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Dynamic of Strategies

Table of Contents

Introduction.

Vision Statement.

Environmental Analysis.

PESTLE Analysis of Adidas.

Political factors.

Economic factors.

Social Factors.

Technological factors.

Legal factors.

Environmental factors.

SWOT Analysis.

Future strategic options.

Evaluating and choosing between strategic Option.

Presenting strategic recommendation.

Conclusion.

References.

Introduction to Adidas

Adidas is a German large corporation having its operations globally established by Adolf "Adi" Dassler developing and distributing sports shoes, clothes, and accessories (Di Maria 2019). This has the head office in Herzogenaurach, Bavaria, Germany. It is the largest maker of sportswear in Europe and the second-biggest in the world behind Nike. The Adidas corporate group includes Reebok sportswear, the German Football Team in Bavaria (8.33 percent), and the Austrian Exercise Technology Business Runtastic.

The business was established by Adolf Dassler in his mother's house; he was accompanied by his older brother Rudolf in 1924 and founded a business under the name of the Dassler Brothers Shoe Factory. For various athletic activities, Dassler helped develop spiked sports shoes (spikes). He changed the consistency of spicy running shoes from an earlier trend of heavy metal spikes to the usage of canvas and rubber. Dassler encouraged US sprinter Jesse Owens to use his handmade spikes in 1936 during the Summer Olympics of 1936. Following four Owens gold medals, Dassler shoes are known to competitors and their coaches all over the world as branded and trustworthy. A prosperous business, the Dassler manufactured 200,000 pairs of shoes a year before the Second World War. Adolf founded Adidas in 1949, and Rudolf created Puma, which became a company strategic rival for Adidas after a split into the brother relationship (Smit 2007).

Adidas' logo consists of three lines that endorse brand apparel and apparel styles of the business. Adidas' introduction in 1952 of the Finnish Karhu Sports company became so successful that Adidas became identified by Dassler as the three-strip organization.

Adidas, a sporting company, was estimated at more than US$ 16.6 billion in 2019, an improvement from about US$ 7 billion in 2016. In 2019, Adidas had reported good improvements in both operations and finance. Revenues grew 6 percent on a currency-neutral basis, representing high-single-digit increases in the Adidas brand and a rise in low-single-digit revenue at Reebok. All the main business divisions reported rises in currency-neutral revenue. Net profit from continued activities rose 12 percent to €1,918 billion, reflecting the adverse effects of IFRS 16's first submission. This converts into simple EPS from continuous activities of €9.70, which marks an improvement of 15 percent relative to the previous year. In terms of the euro, sales rose from €21,915 billion in 2018 by 8 percent to €23,640 billion (Adidas 2019).

Mission Statement

The Adidas Company aims to be the global leader in the sports goods market with products built around a love for fitness and a competitive lifestyle (Klingman 2007). 

Vision Statement

Adidas' vision statement notes that the organization is responsible as industry champions with a commitment to deliver the best goods for athletes across all the other sports clothing business offerings (Collins and Porras 1996).This statement of vision is derived from the operations of the company as a reflection for all its employees who work for them all over the world. Adidas further underlines that the technologies give it the edge over rival businesses, rendering it an appealing name for players in their markets.

The first aspect of Adidas' dream message is that it considers itself as the sport concept pioneer. Adidas insists that it is motivated to lead and set the market expectations, rather than watch what certain firms like Nike are doing.

Core Values of Adidas

Adidas and its staff bear four main principles that are honesty, ambition, success, and diversity throughout the organization. That is the statement of Adidas' vision and is taught to all fresh and existing Adidas employees. Such principles have helped the business remain for years at the top of its game and made them continue to build goods and services for consumers to appreciate (Wesseloo 2015). What consistency implies for Adidas is that the business needs to be good with all it does, from quality goods to money-making. Business executives understand the market from teenagers to professionals for sportswear and have therefore succeeded in making Adidas a profitable brand in sports from Germany and other areas of the world. Adidas considers its workforce as the biggest asset; staff deserves to remain fit, stay successful, and have the space for research and development while operating with Adidas management and executives.

Environmental Analysis

PESTLE Analysis of Adidas

Political factors

Adidas produces, carries, and distributes its products worldwide. This helps them, as they are distributed digitally, to extend supply chains globally and introduce diplomatic protocols. The corporation employs government powers to strike as a means of counterfeiting goods (Shtal et al. 2018).

Every country is taxable in its way. Adidas must comply with these laws for any transaction and commodity sold worldwide. The business continues to outsource its production in third world countries. Very certainly due to a decrease in manufacturing costs. But for organizations, this form of business is not suitable.

Economic factors

There is a focus on the sports goods industry. About 70% of the industry's sales come from the 50 biggest firms. One such company is Adidas. The products offered by Adidas are categorized as premium products and are not considered as necessity products. The buyer's tastes and preferences drive the sales of the products. Premium goods must compete amongst themselves in different categories. The gaming and music industry competes against sports goods. With the changes in the global economy, the manufacturers make changes for accommodating the new changes. The company’s opportunities and growth are dependent on the business decisions of selling and distributing the products (Shtal et al. 2018). The products of the company are produced in China because of the low cost of labor as compared to other countries especially North America. Adidas needs to be careful with the cost of the materials. The major challenge they face is in getting the products imported or exported. Along, with this another major challenge of duplicate products which affects the sales of original Adidas.

Social Factors

Changes in the designs of the products are done to match the taste and preference of the consumers. For any age, gender, or lifestyle, items are always available. But their primary target group are sport-loving health-conscious buyers. They must follow health patterns and expectations to reach the audience. They foster groups and support people's wellbeing. Adidas sponsors Olympic games as well so that new audiences around the world can come across Adidas and its products (Shtal et al. 2018).

Technological factors

Adidas tests its products under different conditions because of choosing athletes as their target audience. In the sports industry, coaches and professionals are trying to improve their results. They use natural material substitutes for permanent solutions to athletic problems (Shtal et al. 2018).

They also make efficient use of the e-commerce platforms for reaching their customers. In the health community’s technology, like Fitbit, is very popular. Adidas will use these technical developments to immerse themselves in emerging markets and create a competitive advantage.

Legal factors 

Intellectual property and IP programs are the property of Adidas. They do have design licenses, which protect their copyright and infringement (Shtal et al. 2018). To stop counterfeit businesses, patents act as a legal defense. Naturally, they have trademark production as a large business. The company supports and follows full compliance with national and local laws.

Environmental factors

Adidas is reducing environmental effects. They must track and remove dangerous substances. that is the reason that they offer their products with natural materials (Shtal et al. 2018). They pursue ethical business practices to ensure that supplies are controlled in every country in which their goods are made.

Political

• Possible conflict on exchange owing to political divisions

Economical

• Currency changes impact

• Domestic market weaknesses

Social

• Rising patterns over thousands of years such as body health and yoga

Technological

• Digital appliances like smart watch and wearable

• Automated technical engineering and development redefinition approaches

Legal

• Applying administrative enforcement application frameworks

Environmental

• Monitoring of activities' environmental effects

• Development of the sustainable products

SWOT Analysis of Adidas

Adidas is one of the largest sportswear and footwear companies in the world with over 800 independent factories manufacturing over 900 million sport and fitness lifestyle items in 55 countries. This research offers an understanding of and its effect on the micro and macro climate of companies through SWOT research of both internal and external factors. The SWOT analysis is precisely a method used to determine the competitive attitude of an organization by considering its internal strategic factors such as strengths and weaknesses, external factors such as opportunities and threats (Jackson et al. 2003).

Adidas and Reebok are the main parent labels of the Adidas Group. While the two brands work in the field of athletics, their target markets are distinctive, Adidas is a luxury brand, typically targeted at cities of the highest tier, while Reebok is a mid-term brand targeted at mid-size groups. Factors such as deep heritage, strong brand recognition, diverse product range, excellent and remarkable sponsorship and partners of famous sporting events (FIFA, Olympics, NBA & UEFA), brand awareness, solid fiscal muscles, respected sales platforms are one of Adidas Group's main strengths apart from serving a wide spectrum of audiences (Byun 2015). The Adidas Group has been able to gain a strategic edge over its rivals through these core competencies. 

The biggest drawback of Adidas is pricing because of unnecessary spending on product technologies and marketing campaigns such as city approvals. The finished cost of the Adidas product is very high (Byun 2015). Customer engagement is a flaw and a threat for the business because the sports market is extremely competitive and consumers are more inclined to turn from brand to brand.

People's heightened curiosity in wellness and fitness is a tremendous boost to the whole sports sector. The Adidas Group has an improved lifestyle and generous audience spending on branded Sportswear (Byun 2015). The Adidas company will give tremendous incentives to the market through fusions and acquisition, an extension of the product portfolio, the production of new and trendy goods, mergers with the sports team.

Adidas goes targeting its biggest rival Nike, the largest luxury company, the second-highest value company. Therefore, not just top companies, but also small producers, are challenging the business with a strong market. Fake goods that can harm the credibility of the company are another big danger.

• Strengths

Healthy financials

Constant Innovation

Effective Point-of-Sale Network

Strong Presence in the European Market

• Weaknesses

Foreign Exchange and Market Risk

Impact on Business due to Competitors Actions

Limited financing

• Opportunities

Rise in Health and Fitness Trend

Growth Opportunities in Asia

E-commerce to be a major growth driver

• Threats

Highly dependent on sports segment

Intense Competition

Future strategic options

Strategic decisions can be taken by the company, which would leverage the opportunities using the strengths of the company and rectify the weaknesses which would help in eliminating the threats.

  • Vertical Integration strategies 

These strategies comprise of vertical integration and horizontal integration. These strategies help a company in consolidating its position amongst the competitors. Companies use vertical integration when they want to take complete control over the production or distribution of their product. Horizontal integration is acquiring businesses at the same level in similar or different industries (Wei, Zhao, and Hau X 2019).

Adidas, can either vertically integrate for having better technology, or faster deliveries and enjoying economies of scale. Or either can horizontally integrate with similar companies or with different companies for enjoying diversity in their product portfolio.

  • Intensive strategies

Intensive strategies are those strategies, which demand furthermore intensive efforts to improve the performance of existing products in the market. They are of three types, market development, product development, and market penetration (Paklina, Molodchik and Fernandez 2017).

Market development is launching its products in new markets or geographical areas. Market penetration is a strategy in which the companies focuses deeply on the existing products and try to increase the market share in the existing markets through intensive marketing efforts. Product development is modifying and improving existing products. 

Adidas can make use of the intensive strategies for improving their products, improving their marketing activities for improvement and increase in the market share, and penetrating new geographies, such as Asia which is an opportunity for the company.

  • Diversification strategies

Diversification strategies are used by the companies to extend the company’s product lines and operate in several different markets. There are primarily of two types related and unrelated diversification. Related diversification is expanding the existing line of products or markets, i.e. the company manufactures a new line of product or enter a new market related to its business operations (Shropshire 2019). While unrelated diversification is adding new products and markets which are not related to the existing operations and products. 

Adidas expands its business operations in another consumer segment as well, as its primary product line is the sports segment, thus expanding its operations in the other segments can be beneficial for the company, such as health supplements, sports equipment, etc.

Evaluating and choosing between strategic Option

The strategic option can be chosen by a company if it improves the profitability of the company, leads to increase in sales and market share, enhances returns on investments, enhances customer satisfaction, helps in improving brand image, is aligned with the corporate mission and vision strategies of the company, and optimally utilizes the resources and capabilities of the company.

Rank

Opportunity

Business Impact

Customer Base

Outcome

1.

Diversification

Increase in the market share and company revenue

Improvement of the brand image

Fitness enthusiast, current customer base

Increased market share and business value

2.

Intensive strategies

Improvement in brand image

Enhancement of customer satisfaction

Fitness enthusiast

Increased market share and business value

3.

Vertical integration

Improves profitability

Improvement in the resource and capabilities

Current customer base

Increase in the business value

Presenting strategic recommendation

It is recommended to employ Diversification strategy by Adidas, for improving the competitive advantage of the company as it would help the company in not only gain competitive advantage but also help in capturing the market share in new consumer segment and product segment.

Diversification has its advantages and disadvantages, thus is important for a company to employ any strategic decision after careful consideration.

Advantages of diversification:

  • It can help create balance in the organisation during the economical ups and downs in a country.
  • It would help in optimum utilisation of the resources

Disadvantages of diversification:

  • Lack of expertise in the new segment can prove to be a risk taking decision for the company.
  • Risk in the response taking time by the company, in case of market changes.

Conclusion on Case Study

It is concluded from the above report that Adidas is one of the major brands in the apparel and athletic wear industries. The company has rendered several major adjustments to its operating strategy over the last few years. This has culminated in Adidas doing well. However, to grow faster and gain competitive edge it is recommended that Adidas employs diversification in its business strategy for having increased business portfolio and competitive advantage. This would help the company in increasing the business revenue, brand image, improved customer satisfaction. However, it is also noted that the diversification also poses some threats along being beneficial for an organisation. Benefits such as creating balance during the economic distress and help in the optimum utilisation of the resources. However, there are some disadvantages also such as not being able to successfully diversify because of lack of expertise not being able to respond to market changes timely. Thus, it becomes important for Adidas to analyse the strategic decisions after considering all the possibilities for corrective diversification actions.

References for Case Study (Havard Style)

Adidas. 2019. Financial Publication. [online]. Available at https://www.adidas-group.com/en/investors/financial-reports/ [ Accessed on 9th may 2020].

Byun, J.W., 2015. Successful Global Brand of the Adidas: Porter’s 5 Forces and SWOT Analyses. Chinese journal, 15(4), pp.141-167.

Collins, J.C. and Porras, J.I., 1996. Building your company's vision. Harvard business review, 74(5), p.65.

Di Maria, E., 2019. A short history of the sporting goods industry. The Global Sport Economy: Contemporary Issues, p.13.

Klingmann, A., 1999. adidas-scape. Daidalos, 73, pp.36-46.

Paklina, S.N., Molodchik, M. and Fernández-Jardón, C.M., 2017. Intangible-intensive strategies of Russian companies. Higher School of Economics Research Paper No. WP BRP, 57.

Shropshire, C., 2019. Board Interlocks and Diversification Strategies. In Oxford Research Encyclopedia of Business and Management.

Shtal, T.V., Buriak, M.M., Amirbekuly, Y., Ukubassova, G.S., Kaskin, T.T. And Toiboldinova, Z.G., 2018. Methods of analysis of the external environment of business activities. Revista ESPACIOS, 39(12).

Smit, B., 2007. Pitch invasion: Adidas, Puma and the making of modern sport. Penguin UK.

Wei, J., Zhao, J. and Hou, X., 2019. Integration strategies of two supply chains with complementary products. International Journal of Production Research, 57(7), pp.1972-1989.

Wesseloo, D.M., 2015. The reflection of core values in a company’s logo and slogan–An experimental study.

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