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Strategic analysis of Adidas Sample Assignment

Executive Summary

The strategic analysis of Adidas has been done in the current report. The brand’s current strategic position in the market and how the brand is performing in competition with the rivals have been analysed in the report with the help of their key performance indicators. The strategic direction of the brand has also been done in the report with the help of BCG matrix and Ansoff matrix to analyse what strategies the brand has undertaken to meet market demands and beta competition in the international market. Finally the evaluation of the current strategy of the brand has been done with the help of SAF framework which helps in understanding the suitability, feasibility and acceptability of the brand’s strategy has been done. Based on the report a conclusion has been drawn and recommendations have been provided to help the brand achieve sustainability.

Introduction

The strategic decisions of Adidas are based on the strengths and capabilities of the business. The business has been able to make strategic moves to beat competition and survive in their international market amidst the external changes that are continuously taking place. Adidas has been able to face external challenges with their key performance points and ability to meet market trends. The brand is currently competitively positioned in the market and is thriving towards the direction of success. The brand though is facing a few drawbacks which need to be fought by the brand in order to survive in the industry and operate successfully on the international marketplace (Bücker and Ernste, 2018). The retail experience provided by Adidas enables the business to meet consumer requirements and keep them loyal to the business. The business has also been highly dependent on innovation which enables the business to localise their services while their products remain globally standardised. This helps the brand service tough competition from local brands in several countries worldwide. One of the major challenges which is faced by Adidas is that the business is highly dependent on their suppliers based in the developing countries and hence the brand has to pay higher bargaining power to the suppliers due to lack of suppliers in the developed countries for the business (Parmentier and Reynaud, 2018). With the current strategies for the business and their key strengths the business will be able to overcome these challenges and operate successfully internationally.

Background of the company

Adidas has been operating for a period of 95 years in a consistent manner. Though it started as a German brand, it now has a strong global presence, with its headquarters in Germany. As per the reports of 2018, the company had earned annual revenue of €22 billion approximately. The total assets and equity of the company is also on the rise. The key strengths of Adidas have been their infrastructure and their human resource. Working in the retail industry Adidas has been able to draw consumer attention and retain consumers for a long period of time with the help of their customer service. This could be made possible because of the relentless efforts in building strategies playing a key role in sponsoring sports events, hence attaining a global presence (adidas, 2019).

Analysis of Adidas’s strategic position in the industry

The key performance indicators of Adidas determine the current business position of the company in the industry such as:

Investment of innovation- Adidas has been successfully investing on innovation to lead the market and beat competition. The major international competitors of Adidas such as Reebok and Puma have been delivering new and innovative products to the consumers in order to keep up with the changing consumer preferences in the market. To be able to deal with these competitive rivalry Adidas have invested on its research and development as well as the infrastructure of the business which has provided the business with a competitive advantage in the market (Holtbrügge and Schuster, 2017). The competition of the brands have been attracting consumers with the help of innovative sports product which are not limited to the ordinary use but also for the use of professional sports and hence Adidas has invested on developing their professional range with the help of technical innovation. In order to invest in product development and swift market delivery, the company has been investing in physical infrastructure. For products that were less than a year old, Adidas has been offering more than 50% on discount and making way for the new (businessinsider, 2019).

Global distribution of products- The global distributorship of Adidas has helped the brand to gain multiple leverages over their competitors. Even through the suppliers of Adidas are mainly based in the developing countries the brand has been able to operate successfully with their vast distribution channels. The business has been able to work with their distributors who are placed strategically all over the global and hence the brand is also able to localise their products with their retail operations distributed globally (Parmentier and Reynaud, 2018). This provides the brand with an advantage over its competitors in terms of meeting the market demands and being more consumers friendly when it comes to availability of products as well as limited edition products worldwide. The company has 1342 stores across the world and the net annual sales has been around €22 billion (Statista, 2019).

Market leader- The brand Adidas is currently working as the market leader with the help of their vast range of products and partnership with several brands. The brand has been tying up with global leaders for several events and merchandise which has provided Adidas with a competitive advantage over its main competitors in the sports wear industry (Wright, 2019). The ability of Adidas to operate in every corner of the world with the help of their standardisation and localisation strategies the business is able to attract consumers worldwide by investing on the research and development to understand the changing consumer preferences in the market.

Marketing and promotion- The marketing and promotional campaigns that are run by Adidas help the business to be able to attract consumers from their vast operational sector. Adidas does not only stick to the traditional marketing strategies and hence is able to attract consumers from all corners of the market. The business has been able to operate in the professional as well as common retail sectors with their sports goods and sports merchandise (Aubert et al. 2016.). The brand Adidas has been able to work with the help of unconventional ways of marketing such as sponsorship, partnership and event sports event promotions to attract consumers and hence has built a global fanship for the brand.

Global market positioning- The global market positioning of Adidas has been done strategically by the brand where the consumer range of the brand varies from ordinary and common people to the sportsmen. The brand has been able to build a reputation in the market with their diversified consumer base based on sports merchandise and athleisure products. Adidas is competitively operating across the world and is a market leader in the UK where it has been positioned as one of the most chosen brands for sports merchandise by consumers (Collis, 2019). Adidas also invests on their corporate social responsibilities which enable the brand to globally position themselves as a sustainable brand.

Analysis of Adidas’s strategic direction

BCG matrix

The BCG matrix of Adidas would help in analysis the star products of the brand where investment would be fruitful for the brand and the products of the brand where investing might not be strategically beneficial choice for the brand. As per the BCG matrix the products of a brand are divided on the basis of them being termed as Stars, Cash Cows, Dogs and question marks. The star products of the brand are those which help the brand develop their market and at the same time generate maximum revenues for the brand. The cash cows are those products which generate high revenues for the brand but do not develop their market (Mahdi et al. 2015). The dogs are those products of the brand which does not help the brand develop their market as well as does not generate revenues for the brand. Finally the question marks are those products which do not have a stable future in the market and the brand’s investment on this product with a questionable future might lead to loss. The star products of Adidas are their shoes and footwear which has the highest market demand. The cash cows for Adidas are their sports merchandise such as clothing and sportswear. Adidas’s dog products are such as their sunglasses and other accessories and finally the technological products by Adidas are their question marks as the future of these products is not sure in the market (Schmid et al. 2018). Therefore, investment on promoting their star products and high cash generating products would be a fruitful choice for the brand in order to expand their consumer base and generate revenues. Sports equipments form the star product of the company, with high market share abd growth, while the sports shoes form the question mark, high market growth and low market share. The dog product of the company are the hats and sunglasses, with market share and growth, while the cow product of the company are the clothing products with low market growth but high market share.

Ansoff Matrix

Product development- Product development strategy is used by Adidas to create a wide range of products to match the needs of their diversified audiences. The brand is able to work with different products that are targeted at different sectors of audiences. The brand is also able to work with innovation and technology so that they are able to create new products which are capable of adapting to the new market trends and demands (Schmid et al. 2018). Adidas has developed a product range which meets the demand of the common consumer as well as the sportsmen for professional use which has allowed the brand to gain competitive advantage. The sports shoes of the company, for example, are specially designed for the increased comfort of the consumers, especially the sports persons.

Product diversification- Product diversification strategy is also used by Adidas because the brand targets a wide range of audience through their products. The brand has room for all kinds of products starting from sports equipments to deodorants meant for taking part in sports. The brand operates in the retail industry where the consumer preferences are continuously changing and hence to meet the consumer demands the brand has been developing their product range (Iglesias et al. 2019). The brand has been working with the help of products targeted at different local markets and hence has applied the localisation and standardisation of products to appeal to the diversified audience of the brand.

Market development- Market development strategy is undertaken by Adidas to attract consumers in various markets. The brand has a significant presence worldwide including their developing countries as well as the developed countries (Ind, 2017). The brand has been able to work with their strategies where new markets are developed with product options and the existing markets are developed with innovation and product development to beat competition in the market.

Market penetration- Market penetration strategy is undertaken by the business to attract consumers from various developing countries. The brand has a huge presence over the Asian markets where there are many developed and developing countries with their supplier base being based in these countries. The product of the company is sold through its own websites and various other ecommerce websites like Amazon and Alibaba that already has a global presence. The brand has been able to attract consumers with the help of various strategies of market penetration where new products are launched into these markets and that is how the brand is able to attract consumers (Sicoli et al. 2019). Now the online presence of the brand has also been highly developed which enables the brand to attract more consumers from the international market.

The key performance indicators of the brand that has led it to achieve the strategic position of the company are market share, market growth, net profit margin, inventory turnover and employee turnover. Nike and Puma are the key competitors of the company and only Nike and Adidas has been earning more than $5 billion sales milestones. Nike has the highest market share, about 31%, followed by Adidas with 22% market share, while Puma has 15% market share. When it comes to the profit margin, Adidas is in the leading position with 48.3% as the gross profit margin, while Nike and Puma has 46% and 45.5% respectively. The inventory turnover is also positioned in the same order. The employee turnover for the company has been very low compared to the competitors and the strength has increased by almost 50% in the last 10 years.

Critical evaluation of organisation’s strategy

The currently chosen strategy of Adidas is to develop their market through new and innovative products. The existing markets of Adidas are going to be targeted with a diversified range of products to meet the different needs of the consumers ranging from various costs. This will create a better option for the brand to target their consumers and gain competitive advantage over brand which only target a specific consumer base (Taylor, 2019). The new and innovative product range of Adidas which is going to be developed after using the brand’s strength which is research and development will enable the brand to target markets better and generate revenues through their star products and cash cows.

SAF model

Suitability- The suitability of Adidas’s strategy where the business is going to launch products which appeal to the consumers globally based on innovation and technology helps the organisation to acquire a better market share. The care for sustainability by the company started in the year 1989 and the transformation at management level began during 1998-1999. Form the early 2000s the company has associated itself with sustainability reporting and saving natural resources. Conducting environmental audits and bringing a positive change in the industry, the company has contributed a lot. This has also been taken care at the employee level with an ensuring approach to achieve justice. Having achieved plastic free operations, the company would now adopt a circular future (adidas, 2019). This product and market development strategy adopted by Adidas based on their star products which are their shoes and clothing merchandise is a suitable idea to acquire new markets. The brand is well positioned internationally with the help of their sponsorship and event promotions of sports events and partnership with market leaders from different industries (Sicoli et al. 2019). The brand can therefore use this strategy to generate better revenues and diversify their market to new places.

Acceptability- The acceptability of this structure by all the stakeholders of the business is high in probability. This is because Adidas is going to use their star products and maximum cash generating products to develop their market (Taylor, 2019).In the year 2018, the company has been able to sell 409 million pairs of shoes and 457 million sports apparels (Statista, 2019). They will penetrate new markets with innovative products and hence will also be able to create a stable position for themselves in the international market with the help of promotions and marketing to develop these markets.

Feasibility- The feasibility of this strategy is also well equipped for the business. This is because the brand is able to invest on innovation and technology to develop more products for the market and match consumer demands. The expenditure on R&D has increased by 50% in the last 10 years and is currently at €153 million (Statista, 2019). The brand’s strength of research and development will enable the brand to finance their new market development and product development strategies to generate high revenues for the brand and acquire more market share (Bücker and Ernste, 2018). The brand is also going to be able to attract consumers from developing countries which are now getting more exposure into sports and thus will need to invest on sports merchandise providing Adidas with and opportunity to generate revenues.

Conclusion

It can be concluded from the findings of the report that the business has been able to develop itself and strategically intelligently to survive in the competitive market. The retail industry of sportswear is highly competitive and hence the brand has to work with the help of new and innovative strategies to work towards achieving the mission and vision of the brand. The brand has also strategically positioned itself in the market where the global operations of the brand have become easier. The main strategy to build the future position of the brand in the market has been chosen to be market development and product development with the help of investment on innovation and technology. This strategy will provide the brand with an opportunity to combat global competition and expand their market reach to newer markets.

Recommendations

There are a few recommendations of the brand which would help the brand sustain itself in the market for a longer period of time and achieve competitive advantage:

Using technology to enhance their products and to meet the demands of consumers in the changing business environment will help Adidas beat international competition. The organisation has the strength of research and development as well as proper infrastructure to implement this strategy and hence the brand is going to be able to achieve success in the international market (Taylor, 2019).

The brand has to develop their existing markets but there should also be focus on the market penetration of many markets where the brand isn’t already present. The developing countries are now taking part in international sports events which are currently lead by Adidas as one of the major brands for sports merchandise and thus can be used to the advantage (Mahdi et al. 2015). The brand can easily penetrate these markets with online distribution and then through unconventional ways of marketing such as sponsorship to attract consumers. The brand will also be able to lead this market before competitive brands also penetrate these markets.

The product range of Adidas is very limited which acts as a barrier to its market penetration and development strategies and hence need to be targeted by the brand to achieve success in the international market. The star products of the brand as well as the cash cows are very limited to shoes and clothing. Therefore, the brand must work towards achieving a greater consumer reach with the help of their market development strategies and through diversifying the range of their product to appeal to more audiences (Sicoli et al. 2019). The technical products and accessories are not very fruitful for the brand and hence the brand should invest on new products which will meet the needs of the current day consumers.

References

adidas, 2019. STRATEGY. Available at https://www.adidas-group.com/en/group/strategy-overview/

Aubert, B.A., Saunders, C., Wiener, M., Denk, R. and Wolfermann, T., 2016. How adidas Realized Benefits from a Contrary IT Multisourcing Strategy. MIS Quarterly Executive, 15(3).

Bücker, J. and Ernste, K., 2018. Use of Brand Heroes in Strategic Reputation Management: The Case of Bacardi, Adidas, and Daimler. In Reputation Management Techniques in Public Relations (pp. 126-150). IGI Global.

businessinsider.in, 2019. Nike and Adidas are making huge investments that should terrify Under Armour. Retrieved 3 December 2019, from https://www.businessinsider.in/finance/nike-and-adidas-are-making-huge-investments-that-should-terrify-under-armour/articleshow/59041680.cms

Collis, D.J., 2019. The Strategic Management of Execution. Harvard Business School Strategy Unit Working Paper, (20-026).

Holtbrügge, D. and Schuster, T., 2017. The Internationalization Strategy of Adidas. The Internationalization of Firms: Case Studies from the Nürnberg Metropolitan Region, p.19.

Iglesias, O., Ind, N. and Schultz, M., 2019. History matters: The role of history in corporate brand strategy. Business Horizons.

Ind, N., 2017. adidas: rediscovering the source of its success.

Mahdi, H.A.A., Abbas, M., Mazar, T.I. and George, S., 2015. A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic Research, 6(3), pp.167-177.

Parmentier, T. and Reynaud, E., 2018. Strategic case: Change and change management in adidas AG (No. hal-02073700).

Schmid, S., Dauth, T., Kotulla, T. and Leding, P., 2018. Adidas and Reebok: Is Acquiring Easier than Integrating?. In Internationalization of Business (pp. 27-61). Springer, Cham.

Sicoli, G., Bronzetti, G., and Baldini, M. 2019.The Importance of Sustainability in the Fashion Sector: ADIDAS Case Study. International Business Research, 12(6), 41-51.

Statista, 2019. Adidas. Retrieved 3 December 2019, from https://www.statista.com/topics/1257/adidas/

Taylor, M. 2019. Evidence Based Marketing: Using Principles from the Profit Impact of Market Strategies (PIMS) Project by Benchmarking UK Firms and Global Sportswear Manufacturers (GSMs) Marketing Expenditure (Nike, adidas, VF Corp, Under Armour, Puma, Anta and BasicNetSpA). www. thecasecentre. org, (CASE-).

Wright, M., 2019. Strategic Audit of Adidas.

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