Final REPORT: ADIDAS

Final Report

Adidas

Bus 690

TABLE OF CONTENT

Introduction
External Environment Analysis
● General Environment
● Industry Environment
Aspects of strategic group
Internal Analysis
● Tangible and Intangible Assets
Final REPORT: ADIDAS

● VIRO framework
❏ Core competencies
❏ SWOT analysis
Strategic Analysis
● Business Strategies
● Corporate Strategies
❖ Problem Identification
❖ Recommendations
❖ Work cited
❖ Appendix

Adidas

Adidas. is a multinational corporation that is engaged in the design, development,

manufacturing, and worldwide marketing and sales of footwear, apparel, equipment, accessories,
and services. The company which was founded in July 1924 by Adoft Dassler, has a
headquarters in Herzogenaurach, Germany. Adidas is one of the largest sportswear
manufacturers in Europe and the second largest in the world, after Nike. However, they are still
growing fast to develop their products become the best. They work every day to inspire and
enable people to harness the power of sport in people’s lives. Adidas is also a sponsorship to
many big events and provides the best products for many athletes.
Final REPORT: ADIDAS

For developing and expanding their companies, they have the Vision shows that they are
a global company with innovative and designed leaders to help all kind of level to seek peak
performance and concentrate to enhance customer service. They also take responsibility for their
social and environment that embraces creativity and diversity. The vision is important and the
main goal for the company to approach and achieve. For focusing on their vision and being
successful, their mission is made “The Adidas Group strives to be the global leader in the
sporting goods industry with brands built on a passion for sports and a sporting lifestyle.” Adidas
always want to create attractive products and listen to their customers. In addition, the values that
help Adidas create a famous brand and the belief of customers are “Performance, Passion,
Integrity, Diversity.” Until today, Adidas is a global leader in the sporting goods industry,
offering many products about footwear, apparel, and hardware for sport and lifestyle.

External Analyses: Wang

Analyses Required content How does the environment affect that
firm’s quest for competitive
advantage? Effect of each
environmental factor

General PESTEL model: Opportunities:

environment Political-
· Adidas requires following political
procedures in different countries, such as
taxation system, international trade
agreement, product safety laws, labor
laws, and consumer safety product
regulations, because of the supplies, ship,
and distributes their products worldwide.
· The company develops its product in
the third world countries for lower
manufacturing cost, which faces some
controversy from communities.
Economic-
· Adidas is one of the 50 largest
companies that contribute roughly 70% of
the sports good industry’s revenue.
· Their products are leisure items, so
sales are driven by sports buyer trends and
preference.
· Adidas faces counterfeit issues, which
affects their sales.
Social-
· Adidas focuses on health-conscious
buyers with a love for sports and changes
● The worldwide distribution
gives them the opportunity to
increase their brand name
recognition around the world.
● By knowing what their
customers interest, they can
create the products that
customers want and love.
● Their support for
communities and
environment help they build a
good image for their
company.
● The support for the Olympics
allows them to leverage
marketing opportunities and
catch the eye of new
audiences around the world.
● Technological advancement
can help them dive into new
industries and develop an
edge over the competition.
● Their patents help they deal
with the counterfeit issues.
Final REPORT: ADIDAS
their product designs depending on the
interest of consumers.
· They offer corporate volunteer
programs, support communities and foster
the health of individuals.
· They support the Olympics.
Technology-
· Adidas has online sales through its
website and social media.
· They are studying the smart
sportswear industry.
· They use natural material
replacement.
Legal-
· Adidas has design patents, trademark
production, celebrity sponsorships, and
compliance with national and local laws.
· They have ownership of intellectual
properties and IP systems.
Environment-
· Adidas decreases environmental
impact by offering natural materials in
their products.
They follow regulations in every country
their products are manufactured in. They
follow regulations in every country their
products are manufactured in.
Industry -Structure-Conduct-Performance (SCP)
environment model: Adidas market structure is a
monopolistic competitive market. Adidas
has now switched from its past vertical
integration strategy to the outsourcing in
production and manufacturing. It owns 9
factories and has around 615 main
suppliers from all over the world.
-The global athletic footwear market size
was valued at USD 64.30 billion in 2017.
It is expected to expand at a CAGR of
slightly over 5.0% from 2018 to 2025.
● Their connections to the
sports world and celebrities
are great opportunities for
marketing.
Threats:
● Adidas faces some
controversy from
communities due to endorsing
low wages in the third world
countries.
● There are still counterfeit
issues even though they have
patents.
Opportunities:
• The dynamic of the industry
is expanding, which means Adidas
can grow bigger.
• Low power of supplier means
Adidas has more option and the
opportunity to choose better supplies
for its products.
• The quality of its products
that customer recognized is their
opportunity to gain more customers
and build their company bigger.
Threat:
• Their competitors put some
threat to them.
-The strategic position of Adidas is
Final REPORT: ADIDAS

differentiation.

Five Forces model:

1. Competition: Nike, Callaway Golf Company, Puma, Fila, and Converse are the top 5
competitors.
2. Potential of new entrants into the industry: The threat of new entrants for Adidas is low to
moderate. It requires a very large investment and time to compete with Adidas. The new
entrance can threaten the market share, make the industry more competitive and decrease profit
potential for existing competitors that may result in changes to quality or price levels of an
existing product. A low threat of new entrants makes Adidas more attractive and increases profit
potential for the firm already competing within the industry.
3. Power of supplier: The role of suppliers is important but their bargaining power is low in
Adidas’s business. Adidas has many supply chain. Since Adidas is a big company, suppliers less
likely to risk losing business with them. They work with more than 1000 independent factories in
63 countries.
4. Power of customers: Although the switching cost for the customers is low, the bargaining
power of customer becomes low to moderate because of their product quality, design and
performance. This is how Adidas build their customer loyalty.
5. The threat of substitute products: The threat is moderate because of the quality products
and marketing efforts of Adidas. They focused on marketing in the metropolitan markets since
its customer base largely lives there.

Summary:
The general and industry environment of Adidas impacts what it stands today in the shoes
industry. Although it has strong competitor like Nike, Adidas remains one of the dominion in the
industry. Its worldwide distribution gives them the opportunity to increase their brand name. Its
understanding of what customers want and investing in the technology innovation helps the
company grow and create new market. Endorsing low wages in the third world countries, Adidas
faces some controversy from communities. And there are still counterfeit issues even though
they have patents.

Aspects Adidas* Nike** Puma***

Business model Manufacturing & Manufacturing & Manufacturing &

distribution distribution distribution

Gross margin 51.8% 44.5% 47.14%

Return on assets 10.5% 18.4% 6.2%

Final REPORT: ADIDAS

Return on invested capital 22.9% 28.8% 9.29%

US Market share (May ‘17) 11.3% 35.9%

*data as of September, 2018.
**data as of Feb, 2019.
***data as of Dec., 2018.

Internal analysis

Tangible resources Intangible resources

+ Efficient employees + Supplier relation

+ CNC machines + Brand reputation
+ 50,000 Employees + Diverse brand portfolio
+ Buildings + Patent such as: stan smith, superstar...etc
+ Land workforce + Trademarks such as: Originals
+ Inventory + Strategic Innovation
+ Raw material + Sponsorship agreement
+ Copyrights

Adidas VRIO framework

Resource/Capabilities Valuable Rare Imitable Organization Implications
Brand image and Yes Yes No Yes Competitive
positioning advantage
Local and Global Yes Yes Yes Yes Temporary
presence advantage
Technological Yes Yes No Yes Competitive
advantage advantage
Human resource Yes No Yes Yes Temporary
management advantage
Marketing strategies Yes Yes Yes Yes Temporary
advantage
Customer Network and Yes Yes Yes Yes Temporary
loyalty advantage
Supply chain and Yes Yes Yes Yes Temporary
access to capital advantage
The key resources and capabilities of Adidas that give it a competitive advantage are its
advance technology and the company’s brand image and positioning. The Adidas brand is so
Final REPORT: ADIDAS

high end that the only threat to the company’s brand is Nike. These two occupy the largest
market share when it comes to sportswear and Adidas has a competitive advantage because of its
attractive products and its excellent level of popularity.
The other key resources that give the organization a temporary advantage over other companies
are its local and global presence as the brand operates in over 60 countries with Adidas stores
established in those countries that promote the sales of the Adidas products. The company is also
heavily invested in technology to provide the best quality products which are backed up by its
amazing marketing capabilities and this also gives the organization a temporary advantage over
other companies in the same market space.

2. Core competencies:
 Strategic innovation and creativity (technology evolution)
 Customer focus (enhancing services for the customers)
 Technology
 Supply chain
 Collaboratively competitive
 Brand recognition

SWOT Analysis Thuy

● Strength:
- Innovation capability- this strength power can help them serve the changing taste of
customers because a style can’t desire customer for a long time, customers might be buying
Adidas’s products today, but the other days, they might change their minds to choose other
brands. Adidas uses its innovation to come up with new ideas every year and every season, to
satisfy the changing taste of customers.
- It has high brand value among the customer because of the quality of its products.
- It has been sponsoring major sports events including the Olympics and many sports team.
- Production of a variety of products that significantly increase the customer reach of the
company.

● Weakness:
❖ Premium price range- The price is pretty high compared to other brands
❖ The cost structure is very high
❖ Limited product line

● Opportunities:
❖ Changing customer lifestyle- they always try to create new things to attract customers
Final REPORT: ADIDAS

❖ Market expansion: expand their market globally and concentrate to which cities help
them to over-proportionally grow share of mind, the share of market and share of trend
❖ Increasing demand: creating unique styles might help them increasing in demand.
● Threat:
❖ Competition: Compete with Nike which is No 1 sport brand
❖ Changing the taste of customers (lifestyle, trend)
❖ Government Regulation: increasing tax
❖ The growing power of customers and suppliers to set price

Strategic Analysis - Taylor

● Business Strategies
○ Differentiation:
■ Athleisure Wear: Most companies only produce leisure wear or athletic
wear. Adidas combined these to make athletic leisure wear fashionable.
■ Sponsorship of athletic events: The sponsorship of these events promotes
their brand further and make them the only athletic wear advertisement for
the sport.
● World Cup, Basketball Leagues, Soccer, Olympics
● Corporate Strategies
○ Vertical integration and Diversification:
■ Forward Vertical Integration: Adidas owns their warehouses and
maintains control of all activities along the value chain such as sales and
marketing.
■ Product-Market diversification strategy: Adidas is active in several
different countries and is a part of several product markets.
○ Acquisitions:
■ Reebok
■ Runtastic
■ Matix
○ Global Strategy: Transnational
■ Available worldwide
■ Responds to issues locally
■ Multiple HQs in Amsterdam, Portland, Germany, and Boston

Problem Identification
There has been a lot of struggles with the Adidas brand which have seen the company
significantly tumble especially after the unexpected rise in the popularity and sales of Under
Armour which saw it rise to become the number to most selling Sportswear. The company has
Final REPORT: ADIDAS

lacked in effective planning and forecasting which have resulted in improper handling of
products and their distributions all over the globe. There is also an increasing demand of a wide
range of products which Nike thrives well in from their broad range of products and Adidas
needs to adopt the same scheme if it wants to increase its market share and sales records. The
company has to also reconfigure and re-optimize its distribution networks according to their
customer base and the company also needs to identify the kind of products their customers
majorly purchase and maximize on that.

Recommendations
Adidas as a company should focus on improving its market share and climb above the
share occupied by Nike because Nike is arguably the top company when it comes to the sales of
sports apparels and athletic footwear. The company should focus more on marketing through
celebrities rather than mainly focusing on sponsoring of events and sports organizations such as
football clubs. The marketing endorsements celebrities offer is much better and appeals to
customers more compared to the current strategy Adidas is using. Adidas should also expand on
its product line by increasing the variation in its products which may increase the company’s
sales significantly.