SWOT analysis of Puma

Swot analysis of Puma. SWOT analysis is an analytical tool commonly used in the business
community to assist in a business in relation to other competitive businesses’ (Hall, R. 2003).
This tool is extremely helpful in identifying the key successful areas of the business and
shows where the business is most likely to face challenges. With this break down it will then
possible to create a Tows matrix allowing the business to make informed decisions no how
to improve the company.

The sports clothing industry is for the most part an oligopoly with a small number of large
business dominating the market share. An oligopoly is a market share in which a few firms
dominate. When a market is shared between a few firms, it is said to be highly
concentrated. Although only a few firms dominate, it is possible that many small firms may
also operate in the market. (Economics Online 2017)

In our research for the SWOT graph we compared our findings on Puma to their two biggest
competitors which are Nike and Adidas. Within the SWOT graph there are four main
segments it; Strengths, weaknesses, threats and opportunities. For each segment we are
going to look at why the chosen features sit within them.

Strengths of a company play a huge role in how the company tackles new opportunities.
The strengths will dictate how the business continues to grow.

 Research and Development has become a big strength for Puma. This graph shows
the money spent on research each financial year. Since 2013 puma have increased
them spend on research and development by 6 million euros.

(Statista, 2018)
  High Growth rate Off the back of strategic targeting of customers. Focusing on a new
demographic of women’s sport and fashion clothing, sales have increased. Sales
increase by 10%, currency adjusted to € 958 million (+9% reported) with growth across all
regions and product segments, Gross profit margin up 180 basis points at 44.6%. (Puma,
2018). Hi levels of growth rate will allow the company to use extra fiace to continue to grow
into new directions.

 Reptile brand; As a brand puma has a well know reputation for reliable products and
good customer service. Being reliable encourages customers to continue to spend
money with the company as they know they are getting a quality product for their
money. The industry which Puma operates in is a mature market meaning that
customers show brand loyalty to the companies they buy with. In an industry with a
small number of major competitors it is important to have repeat customers. Due to
their reliability Puma have a number of repeat customers especially female ones.

Weaknesses are the companies most venerable areas. If these areas are not properly
managed, then the threats to the company will cause substantial damage. If weakness are
address properly then the company will find itself being more successful in their market.

 Wage disputes, In July 2017 Ethical Consumer viewed Puma's as not having equal
pay for women. In addition, puma

 Lack on sponsorship of events. Nike & adidas cover more events in comparison too
Puma. To keep up with competitors they re going to need to spend more money on
marketing to help promote the brand and increase sales revenue. This is a difficult
task for Puma as their global revenue in very far behind Nike and Adidas which
means that they have less money to spend on marketing. From the graph below you
can see how far puma are from matching Nike and Adidas.

(Statista, 2018)

 Less online presence compared to other competitors. Nike and adidas both have a
larger online presence this allows for them to showcase their products and brand to
a larger number of customers. This will increase the likely hood of a sale.
 As an example we will look at their presence on a media platform. For this example
we are going to use Instagram which is a quickly growing app that many companies
use for product promotion;

Nike – 77.3 Mil

Adidas – 19.6 Mil
Puma – 7.4 Mil

Threats to the business are external factors which may cause harm to the business. These
factors are often out of Pumas control, but it is Pumas task to combat these threats by using
their strengths.

 Regulation on supply chain - the UK government has tightened up its regulation on

supply chains in efforts to try and keep companies which operate in the UK to use UK
manufactures.

 Price war with competitors - At current sporting brands are selling high quality
equipment, using the emphasis on detail as a way to push their product in front of
competitors. Due to the push on quality prices for high end sports products has
reached a premium. For puma to start to increase its volume of sales to keep up with
its competitors they may look at penetrative pricing as a pricing strategy to establish
their premium product with Nike and Adidas.
The aim of penetration pricing is usually to increase market share of a product,
providing the opportunity to increase price once this objective has been achieved.
Penetration pricing is the pricing technique of setting a relatively low initial entry
price, usually lower than the intended established price, to attract new customers.
The strategy aims to encourage customers to switch to the new product because of
the lower price. (Tutor2u, 2018)

 Growing power of suppliers – Increased regulations on supply chain have meant

that suppliers are able to demand more money for their products. Also, puma have
used these reliable suppliers for years. Because these suppliers produce good quality
products they know that Puma won’t want to change supplier in case of a drop-in
quality. This gives them more power when negotiating new contracts.

Opportunities is an area where the business can expand its current operations too.
Opportunities are a way of continuing to grow and exploit as many avenues as possible to
get the greatest return on their investments.

 Emerging markets – a financial market of a developing country, usually small market

with a short operating history (Investor Words, (2018) A huge new market is ethnic
minorities. Puma can exploit these new areas by strategically placing their product
in front of this demographic.
  Government promoting physical activity- Each year the UK government sets a target
for their NGB’s to complete. This way they will receive government funding for
their organisations. At current the government is making a push on increase
participation in sport for women, ethnic minorities and disabled sport. With these
targets governing bodies such at Sport England have set initiatives to increase
participation. This is good news for Puma as it helps to open more demographics
for them to sell too. Nike have already started to make sure of this opportunity by
releasing the Nike pro Hijab. This product has received a huge amount of publicity
as this product caters for a religion who’s followers are not massively involved with
sport.

 Market events such as world cup 2018 can be a huge opportunity for Puma to reach
a large number of sport products users. It will also be a huge opportunity to reach
new demographics which Puma have not currently managed to target such as the
Russian market where Pumas presence is not as strong.

 
References:

Economics Online, E.O. (2017) Oligopoly Defining and measuring oligopoly.

Http://www.economicsonline.co.uk/business_economics/oligopoly.html:

Puma, (2018) Puma Improves in 2016. Http://about.puma.com/en/newsroom/corporate-

news/2017/february/fourth-quarter-and-full-year-2016: puma

Statista, (2018) how to build a culture of self- service analytics. Global Revenue of Adidas,
Nike and Puma From 2006 to 2017., p. 1.

Statista, (2018) Global r&d expenditure of puma from 2013 to 2017. Research and Development
(R&d) Expenditure of Puma Worldwide From 2013 to 2017., p. 1.

Tutor2u, (2018) Business study notes. Penetration Pricing., p. 1.

Investor Words, (2018) www.investorwords.com/1693/emerging_market.html. Emerging Market., p.

1.