ASSIGNMENT 2 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 1: Business and Business Environment

Submission date Date Received 1st submission

Re-submission Date Date Received 2nd submission

Student Name Bui Thi Hong Nhung Student ID GBS200321

Class FA21.2 Assessor name Nguyen Thi Bich Diep

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that making a false declaration is a form of malpractice.

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P4 P5 P6 M3 M4 D2
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Table of Contents

I.Introduction

II. Porter 5 forces model

1. Bargaining power of the suppliers strong

2. Bargaining power of buyers

3. Threat of substitutes

4. Threat of new entrants

5. Level of competitive rivalry in sports fashion industry

III. Petsel

M3 Apply appropriately the PESTLE model to support a detailed analysis of the macro environment within an
organisation.

a.Technological factors: Smart sportswear opportunities

b. Legal factors: Patents and more patents

c. Economic factors: Counterfeit issues

d. Social Factors: Health conscious shoppers

e. Environmental factors

IV. Conduct internal and external

1. Strength of Aidas: Brand Value

2. Weaknesses of Adidas: Market resources

V. STRENGTHS AND WEAKNESSES INTERRELATE WITH EXTERNAL MACRO FACTORS

1. Adidas Business Decision

2. Strengths and Weaknesses

• Stregths

• Weaknesses
 3. PESTLE model influences business decisions

4. Porter’s Forces on business decision

M4 Apply appropriately SWOT/TOWS analysis and justify how they influence decision-making

CONCLUSION

REFERENCE
 I. INTRODUCTION

Wells Fargo is a global financial services firm that's based in the United States. This is the world's largest
consulting bank by market capitalization, and the largest consulting bank by total assets in the United States. As
a market analyst at Wells Fargo, I will analyze the Adidas AG's internal and external field in the US market.

1. Porter 5 forces model

a. Bargaining power of the suppliers strong
Adidas operates globally but outsources the majority of its production to more than 1,000 local factories in 63
countries. Adidas has the power to decide the rules of the game and regulate how many hours employees must
work, as well as the quality of the goods they make. Adidas has a system of inspections and compliance to
ensure that vendors follow the rules. Adidas has a lot of influence on their vendors. Even though suppliers had a
minor impact on Adidas, the company gained when suppliers had limited power.

b. Bargaining power of buyers:

In the case of Adidas, consumers have low to moderate purchasing power, and while individual purchasers may
not have much clout, as a collective, they do. Many companies battle for market share in this industry.
Switching costs for customers are minimal. Adidas' product uniformity and advertising, on the other hand,
significantly mitigate this factor. After all, customers have a huge influence on Adidas.
 c. Threat of substitutes:
Until Adidas, the chances of finding alternate items are slim to
modest. Its competitors are few, but they are not significant.
There are little and major competitors, as well as domestic and
international competitors, who sell items at varying prices. Some
cater to the needs of high-end clientele, while others compete on
price. Competition from other things affects Adidas' profits.

Eg: What would you wear when you go out if you don't want to
wear sneakers? BedRock is a well- known footwear company in
US that might be a good fit for you.
 d. Threat of new entrants

A lot of new companies have been coming out to compete with

Adidas, which is making Adidas a difficult market to enter. A small
initial investment can get a business started, but it's difficult to
grow a large company. Although the company is doing well and
the market is booming, it might be difficult to get in the business if
you don't have a lot of money. Brand value is not something that
happens quickly. Building brand value means putting in time and
commitment. Two characteristics mentioned here help to reduce
the risk of any potential entrant into the industry. New rivals, on
the other hand, are still a risk for Adidas, which has a negative
effect on their revenue

Eg: In USA, Converse is a well-known sportswear company. The arrival of such a brand in the United States will
give Adidas a serious competitor.

e. Level of competitive rivalry in sports fashion industry

In terms of business, the industry is quite competitive. Aside from the big rivals, there are a number of minor
competitors such as Nike, Under Armour who add to the level of competition in the business. With billions
spent on commercials and sponsorships, all of the firms are actively engaging in marketing. Because there are
just a few wealthy labels on the market, the industry is highly competitive. Adidas products are in direct
competition with those of other well-known companies. Nike and Under Armour is a well-known brand in the
United States.

Sportswear market share in the United States as of 2018

II. Pestel

A PESTEL study, commonly

known as a PESTLE analysis, is a
framework or method for
assessing and monitoring macro-
environmental factors that might
have a substantial impact on the
performance of a company. PESTEL
is influenced by political, economic,
social, technical, environmental,
and legal aspects. Adidas is strongly
influenced by PESTEL. In this post, I'll
 discuss some of the implications for
Adidas.

M3 Apply appropriately the PESTLE model to support a detailed analysis of the macro environment
within an organisation.

1. Technological factors: Smart sportswear opportunities

Adidas has been doing a lot of testing with their products to make sure they function really well in a
variety of situations. They're appealing to athletes because it's what they do. Coaches and sports
professionals are seeking to improve their chances of success. For long-term remedies to sports
concerns, natural material alternatives are applied. They help with online sales through their website
and social media. They are currently investigating the smart sportswear market. Technology like the
Fitbit is popular in the health community. Adidas might use new technologies to achieve a competitive
advantage. Adidas benefits from this. Adidas could improve the quality of their products by considering
the materials they use. As a result, customers would feel empathy for Adidas.

2. Legal factors: Patents and more patents

Adidas owns the patents and technologies of intellectual property. They also have design patents, which
protect them from copycats and from being copied. The patents also provide a legal defense against
counterfeiters. They have trademark production and they are a large, powerful company. Adidas
promotes celebrity sponsorships as a way to promote its brand because of its ties to the sporting world.
Adidas has a good working relationship with the government and follows all the laws in the regions
 where they are selling. Customers will feel more positive about their purchases as a result of this.
Adidas' company receives a positive boost as a result of this.

3. Economic factors: Counterfeit issues

The sporting goods industry is small. Around 70% of the industry's revenue is produced by the top fifty
firms. one of these companies is Adidas. Adidas products are classified as “leisure facilities”. These are
not necessary. Sports buyer trends and tastes drive sales. Different types of leisure goods compete with
one another. The gaming and music industries are in competition with sports goods. The global
economy is undergoing great change. As a result, manufacturers adjust their production processes to
make them more efficient. Adidas would conduct market analysis to determine where goods will be sold
and distributed. As a result of this, the company has a lot of growth and success. Adidas produces its
goods in China because they are labor-intensive and have a low production cost. For example,
compared to countries in North America. Adidas has to be strategic in deciding how much it should
charge for its product. However, when it comes to importing and exporting goods, businesses continue
to confront challenges. The growth of counterfeit products is also limiting Adidas' earnings. Adidas's bad
market performance is the most significant element influencing it.

4. Social Factors: Health conscious shoppers

Adidas' product is always changing. What people want has a big effect on designers. People of all ages,
genders, and lifestyles may frequently find products that suit them. Their major target demographic,
though, is health-conscious sports fans. They must stay up with the current health trends and
preferences in order to respond to their audience. Businesses might also take use of their voluntary
services. They contribute to the growth of communities while also improving individual well-being.
Adidas also supports the Olympics in order to get access to new markets throughout the world. Adidas is
still concerned about the comfort and impact of its products on customers' feet. This helps customer to
appreciate their items more frequently, which increases sales.

5. Environmental factors
 Adidas has a program to reduce the negative effects of its business on the environment. The
responsibility falls on them to keep track of dangerous substances and remove them. This is why they
use natural materials, the source of their goods. They commit to fair business practices by ensuring that
supplies adhere to legislation in the country where their goods are made.

III. Conduct internal and external

1.Strength of Adidas: Brand Value

Kanye West, a famous rapper, has created a

craze for his music around the world by teaming
up with adidas, a sports-goods company, in 2015.
Adidas has been one of the most hot topics in
mass media and social media channels in recent
years. Adidas has had a successful partnership
with this company. Adidas has made a huge
profit of $1 billion in the first quarter of 2020
2.Weaknesses of Adidas: Market resources

Adidas uses third-party or independent manufacturing firms, particularly in China, Cambodia, and
Vietnam, as a result of a supply chain shortage. Competition and brands similar in size mean customers
switch brands more often. Adidas is a company that is reliant on foreign suppliers. These manufacturers
are unable to meet the growing demand for mid-priced clothing in the North American market, resulting
in a 1-2% reduction in revenue growth (Reuters, 2019).
IV. STRENGTHS AND WEAKNESSES INTERRELATE WITH EXTERNAL MACRO FACTORS
1.Adidas Business Decision

By the 1980s, Reebok's Freestyle sneaker, released in 1982 as the first gym shoe particularly designed for
women, had become the best-selling shoe in the world. Reebok surpassed Nike in 1987, but Nike
remains the most popular. Adidas paid 3.8 billion United States dollars for Reebok in 2005. After Adidas
acquired Reebok, the company was reduced to a shell of its former self. In recent years, Reebok has
been a burden on Adidas. On March 10, 2021, Adidas announced that it will sell its subsidiary, Reebok,
after 15 years.
2. Strengths and Weaknesses
a. Stregths

Adidas, the sports brand, was dominant in Europe at the time, but had struggled to establish a
presence in the United States. In principle, Reebok would allow it to do so. The company had an
impressive roster of sportsmen and singers and it managed to maintain a sizable share of the
American market. After the transaction, nothing much happened. Adidas did not do anything, and
Reebok was already on the decline for years. The first signs of a resurgence came in 2008 when
Reebok joined the tonic market with EasyTone, a shoe that promised to shape the back of a person
just by walking. It was the company's most successful project in a long time. Nevertheless, the firm
failed to compete in the market. It had dropped to fourth position in the world, behind Nike,
Adidas, and Puma. It was also losing money.

The statistics table shows that

Adidas failed to rescue Reebok. This
is why they sell Adidas in order to
reduce the financial burden. Adidas
and Reebok's separation of offline
reading allows Adidas to focus on its
strengths. Adidas announced that it
completed a review of "strategic
options" for Reebok, as part of its
five-year plan to focus on improving
the Adidas brand.

“The long-term growth

opportunities in our industry are very attractive, especially for iconic sports brands,” said Kasper
Rrsted, CEO of adidas. “After careful analysis, Reebok and Adidas have concluded that independent
work can significantly increase their growth potential. The Reebok brand and the people behind it
have a bright future. We will be busy with schoolwork over the next few months.” The athletic wear
brand has improved its pace of growth and profitability outlook under the plan launched in 2016.

b. Weaknesses

Adidas made a significant choice by announcing it on March 10, 2021. Adidas has announced the
sale of the ailing Reebok clothing division. The brand is projected to be sold for less than $2 billion.
In 2006, it paid 3.8 billion for Reebok. The company resold the stock for 2.5 billion dollars, resulting
in a huge loss. Clothing company Adidas withdrew a well-known brand from its portfolio, providing
them a competition in the US business. Despite the fact that Reebok is no longer in the same
position as it once was, it nevertheless holds a particular place in the hearts of many customers.
3.PESTLE model influences business decisions.

a. Political factors

Brands of Reebok and Adidas are not the same. They use low-cost labor services in other nations, and
they use their own major resources in the United States. As Adidas sold Reebok, its investment in the
brand has diminished. Adidas will solely focus on hiring the unemployed and cutting labor costs in
order to export items at lower prices and increase margins to previously used locations such as China.
b. Economic factors
Reebok was a popular fashion label in the 1990s. However, when it comes to Adidas, there is no
distinctive approach or good. Reebok is the name of a corporation that has failed in the market. adidas
has made a right move by selling Reebok.

c. Social

To improve sales, Reebok must stay up with societal trends to guarantee that its designs are unique,
appealing to clients of all ages and ethnicities. Reebok, on the other hand, struggled in this chapter,
which was a big role in the team's failure.

d. Technological

It was the company's most popular item when it originally came out, the Reebok Pump. Nike's new Air
Pressure shoe gained early appeal as a result of a macro analysis of the shoe. However, in compared to
well-known labels, they nowadays are insignificant. Later, other brands on the market would use the
same technology.

e. Legal

Reebok's hiring of employees from China. Reebok's suppliers break Chinese law whenever possible. As a
result of the negative influence on the Reebok brand, concerns arose about the quality of their products.
were delivered. Reebok should ensure quality more. And "Why can't Reebok do more to ensure
quality?" when considering how our Human Rights Standards should be applied?

f. Environmental:

Reebok has continued to produce sustainable things with recycled materials, such as the "Better
Cotton" that they co-created with other groups. Reebok, on the other hand, is having trouble with
sales.

4. Porter’s Forces on business decision.

Power of Suppliers: Low

Adidas makes use of its own resources as well as labor from other markets, and their supply chain is
extensive. As a result, Reebok's supply in the US market for Adidas is insignificant.

Level of competitive rivalry in sports fashion industry: high

The current level of competition between Reebok and other well-known brands is very difficult. Even
the parent company's Adidas brands are different. While Nike and Under Armour are other well-known
companies that use Adidas, Reebok is a company that uses Adidas' products. Despite their failure to re-
make other well-known brands in recent years, Reebok has a strong position in the business. New
powers, including Reebok, are finding it difficult to compete with one another.

The threat of New Entrants: Moderate

Despite their failure to re-make other well-known brands in recent years, Reebok has a strong position in
the business. New powers, including Reebok, are finding it difficult to compete with one another.

The threat of Substitutes: High

The possibility that Reebok would be replaced is very risky. Reebok's products are not very notable, but
the price is very expensive. Many consumers would choose a less expensive option if they were of
comparable quality.

Buyer Power: High

Given the large number of items and alternatives in this market, clients will likely have a lot of bargaining
power. Due to the large selection and inexpensive upgrades, buyers have a lot of negotiation power. As
a result, the items must stand out, and the marketing effort must be effective; Reebok is unable to do
this.

M4 Apply appropriately SWOT/TOWS analysis and justify how they influence decision-making.

Opportunities: Threats:
 Growing health and fitness  Extremely reliant on the
trend sports section
 Growth opportunities in
Asia  Fierce competition
 E-commerce as an
important growth driver
 Strengths: SO: ST:
 Good financial management Adidas understands that because
Adidas can be found anywhere
 Constant innovation and the they are one of the big boys in the
online and in countless retail
introduction of new items sportswear market, they can charge
stores worldwide.
 A strong POS network high rates without losing clients.

 Strong Presence in European

Market
Weaknesses: WO: WT:
 Exchange rates and market risk Since internet showcasing is To compete in a crowded market,
 The business impact of the turning out to be more pervasive, Adidas needed to come up with a
actions of competitors Adidas should focus on elevating new concept, and break through.
 Budget constraints footwear to build benefits.

IV. CONCLUSION

Adidas is a company that has the global recognition of a well-known company. Adidas should think about
what is best for their company and its current environmental conditions. Adidas must regularly assess their
ability to implement their strategy in order to establish whether it is working. The top management must
create a safe, harmonious atmosphere within the organization in order to ensure the commitment of all
employees, motivate them to innovative, efficient performance, and ensure successful policy
implementation. Adidas's advice was that all preparations should be planned and executed in advance.

V. REFERENCE

Baron, P. (2012) Business and its Environment. 7th edn. Prentice Hall (Pearson).

Worthington, I. and Britton, C. (2006) The Business Environment. 5th edn. Prentice Hall
(Pearson). Palmer, A. and Hartley, B. (2011) The Business Environment. 7th edn. McGraw
Hill.

Weatherley, P. and Otter, D. (2014) The Business Environment: Themes and Issues in Globalized World. 3rd
edn. Oxford.
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December, 2021)

Pestleanalysis (2017) PESTLE Analysis of Adidas. Available at: https://pestleanalysis.com/pestle-

analysis- adidas/ (Accessed: 7 December, 2021)

Theguardian (2021) Adidas confirms plans to sell Reebok. Available at:

https://www.theguardian.com/business/2021/feb/17/adidas-confirms-plans-sell-reebok-sportswear
(Accessed: 7 December, 2021)

Adidas-group (2021) ADIDAS STARTS DIVESTITURE PROCESS FOR REEBOK. Available at:
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Notesmatic (2017) Adidas Five Forces Analysis. Available at:

https://notesmatic.com/2017/10/201710adidas- five-forces-analysis/ (Accessed: 8 December, 2021)

Bstrategyhub (2020) Adidas SWOT Analysis. Available at: https://bstrategyhub.com/adidas-swot-analysis/

(Accessed: 8 December, 2021)

Statista (2020) Nike's revenue worldwide from 2005 to 2020. Available at:
https://www.statista.com/statistics/241683/nikes-sales-worldwide-since-
2004/#:~:text=In%202020%2C%20Nike's%20global%20revenue,about%2037.4%20billion%20U.S.%20do
llars. (Accessed: 8 December, 2021)

Marcotrends (2020) Adidas AG Revenue 2006-2020 | ADDYY. Available at:

https://www.macrotrends.net/stocks/charts/ADDYY/adidas-ag/revenue (Accessed: 9
December, 2021)

Footshop (2020) The history of Yeezy: from Nike, Louis Vuitton to Adidas Yeezy. Available at:
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December, 2021)