Company Profile:Adidas Group is the largest sportswear manufacturer in Europe and also the world’s second largest producer of sports footwear, apparel and accessories. They have over 80 years of operation history in this market segment and have prided themselves traditionally with the manufacture of cutting edge products made to last. Adidas’s direct competitor is Nike in which the former purchased Reebok to increase their market share and also reach untapped markets of their brand. The company headquarters are located in Herzogenaurach, Germany.
History:The company was founded by Adolf ("Adi") Dassler after coming back home from World War I in 1924 and began to produce his own shoes at home in Herzogenaurach, Germany. During this period Adolf and his brother Rudolf Dassler started a small business of making high performance sport shoes. The brand first achieved international recognition in Amsterdam as Jesse Owens wore the shoes made by the Dasslers brothers to win the gold medal. When the German football team wore soccer boots made by the Dassler brothers to beat the previously unbeatable Hungarians their success made the Dassler brothers and their brand a household name.SWOT Analysis ChartExternal Analysis (General Environment)Political forces:Countries where Adidas has vested interest in like China are in the midst of debating laws and changes to the scheme of corporate tax. This could have a significant impact on Adidas operations as 30% of the company’s production activities are based in China Economic conditions:Labor charges to manufacture products in Germany (which serves as their headquarters) are high.
Adidas, like many other manufactures have taken the option to move their main production facilities to countries like Indonesia and Thailand to decrease outlay. In this manner, Adidas created jobs and provided employment opportunities in many countries. An example would be their involvement with the Olympics where industrial production in Germany benefited. During and after the period of the Olympics, demand for sporting products will increase.Socio-cultural conditions:Adidas products are not focused on any particular race or religion but at anyone with the passion for sports. There are increasing numbers of women who take up sports and also there is the trend of increasing health awareness of this generation.
Such social trends combined with the soccer and Olympic fever sweeping through the UK has resulted in a potentially commercially lucrative market to tap.Technological forces:Adidas is harnessing technology in a bid to apply more sustainable production methods. Nike has recently paired up with Apple to create a line of products whereas Adidas has looked to team up with Samsung in order to compete in the high-tech sportswear segment. Adidas is also looking to utilize their resources to the best of its ability. For example, using well-crafted information systems and consistently updating their webpages allows Adidas the opportunity to be more efficient in operations which will improve their overall production. Therefore this method will not only offer a high standard of customer service but also allow Adidas to maintain lead market share and an important advantage over their competitors.
Environmental issues: This affects Adidas in the area such as animal rights as some Adidas footwear are produced from animal skin. Furthermore, as aforementioned Adidas produce their products mainly in China due to the availability of cheap labor. However Adidas needs to consider the publicity they will receive due to lax regulations of operations resulting in environmental pollution or questionable methods of obtaining animal products.Legal: A key area of concern to Adidas is to adhere to strict labor codes wages in their quest to search for cheap production facilities. Minimum wage is mandatory in most parts of Europe and hence due to higher production costs work is sub-contracted out to third world countries despite the headquarters being located in Germany. Lax regulations have resulted in accusations of child labor and mal-treatment of employees.
Adidas has to be more stringent in ensuring there are no lapses in ensuring the good health and safety of all employees around the world in addition to the upholding of worker rights.External Analysis (Competitive Environment)Intensity of rivalry among competitors: HIGH Although Adidas can be considered a global leader, the main competitor of Adidas in the U.S market is Nike which has a market share of almost 54%. In addition to Nike, Adidas faces fierce competition from companies in the market which are smaller in size than Nike such as New Balance and Puma operating in United States and European Countries leaving Adidas trailing at 6th place. With the internet, major firms such as Nike and Adidas has harnessed the use of e-commerce as online selling helped to increase sales while keeping operating costs low.
Threat of new entrants: LOWWith their large operational scale, firms like Adidas have been able to maintain a competitive advantage over smaller firms and huge amounts of capital invested in advertising has helped the brand continue to entice customers to purchase their products. Adidas websites are done up in a much more professional and attractive manner compared to many other competitors and constant promotions tied up with social media has assisted in maintaining their presence in a highly competitive online sportswear market. As the barrier of entry into e-commerce is very low, there are many small start-ups but without the leverage that Adidas enjoys, chance of them posing a market threat is low. Barriers of entry are considered high with regards to having a physical storefront business require economies of scales amidst other factors.Substitutes: LOWThe main competition for Adidas brands and products comes from the products and brands of Nike and Puma.
There is no huge discrepancy in terms of pricing hence it is easy for the average consumer to brand hop. As with all performance related products, users are more concerned with the results rather than the prices and hence it is usually up to the branding and positioning of sportswear companies to win over the consumer. As there are no substitutes for sporting footwear, there is still great demand for Adidas products.Consumer Behavior:HIGH There is a vast number of buyers in comparison to the firms of this nature. Adidas must continue to strengthen their brand image in order to differentiate Adidas from their rival sportswear companies in order to increase sales and market share. Consumers are willing to pay top dollar for high quality equipment and can easily impose the requirement for quality products by switching over to a rival competitor.
It is Adidas’s prerogative to position itself as a maker of high performance top quality products to induce brand loyalty. Customers are more discerning and in order to win over new customers, the best technology and ability to customize is highly important.Supplier Behavior: LOWThere are a abundance of suppliers for this industry and options are available globally. There is very little variance in what a supplier can offer other than lower manufacturing prices in order to attract the lucrative contracts of the major sportswear manufacturers and it can even be said these manufacturers are dependent on sportswear firms in order to survive. Over the year, Adidas has standardized their logistics and procedures in this respect and are able to switch between suppliers both cost-efficient and effectively. Suppliers have very little bargaining power in this respect and most of the time have to adhere to the requirements of the major sportswear firms.
Internal Environment analysis: Resource Types: Tangibles (strong) – Adidas’s company revenue for 2008 was over USD10 billion. As a company, they have targeted position as market leaders in every segment of business in all countries. With over 150 subsidiaries worldwide they have immense global reach and influence.Adidas’s core business resolves around people and it is to no surprise it regards people as crucial to their success and hence treat their own employees well. Adidas looks after their own staff and helps them to achieve a work-life balance.
Happier staff in turn leads to better performance for their company.Logos and slogans of the company is owned and controlled. You may only use the materials for personal, non-commercial use. Adidas’s strong branding is unmistakable anywhere in the world and their rapid adoption of technology and e-commerce has helped them to attract more tech savvy consumers. Adidas also controls and maintains many software and technological patentsThe reputation of the company dropped slightly in recent years due to the reports of child labor usage and that had caused a stir in Europe. Despite these scandals, Adidas has continued to maintain profitability and continue to experience growth.
Brand reputation remains positive due to goof products being released with the commitment to quality.The management is effective and efficient. This is evident as quality of product is consistent and instills trusts as the consumer can expect to receive similar high quality products around the world. Top level management has also demonstrated foresight in business strategy in acquiring Reebok in order to further the brand’s interests.
Brand loyalty is important for a sportswear giant and is shown by the lucrative endorsement contracts handed out to sporting superstars to continue to attract consumers to have faith in the brand.Conclusion: Adidas has its roots in Germany and has now grown into a world-wide operation. Adidas has made some astute business decisions to help remain competitive and stay relevant in the eyes of the fickle consumer. Adidas with its tradition of innovation and technology has garnered much praised from athletes who swear by its products and is now synonymous with the world of sport.
Even during times of economic crisis Adidas had emerged none worse to wear and this was an firm indication of good corporate governance. The company has experienced constant growth in company revenue annually and has flexed its financial muscle to capture Reebok in a bid to muscle in on the U.S market. However, Adidas must not rest on its laurels and continue to believe in its slogan that “Adidas is All-In” and continue to push the envelope of marrying technology and sportswear to continue be a household name people associate with sports.Corporate level recommendation: 1.
Repositioning Reebok: The main factor in the decision to acquire Reebok was due to the intense competition from Nike and it’s stranglehold on U.S market. The acquisition had worked well to some extent as the Reebok brand boasted of products both for normal use and sports inclined, helping Adidas move into market territory which it could not penetrate before. A recommendation would be for Reebok to be repositioned as a fashion inclined brand whereas Adidas could be a positioned as a premium sportswear brand hence not having overlapping areas of interest, negating cannibalism.
By purchasing Reebok, Adidas effectively absorbed Reebok’s market share and hence they should leverage on that by absorbing Reebok products into the Adidas line. This will create a recognizable flanker brand and strengthen the position of the main brand of Adidas. 2. Targeting untapped markets.Adidas has not realized its full potential in many areas and there is plenty of untapped potential. U.
S market sales for Adidas has grown for the 3rd year running with the help from Reebok but segments like women’s sportswear which is potentially lucrative have remained relatively untapped. Products of Reebok are available in both sporting and normal variations therefore it can use the Reebok to target this part of the market. Women’s novelty athletic socks and accessories have experienced a booming increase in demand and this is certainly something that can be looked into. Adidas has already beat Nike in country sales in places such as China and India but places like Africa and Asia still remain open.Business level recommendations: 1.
Embrace the culture of the country of operations Allow more customization and focus on customer satisfaction and aftercare market. Adidas is a luxury and high quality brand which prides itself in consumer satisfaction and that in turn will win the hearts of consumers. Sponsoring local events help to build brand association with the consumers in the specific country and brand image will improve. Adidas has maintained sponsorship of many German football teams in recognition of its roots in Germany and after acquiring Reebok sponsorship was extended to the National Basketball Association teams. Key points to create brand awareness would be to identify promising athletes and groom them up because Adidas have faith in its products will make a difference.
This will promote positive public perception and consumers will be more receptive towards the brand. 2. Invest in the producers of raw material and R&DAdidas core business of manufacturing depends on raw materials and raw materials continue to be expensive to produce. In order to reduce outlay Adidas has to relook at logistics and streamline the process of resource management and that is one way of cost savings. Research into more environmentally friendly products will also be beneficial to the company as they will face less resistance from the stakeholders.
