on the kits of 10 teams, 73 referees and 25,000 officials. In addition, it has signed David Beckham and Zinedine Zidane. But legend has it that when Mr Knight founded Nike 20 years ago, he told his staff his ambition was to crush Adidas. With potential markets in Asia and Africa at stake, the latest battle in his fight promises to be every bit as nasty as anything on the World Cup pitches over the next month.