Adidas Case Analysis
Adidas went through a stage of restructuring when the company’s corporate strategy needed to be revamped. Before 2009, adidas focused on making acquisitions that would ultimately lead to overtaking Nike as the leader of the global sporting goods industry. In 2009, adidas restructured the corporate strategy to extend its leadership in product innovation, creating a differentiated image for the products offered by each its three business segments (adidas, Reebok, and TaylorMade-adidas Golf). Adidas would also center their attention to achieving efficiencies in its global supply chain processes and activities.
In order to maximize the outcome of adidas’ new strategy, each business unit was expected to develop at least one major product innovation every year in each product category. This would help adidas build differentiation within all of the products. To further differentiate adidas, Reebok, and TaylorMade, the company began to focus on brand building by creating partnerships with sporting events around the world and prominent athletes.
Internal Environmental Analysis Adidas’ internal environment was strong and helped keep the company competitive and profitable. The Reebok and adidas brand together held 8.52 percent of the market share for leading sellers of athletic footwear in 2008. Even though the company’s’ market share had dropped over the previous years, the net sales had been rising since 1998. A SWOT analysis was taken of adidas and it shows that adidas has a strong internal environment that can grow stronger over time if they capitalize on the opportunities offered and manage the threats.
Strengths Adidas’ strengths consisted of worldwide presence, a differentiated product line, a focus on performance technology and technology development, sponsorship to various sports and events, brand reputation in achieving sports performance products.
Weaknesses The company’s weaknesses were limited exposure to the U.S. market, few influential athletes used for brand recognition, and poor customer service.
Opportunities Adidas has many opportunities to look into including expanding into the international market through e-commerce and retail outlets, using more effective advertising, and increasing endorsement.
Threats The biggest threat to adidas is the company’s main competitor Nike who has a greater market share and has a larger marketing budget. Other threats are adidas’ increasing advertising budget from new brands like Reebok, the amount of competitors in the industry are increasing day by day, and the global economic crisis that has decreased market potential especially in the U.S.
External Environmental Analysis
Porters Five-Forces Model of Competition Intensity of competitive rivalry in this industry is high and adidas is competing fiercely for more market share against several firms like Nike, Puma, and Umbro. In order to keep market share in this industry, adidas must ensure that their goods are of a high quality and reasonably priced.
The threat of new entries into the industry by new competitors is extremely weak because there are high barriers of entry. This would make it difficult for new organizations to break into the industry because it would be expensive to start up and run a company that could be a threat to adidas.
There is a threat to adidas from other manufacturers’ products because there are many companies that produce similar products. This poses as a threat to adidas even though their products have unique features like the rubber pads in their shoes.
Adidas raw materials to make products are not supplied by a monopoly which means that the power of suppliers is weak. This gives adidas more power to dictate the price at which they buy their raw materials, as there are a large number of competitor suppliers.
The power of buyers is strong though because Adidas primarily sells their products in bulk to major sports outlets and online stores. Adidas relies heavily on these buyers because there is only a small amount of customers who buy products directly from adidas.
Recommendations I have come up with a few key success factors that adidas should incorporate into their corporate strategy and business as a whole in order to keep the company moving forward. First, they need to create more endorsement programs with professional athletes for sports performance products. This will give them higher product and brand recognition and show athletes and sports fans the variety of products they provide. Second, they need to keep building brand equity by buying out other companies. Third, focus marketing efforts at large sporting events and on key products. Fourth, sponsor a premier soccer team for the world cup to keep their market share in the soccer segment growing. Finally, I would propose opening more concept stores to make the products more easily available.